1990 (5) TMI 87 - AT - Wealth-tax

Issues Involved:

1. Status of the assessee for assessment purposes.
2. Impact of the retrospective amendment under Section 40A(11) of the Income-tax Act on the assessable wealth of the assessee.
3. Applicability of Sections 2(e)(2)(iii) and 4(1)(a)(iv) of the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Status of the Assessee for Assessment Purposes:

The assessee, a trust, was assessed in the status of an Association of Persons (A.O.P.) for the assessment years 1982-83 and 1983-84. The Commissioner (A) upheld this status based on the decision of the Madras High Court in the case of State Bank of India Officers Association v. CWT [1986] 158 ITR 23. The assessee contended that this status was erroneous. However, the tribunal did not find it necessary to pronounce on this issue in detail, as the primary contention regarding the retrospective amendment under Section 40A(11) was sufficient to resolve the appeals.

2. Impact of the Retrospective Amendment under Section 40A(11) of the Income-tax Act:

The pivotal issue was whether the retrospective amendment introduced by Section 40A(11) affected the assessable wealth of the assessee. The amendment allowed the parent company to recall its contributions to the trust, which was intended for the welfare of its employees. The trust had to comply with such a requirement. The tribunal referred to the case of ITO v. Tube Investments of India Ltd. [1990] 32 ITD 172 (Mad.), where it was established that the law enacted with retrospective effect from 1-4-1980 must be deemed to be in force on the relevant valuation dates (30-6-1981 and 30-6-1982). Consequently, the trust had no option but to repay the unutilized amounts upon the company's request.

The tribunal emphasized that a willing buyer would not pay for the trust's assets, knowing that the trust would have to part with them upon the company's request. Therefore, there was no wealth assessable in the hands of the trust on the relevant valuation dates. The tribunal concluded that the net wealth assessed for the assessment years 1982-83 and 1983-84 should be excluded.

3. Applicability of Sections 2(e)(2)(iii) and 4(1)(a)(iv) of the Wealth-tax Act:

The assessee also argued that the provisions of Sections 2(e)(2)(iii) and 4(1)(a)(iv) of the Wealth-tax Act applied, as the revocation of the trust fund took place within six years of the trust's constitution. However, the tribunal did not find it necessary to delve into this argument, given the conclusion reached regarding the retrospective amendment under Section 40A(11).

Conclusion:

The tribunal allowed the appeals, holding that no wealth was taxable in the hands of the trust for the assessment years 1982-83 and 1983-84. The retrospective amendment under Section 40A(11) was deemed to be the law in force on the relevant valuation dates, leading to the exclusion of the net wealth assessed. The tribunal did not find it necessary to pronounce on the status of the assessee or the applicability of other provisions of the Wealth-tax Act.

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