1990 (12) TMI 175 - AT - Wealth-tax

Summary

Issues:
Enhancement of investment value shown by the assessee for wealth tax assessment.

Analysis:
The appeal was against the enhancement of the investment value shown by the assessee for wealth tax assessment. The assessee, an individual, had shown her interest in a firm as part of her net wealth. The firm, M/s Jaisingh Investments, had commenced in 1980, and the assessee had contributed her flat in Bombay as capital. The firm later sold the flat, and the income tax department treated the transaction as if the assessee had sold the flat directly. This led to an increase in the value of the investment shown by the assessee for wealth tax purposes. The WTO and the appellate authority upheld this decision.

In the further appeal, the main contention was whether the entire amount from the sale of the flat should be assessed as part of the assessee's net wealth, considering the Tribunal's view that the firm was sham. The assessee argued that only her actual asset should be considered for wealth tax assessment, as she did not receive the full consideration from the sale of the flat.

The Tribunal analyzed the situation and held that for wealth tax assessment, the focus should be on the assets belonging to the assessee on the valuation date. Even if the firm was considered sham for capital gains, it did not mean that all assets held by the firm automatically belonged to the assessee. Referring to a Supreme Court case, the Tribunal emphasized that mere possession of property does not make it part of the net wealth if the legal title is not with the assessee. Since the sale proceeds were received and invested by the firm, and the assessee did not have possession of the proceeds, the investments made by the firm could not be considered as belonging to the assessee.

The Tribunal concluded that only the assessee's share in the firm's property could be assessed as her asset, especially since she had not received the full consideration herself. The Tribunal set aside the previous orders and directed the Wealth-tax Officer to assess the assessee's interest in the firm at the value originally shown by the assessee. As a result, the appeal was allowed in favor of the assessee.