1997 (1) TMI 42 - HC - Wealth-tax

Summary

Issues:
- Interpretation of whether the business of the firm constitutes an undertaking engaged in the distribution of power for tax exemption under the Wealth-tax Act.

Analysis:
The case involved a question of law referred by the Tribunal to the High Court regarding the entitlement of the assessee to tax exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957. The assessee, a partner in a firm engaged in the supply of gas cylinders for domestic consumption, claimed exemption on the grounds that the firm should be considered an industrial company under the Act. The Wealth-tax Officer and the Appellate Assistant Commissioner denied the exemption, stating that the firm was not engaged in the distribution of power but in trading activities. The Tribunal, however, ruled in favor of the assessee, considering the distribution of gas cylinders as distribution of power and granting the exemption.

The main contention raised by the Department's counsel was that gas should not be considered power but only a source of power. The counsel argued that power should be understood in the context of various forms such as solar power, wind power, and hydroelectric power, and that gas itself is not power. The counsel relied on dictionary definitions to support the argument that power is distinct from the source of power, and therefore, the business of the firm cannot be considered engaged in the distribution of power.

On the other hand, the assessee's counsel argued that gas should be considered a form of power and that power encompasses any form of energy as commonly understood. The counsel contended that distributing the source of power should also qualify as distribution of power, and since gas was distributed through cylinders, it should be considered an undertaking engaged in the distribution of power.

The High Court analyzed the definitions of "power" from various dictionaries and concluded that while power includes various forms of energy, the source of power itself, such as gas, cannot be equated to power. The Court held that gas, being a fuel, cannot be considered power directly, as it needs to be oxidized to generate energy. Therefore, the firm in which the assessee is a partner was not deemed an industrial undertaking engaged in the distribution of power, and the exemption under section 5(1)(xxxii) of the Act was denied to the assessee.

In conclusion, the High Court answered the question referred in the negative, ruling in favor of the Department and denying the tax exemption to the assessee.