2020 (3) TMI 582 - HC - Wealth-tax

Wealth tax assessment - Valuation of the shares - HELD THAT - The case of applicant's wife has held that Rule 1D of the Wealth Tax Rules, 1957, is prospective in nature and therefore, the same could not have been applied for undertaking valuation of the shares for the assessment years 1964-65, 1965-66 and 1966-67. However, the Tribunal, Pune Bench has held that Rule 1D of the Wealth Tax Rules could have been applied for the assessment years 1967-68 and 1968-69. On this basis, the Tribunal, Pune Bench, in fact, partly allowed the Appeals instituted by the applicant's wife, insofar as assessment years 1964-65, 1965-66 and 1966-67 are concerned, but, dismissed the Appeals for the assessment years 1967-68 and 1968-69. Once, the Tribunal, Pune Bench ruled that Rule 1D of the said Act could have been invoked prospectively and such view of the Tribunal, Pune Tribunal was never challenged by the Revenue, the same view was required to be adopted in the case of the present applicants as well. In fact, the Tribunal has also taken a view that the Pune Bench view was required to be followed. However, while actually following such view, the Appellate Tribunal proceeded to dismiss all the Appeals instituted by the present applicants, instead of following the same course of action as was adopted by the Tribunal, Pune Bench. Appeals instituted by the present applicants, insofar as assessment years 1964-65, 1965-66 and 1966-67 were required to be partly allowed by the Appellate Tribunal and only the Appeals concerning the assessment years 1967-68 and 1968-69 could have been dismissed. Inclusion in the net wealth of the assessee the amount due to the assessee by certain parties in Portugal - HELD THAT - As relying on M/S SHIV SHAKTI FLOUR MILLS (P) LTD. VERSUS COMMISSIONER OF INCOME TAX 2020 (3) TMI 182 - SUPREME COURT Tribunal was not justified in law in confirming the inclusion in the net wealth of the assessee as amount due to the parties (the Lisbon fund).

Summary

Issues:
1. Valuation of shares in a company for wealth tax assessment
2. Inclusion of foreign advances in net wealth for wealth tax assessment
3. Classification of gold ornaments as jewelry for wealth tax assessment
4. Claim for deduction from the value of assets for wealth tax assessment

Issue 1: Valuation of Shares in a Company
The High Court considered the Tribunal's order regarding the valuation of shares held by the assessee in a company. The Tribunal had applied Rule 1D of the Wealth Tax Rules, 1957, prospectively for certain assessment years. The Court noted that the Tribunal had partially allowed appeals for specific years based on this rule but dismissed others. The Court agreed with the Senior Advocate's argument that consistency was required in applying the rule. It held that the Tribunal should have partly allowed the appeals for certain years and dismissed others, as done in the previous case. The Court concluded that the first question regarding the valuation of shares should be answered in favor of the applicants.

Issue 2: Inclusion of Foreign Advances in Net Wealth
The Court examined the inclusion of amounts due to the assessee from parties in Portugal in the net wealth. The Senior Advocate presented a communication addressing the Lisbon fund issue for later assessment years. The communication highlighted various factors affecting the recovery of the debt, such as restrictions on imports, strained economic relations, and remittance bans. The Court noted that similar circumstances existed for the earlier assessment years in question. Despite the argument that recovery might not be time-barred, the Court emphasized the relevance of other factors mentioned in the communication. It observed that these circumstances applied with more significance to the earlier assessment years. Relying on the communication and past Tribunal decisions, the Court concluded that the inclusion of the Lisbon fund in the net wealth was not justified. Therefore, the second question was answered in favor of the assessee.

Issue 3: Classification of Gold Ornaments
The applicants did not press for an opinion on whether gold ornaments without precious stones should be classified as jewelry for wealth tax assessment. Consequently, the Court disposed of this issue without expressing an opinion.

Issue 4: Claim for Deduction
The claim for deduction from the value of assets was not pressed by the applicants. The Court disposed of this issue without expressing an opinion.

In summary, the High Court of Bombay addressed issues related to the valuation of shares, inclusion of foreign advances in net wealth, and the classification of gold ornaments for wealth tax assessment. The Court emphasized the need for consistency in applying rules and considered relevant factors affecting the recovery of foreign advances. Ultimately, the Court ruled in favor of the applicants on the valuation of shares and the inclusion of foreign advances in net wealth, while disposing of the other issues without expressing an opinion.