Seized Jewellery Not To Attract Market Rates For Wealth Tax

If you are one of them whose premises have been searched and assets seized under Section 132 or the Income Tax Act, take heart from the fact that you will not be required to pay wealth tax on the actual market value of the seized jewellery.

In a landmark judgment, the wealth tax bench of the Mumbai Income Tax Appellate Tribunal recently pronounced that appropriate discounts in the market value of jewellery seized should be made where payment of wealth tax is concerned.

Though the discount on the market value would be determined by the assessing officer on a case-to-case basis, the view is that the discount could be around 50 per cent. The wealth tax is pegged at one per cent of the market value of properties.

Legal experts stated that such a judgment will have far-reaching implications. "Today it is jewellery. Tomorrow it could be property seized during income tax raids as well," said a leading advocate familiar with the case.

In deriving the wealth tax payable, the tribunal has pointed out that the market value of the asset ought to be appropriately discounted.

M K Chaturvedi, vice-president of the tribunal, in his judgment stated: "For ascertaining the correct value of the asset, the value of the property ought to be appropriately reduced because deprivation of possession tantamount to a depressing effect."

All factors leading to the seizure have a tendency to influence the value of the property and these ought to be factored into the discounting when determining the value of the assets for the purpose of levy of wealth tax, stated the tribunal.

The tribunal has further directed the assessing officer to give adequate opportunity to the assessee of being heard. Currently, the assessee, though deprived of the right to possession, is required to pay wealth tax on the market value at the rate of one per cent.

In Mumbai, litigation continues for at least seven to eight years and the assessee is deprived of using or disposing of such assets. "As deprivation of possession of the jewellery tantamounts to a depressing effect", the recent decision of the tribunal will mitigate the hardship faced by assessees.

The judgment was given on a case filed by S P Goyal against the assistant commissioner of wealth tax in relation to the value of gold and jewellery at Rs 1.08 crore for the assessment year 1994-95 and Rs 1.1 crore for the assessment year 1995-96.

The appeal on behalf of the assessee was argued by Prakash K Jotwani, advocate, at the instruction of advocates D M Harish & Co.