THE COMMISSIONER OF INCOME TAX vs. M/S.HEMLA EMBROIDERY MILLS PVT

ITR/159/1999HC Punjab & HaryanaPHHC01038597199902 August 2007Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE M.M. KUMAR9 pages
AI SummaryAllowed

What were the facts?

The assessee, Hemla Embroidery Mills Pvt. Ltd., filed a wealth tax return for Assessment Year 1987-88. Initially, it declared a net wealth of Rs. 3,396. Subsequently, it filed a revised return declaring land valued at Rs. 2,53,396, leased to M/s R. Narayan Dying and Printing Mills. The assessee later stated it sold part of its building and machinery to M/s R. Narayan Printing & Dying Pvt. Ltd., but leased the land. The Assessing Officer (AO) estimated the land value at Rs. 200 per Sq. Yard, totaling Rs. 27,00,000, and the building value at Rs. 10,00,000, adding it to the net wealth. The AO initiated proceedings under Section 18(1)(c) of the Wealth Tax Act, 1957, for concealment. The Commissioner of Wealth Tax (Appeals) directed the AO to determine the building's fair market value at Rs. 3,50,000 and the land's at Rs. 9,00,000. Both the revenue and assessee appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT dismissed the revenue's appeal and allowed the assessee's appeal.

What did the High Court hold?

The High Court held that the controversy was squarely covered against the revenue and in favour of the assessee by the Supreme Court judgment in Commissioner of Income-Tax v. Podar Cement Pvt. Ltd. The Court noted that while the amendment to Section 4(8) of the Wealth Tax Act was incorporated in 1997, the Podar Cement case established that similar amendments in respect of Section 27 of the Income-tax Act were declaratory and clarificatory, thus operating retrospectively. The High Court further observed that a Division Bench of their own court in Commissioner of Income Tax v. Badhurani Deepinder Kaur had followed and applied the Podar Cement judgment while construing Section 4(8) and Section 2(m) of the Wealth Tax Act. Therefore, the question of law was answered against the revenue and in favour of the assessee. The Tribunal's direction to the AO to delete the addition of Rs. 3,50,000 in the hands of the assessee company was upheld.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the factory building did not belong to the assessee company as on the relevant valuation date relating to A.Y. 1987-88 and, therefore, the value thereof is not liable to Wealth Tax in the hands of the assessee company. Assessee's Contention: The assessee argued that the factory building and machinery were transferred to a subsidiary company, and the land was leased. The Tribunal, in its order, relied on Supreme Court judgments in Nawab Sir Meer Osman Ali Khan v. CIT and Commissioner of Income-Tax v. Podar Cement Pvt. Ltd. to hold that the amended provisions of Section 4(8) of the Wealth Tax Act should be treated as declaratory and clarificatory, having retrospective operation. The Tribunal also referred to an ITAT Mumbai Bench decision in M/s. Tulsidas V. Patel Pvt. Ltd. v. W.T.O. and a Supreme Court judgment in Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur & Anr. to interpret the phrase "belonging to the company" as not necessarily implying absolute title, but including possession of an interest less than full ownership. The Tribunal concluded that since the building was transferred, full consideration received, and physical possession handed over, with the vendee using and enjoying it without hindrance, the asset could not be treated as belonging to the assessee. Revenue's Contention: The revenue's arguments are not explicitly detailed in the provided text, but their appeal to the Tribunal and the reference to the High Court indicate their disagreement with the Tribunal's finding that the building did not belong to the assessee and was not liable for wealth tax.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 16A(5),Section 40(3)(iv),Section 18(1)(c),Section 4(8),Section 27,Section 2(e),Section 53A,Section 2(m)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R. No. 159 of 1999 DATE OF DECISION: 2.8.2007 The Commissioner of Income-tax, Haryana, Rohtak …Applicant Versus Hemla Embroidery Mills Pvt. Ltd., Faridabad …Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present: Mr. Yogesh Putney, Advocate, for the applicant-revenue. Mr. Sanjay Bansal, Senior Advocate, with Mr. Parvesh Saini, Advocate, for the respondent-assessee.

JUDGMENT M.M. KUMAR, J. At the instance of the revenue the Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi (for brevity, ‘the Tribunal’) has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 (for brevity, ‘the Act’), which is stated to have emerged from I.T.A. No. 675/Del/92 from its order dated 16.3.1998, in respect of the assessment year 1987-88:-

I.T.R. No. 159 of 1999 “ Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the factory building did not belong to the assessee company as on the relevant valuation date relating to A.Y. 1987- 88 and, therefore, the value thereof is not liable to Wealth Tax in the hands of the

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 256(1)

All 755 judgments and leading authorities on Section 256(1) →

Recent GST High Court judgments

Search GST case law →