2011 (10) TMI 621 - AT - Income Tax

Summary

Issues involved:
The judgment involves the issue of whether an aircraft co-owned by the assessee company is liable to wealth-tax under section 2(ea)(iv) of the Wealth-tax Act, 1957, and if the aircraft was acquired for non-commercial purpose.

Details of the judgment:

1. Background and Assessing Officer's Decision:
The Assessing Officer noted the company owned an aircraft, valued at Rs. 3,52,77,744, in its Balance sheet. The assessee contended that the aircraft was used for business purposes and should not be considered an asset for wealth-tax. However, the Assessing Officer disagreed, stating that the aircraft was not exclusively used for business purposes, resulting in the inclusion of its value in the total wealth assessment.

2. Appeal before Commissioner of Wealth-tax (Appeals):
In the appeal, the assessee reiterated that the aircraft was used for business purposes and cited a Tribunal decision in a similar case. The Commissioner of Wealth-tax (Appeals) upheld the inclusion of the aircraft as an asset, stating it was not exclusively used for business purposes during the relevant year.

3. Arguments before ITAT:
The assessee argued that the aircraft's use for business purposes, as evidenced by allowed depreciation, qualified as commercial use under section 2(ea)(iv). The Revenue contended that personal use disallowance in income-tax proceedings negated exclusive business use.

4. ITAT Decision:
ITAT considered the definition of 'commercial purposes' under section 2(ea)(iv) and referred to a Tribunal decision supporting the assessee's position. It concluded that the aircraft, treated as a business asset and used for business with allowed depreciation, met the criteria for commercial use, excluding it from wealth-tax. The Revenue's argument based on personal use disallowance was rejected.

5. Outcome:
The ITAT set aside the Commissioner of Wealth-tax (Appeals) order, directing the exclusion of the aircraft value from the assessee's net wealth. The alternative plea regarding share application money deduction was deemed academic and not adjudicated upon.

In conclusion, the appeal of the assessee was allowed, and the judgment was pronounced on October 21, 2011.