1986 (8) TMI 142 - AT - Wealth-tax

Summary

Issues Involved:
1. Entitlement to exemption under section 5(1)(iv) of the Wealth-tax Act, 1957 for non-residential buildings.
2. Interpretation of the term "house" within the context of section 5(1)(iv).
3. Applicability of the circular issued by the Board regarding the interpretation of "house".
4. Jurisdiction of the AAC to enhance the assessment.

Detailed Analysis:

1. Entitlement to Exemption Under Section 5(1)(iv) of the Wealth-tax Act, 1957 for Non-Residential Buildings:
The primary issue in these appeals is whether the assessee is entitled to exemption under section 5(1)(iv) of the Wealth-tax Act, 1957 in respect of a non-residential building. The WTO had initially allowed this exemption, but the AAC withdrew it during appellate proceedings, enhancing the assessment under section 23 of the Act. The property in question, known as 'Gita Chamber', is a multi-storeyed building with open halls and attached toilets, originally approved as a residential building but later used for commercial purposes such as offices and showrooms. The AAC argued that the exemption should only apply to properties meant for human habitation, citing various legal precedents and legislative clauses.

2. Interpretation of the Term "House" Within the Context of Section 5(1)(iv):
The AAC's interpretation was that the term "house" should be limited to buildings meant for human habitation. However, the assessee's counsel argued that the term "house" should include buildings used for both residential and commercial purposes, as the building in question possesses permanent structures and facilities akin to a house. The counsel relied on a circular issued by the Board and the Supreme Court's decision in Tata Engg. & Locomotive Co. Ltd. v. Gram Panchayat, which supported a broader interpretation of the term "house". The Tribunal agreed with the assessee, stating that the term "house" in section 5(1)(iv) should not be restricted to residential buildings alone but should also include commercial buildings that generate income assessable under the head "Income from house property".

3. Applicability of the Circular Issued by the Board Regarding the Interpretation of "House":
The circular F. No. 317/23/73/WT dated 24-7-1973 clarified that the exemption under section 5(1)(iv) applies to both residential and business premises. The Tribunal emphasized that circulars issued by the Board are binding on all officers and persons employed in the execution of the Act. The Tribunal also cited the rule of contemporanea expositio, which supports the interpretation of statutes based on how they were understood at the time of enactment. The Tribunal concluded that the circular provides legitimate aid in interpreting the term "house" to include commercial premises.

4. Jurisdiction of the AAC to Enhance the Assessment:
The assessee also raised the issue of whether the AAC had the jurisdiction to enhance the assessment by withdrawing the exemption. However, this ground was not seriously pressed before the Tribunal, and thus, it was not a focal point of the judgment.

Conclusion:
The Tribunal concluded that the term "house" in section 5(1)(iv) of the Wealth-tax Act, 1957 includes buildings used for commercial purposes such as offices and showrooms. The Tribunal set aside the AAC's order enhancing the assessment and restored the exemption initially granted by the WTO. The appeals were allowed, emphasizing that the exemption under section 5(1)(iv) is not restricted to residential buildings alone.