2017 (6) TMI 978 - HC - Wealth-tax

Assessment to wealth tax of amalgamated company - whether Tribunal is right in law in not considering the issue of the valuation of the properties which are under challenge in appeals? - Held that - The present case relates to the period prior to the date of amalgamation. Returns were also filed prior to the amalgamation and the notices were issued before the date of amalgamation when the assessee existed during the assessment. Amalgamation was done with effect from 1.4.1995 before the date of completion of assessment. As per the scheme, all actions and legal proceedings pending on the completion of procedures date shall be continued to enforce transfer as held by the Commissioner of Income Tax. The existing liability has to be discharged by M/s.Balaji Industries Ltd., as continued. Therefore, the contention of the appellant would not be valid and cannot be accepted. On examination of the Balance Sheet for the relevant assessment year, the property has been held as fixed asset and not stock in trade. Therefore, the assessee is liable to be assessed to the wealth tax. Insofar as the lands at Nellore is concerned, the same was purchased to establish Aqua Farm. As the water on the lands was not suitable for breeding fishes, the project had been given up. Therefore, the land is amenable to wealth tax. The aforesaid contention was decided by the appellate authority as well as the Tribunal on facts. Therefore, the liability of M/s.Balaji Industries Limited would continue against the M/s.Balajai Hotels and Enterprises Ltd. Learned counsel for the appellant would not raise any of the grounds which has already been discussed by the appellate Tribunal and in accordance with clause 9 and 10 of the scheme. Therefore, we are of the opinion that the said fact was considered by relying upon the relevant clause of the amalgamation scheme which was approved by the High Court of Andhra Pradesh. Therefore, no interference is required insofar as the aforesaid question of law raised by the appellant. We confirm the factual findings of the lower authorities.

Summary

Issues Involved:
1. Validity of assessment to wealth tax post-amalgamation.
2. Consideration of property valuation issues under appeal.
3. Acceptance of valuation declared by the appellant.

Detailed Analysis:

1. Validity of Assessment to Wealth Tax Post-Amalgamation:
The court addressed whether the assessment to wealth tax for the amalgamated company was valid. The Tribunal held that as per the scheme of amalgamation, all actions and legal proceedings by or against the transferor company pending on the completion of the procedure date shall be continued and enforced against the transferee company. Therefore, the transferee company, M/s. Balaji Hotels and Enterprises Ltd., is liable for the wealth-tax liabilities of the transferor company, M/s. Balaji Industries Pvt. Ltd. The court confirmed this finding, stating that the proceedings initiated by the authority were valid and in accordance with the law, as the scheme of amalgamation approved by the High Court of Andhra Pradesh included provisions for the continuation of liabilities.

2. Consideration of Property Valuation Issues Under Appeal:
The appellant challenged the valuation of the Mount Road property. The court noted that the property was purchased on 25.9.1986, and as per proviso 3(v) to Section 40 of the Finance Act, 1983, if the land is unused for two years from the date of acquisition, it is liable to wealth tax. The property was held as a fixed asset and not as stock-in-trade, thus attracting wealth tax. The Commissioner of Income Tax and the Tribunal confirmed this finding. The court also discussed the valuation method, stating that Rule 3 of Schedule III of the Wealth Tax Act governs the valuation of immovable property, and the Assessing Officer was directed to apply Rule 8 of Schedule III for valuing the property.

3. Acceptance of Valuation Declared by the Appellant:
The appellant contended that the valuation declared for the Mount Road property should have been accepted. However, the court observed that the guideline value fixed by the State Government was considered by the Commissioner of Income Tax due to the absence of other evidence from the assessee. The court upheld the Tribunal's decision, stating that the valuation method applied by the Assessing Officer was proper and in accordance with the law. The court also referenced several case laws, including "Marshall Sons and Co. (India) Ltd. vs. Income Tax Officer" and "Giridhar G. Yadalam v. Commissioner of Wealth Tax," to support its conclusions.

Conclusion:
The court dismissed the appeals, confirming the factual findings of the lower authorities and holding that the assessment to wealth tax post-amalgamation was valid, the property valuation issues were correctly addressed, and the valuation declared by the appellant was not acceptable due to the lack of supporting evidence. The substantial questions of law were answered against the assessee, and no costs were awarded.