1988 (6) TMI 60 - AT - Income Tax

Summary

Issues:
1. Whether a cinema theatre belonging to the assessee is chargeable to wealth-tax.

Analysis:
The case involves the claim of the assessee that a cinema theatre owned by a private limited company is not subject to wealth-tax. The Wealth-tax Officer valued the cinema theatre and held it as not exempt from tax. The main contention was whether a theatre building should be considered a plant for tax purposes under section 40(3)(vi) of the Finance Act, 1983. The Tribunal considered the legislative intent behind the reintroduction of wealth-tax on closely-held companies and analyzed the specific assets liable to tax under section 40 of the Finance Act, 1983.

The Tribunal observed that plant and machinery used in the business of the assessee were not listed as assets liable to tax under section 40(3). Referring to previous Tribunal decisions, the Tribunal held that a cinema theatre could be treated as a plant for the purpose of wealth-tax, even if not assessed as a plant for income tax. The objective of the legislation was to tax unproductive assets not utilized in the business, and since the cinema theatre generated income for the assessee, it was considered a plant for wealth-tax purposes.

Furthermore, the Tribunal examined the subsequent amendment in the Finance Act, 1988, which included "cinema house" in the list of buildings exempt from wealth-tax. The Tribunal interpreted the amendment as declaratory in nature, intending to clarify the law rather than change it. Citing legal principles on declaratory statutes, the Tribunal concluded that the inclusion of cinema houses in the exempt category was retrospective from the inception of the legislation.

Additionally, the Tribunal applied the rule of ejusdem generis to interpret the clause listing exempt buildings, concluding that a cinema theatre fell within the category of exempt buildings. Considering that a cinema house may also contain office premises, the Tribunal held that the entire building could be considered exempt under the office premises category. Consequently, the Tribunal accepted the assessee's claim that the cinema theatre was exempt from wealth-tax, annulling the assessments as the assessee had no other chargeable assets.

In conclusion, the Tribunal allowed the appeals, ruling in favor of the assessee and holding that the cinema theatre was not liable to wealth-tax, based on the legislative provisions and interpretative principles applied during the analysis.