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2009 Supreme(Raj) 1600
RAJASTHAN HIGH COURT AT JAIPUR BENCH
R.C.Gandhi, M.N.Bhandari, JJ.
Commissioner of Wealth - Appellant
Versus
Smt. Bhanwari Devi (and other cases) - Respondent
D.B. Wealth-tax Reference Nos. 82 of 1986, 4, 5, 7, 6, 66, 49 and 65 of 1988, 7 and 34 of 1989, 14, 16, 32 and 38 of 1990, 3, 5 and 6 of 1992, 8 of 2003 : D.B. Wealth-tax Appeals Nos. 3, 4, 6, 7, 9, 10 and 11 of 2000 and D.B. Wealth-tax Reference Applications Nos. 20, 26, 27, 118, 156, 140, 144 and 125 of 1988 and 7 and 28 of 1995.
Decided On : 12-02-2009
The burden of proof lies with the Revenue to establish the market value of the closing stock and the applicability of rule 2B(2) of the Wealth-tax Rules. Additionally, the court clarified the definition of an industrial undertaking within the meaning of the Explanation to section 5(1)(xxxi) and the exemption under section 5(1)(xxxii) of the Wealth-tax Act.
Headnote:
Wealth-tax - Industrial Undertaking - Wealth-tax Act, 1957 - Rule 2B(2) - Sections 5(1)(xxxi) and 5(1)(xxxii)
Fact of the Case:
The Wealth-tax Officer applied rule 2B(2) of the Wealth-tax Rules, 1957, for valuing the closing stock of a firm. The Appellate Assistant Commissioner held that rule 2B(2) has no application. The Tribunal upheld the Appellate Assistant Commissioner's decision. The controversy also involved the exemption under section 5(1)(xxxii) of the Wealth-tax Act for the interest of the assessee in the firm being a partner.
Finding of the Court:
The Division Bench held that the burden was on the Revenue to prove that the market value of the closing stock exceeded the value disclosed in the balance-sheet by more than 20 per cent. The court also held that the assessee's firm was an industrial undertaking within the meaning of the Explanation to section 5(1)(xxxi) and consequently the assessee's interest in the firm was exempt under section 5(1)(xxxii) of the Wealth-tax Act.
Issues: Application of rule 2B(2) of the Wealth-tax Rules for valuing the closing stock and the exemption under section 5(1)(xxxii) of the Wealth-tax Act for the interest of the assessee in the firm being a partner.
Ratio Decidendi: The burden was on the Revenue to prove the market value of the closing stock and the applicability of rule 2B(2) of the Wealth-tax Rules. The court also established that the assessee's firm was an industrial undertaking within the meaning of the Explanation to section 5(1)(xxxi) and consequently the assessee's interest in the firm was exempt under section 5(1)(xxxii) of the Wealth-tax Act.
Final Decision: The references were answered against the Revenue and in favour of the assessee.
(1) D. B. Wealth-tax Reference No. 4 of 1988 :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying rule 2B(2) of the Wealth-tax Rules the onus was on the Revenue to prove that the market value of the closing stock of M/s. Rawat Jewellers, Jaipur, exceeded the value as shown in the firm's accounts by more than 20 per cent ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of the Appellate Assistant Commissioner that the firm M/s. Rawat Jewellers, Jaipur, is an industrial undertaking within the meaning of the Explanation to section 5(1)(xxxi) and consequently in holding that the value of the assessee's interest in that firm is exempt under section 5(1)(xxxii) of the Wealth-tax Act, 1957 ?"
(2) D. B. Wealth-tax Reference No. 5 of 1988 :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying rule 2B(2) of the Wealth-tax Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s. Rawats Bombay exceeded the value as shown in the firm's accounts by more than 20 per cent. ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of the Appellate Assistant Commissioner that the firm M/s. Rawats Bombay is an industrial undertaking within the meaning of Explanation to section 5(1)(xxxi) and consequently in holding that the value of the assessee's interest in that firm is exempt under section 5(1)(xxxii) of the Wealth-tax Act, 1957 ?"
(3) D. B. Wealth-tax Reference No. 7 of 1988 :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying rule 2B(2) of the Wealth-tax Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s. Rawat Jewellers, Jaipur, exceeded the value as shown in the firm's accounts by more than 20 per cent. ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of the Appellate Assistant Commissioner that the firm M/s. Rawat Jewellers, Jaipur, is an industrial undertaking within the meaning of Explanation to section 5(1)(xxxi) and consequently in holding that the value of the assessee's interest in that firm is exempt under section 5(1)(xxxii) of the Wealth-tax Act, 1957 ?"
(4) D. B. Wealth tax Reference No. 66 of 1988 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the Wealth-tax Officer to arrive at the value of the immovable property by applying rule 1BB and further in directing if the value arrived at by applying rule 1BB does not exceed the value as per the books by 20 per cent. than he shall not apply rule 2B(2) in respect of immovable property ?"
(5) D. B. Wealth-tax Reference No. 6 of 1988 :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying rule 2B(2) of the Wealth-tax Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s. Rawats Bombay and M/s. Rawat Jewellers, Jaipur, exceeded the value as shown in the firms' accounts by more than 20 per cent. ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of the Appellate Assistant Commissioner that the firm M/s. Rawats Bombay and M/s. Rawat Jewellers, Jaipur, are an industrial undertaking within the meaning of Explanation to section 5(1)(xxxi) and consequently in holding that the value of the assessee's interest in that firm is exempt under section 5(1)(xxxii) of the Wealth-tax Act, 1957
