1983 (11) TMI 172 - AT - Wealth-tax

Summary

Issues Involved:
1. Admission of Additional Ground by the Assessee
2. Deduction of Liability for Restoration of Land
3. Inclusion of Lease Interest as an Asset
4. Validity of Gifts to HUF Members
5. Inclusion of Jetty Value and Income in Assessments
6. Valuation of Barges
7. Deduction for Restrictions on Karta's Power
8. Inclusion of Gold and Silver Ornaments as Jewellery

Detailed Analysis:

1. Admission of Additional Ground by the Assessee:
The assessee sought to raise an additional ground claiming deduction of liability for restoring mined land. The department contested this, citing prior rulings that additional grounds not raised before the WTO could not be admitted. However, the Tribunal admitted the additional ground, noting that the documents supporting the claim were part of the assessment record and no new material was introduced.

2. Deduction of Liability for Restoration of Land:
The assessee argued that the liability to restore land used for mining should be deducted as an accrued liability. The Tribunal examined the lease agreements and found that the liability was contingent upon the land being fully exploited or abandoned. Since these conditions were not met, the liability did not qualify as a debt due on the valuation dates. The Tribunal rejected the assessee's claim, applying the Supreme Court ruling in Standard Mills Co. Ltd. v. CWT.

3. Inclusion of Lease Interest as an Asset:
The assessee contended that its mining leases did not qualify as assets under section 2(e) of the Wealth-tax Act due to their precarious nature. The Tribunal referred to a prior decision in Smt. Sushila M. Timblo's case, which held that the leases were not precarious and thus were includible as assets. The Tribunal upheld this view for the years 1964-65 to 1972-73. For the years 1973-74 to 1976-77, the assessee argued that the amendment to the Indian Act in 1972 made the leases precarious. The Tribunal rejected this, noting that the government's power to terminate leases under section 4A was not absolute but subject to regulatory interests.

4. Validity of Gifts to HUF Members:
The Tribunal upheld the Commissioner (Appeals)'s decision that the gifts made by the karta to persons outside the family and to family members were invalid, based on a prior Tribunal ruling in the assessee's income-tax case. Consequently, the gifted properties were rightly included in the HUF's assessments.

5. Inclusion of Jetty Value and Income in Assessments:
The assessee argued that the jetty and its income, derived from invalid gifts, should not be included in the HUF's wealth. The Tribunal rejected this, noting that the invalidity of the gifts meant the assets remained HUF property. For the years 1975-76 and 1976-77, the assessee claimed adverse possession under the Limitation Act. The Tribunal remanded this issue to the WTO for further enquiry into the nature of the adverse possession.

6. Valuation of Barges:
The department contested the Commissioner (Appeals)'s acceptance of the assessee's valuer's report over the departmental Valuation Officer's report. The Tribunal found that the Commissioner (Appeals) failed to provide clear reasons for preferring the assessee's valuation and did not allow the WTO to examine the valuer's report. The Tribunal set aside the Commissioner (Appeals)'s order and directed a fresh examination.

7. Deduction for Restrictions on Karta's Power:
The Commissioner (Appeals) allowed a 10% deduction in the value of immovable property due to restrictions on the karta's power to sell HUF property. The Tribunal found this reasoning flawed, noting that the subject of valuation was the HUF's property, not the karta's powers. The Tribunal set aside the Commissioner (Appeals)'s order and restored the WTO's valuation.

8. Inclusion of Gold and Silver Ornaments as Jewellery:
The Commissioner (Appeals) had ruled that gold and silver ornaments were not includible as jewellery before the amendment to section 5(1)(viii) of the Wealth-tax Act. The department argued that the amendment merely clarified existing law. The Tribunal noted conflicting judicial opinions on this issue but ultimately rejected the department's contention, siding with the view that the amendment was clarificatory.

Conclusion:
The Tribunal dismissed the assessee's appeals for the years 1964-65 to 1974-75, partly allowed the appeals for 1975-76 and 1976-77 for statistical purposes, and partly allowed the departmental appeals for statistical purposes.