2021 (9) TMI 276 - AT - Wealth-tax

Properties considered for wealth tax purposes - four properties were treated as stock-in-trade and profits from sale of said properties has been offered to tax under the head income from business , thus not included under wealth tax - HELD THAT - When the Assessing Officer has accepted profits earned from sale of said assets as income assessable under the head income from business or profession , then there is no reason for the Assessing Officer to treat said assets as investments only for the reason that those assets are not classified as stock-intrade in books of account of the assessee. It is well settled principles of law by the decision of various courts, as per which entries in the books of account is not relevant criteria to decide nature of asset or income or expenses, but what is relevant is nature of assets and intention of the assessee to hold such assets in the business of the assessee. From the intent and conduct of the assessee, it was very clear that those lands were held in the business of the assessee as stock-in-trade and further, profits derived from sale of said land was rightly assessed under the head income from business or profession. The Assessing Officer having accepted income declared from sale of land under the head profits gains from business, was erred in considering those lands as investments which falls under the definition of assets u/s.2(e)(a) of the Wealth Tax Act, 1957, and to charge for wealth tax. Therefore, the Assessing Officer as well as learned CWT(A) completely erred in considering assets held as stock-in-trade within definition of assets for the purpose of wealth tax. The Assessing Officer is directed to delete four assets as claimed by the assessee as stock-in-trade for the purpose of wealth tax - appeal filed by the assessee for both assessment years are allowed.

Summary

Issues:
Assessment of properties for wealth tax purposes based on nature of assets and intention of holding, treatment of assets as stock-in-trade, relevance of entries in books of account, acceptance of profits under 'income from business', errors in assessing assets for wealth tax.

Analysis:
The appeals were filed against orders of the CWT(A) regarding assessment years 2008-09 and 2009-10. The Assessing Officer included properties for wealth tax as assets under the Wealth Tax Act, 1957, despite the assessee treating some as stock-in-trade with profits offered under 'income from business'. The CWT(A) upheld the assessment, stating the assets were not substantiated as stock-in-trade in the balance sheet. The assessee argued that not showing assets as stock-in-trade in the balance sheet doesn't make them assets under the Act. The Tribunal noted that the nature and intention of holding assets for business were crucial, not just book entries. It found merit in the assessee's arguments, emphasizing that profits declared under 'income from business' indicated the assets were held as stock-in-trade. The Tribunal held that the authorities erred in considering these assets as investments for wealth tax, directing the deletion of four assets claimed as stock-in-trade.

The Tribunal emphasized that the Assessing Officer's acceptance of profits as business income indicated the assets were held as stock-in-trade. It highlighted that the nature of assets and the intention of the assessee were pivotal, not just book entries. The Tribunal found errors in the authorities' decision to treat the assets as investments for wealth tax purposes, emphasizing the assets were held in the business as stock-in-trade. Consequently, the Tribunal directed the deletion of the assets claimed as stock-in-trade for wealth tax assessment.

The Tribunal reiterated that the nature of assets and the intention of holding them for business purposes were crucial in determining their classification for wealth tax. It emphasized that the acceptance of profits under 'income from business' indicated the assets were held as stock-in-trade, contrary to being treated as investments. The Tribunal found errors in the authorities' approach, emphasizing that the assets were rightly assessed under 'income from business or profession'. Therefore, the Tribunal directed the deletion of the assets from the wealth tax assessment, allowing the appeals for both assessment years.