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TMI Blog1990 (12) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... Order Amount due from Pudukott ah Textiles Ltd. 1983-84 31.3.83 29.11.83 9,05,680 12,40,400 26.3.87 . 1984-85 31.3.84 1.2.85 7,25,000 12,49,400 26.3.87 Rs. 42,983 total of pronotes the executed by Puduko ttah Textiles 1985-86 31.3.85 17.12.85 7,17,000 11,66,700 26.3.87 Rs. 42,983(total of pronotes) 1986-87 31.3.86 23.10.86 7,65,700 10,82,800 26.3.87 Rs. 42,983 In these assessment made by the IAC (Asst), no amount due under the pronotes executed by M/s Pudukottah Textiles Ltd. in the name of the assessee was admitted as part of her net wealth in the wealth-tax returns relating to any of these four assessment years on the ground that the amounts receivable under the said pronotes in future are doubtful. However, the WTO completed the assessments as stated above since he felt that the amount receivable under the pronotes is an asset till a finality is reached in this matter. Thus holding, the IAC (Asst) included the sums shown in the column No. 7 of the above tables as part of the net wealth of the assessee for the four assessment years under consideration respectively. Inter alia having been aggrieved against this portion of the assessment, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order of the CWT(A) have preferred these appeals before us and thus the matter now stands for our consideration. 2. Broadly stated, the Department contends that the whole of the remaining amount which is realisable under each of the pronotes which includes principal as well as interest, due thereon, as on the relevant valuation dates should be included in the net wealth of the assessee. On the other hand, the contention of the assessee remained that the company stopped making payments even before the valuation dates relevant to any of the four assessment years and there is no chance of realising any amount under the pronotes. Even after taking into consideration the assets available with the company, it is highly unlikely that the unsecured credits could be capable of being discharged fully or to any extent whatsoever and, therefore, it always remained the contention of the assessee that the realisable value of the debts should be taken at 'nil' on all of the four valuation dates to these years. 3. After hearing both the parties, we feel that the following questions call for our consideration; (i) Whether the whole amount due under the pronotes as on the relevant valuation d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, the conclusion is inescapable that even though the accounts of the assessee are maintained on cash basis, interest due on accrual basis, though not realised, on the outstanding of the money-lending business are liable to be included in the net wealth of the assessee." Thus all the rights available under the pronote which included the right to realise not only the principal but also the interest thereon, as it is found outstanding on the relevant valuation dates, should be considered as an asset of the assessee. Here we want to state clearly that considering any right or property as an asset is one thing and valuing the asset is a quite different thing. Even in the very judgment in the case of CWT vs. Vysyaraju Badreenarayana Moorthy Raju, their Lordships made this distinction very clear when they held at page 456 of the reported judgment as follows; ''The assets are not confined to cash. Where the asset is an asset other than cash, its value is determined pursuant to sub-s. (1) of s. 7 as the estimated price, which, in the opinion of the WTO, the asset would fetch if sold in the open market on the valuation date." Now having held that the right under each of the pronotes is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses in para 5. Each of the unsecured creditor falling in that category is given three options to choose and it is admitted that the assessee before us opted for the third option contained in para 5(c). Hence, the relevant para 5(c) only is extracted as under leaving the other paras (a) and (b) as we are not concerned with them : "(1) Each of the Unsecured Creditors who accept the scheme will be paid within one month from the date of acceptance duly reduced to writing and signed by the parties, 5 per cent of the amount of the dues outstanding in the books of the company as on 31st Dec., 1971. xx xx xx xx xx xx (5) Each of the Unsecured Creditors, the value of whose debt is Rs. 10,000 or above as on 31st Dec., 1971 as per the books of the company can opt for any one of the following modes of payments: (a)........... (b)........... (c) Repayment of the balance of debt in twenty half yearly equal instalments commencing from the 1st May, 1974 simple interest at 12 per cent per annum from 1st Jan., 1972 being payable alongwith each instalment on the amount of the debt outstanding from time to time." Admittedly some amounts were realised under the pronote debt as per the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government as communicated to the Register by letter of 29th Nov., 1982. 3. I state that the Applicants herein to whom more than Rs. 10,000 was due as on 31st Dec., 1971 were covered by the paragraph 4 of the said scheme and they opted for payment of dues in 20 half yearly instalments commencing from 1st Jan., 1974 with interest at 12 per cent per annum from 1st Jan., 1972. 4. I state that the company has failed and neglected to make payments in accordance with the said scheme on and after 1st May, 1982. No instalments were paid after that date by the company to either of the Applicants. 5. I state that in view of such default, each of the applicants herein caused notice through counsel to be served to the Respondent company dt. 24th July, 1984 setting out the amounts due to each of the Applicants in respect of the defaulted instalments and also interest at 21 per cent per annum thereon in view of such default. As on 1st Nov., 1983 a sum of Rs. 42,983 was due to me and a sum of Rs. 1,14,713 to the Second Applicant, representing the instalments payable on 1st March, 1982, 1st Nov., 1982, 1st May, 1983 and 1st Nov., 1983. Thereafter two further instalments became payable on 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had a company by name India Coated Cartons P. Ltd. as its debtor. The wealth-tax assessments for 1978-79 to 1981-82 had to be framed against that assessee. It is an admitted fact that the company was not in a position to discharge the whole of the debt keeping in mind the value of the assets available with it as on the relevant valuation dates. In the original assessments framed against the assessee, the assessee had given a computation of value returned by her wherein from the total of the assets consisting of fixed assets, investments, current assets, etc., of the debtor-company, the value of secured loans has been deducted to arrive at the net assets available to meet unsecured loans and current liabilities and provisions and on the basis of the availability of such net assets to be distributed among the unsecured loan creditors and current liability creditors, the proportion had been worked out. After thus working the proportions for the four assessment years, the same proportion of the debt was accepted by the WTO as part of the wealth of the assessee for each of the four assessment years. The learned CWT seeking to revise the original assessments passed a revisionary order sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflecting the financial position of the debtor-company as on 31st March, 198 and the balance sheet as on 31st Dec., 1983 is adopted as disclosing the financial affairs of the company as on 31st March, 1984. Adopting the formula which the earlier Tribunal approved while deciding the case before them and reflected in their order in WTA Nos. 731 to 734/Mds/84 dt. 11th July, 1985 cited supra, we got the proportion worked out for the asst. yr. 1983-84 and 1984-85 and the position stood as follows: As on 31.12.1982: Total assets as on 31st Dec., 1982 . Rs. 3,03,06,614 Less : Loss upto the year end which is only a fictitious asset . Rs. 1,22,01,268 Net Assets (A) Rs. 1,81,05,348 Total secured loans: Rs. 3,77,343 . . Rs. 7,69,317 . . Rs. 94,85,288 .. . Rs. 1,97,235 . . (B) Rs. 1,08,29,183 Net assets as worked out above: . Rs. 1,81,05,348(A) Total secured loans . Rs. 1,08,29,183(B) Net assets available for meeting unsecured loans, creditors and current liabilities: A(--)B . Rs. 1,81,05,348 . . (--) Rs. 1,08,29,183 . . Rs. 72,76,165 . (C) . Proportion of availability of net assets to meet the unsecured loans, creditors and current liabilities: Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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