From: "CABHUPENDRASHAH" <ca.bhupendrashah@
Date: Wed, 16 Jan 2008 16:10:37 -0000
Subject: [globalIndianCAs] Rent and deposits received by intermediary tenant from ultimate user not to be t
Rent and deposits received by intermediary tenant from ultimate user
not to be taken for computing net wealth of owner; CIT(A) gives no
reasons for rejection Revenue in appeal with new ground should
Govt suffer for officers' mistakes? : Bombay HC
MUMBAI, JAN 16, 2008 : REVENUE has preferred this appeal on the
following questions of law :-
(a) In the facts and circumstances of the case and in law, whether
the rent and deposits received by the intermediary tenant from the
ultimate user of the premises or the rent and deposit received by
the assessee from the intermediary tenant, who never occupied the
premises is to be taken for the computation of the net wealth of the
assessee for valuation under Rule 3 of part B of Schedule III of the
Wealth Tax Act, 1957 ?
(b) Whether the assessee could be allowed deduction u/s 2(m) of the
Wealth Tax Act, 1957 of the debts owed on pro-rata basis without the
assessee establishing that the debts were incurred in relation to
assets which formed part of the net wealth of the assessee?
In so far as question (a) is concerned, the same does not survive in
view of the judgment of the High Court in The Commissioner of Income
Tax-3 v.M/s.Akshay Textiles Trading -
In so far as question (b) is concerned, here is the funny story of
classic mismanagement of appeals and issues till the High Court. The
High Court found that the said question was never raised in the memo
of appeal. The said question was also not answered by the Tribunal.
The Tribunal in fact answered some non existing question considering
the appeal memo as drafted by the appellant.
One of the contentions raised by the respondents before the
Assessment officer was in respect of the debt of sum of
- considering section 2(m) of the W.T.Act, 1957. The
Assessing officer for reasons recorded, rejected the claim by
holding that it was not incurred for acquisition of assets
chargeable to Wealth tax.
The respondents aggrieved, preferred an appeal. One of the grounds
raised was in the matter of proportionate debts, the very question
has been decided by the assessing officer. The Commissioner (Appeal)
in paragraph 4.1 considered the said contention, and in paragraph
4.3 answered the said issue in favour of the assessee and
accordingly, partly allowed the appeal.
6. Revenue aggrieved, preferred an appeal before ITAT. In ground (b)
the liability of Rs.21,94,144/
- was set out but it was wrongly
stated as being deposit received from the tenants for letting out
the properties. The other ground which was framed infact, did not
arise from the order of the Commissioner (Appeal). The Appeal was
listed with other Appeals. On common questions framed ITAT disposed
of the various appeals including the appeal filed by the appellants
herein. The three grounds which were raised in fact, were most
extraneous in so far as respondent was concerned.
Now what should the High Court do?
The question is whether on account of failure by revenue to frame
the proper ground in the appeal memo, is there power in the court,
after it has been brought to its notice that an issue arose which
required to be answered but had not been properly raised as required
to preclude itself from considering the said issue.
The High Court observed,
1. Procedure is not meant to trip justice but to aid the cause of
2. Wrong drafting by the draftsman cannot result in the Court being
prevented from looking at the correct issue and having the issue
3. Law would be much poorer if the Court precluded itself from doing
so, merely because the draftsman for some reason has not applied his
mind in framing the correct question or grounds.
4. The order of the Commissioner(
appeals) does not disclose any
reason as to why the appeal was allowed on the issue of
proportionate debts. If the appellate authority seeks to reverse the
finding of the authority below, it was bound to give reasons to its
conclusion. We find the order does not disclose any reason for
coming to the conclusion arrived at.
So the matter is remanded to the Tribunal.
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