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N. Mahalingam Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1982)1ITD913(Mad.)
AppellantN. Mahalingam
RespondentWealth-tax Officer
Excerpt:
.....were passed, are given in the following table :assessment valuation refund due date of income-tax years dates assessment orders rs.1970-71 31-3-1970 41,316 26-6-19711971-72 31-3-1971 42,353 22-12-19711974-75 31-3-1974 31,470 31-10-19751975-76 31-3-1975 17,516 24-2-1976 the authorities below have regarded these income-tax refunds as part of the net wealth and justified the inclusion. the aac observed that the right to receive refund from the government was a valuable right and was property and constituted an asset for the purpose of the act, even though the date of payment was deferred and its payment was spread over a period of years. he also observed that the right to receive the refund was both enforceable and transferable and was an actionable claim. there cannot be any quarrel with.....
Judgment:
1. In these appeals filed by Shri N Mahalingam, Pollachi, against the wealth-tax assessments made for the assessment years 1970-71, 1971-72, 1974-75 and 1975-76, one of the common points involved was whether the department was in any manner justified in including as part of the net wealth of the assessee, the amounts of refund relating to these assessment years, though determined as a consequence of assessments made much after the relevant valuation dates, i.e., the question is whether on the relevant valuation dates, the amount of refund which remained undetermined for the reason that the assessments were not made, could be regarded as an asset for the purpose of computing the net wealth. The amounts added by way of refund for these assessment years and the dates on which the assessment orders were passed, are given in the following table :Assessment Valuation Refund due Date of income-tax years dates assessment orders Rs.1970-71 31-3-1970 41,316 26-6-19711971-72 31-3-1971 42,353 22-12-19711974-75 31-3-1974 31,470 31-10-19751975-76 31-3-1975 17,516 24-2-1976 The authorities below have regarded these income-tax refunds as part of the net wealth and justified the inclusion. The AAC observed that the right to receive refund from the Government was a valuable right and was property and constituted an asset for the purpose of the Act, even though the date of payment was deferred and its payment was spread over a period of years. He also observed that the right to receive the refund was both enforceable and transferable and was an actionable claim. There cannot be any quarrel with this abstract proposition of law. But the question is whether such a right had accrued on the respective valuation dates.

2. Under the existing taxation laws, it is next to impossible to determine the process of assessment and even to prophecise whether it would result in a demand or refund. * Several imponderables come in the way, several considerations arise in the course of assessment proceedings as a consequence of enquiries made and materials gathered which will change the course of the determination of income and consequently the amount of tax payable. That was precisely why the Gujarat High Court in the case of CIT v. Arvindbhai Chimibhai [1982] 133 ITR 800 held that the mere possibility of getting income-tax refund in future as and when the assessment proceedings were to be finalised would not form part of an asset of the assessee belonging to him on the valuation date. On the valuation date what the assessee does is to discharge his legal obligations by paying advance tax, which otherwise, if undischarged, will remain as a debt owed by him on the valuation date. The future possibility of getting refund of the advance tax paid represents a mere chance to get an asset in future, may be years after the valuation date, when the assessment proceedings under the Income-tax Act would be finalised. The Gujarat Hight Court further pointed out that even assuming that the mere likelihood of obtaining a refund, in future, of tax paid for the relevant assessment year could be characterised as an asset in the hands of the assessee on the relevant valuation date, it would be impossible to comprehend and predict with any degree of certainty as to what would be the actual amount of tax refund, if any, which would be available to the assessee in future and which could be treated as his asset on the valuation date. The right of the assessee to receive a particular amount of refund vis-a-vis tax paid for a given assessment year is a mere possibility. Equally so is the corresponding liability of the department to refund to the assessee a particular amount. After pointing out those uncertainties, eventually the Gujarat High Court held that even assuming that the likelihood of obtaining refund is an asset, it is incapable of being evaluated on the valuation date and an asset not capable of being ascertained and evaluated, could not be treated as an asset for the purpose of arriving at the net wealth of an assessee. This, therefore, directly settles the issue and that the assessee's claim that the right to receive refund is an asset not includible in the net wealth is right and the stand taken by the revenue is erroneous. Bearing in mind the principle of law laid down by the Gujarat High Court as above, we hold that the revenue was not at all right in including the amounts of refund.

[Para 3 is not reproduced here an it deals with a minor issue not covered in the synopsis.} 4. In the result, the appeals are partly allowed for the assessment years 1970-71, 1971-72 and 1974-75, and the appeal for the assessment year 1975-76 is allowed.


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