Ajoy Nath Ray, J. - (1.) This is a wealth -tax matter and the only question which has come up for answer at the instance of the revenue, is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the assessing officer to allow the sum of Rs. 50 lakhs received as advance sale consideration in terms of agreement dated 22 -9 -1986, as debt owed in computing the net wealth under Sec. 40(2) of the Finance Act, 1983 -
(2.) The undisputed facts of this case are as follows : The assessee is a private limited company and is the owner of a property being 3, Alipore Road, Calcutta. On 22 -9 -1986, the said company entered into an agreement with one Satyam Properties and Finance (P) Ltd. for sale of the said property, at Alipore, at a consideration of Rs. 3 crores. Out of the said amount of Rs. 3 crores Rs. 50 lakhs was paid during the year ended on 31 -3 -1987. The intending purchaser, however, obtained the possession of the land for the purpose of construction of a multi -storeyed building on the said land. The conveyance of the property had not been executed, however, the purchaser took steps for construction of the multi -storeyed building after obtaining the possession. The assessment year involved in this reference is 1987 -88, and the relevant valuation date is 31 -3 -1987. The revenue has never disputed the valuation of the said property. The valuation of the said property is Rs. 3 crores. It was contended by the assessee before the assessing officer that the sum of Rs. 50 lakhs paid by the intending purchaser should be deducted as a liability from the said sum of Rs. 3 crores. Under the said agreement for sale dated 22 -9 -1986, the assessee was to receive the total sale consideration of Rs. 3 crores in several instalments. The assessee received Rs. 50 lakhs from the said Satyam Properties and Finance (P) Ltd., during the year ended on 31 -3 -1987. The dates of payments of the said sum of Rs. 50 lakhs were as follows : JUDGEMENT_23_LAWS(CAL)12_2002.htm It appears from the order of the assessing officer that the said claim for deduction was rejected on the ground that it was part of the sale consideration and was not a liability against the value of the property. Therefore, according to the assessing officer the assessee was not entitled to claim the said amount of Rs. 50 lakhs "As liabilities debts in terms of the provision of sub -section (2) of Sec. 40 of the Finance Act, 1983, nor under the provisions of Sec. 2(m) of the Wealth Tax Act, 1957." The assessee, no doubt, preferred an appeal and the said order of the assessing officer was affirmed by the Commissioner (Appeals), Calcutta. The Commissioner, however, was of the view that the amount of Rs. 50 lakhs which had been received by the assessee as advance did not form part of the net wealth computed in terms of Sec. 40(3) of the Finance Act and, therefore, no deduction could be allowed in relation to such an asset which was not forming part of the computation of the net wealth. The Commissioner (Appeals) held further that the said sum of Rs. 50 lakhs was not a debt owed by the appellant In relation to the said property inas much as the appellant was the owner of the property and had not encumbered the said property by the said sum of Rs. 50 lakhs. The Commissioner (Appeals), in fact, affirmed the order of the assessing officer. The assessee having been aggrieved by the said order of the Commissioner(Appeals) preferred yet another appeal to the Tribunal. The learned Tribunal, however, accepted the contention of the assessee by allowing the said sum of Rs. 50 lakhs as deductions from the value of the said property as claimed by the assessee. The learned Tribunal in its order directed the assessing officer to deduct Rs. 50 lakhs in computing the net wealth of the assessee. Against the said order of the learned Tribunal dated 9 -3 -1992, the revenue sought this reference on the above question of law under the provisions of Sec. 27(1) of the Wealth Tax Act, 1957.
(3.) Before dealing with the respective contentions and submissions both on behalf of the revenue and on behalf of the assessee it is to be noted that companies were granted exemption from payment of wealth -tax under the Finance Act, 1983, the levy of wealth -tax was revived in the case of closely held companies which are those companies in which the public were not substantially interested. Such companies were brought under the cover of the wealth -tax in respect of net wealth of certain specified assets owned by such companies. All the assets owned by such companies were not subjected to wealth -tax but only net wealth of the specified assets which were invested in non -productive activities were subjected to such tax.;