Commissioner of Wealth Tax, Central Kanpur vs Shadi Ram Ganga Prasad, (HUF)

The income tax Appellate Tribunal, Allahabad has referred the following questions of law u/s 27(1) of the Wealth Tax Act, 1957 (hereinafter referred to as the Act) for opinion of this Court. Assessment Year 1978-79:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the decision of the C.W.T. (A) holding that the provisions of Rule 1-BB of the Wealth-tax Rules should apply and the municipal valuation should be taken as gross maintainable rent for the residential property to compute the valuation of the same?

Whether in law and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs, 4,49,180/- being the value of six immovable properties and holding that these properties did not belong to the assessee even when there is no registered deed executed by the assessee for creation of the trust?

Whether in law and circumstances of the case, the Tribunal was justified in confirming the order of the C.W.T. (Appeals) herein that the assessee was entitled for deduction u/s 5(1) (xxxi) in respect of plant and machinery owned by the assessee HUF despite the fact that the assessee did not make use of these assets for the, purposes specified in the said section and same had let out to a sister concern?

Assessment Year 1983-84:

Whether in law and circumstances of the case, the Tribunal was justified in arriving at a conclusion that the value of the property situated at 365, Harrisganj, Kanpur, should be adopted at Rs. 45,767/-, as taken in the assessment year 1971-72 u/s (4) of the Wealth-tax Act, 1957?

Whether in law and circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 4,16,400/- being the value of three immovable properties and holding that these properties did not belong to the assessee even when there is no registered deed executed by the assessee for creation of the trust?

Whether in law and circumstances of the case, the ITAT was justified in confirming the C.W.T. (A)''s decision holding that the assessee was entitled for deduction u/s 5(1)(xxxi) in respect of Plant and Machinery owned by the assessee-HUF, despite the fact that the assessee did not make use of these assets for the purposes specified in the said section and had let out to a sister concern?

Assessment Year 1984-85:

Whether in law and circumstances of the case, the I.T.A.T. was justified in arriving at a conclusion that the value of property at 365, Harrisganj, Kanpur should be adopted at Rs. 45,767 was taken in assessment year 1971-72 u/s 7(4) of the Wealth-Tax Act, 1957?

Whether in law and circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 49,200/- being the value of one immovable property and holding that this property did not belong to the assessee even when there is no registered deed executed by the assessee for creation of the trust?

Whether in law and circumstances of the case, the I.T.A.T. was justified in confirming the C.W.T. (A)''s decision, holding that the assessee was entitled for deduction u/s 5(1)(xxxi) in respect of Plant and Machinery owned by the assessee-HUF, despite the fact that the assessee did not make use of these assets for the purposes specified in the said section and had let out to a sister concern?

The reference relates to the assessment years 1983-84, 1978-79, 1983-84 and 1984-85.

Briefly stated the facts giving rise to the present reference are as follows:

The assessment, in this case, was completed by the Assessing Officer after making addition, representing the value of the residential building, which was taken as per land and building method according to the valuation made by the Valuation Officer. The lessee''s contention was that the valuation of the residential building should be made in accordance with the provisions of Rule l-BB of Wealth-tax Rules and for the purposes of working out the value under Rule 1-BB of the house occupied by the assessee, the gross maintainable rent, should be taken on the basis of municipal valuation of the building as determined by -Cantonment Board. In the assessment years 1983-84 and 1984-85, the assessee had taken a different stand that the value of the property should be assessed as per the provisions of section 7(4) of the Act and that the value of the property should be frozen at Rs. 45,767/- which was determined in the assessment year 1971-72. The Assessing Officer did not accept the contention of the assessee. The assessee being aggrieved preferred an appeal before the Commissioner of Wealth Tax (Appeals), who allowed the same in 1984-85. The Revenue being not satisfied with the said decision of the Commissioner of Wealth Tax (Appeals), however, took up the matter before the Tribunal which dismissed the appeal filed by the Revenue. On the similar issue the assessee had also filed appeal before the Tribunal against the order of the Commissioner of Wealth Tax (Appeals) for the assessment year 1981-84 challenging that the valuation of this property should have been frozen u/s 7(4) of the Act at the level of its valuation assessed in the year 1971-72. The Tribunal allowed the assessee''s appeal and modified the order of the Commissioner of Wealth Tax (Appeals) to the extent that the value of the property situated at 365, Harrisganj, Kanpur will be frozen at the valuation accepted by the Revenue in the assessment year 1971-72 i.e. at Rs.45,767.

