Mrs. Achamma Sebastian vs Commissioner of Wealth Tax

T. Kochu Thommen, J.—The following question has been, at the instance of the assessee, referred to us by the Income Tax Appellate Tribunal, Cochin Bench:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a sum of Rs. 19,54,685 due from M/s. Koolfoam Pvt. Ltd. and a sum of Rs. 1,67,160 due from M/s. Stella Rubber Works should be treated as the assets of the firm of M/s. Heavea-tex Rubber Co. in computing the value of the interest of the assessee in the said firm for the purpose of wealth-tax ? "

The assessment years in question are 1976-77, 1977-78 and 1978-79 for which the relevant valuation dates are March 31, 1976, March 31, 1977, and March 31, 1978, respectively. The assessee is an individual whose wealth included her interest in a firm. Certain amounts were due to the firm from its customers and the firm had written off Rs. 15 lakhs from one of them and Rs. 1,67,160 from another. The assessee in computing her interest in the firm excluded these amounts from the assets of the firm as bad debts. The Wealth-tax Officer held that the debts had not become bad debts and rejected the assessee''s contention on this point. The assessee''s appeal was allowed by the Appellate Assistant Commissioner. But his decision was reversed by the Income Tax Appellate Tribunal. The Tribunal held in paragraph 5 of its order as follows:

"5. We have considered the matter. It is not disputed that the claim of the firm to write off of the amount as bad debt has been disallowed in the Income Tax assessment. This has become final. The firm cannot, therefore, claim the amount as bad debt in spite of the fact that the same has been written off in the accounts. When this is the position as regards Income Tax, we find no reason to take a different view of the matter when it comes to the working out of the interest of a partner in the firm for the purpose of wealth-tax. Further, this will be against the express provisions contained in Rules 2C and 2D of the Wealth-tax Rules."

This is essentially a finding of fact. The Tribunal has also rightly found that the claim of the assessee is contrary to Rules 2C and 2D of the Wealth-tax Rules, 1957. In the circumstances, we answer the question in the affirmative, that is, against the assessee and in favour of the Revenue.

We direct the parties to bear their respective costs in these tax referred cases.

A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.