1984 (9) TMI 152 - AT - Wealth-tax

Summary

Issues Involved:
1. Justification of the AAC's direction to the WTO to allow exemption under section 5(1)(iv) of the Wealth-tax Act, 1957, in respect of the assessees' share of interest in the Hotel Skylark building.
2. Legitimacy of the AAC admitting new claims at the appellate stage.
3. Obligation of the WTO to provide beneficial treatment to the assessee based on the Board's circular.

Issue-wise Detailed Analysis:

1. Justification of the AAC's direction to the WTO to allow exemption under section 5(1)(iv) of the Wealth-tax Act, 1957, in respect of the assessees' share of interest in the Hotel Skylark building:

The AAC directed the WTO to allow the exemption under section 5(1)(iv) in respect of the assessees' share in the Hotel Skylark building instead of the Karnal property. The AAC relied on Sampath Iyengar's "The Three New Taxes" and a Board circular which suggested that the exemption should be available in respect of any one building that would give the maximum tax benefit to the assessee. However, the Tribunal observed that there was a divergence of judicial opinion on whether such an exemption could be claimed for a building owned by a partnership. The Tribunal noted that the Madras High Court in Purushothamdas Gocooldas v. CWT held that partners could not claim exemption for a property owned by the partnership. Contrarily, the Karnataka and Patna High Courts allowed such exemptions in individual assessments of partners. Due to this conflict, the Tribunal concluded that the matter was not settled and thus the AAC was not justified in directing the WTO to substitute the Skylark building for the Karnal property for exemption purposes.

2. Legitimacy of the AAC admitting new claims at the appellate stage:

The Tribunal held that the AAC was not justified in admitting new facts and claims at the appellate stage that were not presented before the WTO during the assessment proceedings. The original exemption claim was for the Karnal property, and no claim was made for the Skylark building at the assessment stage. Referring to the Supreme Court's decision in Addl. CIT v. Gurjargravures (P.) Ltd., the Tribunal emphasized that new claims or facts should not be entertained at the appellate stage if they were not part of the original assessment proceedings. Therefore, the AAC erred in admitting the new claim for the Skylark building exemption.

3. Obligation of the WTO to provide beneficial treatment to the assessee based on the Board's circular:

The AAC argued that based on the Board's circular, the WTO should have informed the assessees about the more beneficial exemption option. The circular stated that officers should assist taxpayers in claiming reliefs to which they are entitled. However, the Tribunal noted that this obligation applies only to clear-cut cases where there is no controversy regarding the exemption. Given the judicial conflict on whether the exemption under section 5(1)(iv) applies to properties owned by partnerships, the Tribunal held that the WTO was not obligated to suggest the more beneficial exemption option. The Tribunal highlighted that the matter was not free from doubt and thus the WTO had no duty to advise the assessees to claim the exemption for the Skylark building.

Conclusion:

The Tribunal concluded that the AAC was not justified in directing the WTO to allow the exemption under section 5(1)(iv) for the Skylark building and in admitting new claims at the appellate stage. The Tribunal reversed the AAC's orders and restored the WTO's original assessments, emphasizing that the WTO was not obligated to provide beneficial treatment in cases involving judicial controversy. The appeals filed by the department were allowed.