2003 (3) TMI 36 - HC - Wealth-tax

Scope and ambit of section 40(3)(vi) of the Finance Act 1983 regarding the computation of net wealth of a closely held company which was made liable to wealth-tax assessment as per the said Act Held that building used by the assessee-company for running the hospital (and the land appurtenant thereto) does not qualifies as a building used as office for the purposes of the business envisaged under section 40(3)(vi) of the Finance Act 1983 read with the Wealth-tax Act 1957

Summary

Issues Involved:
1. Interpretation of section 40(3)(vi) of the Finance Act, 1983.
2. Whether the hospital building used by the assessee qualifies as "office for the purposes of the business" under section 40(3)(vi).
3. Whether the hospital building and the land appurtenant thereto fall under the exclusion of section 40(3)(vi).

Detailed Analysis:

1. Interpretation of section 40(3)(vi) of the Finance Act, 1983:

The matter arises under the Wealth-tax Act, 1957, specifically concerning the scope and ambit of section 40(3)(vi) of the Finance Act, 1983. This section pertains to the computation of net wealth of closely-held companies made liable to wealth-tax assessment. The relevant provision states that buildings or land appurtenant thereto, other than those used by the assessee as a factory, godown, warehouse, cinema house, hotel, or office for the purposes of its business, or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room, or lunch room mainly used for the welfare of its employees, are includible in the computation of net wealth.

2. Whether the hospital building used by the assessee qualifies as "office for the purposes of the business" under section 40(3)(vi):

The Tribunal had held that the hospital building used by the assessee qualifies as "office for the purposes of the business" and thus should be excluded from the computation of net wealth. The Tribunal reasoned that the hospital building is where the business of the assessee is carried on, akin to an office. However, the High Court disagreed, stating that the term "office" should be understood in its ordinary sense, meaning a place where administrative or clerical work is conducted. The Court emphasized that if the legislative intent was to exclude all buildings used for business purposes, it would not have specified particular types of buildings separately.

3. Whether the hospital building and the land appurtenant thereto fall under the exclusion of section 40(3)(vi):

The High Court concluded that the hospital building used by the assessee does not qualify for exclusion under section 40(3)(vi). The Court noted that the legislative intent was clear in specifying which buildings are excluded from the computation of net wealth, and hospitals are only excluded if they are mainly for the welfare of the company's employees. The Court found that the hospital run by the assessee did not meet this criterion, as it was not intended for the welfare of its employees but was a part of the business operations. Consequently, the hospital building and the land appurtenant thereto should be included in the net wealth computation.

Conclusion:

The High Court set aside the Tribunal's order and restored the Assessing Officer's decision, affirming that the hospital building used by the assessee does not qualify as "office for the purposes of the business" under section 40(3)(vi) and should be included in the computation of net wealth. The Court emphasized that the legislative intent and the specific exclusions mentioned in the provision must be adhered to, and the hospital building used for business purposes does not meet the criteria for exclusion.