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Interpretation of the term 'used as a factory' under section 40(3)(vi) of Finance Act, 1983 for wealth tax assessment. Analysis: The case involved a Private Limited Company for the assessment year 1984-85, concerning the valuation date of 30th June 1983. The dispute arose regarding the treatment of a building under construction with inadequate plant and machinery as a factory used by the assessee on the valuation date in terms of section 40(3)(vi) of Finance Act, 1983. The Wealth Tax Officer (WTO) subjected the investment in the construction of the factory building to wealth tax as it was incomplete on the valuation date. The Commissioner of Wealth-tax (Appeals) overturned this decision, stating that once an asset is committed for use as a factory, even passive use during the construction process fulfills the conditions for exclusion under the relevant provision. This decision was supported by the Appellate Tribunal. The legislative intent behind reintroducing wealth tax on closely held companies from the assessment year 1984-85 was to tax unproductive assets. The Tribunal emphasized that the use of the asset as a factory building becomes evident from the date construction commences, not necessarily when production starts. Reference was made to a Supreme Court decision regarding a similar issue under the Wealth-tax Act, 1957, highlighting the importance of readiness to commence business as the defining factor for 'setting up' a unit. The Tribunal confirmed the decision of the Commissioner of Wealth-tax (Appeals) based on this interpretation, emphasizing that the construction process itself signifies the asset's use as a factory. The Tribunal drew parallels from a Supreme Court decision under the Wealth-tax Act, 1957, to support the interpretation that readiness to commence business is crucial for considering an asset as 'set up.' The decision highlighted the distinction between 'setting up' and 'commencing' a business, emphasizing that operations for establishing a unit precede its actual setting up. This interpretation was applied to the current case to affirm the exclusion of the factory building under construction from wealth tax assessment. The Tribunal dismissed the appeal, upholding the decision of the Commissioner of Wealth-tax (Appeals) based on the legislative intent and judicial precedents cited.
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