Commissioner of Wealth Tax vs Smt. S.K. Bader

These wealth-tax reference petitions filed u/s 27(3) of the Wealth-tax Act, 1957 (''the Act'') raises common questions and, there fore, they are being disposed of by this common order. D.B. Wealth-tax Reference Petition No. 214 of 1985 relates to the assessment year 1974-75, and the other three reference petitions relate to the assessment year 1975-76. In Wealth-tax Reference Petition Nos. 213 and 214 of 1985 the assessee is Smt. S.K. Bader, in WT Reference Petition No. 217 of 1985 the assessee Shri Gulabchand Bader, and in WT Reference Petition No. 221 of 1985 the assessee is Shri H.C. Bader. Smt. S.K. Bader and Gulabchand Badre are partners of K.D. Jhaveri, Jaipur which carry on the business of purchase and sale of precious and semi-precious stones both in India and abroad. Shri H.C. Bader the assessee in WT Reference Petition No. 221 of 1985 is a partner of the firm Cosmopolitan Trading Corpn., Jaipur which also carries on business of export of precious and semi-precious stones.

Insofar as the assessee in WT reference Petition Nos. 213, 214 and 217 of 1985 are concerned, it has been stated that in respect of the assessment year 1974-75, K.D. Jhaveri declared a closing stock of Rs. 10,95,667 in the jewellery account and Rs. 5,880 in the precious and semi-precious stones account and the assessees submitted their wealth-tax return on the basis of the aforesaid value of the closing stock. The WTO in the assessment order dated 3-1-1979 did not accept the aforesaid value of the closing stock and fixed the market value of the closing stock in jewellery account at Rs. 19,57189 as per the export invoice value as a result of the aforesaid revision in the market value of the stock, the value increased by more than 20 percent and as per rule 2B(2) of the Wealth-tax Rules, 1957 (''the Rules'') the net wealth was computed on that basis. During the assessment year 1975-76 for the value of closing stock of K.D. Jhaveri was declared at Rs. 8,21.202 and the returns were filed on that basis. The WTO did not accept that figure and fixed the market value of the stock at Rs. 14,88,247, the export invoice value, and after applying the provisions of rule 2B computed the net wealth of the assessees. The assessees filed appeals against the assessment orders passed by the WTO and the said appeals were allowed by the AAC. The AAC held that the export invoice could not be made the basis for the market value of the stock and that the WTO was not justified in invoking the provisions of rule 2B(2) to determine the net wealth of the firm K.D. Jhaveri, Jaipur, and then making additions on pro rata basis. The revenue filed appeals against the aforesaid orders of the AAC before the income tax Appellate Tribunal and the said appeals were disposed of by the Tribunal by order dated 31-12-1983. The Tribunal agreed with the AAC that the export invoice value could not be the basis for determining the market value of the stock, because the goods did not fetch the export invoice value in the foreign markets. According to the Tribunal it will be reasonable if the fair market value of the closing stock was arrived at by making a deduction of 35 percent from the export invoice value. The Tribunal found that if deduction of 35 percent was made from the export invoice value and fair market value is determined on that basis, then for the assessment years 1974-75 and 1975-76 the said fair market value was less than 20 percent as contemplated in rule 2B(2) and no addition on account of enhanced market value of the closing stock could be made under rule 2B(2). Being aggrieved by the aforesaid order of the Tribunal, the revenue moved petitions u/s 27(1) whereby it was prayed that the following four questions may be referred to this Court:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified holding that in order to ascertain the actual market value of the closing stock of the firm for purpose of rule 2B(2) of the Wealth-tax Rules, 1957, the export invoice value has to be reduced by 35 percent?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the export invoice value is not the market price but merely a quotation notwithstanding the provisions of section 18 of the Foreign Exchange Regulation Act?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the difference between the market value and the cost price of the closing stock of the firm is less than 20 percent and, therefore, no addition on account of increased value could be made in the assessee''s net wealth under rule 2B(2) of the Wealth-tax Rules, 1957?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that Cosmopolitan Trading Corporation, Jaipur is an industrial undertaking and as such the assessee is entitled for exemption u/s 5(1)(xxxii) of the Wealth-tax Act, 1957?

