1999 (12) TMI 96 - AT - Income Tax

Summary

Issues Involved:
1. Liability of the assessee to wealth-tax.
2. Exemption of hostel buildings from wealth-tax.
3. Prima facie adjustments for assessment years 1994-95 to 1996-97.

Detailed Analysis:

1. Liability of the Assessee to Wealth-Tax:
The primary issue was whether the National Dairy Development Board (NDDB) is liable to wealth-tax. The assessee argued that it should not be liable to wealth-tax, citing its exemption from income-tax under section 44 of the NDDB Act, 1987. However, the Tribunal held that NDDB, being a body corporate constituted under an Act of Parliament, qualifies as a "company" under section 3 of the Wealth-tax Act, 1957, and is thus liable to wealth-tax. The Tribunal noted that the NDDB Act specifically exempts NDDB from income-tax but not from wealth-tax. Consequently, the Tribunal concluded that NDDB is liable to wealth-tax from the assessment year 1993-94 onwards, as the Parliament has not exempted it from wealth-tax.

2. Exemption of Hostel Buildings from Wealth-Tax:
The second issue was whether the hostel buildings owned by NDDB were exempt from wealth-tax under section 2(ea)(i) of the Wealth-tax Act. The assessee contended that the hostels were commercial assets used for training purposes and not residential houses, thus falling outside the purview of taxable assets. The Tribunal agreed with the assessee, stating that the hostels were used for temporary accommodation of trainees attending various courses organized by NDDB, and were thus productive commercial assets. The Tribunal referred to the Finance Minister's speech indicating that wealth-tax should be levied on non-productive assets. Therefore, the Tribunal directed the Assessing Officer to exclude the value of the hostel buildings from the wealth-tax assessment, ruling in favor of the assessee on this issue.

3. Prima Facie Adjustments for Assessment Years 1994-95 to 1996-97:
The third issue concerned the prima facie adjustments made by the Assessing Officer for the assessment years 1994-95 to 1996-97, which included the value of the hostel buildings in the total wealth of the assessee. The Tribunal held that since the hostel buildings were not liable to wealth-tax as per section 2(ea)(i), their value should not have been added to the total wealth under section 16(1)(a) by way of prima facie adjustments. Therefore, the Tribunal ruled in favor of the assessee on this issue as well, directing the exclusion of the hostel buildings' value from the wealth-tax assessments for these years.

Conclusion:
The Tribunal concluded that NDDB is liable to wealth-tax as a body corporate under section 3 of the Wealth-tax Act, 1957. However, the hostel buildings owned by NDDB were deemed commercial assets and thus exempt from wealth-tax under section 2(ea)(i). Consequently, the value of these hostel buildings should not be included in the wealth-tax assessments for the concerned years. The appeals were partly allowed, with the Tribunal ruling in favor of the assessee on the exemption of hostel buildings and prima facie adjustments, but against the assessee on the overall liability to wealth-tax.