wealth tax - moment at which computation is to be made - Income Tax - 637/CBDT

INSTRUCTION NO. 637/CBDT Dated : December 11, 1973 Section(s) Referred: 20 Statute: Wealth Tax Act, 1957 Net wealth is defined in section 2(m) to mean the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value all the debts owed by him on the valuation date. Valuation date is defined in section 2(q) to mean in relation to any assessment year, the last day of the previous year/last day of the last of the previous year, as defined in the I.T.Act in the case of Income-tax assessees and 31st day of March immediately preceding the assessment year in the case of others. 2. A question arises as to whether the net wealth at the first moment of the valuation date is to be taken into account or the net wealth at the last moment of that date is to be taken into account. The High Court at Allahabad has held in the case of Shri Dwaraka Nath Vs.CIT, reported in 62 ITR, Page 304:- "As the net wealth on the last date of previous years is to be assessed to tax, it is mere reasonable to hold that the net wealth at the last moment of the last date should be assessed and not the net wealth at the first moment of the last date. If the object is to take the net wealth at a time as late as possible in the previous year one must take the net wealth at the last moment, rather than at the first moment of the last date. Selecting the first moment does not fit in very well with the legislatures selecting the last date of the previous year for assessing the net wealth. 3. This decision has been accepted by the Board. The Wealth-tax Officers may, therefore be instructed to take into account the net wealth at the last moment of the valuation date for the purpose of wealth-tax assessments. The only exception to this principle is the provision contained in section 20 of the Wealth-tax Act. In terms of section 20 if the property of a joint family has been partitioned as a whole among the various number or groups of members in definite portions, the Wealth Tax Officer shall have to make assessments on the net wealth of the undivided family as such for the assessment year including the year relevant to the previous year in which the partition has taken place, if the partition has been taken on the last date of the previous year. The Board have already issued instruction on the scope of section 20 of the W.T.Act vide the Board Instruction No.281 dated 1-4-71. It would follow that in the case of a partial partition of the HUF which takes place on the valuation date the asset in question will be assessed in the hands of the members who get the asset and not in the hands of the HUF.