Law:

Section:

Section 2(m) of the Wealth-tax Act, 1957 - Net wealth - Assets belonging to assessee - Assessee was a shareholder of a company - For relevant assessment year aforesaid company declared gross dividends but deferred its payment along with interest thereon as required by provisions of Companies (Temporary Restrictions on Dividends) (Amendment) Act, 1975 - Whether right to receive dividends had accrued to assessee daring relevant accounting year even though its payment was deferred to a future date and, therefore, it was includible in net wealth of assessee - Held, yes - Whether when not only payment of interest on dividends declared was deferred to future date but accrual of interest itself was deferred, said interest was not an asset held by assessee on valuation date and, therefore, it could not be included in assessee's net wealth - Held, yes Facts The assessee was shareholder of a company. For the relevant assessment year, the aforesaid company declared total dividends but withheld its payment for a period of two years from 6-7-1974 because of restrictions imposed by the Companies (Temporary Restrictions on Dividends) (Amendment) Act, 1975. As per the provisions of that Act, the company paid interest in instalments, first on the expiry of the period of two years and the second on the expiry of another year. The WTO treated the gross dividend declared by the company as part of the net wealth of the assessee. On appeal, the Tribunal held that in evaluating the value of the right to receive the deferred dividends and the interest on the respective valuation dates, the present value of the right to receive an amount in future would certainly be lower than the amount itself, in that a discount would have to be allowed. Therefore, it was not the total dividend declared that was includible in the net wealth of the assessee, but only discounted value of the gross dividend. Accordingly, the WTO's order was set aside. On reference: Held The Tribunal evaluated the aforesaid dividend on a principle of actuarial basis, when, in lieu thereof, it adopted a rough and ready method. Any discount, for that purpose whether calculated on actuarial basis or on a rough and ready…

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