Income Tax Appellate Tribunal - Delhi
Ge Countrywide Consumer Financial ... vs Department Of Income Tax on 24 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'C': NEW DELHI
BEFORE SH. I.C. SUDHIR, JUDICIAL MEMBER
AND
SH. O.P. KANT, ACCOUNTANT MEMBER
Wealth Tax Appeal No. 29/Del/2014
Assessment Year: 1998-99
Asstt. Commissioner of Income Vs. M/s. GE Countrywide Consumer
Tax, Circle-12(1), New Delhi Financial Services Ltd. (Now
known as GE Money Financial
Services P. Ltd.), Mahalaxmi
Engg. Estate, Plot No. 511, L.J.
First Cross Road, Mahim,
Mumbai
(PAN: AAACC0624F)
(Appellant) (Respondent)
Appellant by Sh. T. Vasanthan, Sr. DR
Respondent by S/sh. Rahul Sateeja & Tushar Jarwal,
Advocates
Date of hearing 13.01.2016
Date of pronouncement 24.02.2016
ORDER
PER O.P. KANT, A.M.:
This appeal of the Revenue is directed against the order dated 22.08.2016 of the Commissioner of Wealth Tax (Appeals)-XV, New Delhi, raising following grounds of appeal:
1. Whether learned Commissioner of Income Tax(Appeals) is right in deleting the addition made by the A.O. in the valuation of the motor cars by ignoring the contradiction in the stand of assessee, viz., giving insured value of motor cars with evidence in A.Y. 1997-98 and pleading impracticability of the same in A.Y. 19998-99.2 ITA No. 29/Del/2014
Assessment year: 1998-99
2. Whether learned Commissioner of Income Tax(Appeals) is right in substituting the WDV method for valuation of motor cars without pointing out any inaccuracy in invoking & application of Rule 20 of the IIIrd Schedule.
3. Whether learned Commissioner of Income Tax(Appeals) is right in discarding the estimate of debt made by the A.O. and accepting the assessee's estimate holding it to be scientific without elucidating the reasons for the same.
4. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.
2. The facts in brief are that the assessee filed return of wealth tax on 30.11.1998 declaring total wealth of Rs. 63,39,790/-. A notice under Section 16(2) of the W.T. Act was issued and served to the assessee within the stipulated time. The ld Assessing Officer determined the value of Motor Car at Rs. 8,28,77,949 as against value of Rs. 6,92,87,901 declared by the assessee and debt in relation to assets was determined at Rs. 2,00,00,000/- as against Debt of Rs. 5,90,83,620/- declared by the assessee in revised computation of net wealth. Aggrieved with the valuation of motor cars and debt in relation to assets as on valuation date, the assessee filed an appeal before the learned Commissioner of Wealth Tax (Appeals). Before the learned Commissioner of Wealth Tax (Appeals), the assessee relying on the judgment of the Hon'ble Chennai High Court in the case of CWT Vs. T.V. Sundaram Iyenger and Sons Ltd., 205 CTR 191 (Chennai), submitted that WDV was adopted as market value in that case as the Revenue could not establish that the WDV did not show the market value of the vehicles. Learned Commissioner of Wealth Tax (Appeals) accepted the contention of the assessee in respect of valuation of motor vehicles and debt 3 ITA No. 29/Del/2014 Assessment year: 1998-99 computed as on valuation date and allowed the relief to the assessee. Aggrieved, the Revenue is before us with the present appeal.
3. In grounds no. 1, the Revenue has raised that the Commissioner of Wealth Tax (Appeals) ignored the contradiction in the stand of the assessee that in assessment year 1997-98, the insured value of motor cars was available and in subsequent year i.e. assessment year 1998-99, the assessee pleaded impracticability of providing the same. In ground No. 2, the Revenue has raised the issue of substitution of WDV Method for valuation by the method adopted by the Assessing Officer.
3.1 The learned Commissioner of Income Tax (Departmental Representative) submitted that market value as per WDV was substituted by the assessee in place of insured value without any valid reason and the Assessing Officer has rightly invoked and applied Rule 20 of IIIrd Schedule of Wealth Tax as there was difference of more than 20 percent in the value determined by the Assessing Officer and the value declared by the assessee.
