TMI Blog1983 (7) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... Patel Co., Nadiad, and the value of his share in the firm has been included in the net wealth. However, it is seen that in adopting the share, the WTO has committed a mistake inasmuch as he did not include in the assets the value of the goodwill of the firm in which he was a partner, with the result that the assessee's share in the said goodwill remained to be taxed. The value of an asset not disclosed in the balance sheet is includible in the wealth of the assessee as provided under Rule 2C(d) of the Wealth-tax Rules, 1957. 2. It is further seen that C.J. Patel Co., Nadiad, in which the assessee is a partner owned, inter alia, agricultural lands. While computing the net wealth of the firm, the WTO has given deduction in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is well settled that goodwill is a valuable asset and the same is includible in the wealth of the assessee. I, accordingly, hold that the assessee's share in the goodwill is includible in the net wealth of the assessee and as the WTO has not included the same in the net wealth, he has committed a mistake which is prejudicial to the interest of the revenue. The decision of the Supreme Court as referred to by the counsel in the case of CIT v. B.C. Srinivasa is not at all applicable as the same related to capital gains and not wealth-tax. 6. Insofar as exclusion of the assets being agricultural land is concerned, it is an admitted fact that the said asset is the property of the firm of which the assessee is one of the partners. Section 4(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the interest of a partner in a firm, the said interest computed in terms of rule 2 cannot be said to partake the character of individual assets comprised in the firm's estate. In other words, the assessee's interest in the firm in the present case cannot be said to represent, in part, the value of immovable asset, viz., agricultural lands owned by the firm. It is clear, therefore, that the exemption allowed under section 5(1)(iva), was an error and the order under consideration is prejudicial to the interest of revenue. 9. Since the assessment as framed by the WTO is erroneous insofar as it is prejudicial to the interest of revenue, it is hereby set aside and the WTO is directed to pass fresh order in accordance with law." 4. Being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5(1)(iva), the learned counsel for the assessee submitted that in view of the decision of the Hon'ble Karnataka High Court in the case of CWT v. Mrs. Christine Cardoza [1978] 114 ITR 532, the order of the CWT was bad in law and deserves to be set aside. 6. The learned representative for the department, on the other hand, strongly supported the order of the CWT, and justified his action. Inviting our attention to sub-rule (b) of rule 2C of the Wealth-tax Rules, 1957, the learned representative for the department submitted that the provisions of that sub-rule will be applicable only in a case where a goodwill has been purchased by the assessee for a price. Since in the instant case, the goodwill has not been purchased for a price, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the assessee's share in the firm of C.J. Patel Co. Wealth-tax is paid on the net wealth as computed under the Act. Net wealth is arrived at by taking the difference between the aggregate value of the assets as computed under the provisions of the Act and the aggregate value of the debt owed by the assessee on a relevant valuation date. The expression ' asset ' is defined under section 2(e) of the Act to include property of every description movable or immovable with certain exceptions mentioned therein with which we are not concerned in the present appeal. Section 7 of the Act lays down the procedure to determine the value of assets. Rules 2 to 2G of the Rules contain provisions in respect of valuation of interest of a partner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Suffice it to say that the concept of computing the total income, more particularly the computation of capital gains under the Income-tax Act, 1961, is quite different from computing the net wealth under the Wealth-tax Act, 1957. The net wealth is determined with reference to the relevant valuation date and, therefore, it is of no consequence whether an asset is a self-generated asset or not. As stated above, the provisions of sub-rule (b) of rule 2C would come into play only when the goodwill is purchased for a price. Otherwise, the provisions of sub-rule (d) of rule 2C would be attracted. For all these reasons, we would uphold the order of the CWT on this point. 8. As regards the assessee's claim for exemption under section 5(1)(iva) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