The next issue involved is regarding the assess ability of value of six y immovable properties in the assessment year 1978-89, three immovable properties in the assessment year 1983-84 and one in the assessment year 1984-85 in the hands of the assessee HUF. The assessee created verbally a Public Charitable Trust on 31.10.1975. As a settler the assessee settled six immovable properties bearing Nos. 5/1, 158, 183, 44, 200 and 112, Harrisganj, Kanpur, on the said Trust on 31.10.1975, without executing the document on the said date. The assessee had not disclosed the value of these properties in question. As the properties stood vested in the Trust and the assessee was not the owner of the properties on the relevant valuation date and thus the value of the properties was not assessable in the hands of the assessee. The Assessing Officer did not accept the contention of the assessee and added the value of six properties in the assessment year 1978-79, three properties in the assessment year 1983-84 and one in the assessment year 1984-85, to the wealth of the assessee HUF holding that the setters had settled immovable properties on the Trust without drawing any document to transfer the same and there being no document duly registered, indicating such a legally valid transfer of immovable properties, the transfer remained incomplete-Consequently, he arrived at a conclusion that no transfer of property had taken place on the valuation date. Being aggrieved by the said decision of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Wealth Tax (Appeals), who allowed the same and deleted the impugned addition made by the Assessing Office on this account The Revenue being not satisfied with the said decision, further took up matter before the Tribunal which relying upon its earlier order dated 24.5.1988 confirmed the order of the Commissioner of Wealth Tax (Appeals) and dismissed the appeal filed by the Revenue.

The last question involved in this case is regarding allow ability of deduction u/s 5(1)(xxxi) of the Act in respect of the plant and machinery owned by the HUR The assessee owned an Industrial Undertaking engaged in the specified modes of business-activity as laid down in the Explanation to that section. Further the machinery was given on lease to a sister concern of the assessee, namely, M/s Sadi Ram Ganga Prasad and the mill was run by the said firm. The assessee had claimed exemption u/s 5(1)(xxxi) on the basis that it was an Industrial Undertaking and thus the assets of the said undertaking could not be included in the wealth of the assessee. The said contention was not accepted by the Assessing Officer, but was accepted by the Commissioner of Wealth Tax (Appeals) relying upon the decision of the Andhra Pradesh High Court, reported in Commissioner of Wealth Tax Vs. C.S. Rao, . The appeal filed by the Revenue against the said decision was also dismissed by the Tribunal.

We have heard Sri R.K. Upadhyaya learned standing counsel for the Revenue. Sri R.S. Agarwal, learned counsel has put in appearance on behalf of the assessee.

So far as question no. 1 is concerned, we find that in Wealth Tax, Reference No. 245 of 1989 (Commissioner of Wealth Tax v. Sadi Ram Ganga Prasad, HUF,) decided on 4th September, 2006 similar question has been answered by this Court in favour of the assessee and against the Revenue.

So far as question nos. 2, 5 and 8 are concerned, we find in Income Tax Reference No. 127 of 1989 CIT v. Sadi Ram Ganga Prasad Charitable Trust, Kanpur) decided on 19th September, 2006 similar question has been answered by this Court in favour of the assessee and against the Revenue.

So far as question nos. 3, 4, 6, 7 and 9 are concerned we find that in CWT v. Shadi Ram Ganga Prasad, WT Reference No. 67 of 1992 dated 19-9-2006 similar question has been answered by this Court in favour of the assessee and against the Revenue. Respectfully following the aforesaid decisions we answer all the questions referred to us in affirmative, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.