3.2 On the other hand, learned Authorized Representative of the assessee agitated that the condition of invoking Rule 20 of IIIrd Schedule of the Wealth Tax was not fulfilled as the market value determined by the AO was not 20% higher than the value declared by the assessee. The learned Authorized Representative also submitted that the Assessing Officer has made an estimate whereas the value worked out by the assessee was based on the evidences and which has been accepted by the Assessing Officer in assessments subsequent to present assessments also i.e. AY 2012-13. The ld. AR submitted that it was 4 ITA No. 29/Del/2014 Assessment year: 1998-99 difficult for the assessee to gather the insured value of the vehicles being large number of vehicles leased out to various persons.
3.3 We have heard the rival submissions and perused the material available on record. The assessee computed the WDV of the Motor Cars under section 32 of the Income-tax Act as the value of Motor Cars for the purpose of wealth Tax. The Assessing Officer on the other hand was of view that value of the Motor Cars should be computed as per rule 20 of the Wealth tax Rules , by which the value is to be taken at a price, which it can fetch in the open market on the date of valuation. In last assessment year i.e. AY 1997-98, the assessee took the insured value of the vehicles as value of the motor cars but this year the assessee expressed inability to provide such value, and thus in absence of the such insured value , the AO computed the valuation of Motor Cars at Rs. 8,28,77,949 after allowing deduction out of the cost of the old and new cars as reflected in scheduled of fixed assets to the balance sheet as on 1-4-1997. The CWT(A) has followed the findings of the Hon'ble Chennai High Court in the case of T.V. Sundaram Iyenger and Sons Ltd. (supra), wherein the WDV of cars was held as basis of market value in the absence of any material produced by the Revenue to show that WDV didn't represent the market value of the vehicle . The relevant findings of the CWT(A) is reproduced as under:
"6.3 Schedule III of the Wealth Tax Act contains the Rules for determining the value of assets for the purposes of wealth tax. Rule 20 of the Schedule III of the Act reads as: -
"(1) The value of any asset/ other than cash/ being an asset which is not covered by rules 3 to 10/ for the purposes of this Act/ shall be estimated to be the price which in the opinion of the Assessing Officer. it would fetch if sold in the open market on the valuation date............"5 ITA No. 29/Del/2014
Assessment year: 1998-99 6.4 The Appellant submitted that in the absence of any specific method prescribed under Rule 20 to derive at the fair market value of motor cars, the WDV of such cars computed u/s 32 of the Income Tax Act, 1961 would fairly represent the fair value of motor cars for the purposes of wealth tax. In support of the same, the Appellant placed reliance on a recent decision of the Hon'ble Chennai High Court in the case of CWT vs. T.V. Sundaram Iyenger and Sons Ltd. 205 CTR 191 (Chennai).The relevant extract of the decision is as under:
"We heard the arguments. In this case, what is shown in the books was offered for wealth-tax assessments. The AO had merely adopted the insured value of the vehicles as the market value. The AO ought to have determined the market value for each vehicle, instead of merely adopting the value which was offered to the insurance company, as the market value. As to what should be the value of the asset is essentially a question of fact, especially when the Tribunal had adopted the WDV as market value in the earlier assessment years in assessee's own case. No material is produced before us by the Revenue to show that the WDV does not represent the market value of the vehicle.
4. In view of the foregoing conclusions, we find no error in the order of the Tribunal and hence no substantial question of law arises for consideration in this court. Hence, the above tax cases are dismissed. No costs. Consequently, the connected TCMP Nos. 750 to 753 of 2005 are closed.
6.5 On going through the facts of the case, I find that the Appellant, being a NBFC, has large no. of customers with whom leasing has been carried out. Hence, it is impractical for the Appellant to trace the value of each vehicle separately as on the valuation date. The Appellant therefore applied the of the vehicles for the value of motor cars for wealth tax. Moreover, the AO has not indicated any inaccuracy in the value adopted by the assessee. The approach adopted by the Appellant seems to be practical and no inconsistency on cogent grounds were observed by the AO. On the other hand, I find that the method adopted by the Ld. AO is arbitrary and the AO has not been able to bring on record any positive material to support his method or put forth any rational basis to reject the method followed by the Appellant.
