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J. K. A. Asokan and ors. Vs. Income Tax Officer/Wealth Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petn. Nos. 1315 to 1319, 1321 & 1486 of 1980, 628, 655, 646, 697, 714 & 715 of 1981, 65
Reported in(1986)55CTR(Mad)444
AppellantJ. K. A. Asokan and ors.
Respondentincome Tax Officer/Wealth Tax Officer and ors.
Cases ReferredMangilal Jain v. Collector of Customs
Excerpt:
- - 7 of the act will clearly enable the wto to refer the question of valuation of any asset of the partnership to the valuation officer under s. the said decision of the supreme court squarely governs these cases as well and in the face of the said decision the contentions advanced by the ld. it is seen that even when the petitioner approached this court for the issue of a writ in each, of these cases, the revenue had only three weeks to two months time for completion of the assessments and therefore the revenue cannot claim to be a better position merely because the petitioner have approached this court by way of writ petitions and later withdrawn the same......any specified item of the partnership for wealth-tax purpose. to the similar effect are the other writ petitions. these writ petitions were resisted by the revenue.3. at the time of the filing of the writ petitions, the petitioner filed miscellaneous petitions for stay of the assessment proceeding based on the valuation report given by the valuer. this court granted interim stay and because of the orders of stay, granted at the instance of the petitioners, the assessments have not been made for the various assessment years, involved in these writ petitions.4. subsequent to the filling of the writ petitioners, the supreme court has rendered a decision on the same question in juggilal kamlapat bankers v. wto : [1984]145itr485(sc) . it is seen from the said decision that a similar.....
Judgment:

Ramanujam, J. - The points involved in all these writ petitions are the same, though the prayers asked for in them very, since the facts in all the cases are substantially the same it will suffice if we refer to the facts in W.P. No. 1316 of 1980.

2. The assessee in W.P. No. 1316 of 1980 is a partner in certain firms and in his wealth-tax assessment proceedings the WTO directed the valuation of some of the properties of the firms by the authorised valuer for the purpose of ascertaining the value of the interest of the assessee in the firms for the assessment of wealth-tax. At that stage the assessee came to this Court for the issue of a writ of prohibition restraining the WTO from proceedings to complete the wealth-tax assessment for the relevant assessment year on the basis of the valuation given by the valuer in respect of some of the assets of the various firms in which the assessee was a partner. According to the petitioner assessee, a partner of a firm cannot claim any share in a particular item of the asset of a partnership and he is entitled to claim his share only after valuing the entire assets and liabilities of the partnership. Thus, the challenge made by the petitioner in the writ petition is as regards the validity of s. 16A of the WT Act and the relevant rules which enable the WTO to refer the valuation of any specified item of the partnership for wealth-tax purpose. To the similar effect are the other writ petitions. These writ petitions were resisted by the Revenue.

3. At the time of the filing of the writ petitions, the petitioner filed miscellaneous petitions for stay of the assessment proceeding based on the valuation report given by the valuer. This Court granted interim stay and because of the orders of stay, granted at the instance of the petitioners, the assessments have not been made for the various assessment years, involved in these writ petitions.