By order dated 30-8-1984 the Tribunal declines to refer question Nos. 1, 2 and 3 and has referred question No. 4 to this Court. Thereupon the revenue has filed D.B. Reference Petition Nos. 213, 214 and 217 of 1985.

Insofar as the D.B. Reference Petition No. 221 of 1985 is concerned, it relates to the assessment year 1974-75. In this case, the firm of which the assessee was a partner had declared the value of the closing stock in the jewellery account at Rs. 19,49,960 and the value of the closing stock in precious and semi-precious account at Rs. 1,31,809. The export invoice value of the goods in the jewellery account was Rs. 33,79,560. The WTO assessed the market value of the stock on the basis of export invoice value and applying the provisions of rule 2B(2) computed the wealth of the assessee Shri H.C. Bader. On appeal, the AAC held that the market value could not be assessed on the basis of export invoice value and that rule 2B(2) could not be applied. The Tribunal upheld the said order of the AAC and by its order dated 31-12-1983 held that the market value should have been fixed by making a deduction of 35 percent of the export invoice value for the reasons given by the Tribunal in its order of the same date in the appeals filed by the department in the case of the assessee in Reference Petition Nos. 213, 214 and 217 of 1985. The revenue moved a petition u/s 27(1), for reference of the four questions, referred to above, and the Tribunal referred only question No. 4, and refused to refer question Nos. 1, 2 and 3, and thereupon this petition has been filed by the revenue u/s 27(3).

Shri Surolia, the learned counsel for the revenue, argued in support of all the petitions and has urged that the Tribunal was in error in refusing to refer question Nos. 1, 2 and 3 on the view that the said questions relate to pure finding of fact given by the Tribunal. In this connection, with reference to question No. 2, Mr. Surolia has submitted that the finding of the Tribunal making a deduction of 35 percent in the export invoice value of the goods in stock is perverse and based on no evidence. It may be stated here that question No. 1 which the revenue is seeking to be referred to this Court does not raise the question that the finding recorded by the Tribunal giving a reduction of 35 percent in the export invoice value is perverse and based on no evidence. It cannot, therefore, be said that the aforesaid issue is covered by question No. 1 sought to be referred. Even otherwise we are of the opinion that on the basis of record before the Tribunal it cannot be said that the view of the Tribunal giving reduction of 35 percent of the export invoice value is perverse based on no evidence. The Tribunal has taken note of the findings recorded by the Settlement Commissioner and keeping in view the aforesaid findings the Tribunal has held that it will be reasonable if the fair market value of the closing stock in the firm is arrived at by making a deduction of 35 percent from the export invoice value. u/s 7 of the Act, it is provided that where the value of the asset shall be estimated to be the price which in the opinion of the WTO it would fetch if sold in the open market on valuation date. In the present case, the Tribunal on a consideration of the facts and circumstances on record has estimated the market value of the closing stock by giving deduction of 35 percent in the export invoice value. In our opinion, the said finding of the Tribunal is purely a finding of fact and it does not involve a question of law for reference to this Court.

As regards question No. 2, which relates to the provisions of section 18 of the Foreign Exchange Regulation Act, 1947, it may be stated that no argument on the basis of the provisions of section 18 was advanced by the revenue before the Tribunal and it cannot, therefore, be said that the question arises out of the order of the Tribunal.

With regard to question No. 3, Mr. Surolia had concerned that the said question is dependent on question No. 1 and if question No. 1 can not be referred, question No. 3 also cannot be referred. For the reasons aforesaid we find no force in these petitions and they are, therefore, dismissed.

No order as to costs.