COMMISSIONER OF WEALTH TAX Vs. MAHARANI YOGESH KUMARI

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated June 18, 1983, in respect of the assessment years 1977-78 to 1980-81 under Section 27(1) of the Wealth-tax Act, 1957 (hereinafter called "the Act") :

(2.) THE brief facts of the case are that the assessee advanced loans to certain parties such as Princess Trivikrama Kumari and Golden Sun Cinema THEatre, etc. THE interest income against these loans was not shown in the net wealth declared by the assessee for the assessment years 1977-78 to 1980-81. THE Wealth-tax Officer while completing the assessments included in the net wealth interest of Rs. 41,750 for each of the assessment years 1977-78 and 1978-79 and of Rs. 2,06,250 for the assessment year 1980-81, on accrued basis. It was found that a sum of Rs. 1,75,000 was given as loan to Golden Sun Cinema THEatre and Rs. 2,25,000 was given to Princess Trivikrama Kumari. THE interest was not received. THE Wealth-tax Officer came to the conclusion that the interest due to the assessee is chargeable to wealth-tax. In the books of Princess Trivikrama Kumari the interest was credited to the account of the assessee and thus the interest element was added to the net wealth of the assessee in respect of this loan as well as the loan to Golden Sun Cinema THEatre. In the second appeal before the Tribunal the amount of deemed interest was held not includible in the net wealth of the assessee.

(3.) RULE 2C is relevant rule which provides the adjustment of the assets not disclosed in the balance-sheet. The provisions of rule 2C could be applicable in respect of those assets the value of which was required to be shown in the balance-sheet and has not been shown therein. Under the Act, the system of accounting is not the determinating factor for an asset and even any system of accounting is not required to be maintained under the Act. The only thing to be seen is whether the interest which has accrued and not received could be considered to be a movable asset or not ? This matter was considered by the apex court in the case of CWT v. Vysyaraju Badreenarayana Moorthy Raju [1985] 152 ITR 454, it was held that the system of accounting, mercantile, cash or hybrid, is of no relevance for the purpose of determining the assets of the assessee. All the assets of the assessee, barring those expressly exempted by the statute, are to be taken into account. It was further observed that it is apparent that what accrues as a right also falls to be included within the assets of an assessee under the Act. That being so, the conclusion is inescapable that even though the accounts of the asscssee are maintained on the cash basis, interest due on accrual basis, though not realised, on the outstanding of the money-lending business is liable to be included in the net wealth of the assessee. In view of the above decision of the apex court, we are of the opinion that the Tribunal was not justified in holding that interest of Rs. 41,750 for each of the assessment years 1977-78 to 1979-80 and of Rs. 2,06,250 for the assessment year 1980-81 was not includible in the net wealth of the assessee for these years.