4. Subsequent to the filling of the writ petitioners, the Supreme Court has rendered a decision on the same question in Juggilal Kamlapat Bankers v. WTO : [1984]145ITR485(SC) . It is seen from the said decision that a similar argument, as has been put forward in these cases, was put forward before the Allahabad High Court and the Allahabad High Court rejected the said argument on the ground that it was not always necessary for the WTO to quantify and value the interest of a partner on the basis of the balance-sheet, since the balance-sheet method may not be binding or conclusive and therefore the statute has rightly given discretion to the WTO to value the individual assets of the partnership and refer the valuation of such individual assets to the Valuation Officer. The said decision of the Allahabad High Court has been affirmed by the Supreme Court in the above decision. According to the Supreme Court, a partners interest in a firm is a property or asset liable to be included in the net wealth of the partner and as such it is exigible to wealth-tax under the Act and once that position is accepted, it is clear that such assets will have to be valued for the purpose of wealth tax and the method of valuation of such interest has to be done only according to r. 2(1) of the WT Rules and r. 2(1) read with s. 7 of the Act will clearly enable the WTO to refer the question of valuation of any asset of the partnership to the Valuation Officer under s. 16A of the Act. Thus, the Supreme Court has held that the primary method of determining the value of assets for the purposes of the WT Act is the one indicated in s. 7(1), inasmuch as it provides that the value of any asset other than cash shall for the purposes of the Act be estimated to be its market price on the valuation date, that sub-s. (2) of s. 7 directs that in the case of business for which accounts are maintained by the assessee regularly, the WTO may instead of determining separately the valuation of each asset held by the assessee in such business as whole having regard to its balance-sheet or make such adjustments therein as may be prescribed. But the WTO is also entitled to proceed on the alternative basis of no valuing the business as a whole but taking the value of individual assets and working out the value of the partners share in all the times belonging to the partnership and making due provisions for the liabilities etc. In this view, the Supreme Court has upheld the provisions of the WT Act which enable the WTO to refer the valuation of an asset of a partnership to the authorised valuer for the purpose of bringing to charge the interests of a partner in the partnership firm. The said decision of the Supreme Court squarely governs these cases as well and in the face of the said decision the contentions advanced by the ld. counsel for the petitioners cannot be upheld. Faced with the said judgment of the Supreme Court, the learned counsel for the petitioners, after seeing the difficulty in his way, has prayed for permission to withdraw the writ petitions. We, therefore, dismissed all the writ petitions as withdrawn. There will be no order as to costs.

5. The ld. counsel for the Revenue at this stage seeks a direction or permission from this Court to complete the assessments in all cases under the WT Act by 31-12-1984. According to the ld. counsel if such permission is not granted to complete the assessments, the assessments in these cases will have to be completed within a period ranging from three weeks to two months, as the petitioners have approached this court by way of writ petitions and obtained orders of stay at the last minute thus preventing the WTO from completing assessments in time. The ld. counsel would contended that this Court has got power to extent the time for competing the assessments, notwithstanding the time limit prescribed under the Act. We do not see how this Court can possess such power in the instant cases where the petitioners have filed the writ petitions and they seek to withdraw the same on one ground or other. It is only in cases where some relief is granted to the petitioners, we have to pass consequential orders enabling the WTO to complete the assessments notwithstanding the limitation provided for under the Act for making the assessments, with a view to see that justice is rendered as between the parties. The reason for that is, where a Court, by passing an order of stay prevents the WTO from making an assessment and because of such stay the assessment could not be made within the time limit prescribed it is duty of the Court to put back the parties including the Revenue in their proper positions and it should be seen that the Revenue does not suffer. In these cases we have not granted any relief to the petitioners. No doubt it is true that this Court passed interim orders staying the completion of the wealth-tax assessments by the WTO. In view of this, this Court has to put back the parties in the same position as they were before the filing of the writ petitions. It is seen that even when the petitioner approached this Court for the issue of a writ in each, of these cases, the Revenue had only three weeks to two months time for completion of the assessments and therefore the Revenue cannot claim to be a better position merely because the petitioner have approached this Court by way of writ petitions and later withdrawn the same. Similarly the writ petitioner cannot be put to any disadvantage because they have approached this Court by way of writ petitions. The fair and proper order that can be passed in the circumstances is to direct the exclusion of the period during which the stay granted by this Court was operative. This is provided in s. 17A, Explanation (1)(ii). The learned counsel for the Revenue referred to the decision of the Supreme Court in Grindlays Bank Ltd. v. ITO : [1980]122ITR55(SC) and that of this Court in Mangilal Jain v. Collector of Customs : [1982]133ITR762(Mad) in support of the departments case that once the matter has come before this Court, this Court can extend the time to complete the assessment, notwithstanding the prohibition contained in the Act as to the time limit. We do not find any support from the above decisions for such a wide proposition. After going through the decision of the Supreme Court in Grindlays Bank Ltd. v. ITO : [1980]122ITR55(SC) (supra), we find that it is only in case where the Court sets aside or cancels the order of assessment for some defect or other, the Court can grant time for making a fresh assessment even though the time limit for making such an assessment had already expired and that is not possible for this Court to ignore the statutory provision as to limitation and extend the time for making the assessment merely because the party has come before this Court even before the completion of the assessment. In this view of the matter, we merely say that s. 17A, Explanation 1(ii) will operate and that means the Revenue has to complete the assessments in these cases as per law, after excluding the period during which the stay granted by this Court was operative.


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