1985 (11) TMI 87 - AT - Wealth-tax

Summary

Issues:
1. Claim of exemption under section 5(1)(xxxi) of the Wealth-tax Act, 1957.
2. Validity of rectification under section 35.
3. Interpretation of ownership criteria for granting exemption under section 5(1)(xxxi).

Analysis:

Issue 1: Claim of exemption under section 5(1)(xxxi)
The assessee initially claimed exemption under section 5(1)(xxxii) for immovable properties leased out to specific firms. However, upon realizing the mistake, the assessee contended that exemption should be granted under section 5(1)(xxxi) as the properties were industrial assets belonging to the assessee. The WTO rejected this claim, stating that the industrial activity must be carried out by the assessee, not just ownership. The AAC upheld this decision, leading to the present appeal.

Issue 2: Validity of rectification under section 35
The WTO invoked section 35 to rectify the assessment, denying the exemption originally granted under section 5(1)(xxxii) due to the assessee not being a partner in the firms leasing the properties. The assessee argued that there was no mistake apparent from the record justifying the rectification. However, the Tribunal upheld the validity of the rectification based on the assessee's admission of the initial claim being a mistake.

Issue 3: Interpretation of ownership criteria for exemption under section 5(1)(xxxi)
The Tribunal analyzed the legislative intent behind the Wealth-tax Act, emphasizing that wealth-tax is levied on the total assets owned by the assessee. The Tribunal interpreted section 5(1)(xxxi) to require ownership of assets forming part of an industrial undertaking by the assessee for exemption, without mandating direct involvement in the industrial activity. Drawing parallels with other provisions and judicial decisions, the Tribunal concluded that ownership, not operational involvement, is the key criterion for granting exemption under section 5(1)(xxxi). Thus, the Tribunal directed the WTO to allow the assessee exemption under section 5(1)(xxxi) based on this interpretation.

In conclusion, the Tribunal partly allowed the appeal, emphasizing the ownership criterion for exemption under section 5(1)(xxxi) and overturning the previous decisions that required direct involvement in industrial activities for exemption eligibility.