1979 (5) TMI 96 - AT - Wealth-tax

Summary

Issues:
1. Whether wealth tax can be levied on private trusts when the taxable wealth is below Rs. 1 lakh.
2. Treatment of provision for dividends in the valuation of shares for wealth tax assessment.

Analysis:

Issue 1:
The appeals were against the orders confirming assessments made by the 2nd WTO Companies Circle, Madurai under s. 16(3) of the WT Act on private trusts for the assessment years 1976-77 and 1977-78. The assessees contended that since the taxable wealth was below Rs. 1 lakh, no tax could be levied. However, the AAC confirmed the assessments, citing that tax was leviable either as per the rates in the Schedule to the Act or 1.5%, whichever was higher, under s. 21(4) of the WT Act. The departmental representative argued that s. 3 of the WT Act, the charging section, was subject to other provisions like s. 21(4), allowing tax to be levied on trusts even if taxable wealth was below Rs. 1 lakh. The Tribunal, following a previous decision, upheld the Department's stance, confirming the assessments.

Issue 2:
The assessee raised a contention regarding the treatment of provision for dividends in the valuation of shares held in a company. The assessee argued that the provision for dividends should not be considered as part of the company's assets. However, the WTO and AAC rejected this contention, citing the provisions in Expln. 2 of r. 1D, which specify that amounts set apart for payment of dividends where not declared before the valuation date should not be treated as liabilities. As per the clear provision, the contention was deemed meritless, and the appeals were dismissed.

In conclusion, the Tribunal upheld the assessments made by the WTO on private trusts, even when the taxable wealth was below Rs. 1 lakh, and dismissed the appeals regarding the treatment of provision for dividends in the valuation of shares.