COMMISSIONER OF WEALTH-TAX vs. DOLLARAI N PORECHA

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WTR/60/1995HC GujaratGJHC24022742199517 July 2006Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.S.GARG5 pages

AI SummaryRemanded

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal's order, which relied on the Gujarat High Court's decision in C.W.T. Vs. Ashok K. Parikh, was based on a judgment that was impliedly overruled by the Supreme Court in the case of Bharat Hari Singhania. The Supreme Court's clarification in Bharat Hari Singhania indicated a different interpretation of the law regarding the valuation of a partner's interest, particularly concerning the deduction of provisions for tax. Consequently, the Tribunal's order lost its foundation. The Court answered the reference in favor of the Revenue, set aside the order passed by the Appellate Tribunal, and remanded the matter back to the Appellate Tribunal for a decision in accordance with the law as clarified by the Supreme Court in Bharat Hari Singhania. No specific finding was given on the merits of the valuation itself, as the matter was remanded.

What were the facts?

This case is a Wealth Tax Reference before the High Court of Gujarat at Ahmedabad, initiated at the instance of the Revenue (Commissioner of Wealth-Tax) against the assessee, Dollarai N Porecha. The reference concerns the valuation of a partner's interest in a partnership firm under Rule 2 of the Wealth Tax Rules. The Income Tax Appellate Tribunal (ITAT) had previously ruled in favor of the assessee. The Revenue is challenging the ITAT's decision, which relied on previous High Court judgments. The respondent (assessee) was served but did not appear. The assessment year(s) are not explicitly stated.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in holding that while valuing a partner's interest under Rule 2 of the W.T. Rules in a partnership firm, the entire amount of provision for tax, without deducting therefrom the advance tax paid, should have been deducted? Assessee's contentions: Not recorded as the respondent did not appear. Revenue's contentions: The Appellate Tribunal relied on the decisions of this Court in C.W.T. Vs. Ashok K. Parikh, 129 ITR 46, and the Bombay High Court in C.W.T. Vs. Ramkrishna Bajaj (HUF) (1992) 196 ITR 340. However, the Supreme Court in Bharat Hari Singhania Vs. Commissioner of Wealth Tax and Others, (1994) Vol. 207 ITR 1, clarified the law and observed that the view taken by the Gujarat High Court in Ashok K. Parikh was different from the view taken by the Andhra Pradesh, Karnataka, and Punjab and Haryana High Courts, which were in line with the Supreme Court's clarification. The Revenue argues that the Supreme Court's judgment in Bharat Hari Singhania impliedly overruled the decision in Ashok K. Parikh.

Which sections of the Income-tax Act were involved?

Rule 2 of the W.T. Rules

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

WTR/60/1995 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD WEALTH TAX REFERENCE No. 60 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE M.R. SHAH ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF WEALTH-TAX - Applicant(s) Versus DOLLARAI N PORECHA - Respondent(s) ========================================================= Appearance : MR MANISH R BHATT for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE M.R. SHAH Date : 17/07/2006

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG)

WTR/60/1995 2/5 JUDGMENT Mr. Manish R. Bhatt, learned counsel for the Revenue. None for the respondent, the Office report shows that the respondent is served.

At the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question to us for our answer; “Whether the Appellate Tribunal is right in law and on facts in holding that while valuing partners interest under Rule 2 of the W.T. Rules in the partnership firm, the entire amount of provision

of tax

without deducting therefrom the advance tax paid should have been deducted ?”. WTR/60/1995 3/5

conclusion that value of the partner's interest enough to indicate that if the said sub-clauses are understood in the manner indicated and clarified by the Apex Court, counsel for the assessee would have no grievance.

WTR/60/1995 4/5 JUDGMENT

From the abovereferred observations made by the Supreme Court, it would clearly appear that the Judgment, in the said matter of Ashok K. Parikh (supra), stands impliedly overruled.

If that be so, then the order passed by the Income Tax Appellate Tribunal, placing its reliance upon the said Judgment of Ashok K. Parikh (supra), would lose its basic foundation and would become a bad judgment.

The Income Tax Appellate Tribunal was not unjustified in relying upon the Judgment of this Court in the matter of Ashok K. Parikh, because, on the said date, that was the law interpreted by the High Court, but, because of the Judgment of the Apex Court, the Judgment of the Income Tax Appellate Tribunal, is required to be set aside.

WTR/60/1995 5/5 JUDGMENT

Placing our strong reliance upon the Judgment of the Supreme Court, in the matter of Bharat Hari Singhania, we answer the Reference in favour of the Revenue, set aside the order passed by the Appellate Tribunal, but remand the matter back to the Appellate Tribunal for its decision in accordance with law, in view of the abovereferred Judgment of the Supreme Court. No costs. [ R.S. Garg, J. ] [ M.R. Shah, J. ] RMR.

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