By TIOL News Service

NEW DELHI, APR 07, 2016: THE issue is - Whether assessee can claim refund of voluntarily paid wealth tax if it has filed delayed return and has failed to disinvest shares held in prohibited modes which was essential for claiming wealth tax exemption. NO is the answer.

Facts of the case

The assessee had filed its return on the date prior to the amendment brought in by the Finance (No. 2) Act 1991 by which Clause 2 (iia) was introduced to proviso to Section 13(1)(d) of I-T Act. Resultantly, the assessee did not claim the exemption u/s 11 of I-T Act in the return filed by it for the A.Y 1991-92. The assessee states that in view of the amendment u/s 13(1)(d) of I-T Act, it had filed a revised return claiming exemption u/s 11 of I-T Act, as the assessee was under the bonafide belief that it was entitled to exemption u/s 5(1)(i) of W-T Act upto the time limit prescribed for making reinvestment under I-T Act, i.e, upto 31st March 1993. Therefore, the assessee did not file its return of wealth tax for the A.Y 1991-92 on or before the due date, i.e., 31st October 1991. The assessee claimed that it was subsequently advised that consequent to the amendment by which Clause 2 (iia) was inserted in the proviso u/s 13(1)(d) with retrospective effect from 1st April 1983, it could not presume to be exempt from having to pay wealth tax in terms of Section 5(1)(i) of W-T Act unless it was granted exemption u/s 11 of I-T Act. Consequently, the assessee belatedly filed its return of wealth for A.Y 1991-92 under protest disclosing its total wealth at Rs. 1,81,24,600. The assessee also paid self-assessment tax, including interest for late filing of return, in the sum of Rs. 5,43,692, after claiming that it was entitled to exemption u/s 5(1)(i) of W-T Act. The Additional Director of Wealth Tax however informed the assessee that the return of wealth tax filed by it was time barred and accordingly treated as invalid. Thereafter, the assessee requested him to regularize the assessment proceeding for the AY 1991-92 by issuing notice u/s 17 of W-T Act or to refund the wealth tax of Rs. 5,43,692 paid by it under protest. Having failed to receive any response, the assessee filed a petition before the CBDT u/s 10(2)(b) of W-T Act requesting the CBDT thereby to issue suitable instructions or directions for grant of refund of wealth tax paid by it.

Meanwhile, the income tax return filed by assessee was picked up for scrutiny by the AO, who rejected the claim made u/s 11(1)(ii) of I-T Act. On appeal, the ITAT held that since the assessee had time up to 31st March 1993 to disinvest the shares held by it, the benefit u/s 11(1)(d) could not be denied to it for AY 1991-92. However, subsequently, the CBDT rejected the application filed by assessee u/s 10(2)(b).

Having heard the parties, the High Court held that,

++ it appears that the assessee is not entitled to any reliefs as claimed in the petition. Under the Finance (No. 2) Act of 1991, an amendment was brought about in Section 13(1)(d) of I-T Act whereby clause (iia) was inserted in the proviso with retrospective effect from 1st April 1983 which provided that for a charitable trust to retain its exemption u/s 11(5) of I-T Act, it was required to disinvest its shares/assets, after the expiry of one year from the end of the previous year in which such asset is acquired or 31st March 1992, whichever was later. This was later extended till 31st March 1993. It was in view of the above amendment that the assessee filed its revised return on 18th January 1992 under the I-T Act claiming exemption u/s 11 of I-T Act. However, for the reasons best known to it, the assessee did not file a wealth tax return. The Revenue is right in contending that there was no valid reason given by the assessee in not filing the wealth tax return within the stipulated time when it had filed its income tax return. The other fact that has not been disputed by it is that the assessee filed the wealth tax return belatedly by way of self-assessment. It is seen that the assessee was informed that the return was time barred. Thus, on the date of filing of wealth tax return, the assessee was fully well aware that the deadline for the disinvestment of the shares held by it had long crossed. Yet the assessee claimed that it was entitled to claim the refund of the amount as it had paid the self assessment tax only because as of 31st March 1991 it was entitled to retain the shares which were in the prohibited modes;

++ as rightly pointed out counsel for the Revenue, the conduct of the assessee in filing the wealth tax return belatedly and much after the date by which it was required to disinvest the shares held in the prohibited modes, and the fact that it did not do so, should disentitle it to any of the reliefs prayed for. Therefore, it could not be heard to say that it must be refunded the wealth tax voluntarily paid by it. Further, there is no denial by the assessee that on the date of filing of the wealth tax return it had failed to comply with the essential conditions for claiming exemption. As noticed, the assessees in the other writ petitions are also public charitable trusts formed in Delhi by trust deeds and the issues in the connected writ petitions are more or less similar to that of the assessee in present petition. The said trusts also filed wealth tax returns belatedly under protest, whereby the deadline for disinvesting the shares held in the prohibited modes had expired. Consequently, none of them was entitled to seek exemption as claimed.

(See 2016-TIOL-704-HC-DEL-IT)