6.6 In light of the above discussion, I find merit in the contention of the Appellant for taking WDV of vehicles for taking value for wealth tax purposes. Even the car insurance companies take into account the amount of depreciation for assessing the insured value of vehicles. In view of this, Ground No 1 is allowed in favour of the appellant."
3.4 In view of above, we agree with the contention of of ld AR that the assessee could not gather the information in respect of the insured value of the vehicles being large number of leased out vehicles. The value of motor cars adopted by the assessee has been upheld by the CWT(A) in view of the judgment of the Hon'ble Chennai High Court in the case of e T.V. Sundaram 6 ITA No. 29/Del/2014 Assessment year: 1998-99 Iyenger and Sons Ltd. (supra). We find that the order of the ld CWT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the findings of the CWT(A) and thus we uphold the same. Accordingly, ground nos. 1 & 2 raised by the Revenue are dismissed.
4. Ground no. 3 raised by the Revenue is in respect of debt claimed by the assessee in relation to taxable assets. Learned Sr. Departmental Representative submitted that if the assessee failed to bring out the exact amount of the debt corresponding to the motor cars then there was no option with the Assessing Officer except to estimate the debt corresponding to those motors. 4.1 Learned Authorized Representative, on the other hand, submitted that computation of debt by the Assessing Officer at Rs. 2 crores was without any basis as against the debt of Rs. 5,90,83,620/- was based on applying the ratio of total debt to total asset, i.e., 0.85:1 to the taxable value of the wealth under the Act and that being more scientific method then applied by the Assessing Officer, should be accepted.
4.2 We have heard the rival submissions and perused the material on record. Regarding this issue, the CWT(A) has given his findings, which is reproduced below:
"7.1. Ground No. 2:- The Appellant is a NBFC, engaged in the business of finance and leasing. Being an NBFC, the Appellant has huge borrowings which are used by it for the purpose of business. Given the nature and the quantum of the Appellant's business, the Appellant is in possession of mixed funds through which it transacts its day to day business of leasing and financing. Hence, no direct nexus can be accurately established between the assets purchased by the Appellant with the amount borrowed by it for the purpose of business. In the absence of any clear distinction of funds available with the Appellant, the Appellant had computed the debts incurred in relation to the assets for wealth tax purposes as the ratio of the total debts owed to the total value of assets as on March 31, 1998.7 ITA No. 29/Del/2014
Assessment year: 1998-99 7.2. It is unambiguous that the Appellant has incurred debts relation to the chargeable assets. The fact has also been observed by the Ld. AO at page 4 of the subject assessment order. The AO, on estimate, has allowed Rs.2,00,00,000/- as debts which has been incurred in relation to total assets, however, no basis of the same was given.
7.3. In the absence of any specific identification of debts incurred in relation to assets chargeable to wealth tax, I hold that a more reasonable method of computing the debts in terms of section 2(m) of the Act would be to take the ratio of the total debts to the total assets as on the 'valuation date'. In the light of the above, I hold that the method followed by the appellant is a scientific one compared with the adhoc and arbitrary estimate adopted by the Ld. AO Accordingly, I allow Ground No.2 in favour of the appellant."
4.3 In view of above, we find that the assigning of debt on proportionate basis towards assets liable for wealth tax is a more reasonable and judicious method rather than making a arbitrary estimate by the Assessing officer. The CWT(A) has given a reasoned findings on the issue in dispute and, therefore, no interference is required in his findings on the issue. Accordingly, this ground of the Revenue is dismissed.
5. Ground no. 4 being general in nature, we are not required to adjudicate upon.
6. In the result, the appeal of the Revenue is dismissed.
The decision is pronounced in the open court on 24th February, 2016.
Sd/- Sd/-
(I.C. SUDHIR) (O.P. KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 24th February, 2016.
RK/-
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi