COMMISSIONER OF WEALTH TAX vs. BOMBAY CONDUCTORS & ELECTRICALLTD.

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WTR/29/1989HC GujaratGJHC24013355198927 June 2002Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE K.A.PUJ3 pages

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What did the High Court hold?

The High Court held that the Tribunal was correct in its conclusion. The Court reasoned that since the Income-tax Officer had already accepted the property as being used for business purposes in the income-tax assessment proceedings (under Section 143(3)), the same treatment should be applied in the wealth-tax proceedings. If the property is used for business and accepted as such by the department for income-tax purposes, it cannot be treated differently for wealth-tax purposes. Consequently, the value of the property is exempt under Section 40(3)(vi) of the Finance Act, 1983, and cannot be included in the net wealth of the assessee. The Court answered the reference in the affirmative, in favour of the assessee.

What were the facts?

The assessee, Bombay Conductors & Electricals Ltd., is a company that owned a residential property valued at Rs. 4,40,087. The assessee contended that this property was used as a guest house and business premises, and therefore, its value should be exempt from net wealth computation under the Wealth-tax Act. The Wealth-tax Officer disagreed and included the property's value in the net wealth. The Commissioner of Wealth-tax (Appeals) upheld this decision. The assessee appealed to the Tribunal. The Tribunal noted that in income-tax proceedings, the department itself had treated the property as being used for business purposes, as evidenced by an order under Section 143(3) of the Income-tax Act. Based on this, the Tribunal concluded that the property was indeed used for business and thus eligible for exemption.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in coming to the conclusion that the assessee is entitled to exemption u/s. 40(3)(vi) of the Finance Act, 1983 for the residential property on the ground that the same was used for guest house and business premise? Assessee's contention: The assessee argued that the property was used for business purposes (guest house and business premise) and therefore should be exempt from wealth tax. The assessee relied on the fact that the Income-tax department itself had accepted this position in income-tax assessment proceedings. Revenue's contention: The revenue contended that the property, being residential, should be included in the net wealth of the assessee. The revenue's initial assessment and the Commissioner's (Appeals) order supported this view.

Which sections of the Income-tax Act were involved?

40(3)(vi)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 29 of 1989

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE K.A.PUJ

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

To be referred to the Reporter or not? : NO

Whether Their Lordships wish to see the fair copy : NO of the judgement?

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

Whether it is to be circulated to the Civil Judge? : NO COMMISSIONER OF WEALTH TAX Versus BOMBAY CONDUCTORS & ELECTRICALLTD. Appearance: 1. WEALTH TAX REFERENCE No. 29 of 1989 MR MANISH R BHATT for Petitioner No. 1 MR TANVISH U BHATT for Petitioner No. 1 NOTICE NOT RECD BACK for Respondent No. 1

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE K.A.PUJ

Date of decision: 27/06/2002

ORAL JUDGEMENT (Per : MR.JUSTICE K.A.PUJ)

At the instance of the revenue, following

question of law is referred to this Court for its opinion:-

"Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in coming to the conclusion that the assessee is entitled to exemption u/s. 40(3)(vi) of the Finance Act, 1983 for the residential property on the ground that the same was used for guest house and business premise ?"

In the present case, the assessee is a Company which owns a residential property which was valued at Rs.4,40,087/-. During the course of the assessment proceedings, the assessee had contended that the said property was being used for the purpose of business as a guest house and, therefore, it should not be included in the net wealth of the assessee. The Wealth-tax Officer did not accept this contention and included the value thereof in the computation of the net wealth of the assessee. On appeal, the Commissioner of Wealth-tax (Appeals) had upheld the order of the Wealth-tax Officer and on further appeal by the assessee before the Tribunal, the Tribunal has observed that in the income-tax proceedings, the department itself has exempted treating the property in question as being used for business purposes. The Tribunal has also referred to the order of the Income-tax Officer passed under Section 143(3) in the case of the assessee Company wherein it was clearly stated that the department had taken the stand that the premises were business premises and the Tribunal has, therefore, come to the conclusion that when the property was used for business purposes, the value thereof could not be included in the net wealth of the assessee and as such the exemption was available to the assessee under Section 40(3)(vi) of the Finance Act, 1983.

On the above facts, the above question was referred to this Court for its opinion.

Since the property in question was held to be used for business in the Income-tax proceedings by the Income-tax Officer himself, the same property could not have been treated differently in the wealth-tax proceedings. If the property is being used for business purposes and it is accepted to be so in the income-tax proceedings, Similar treatment is to be given in the wealth-tax proceedings and as such in the wealth-tax proceedings the value thereof cannot be included in the net wealth of the assessee as it is specifically exempt

under Section 40(3)(vi) of the Finance Act, 1983.

In view of the above, we are of the opinion that the Tribunal has rightly excluded the value of the property from the net wealth of the assessee. We, therefore, answer the above question in the affirmative i.e. in favour of the assessee and against the revenue.

The reference is accordingly disposed of with no order as to costs.

(M.S. Shah, J.) (K.A. Puj, J.) sundar/-

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