1984 (6) TMI 133 - AT - Wealth-tax

Summary

Issues: Valuation of jewellery for computing net wealth.

In this judgment by the Appellate Tribunal ITAT MADRAS-D, the case involved the valuation of jewellery to compute the net wealth of the assessees, late Kamalambal Ammal and her great-granddaughter, Vidyalakshmi. The jewellery was seized by the income-tax department, and an order was made under section 132(5) of the Income-tax Act, 1961, determining the tax payable by the assessees. The assessees made disclosures under the Voluntary Disclosure Scheme to avail reduced tax rates. An objection under section 132(10) was filed but dismissed as infructuous due to the voluntary disclosure. The ownership of the jewellery was accepted by the assessees, but there was a reference to the gold control authorities. The Collector of Central Excise and Customs passed an order imposing penalties and confiscation of the ornaments, which was later revoked on appeal.

The main issue before the Tribunal was whether the jewellery in the custody of the income-tax department during specific valuation dates could be considered assets for computing net wealth. The assessees argued that since they lost possession of the jewellery and it was liable for confiscation, it should not be treated as an asset. They also contended that the jewellery's value was practically nil as it could be appropriated for tax dues. The revenue, however, claimed that the jewellery should be considered valuable assets regardless of the tax liability.

The Tribunal held that the assessees were the owners of the jewellery, and the government was merely a bailee. As there was no confiscation order on the valuation dates, the assessees remained the owners, and the jewellery had to be treated as their assets. Regarding the valuation, the Tribunal noted that the jewellery was kept for appropriation towards tax liabilities estimated by the department. The tax liability had to be set off against the jewellery's value, leaving nothing to be added to the net wealth. Even after 1976, when the tax liability was reduced, the jewellery was subject to a confiscation order, making it impractical to include its value. Therefore, the Tribunal directed the Wealth Tax Officer to exclude the entire value of the jewellery from the net wealth computation for all relevant valuation dates.

Ultimately, the appeals were allowed in favor of the assessees, emphasizing the importance of considering the ownership and encumbrances on assets for wealth computation purposes.