C W T JAIPUR Vs. SHYAM MOHAN

JUDGEMENT

(1.) THIS order shall dispose of the reference made by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur for our answer to the following two questions: (i) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying Rule 2b (2) of the Wealth Tax Rules, the onus was on the revenue to prove that the market value of the closing stock of M/s. Rawats Bombay exceeded the value as shown in the firm's accounts by more than 20%? (ii ). Whether on the facts and in the circumstances of the case, the Tribunal was right in up-holding the finding of Appellate Assistant Commissioner that the firm M/s. Rawats of Bombay is an industrial undertaking within the meaning of Explanation to Section 5 (1) (xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5 (1) (xxxii) of the Wealth Tax Act, 1957?

(2.) THE aforesaid two questions of law arise from the facts and circumstances that have been stated by the Income Tax Appellate Tribunal in the statement of the case thus: Shyam Mohan Rawat- assessee is a partner in the firm M/s. Rawats Bombay. THE said firm has been carrying on business in gold jewelery, precious and semi-precious stones. THE firm declared gross profit of 20. 1% in the accounts relating to precious and semi-precious stones. As the firm had shown the closing stock in its accounts at cost, the Wealth Tax Officer was of the view that Rule 2b (2) of the Wealth Tax Rules, 1957 (for short `the Rules'), was applicable and the value of the closing stock would exceed the book value by a margin of more than 25%. THE assessee contended before the Wealth Tax Officer that the rate of gross profit did not establish the value of the closing stock and, therefore, Rule 2b (2) could not be applied by making reference to the rate of gross profit only. THE assessee also contended before the Wealth Tax Officer that the business in the precious and semi-precious stones was of a peculiar type and a part of the stock may not at all be saleable. THE Wealth Tax Officer negatived the aforesaid contentions and applied Rule 2b (2) of the Rules and made an addition proportionate to the assessee's share in the firm. THE Wealth Tax officer in respect of the interest of the assessee in the firm where he was a partner held that the assessee was not entitled to deduction under Section 5 (1) (xxxii) of the Wealth Tax Act, 1957 (for short, `the Act') from the capital employed with M/s. Rawats Bombay as according to him that firm was not an `industrial undertaking' as no manufacturing process at all was being carried on by the firm. THE Wealth Tax Officer, accordingly held that the assessee was not entitled to exemption under Section 5 (1) (xxxii) of the Act and disallowed the deduction claimed by the assessee. In the appeal carried by the assessee to the Appellate Assistant Commissioner, the assessee succeeded on both counts. THE Appellate Assistant Commissioner held that Rule 2b (2) of the Rules was not applicable. THE Appellate Assistant Commissioner also held that the firm was an `industrial undertaking' in view of the processing of the rough stones. THE Appellate Assistant Commissioner accordingly granted exemption under Section 5 (1) (xxxii) of the Wealth Tax Act, 1957 to the assessee. THE Tribunal by its detailed order upheld the order of the Appellate Assistant Commissioner and held that Rule 2b (2) of the Wealth Tax Rules was not applicable and that the assessee was entitled to exemption under Section 5 (1) (xxxii) of the Wealth Tax Act as the business carried on by the firm in processing of the precious stones has to be considered as `industrial undertaking' within the meaning of the aforesaid section. Re: Question (i ).

(3.) WE deem it unnecessary to elaborately discuss the matter. WE adopt the reasoning given in the case of Moti Chand Daga and hold that the onus was on the revenue to prove by positive material that the market value exceeded by more than 20% the value of the closing stock disclosed in the balance-sheet even though the gross profit rate seems to exceed the figure of 20%. Re : Question (ii):