M.A. Murugappan vs Commissioner of Wealth Tax

Ramanujam, J.—The assessee in this reference petition seeks a direction from this court to refer the following question for the opinion of this

court :

Whether, on the facts and in the circumstances of the case, the reassessment proceedings initiated u/s 17(1)(b) of the Wealth-tax Act, 1957, are

valid in law ?

The assessee in this case filed his wealth-tax return showing a net wealth Rs. 10,54,342 and deducted therefrom wealth-tax liability of Rs.

10,870. In arriving at the net wealth, the assessee had deducted debts to the extent of Rs. 1,34,814 which included a policy loan from the Life

Insurance Corporation and accrued interest thereon of Rs. 18,600. Along with the Wealth-tax return, the assessee also appended a note claiming

relief under rule 3 of Part II of the schedule to W.T. Act, as he is not a citizen of India and is not ordinarily resident in India. The WTO allowed the

deduction of the loan from the Life Insurance Corporation treating it as a debt and also gave 50 per cent. reduction of tax, treating the assessee as

a resident, but not ordinarily resident. After the assessment, the internal audit party pointed out (1) that the loan from the Life Insurance corporation

was not deductible under s. 2(m)(ii), and (2) that the Income Tax refund of Rs. 9,202 should be included in the net wealth. It also pointed out that

the assessee was a resident, but not ordinarily resident, and he was not entitled to 50 percent. reduction of the tax, as if he was a non-resident,

following the procedure adopted for the year 1974-75 during which the assessee was in fact a non-resident. Taking note of the said audit report,

the WTO reopened the assessment. We are not at this stage concerned with the merits of the reassessment. The only question that is sought to be

referred to this court was as regards the question whether the audit report which formed the basis for reopening the assessment constituted

information within the meaning of s. 17(1)(b) of the W.T. Act. We are of the view that, on the facts and circumstances of this case, the audit report

should be taken to constitute sufficient information within the meaning of s. 17(1)(b) of the W.T. Act. Even in the note appended to the wealth-tax

return, the assessee has stated that he is not a citizen of India and is not ordinarily resident in India. In spite of the assessee''s own statement, he

was given the relief of 50 per cent. rebate which is available only to a non-resident, by the WTO. Further, the loan taken from the Life Insurance

Corporation, which is an exempted item of asset, has, according to the audit report, wrongly been treated as a debt deductible. Similarly, the debt

that has accrued to the assessee has not been treated as an asset and included in the net wealth. The factual position has been pointed out by the

audit report, and the report should be taken to constitute information within the meaning of s. 17(1)(b).

The learned counsel for the assessee would contend that whether the assessee is a resident, but not ordinarily resident or is a non-resident, is a

question of law, the audit party cannot instruct the WTO as to how the assessee should be treated, and that relates to a question of law. We do

not see any substance in the contention urged by the learned counsel. The audit party merely brings to the notice of the WTO, the note given by the

assessee along with his wealth-tax return wherein he had claimed to be a resident, but not ordinarily resident, and that in the face of that note, the

assessee cannot be treated as a non-resident. We do not see how the said question involves a question of law. In respect of other matters also, the

audit party merely brings to the notice of the WTO certain omissions and commissions made by him, and the audit party cannot be said to have

instructed the WTO on matters of law. In this view, we are in entire agreement with the Income Tax Tribunal when it says that the audit report

would constitute information, so as to attract s. 17(1)(b) of the W.T. Act. The petition is dismissed.