COMMISSIONER OF WEALTH TAX, GUJARAT versus LOV. S. KINARIWALA

Citation: [2002] SUPP. 5 S.C.R. 44 · Decided: 11-12-2002 · Supreme Court of India · Bench: S.S.M. QUADRI, ARIJIT PASAYAT · Disposal: Dismissed

Judgment (excerpt)

A 
COMMISSIONER OF WEAL TH TAX, GUJARAT 
v. 
LOV. S. KINARIWALA 
DECEMBER 11, 2002 
B 
[SYED SHAH MOHAMMED QUADRI AND ARIJIT PASAYAT, JJ.] 
Wealth Tax Act, 1957: 
s.27 (I) and 27(3)-Assessee, a beneficiary of Trust assigned to the trust 
C his share of income received from pa1:tnership firm-The same alongwith 
other income distributed to assessee-Assessee assigned his interest in favour 
of Body of Individuals (80/s) and claimed that it should be assessed as asset 
of 80/s-Claim rejected by Assessing Officer holding that creation of BO/s 
and assignment was a sham and bogus-Commissioner (Appeals) reversed 
D the findings and his decision affirmed by Tribunal-High Court declined to 
direct the Tribunal to state and refer the question holding that decision of 
Tribunal was on the question of fact and no question of law arose-Held, 
once it is found as a fact that creation of 80/s and assignment of interest was 
not sham and bogus activity, the question sought to be referred woulq not 
arise and Tribunal u/s. 27(1) and High Court u/s. 27(3) were right in rejecting 
E the application of Revenue. 
Sunil J. Kinariwala v. Commissioner of Income Tax, (1955) 211 l.T.R 
127 and Commissioner of Income Tax v. Sunil J. Kinariwala, (20031 I SCC 
660, distinguished. 
F 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1858 of 
G 
H 
2002. 
From the Judgment and Order dated 13.4.99 of the Gujarat High Court 
in W.T.A. No. 52 of 1998. 
WITH 
C.A. Nos. 1847-48, 1865,.1869-71, 1873-76, 1877-1881, 1886, 1890, 
1893-98 of 2002 and 2339 of 200 I. 
Preetesh Kapur, Ranbir Chandra, K.C. Kaushik, Ms. Lakshmi Iyengar, 
44 
COMMISSIONER OF WEAL TH TAX v. LOV. S. KINARIW ALA 
45 
Ms. Sunita Sharma, Ms. Neera Gupta, B.V.B. Das and Ms. Sushma Suri for A 
the Appellant. 
U.U. Lalit, H.A. Raichura and S. H. Raichura for the Respondents. 
The following order of the Court was delivered: 
B 
Civil Appeal No. 1858 of 2002: 
This appeal, by the Revenue, arises from the common order passed by 
the High Court of Gujarat on an application under Section 27(3) of the 
Wealth Tax Act declining to direct the Income Tax Appellate Tribunal (for 
short, 'the Tribunal') to state the case and refer to it the following question C 
of law: 
"Whether the Appellate Tribunal is right in law and on facts in 
confirming the order passed by the Commissioner of Wealth-tax 
(Appeals) directing the Assessing Officer to exclude the value of the 
assets transferred to B. O.ls. from the wealth of the assessee?" 
D 
In the order under challenge, the High Court mentioned two grounds 
for rejection of the application under Section 27(3) of the Wealth Tax Act, 
namely, (I) the decision of the Tribunal is on the question of fact emanating 
from the record and no question of law arises out of it; and (2) relied upon 
the judgemeni of the Gujarat High Court in Suni/ J. Kinariwa/a v. E 
Commissioner of Income Tax, (1995) 211 l.T.R. 127. 
Mr. Ranbir Chandra, learned counsel for the Revenue, contends that as 
this Court has reversed the judgement of the High Court of Gujarat in Sunil 
J. Kinariwala (supra), this appeal has to be allowed. We are afraid, we cannot F 
accede to the submission of the learned counsel. 
It would be useful to refer to the facts giving rise to this appeal. 
The respondent-assessee is a beneficiary of the main Trust. The sum 
(being the share income of the assessee from the partnership firm) was assigned G 
to the Trust by the assessee. The same, along with other income of the Trust, 
was distributed among all the beneficiaries, including the assessee. They, in 
turn, assigned their respective interest in favour of Body of Individuals 
(8.0.ls.) and claimed that the beneficial interest derived from the firm should 
be assessed as assets of the 8.0.ls. for purposes of valuation and not the 
assets of the respondent-assessee. The Assessing Officer of the Wealth Tax H 
46 
SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R. 
A rejected the claim of the assessee taking the view that creation of B.O.ls. and 
assignment was a sham and bogus transaction. That finding was reversed, on 
appeal, by the Commissioner (Appeals) and the same was upheld by the 
Tribunal. 
Once it is found, as a fact, that the creation of the B.0.ls. and assignment 
B of assets was not sham and bogus activity, the question sought to be .referred 
would not arise and, therefore, the Tribunal under Section 27(1) of the Wealth 
Tax Act and the High Court under Section 27(3) of the Wealth Tax Act were 
right i

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