2013 (2) TMI 248 - HC - Wealth-tax

Exemption from wealth tax - property used by Director, Manager and Secretary as residential accommodation Allotted the premises at Door No.20 to the Managing Director for being used as residence Held that - A careful reading of the provisions in Section 40(3)(iv b) of the Finance Act would show that the question of holding more than one per cent of equity share for claiming the benefit would arise only in case of an employee of the assessee and not the Director, Manager or the Secretary as the case may be - The second portion of the holding not not less than one per cent of the equity share of the assessee would be applicable only in case of employees of the assessee and not the Director, Manager or the Secretary - even the Manager or Secretary do not hold any share, nevertheless the assessee would be entitled to exemption - Against the Revenue. Wealth tax - inclusion of leased out property into Net Wealth - Assessee, apart from doing printing business, is also doing the business of leasing out the properties Leased out two properties Held that - claim of exemption must be with reference to the nature of the premises Assessee are doing business in leasing as well and in the course of such business, they have leased out the premises leasing out the premises owned by a company is part of the company s business and therefore, the asset itself having been commercially exploited Not includable in the net wealth, - Assessee is entitled to exemption Against the Revenue

Summary

Issues:
1. Exemption of property from wealth tax under Section 40(3)(vi b) of the Finance Act, 1983.
2. Inclusion of property value in the assessee's net wealth.

Analysis:

Issue 1:
The case involved the exemption of properties from wealth tax under Section 40(3)(vi b) of the Finance Act, 1983. The assessee, engaged in printing and leasing businesses, leased properties to entities like Tamilnadu Electricity Board and Lotus Inks. The property at Door No.20, Hunters Road, was allotted for residential use to the Managing Director. The Assessing Officer rejected the exemption claims, leading to appeals. The Commissioner of Income-tax accepted the exemption for the residential property but remitted the matter for the property at Door No.123 for further consideration. The Tribunal dismissed the Revenue's appeal, upholding the exemption for the property at Door No.124. The High Court analyzed the provisions of Section 40(3)(vi b) and concluded that the assessee was entitled to exemption for the residential property as per the law's clear language, even if the Manager or Secretary did not hold any equity share. Therefore, the first substantial question of law was answered in favor of the assessee.

Issue 2:
Regarding the property at Door No.123, the High Court noted that the claim of exemption should be based on the nature of the premises, which required factual findings. Since the Assessing Officer did not provide such findings, the matter was rightly remitted for reconsideration. The Tribunal's confirmation of this decision was deemed appropriate, with no substantial legal question arising. As for the property at Door No.124, the assessee's business activities included leasing to companies like Lotus Inks. The Commissioner of Income-tax Appeals and the Tribunal accepted the assessee's claim for exemption based on the commercial exploitation of the property in the course of business. The High Court found no grounds for interference, and the second substantial question of law was answered against the Revenue in favor of the assessee. Given the tax effect in each appeal being less than Rs.1,00,000, the appeals were dismissed without costs.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning in deciding the case.