Cash Balance generated out of Cash Sales is Business Assets which can’t be deemed as ‘Cash in Hand’ for Wealth Tax: ITAT [Read Order]

Wealth Tax - Kerala High Court - Taxscan

The Kolkata bench of ITAT has held that cash balance generated out of cash sales cannot be treated as ‘cash in hand’ within the meaning of section 2(ea) of the Wealth Tax Act since the same constitute business assets.

In the instant case the assessee, an individual engaged in a sole proprietorship business. During the time of assessment the AO found that The business balance sheet contained cash in hand of Rs. 48,81,761/- and The personal balance sheet contained cash in hand of Rs. 1,52,861/-. The assessee The assessee included the cash in hand as per his personal balance sheet amounting to Rs. 1,52,861/- in the statement of net wealth. In respect of total assets reflected in the balance sheet of the proprietary concern of the assessee, the assessee arrived at the global valuation of business assets at Rs. 9,47,580/-. After these observations, the AO has completed the wealth tax assessment by adding Rs 48,81,761  showed in the business balance sheet as an eligible asset u/s 2(ea) of the act. And the CWTA also upheld this action of the AO.

Assessees’ contentions were accepted by the CWTA during the first appeal. It was held that the addition of the said amount was without considering the fact that the cash in hand was the productive asset of his business concern hence it does not attract the provision of section 2(ea).

On departmental appeal, the bench comprising of S.S. Viswanethra Ravi (Judicial Member) and M.Balaganesh (Accountant Member) has observed that it is a fact that the cash in hand of the said amount represents the cash belonging to the proprietary concern hence it is a business asset for the assessee and he had rightly included the said cash as part of his workings under global valuation of the business asset in terms of Schedule III Rule 14 of the Rules. And the bench further noted that cash balance generated out of cash sales treated as cash in hand instead of business asset and it was against the sec 2(ea). Cash in hand referred as only the personal cash of the assessee that reflected in his personal balance sheet under the said section. The aforesaid amount as cash in hand should be treated as business asset and cannot be treated as cash in hand.

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