1983 (9) TMI 153 - AT - Wealth-tax

Summary

Issues Involved:
1. Validity of the Commissioner's assumption of jurisdiction under section 25(2) of the Wealth-tax Act.
2. Whether the Umed Bhavan Palace, including the surrounding land, is exempt under section 5(1)(iii) of the Wealth-tax Act.
3. Whether the assessment orders passed by the Wealth-tax Officer (WTO) were erroneous and prejudicial to the interests of the revenue.

Detailed Analysis:

1. Validity of the Commissioner's Assumption of Jurisdiction under Section 25(2):

Arguments by the Assessee:
- The Commissioner had access to detailed records, including the assessment for the year 1957-58, which showed that the WTO had made detailed enquiries about the extent of the exemption for Umed Bhavan Palace.
- The assessee had declared the Umed Bhavan Palace and the surrounding land in the wealth-tax returns and claimed exemption under section 5(1)(iii).
- The WTO had made due enquiries and applied his mind to the question of exemption, as evidenced by the correspondence and reports on record.

Arguments by the Department:
- The WTO did not make any enquiry or apply his mind to the exemption claimed under section 5(1)(iii) for the years under consideration.
- The assessment orders did not discuss the exemption claimed by the assessee, indicating a lack of enquiry and application of mind.
- The Commissioner validly assumed jurisdiction under section 25(2) because the assessment orders were erroneous and prejudicial to the interests of the revenue.

Conclusion:
The Commissioner validly assumed jurisdiction under section 25(2) because the WTO did not discuss or make enquiries about the exemption claimed under section 5(1)(iii). The assessment orders were found to be erroneous and prejudicial to the interests of the revenue.

2. Whether Umed Bhavan Palace, Including the Surrounding Land, is Exempt under Section 5(1)(iii):

Arguments by the Assessee:
- The term "building" in section 5(1)(iii) should be interpreted to include the entire Umed Bhavan Palace and the surrounding land, as it constitutes one undivisible unit.
- The inventory of private properties approved by the Government of India included "Umed Bhavan including gardens, rari, buildings comprising the entire compound."
- The exemption should extend to the entire land surrounding the palace, as it forms part of the palace.

Arguments by the Department:
- The term "building" in section 5(1)(iii) refers to the palace building or buildings in a cluster and the land appurtenant thereto for proper use and enjoyment.
- The exemption cannot extend to the entire land surrounding the palace, which is more than 2,000 bighas.
- The inventory of private properties and other documents relied upon by the assessee are not relevant for interpreting section 5(1)(iii).

Conclusion:
The exemption under section 5(1)(iii) applies to the Umed Bhavan Palace building or buildings in a cluster and the land appurtenant thereto necessary for proper use and enjoyment. It does not extend to the entire land surrounding the palace.

3. Whether the Assessment Orders Passed by the WTO Were Erroneous and Prejudicial to the Interests of the Revenue:

Arguments by the Assessee:
- The WTO had made detailed enquiries and applied his mind to the exemption claimed under section 5(1)(iii).
- The assessment orders were not erroneous, as the WTO had accepted the exemption claimed by the assessee after due consideration.

Arguments by the Department:
- The WTO did not make any enquiry or apply his mind to the exemption claimed under section 5(1)(iii).
- The assessment orders did not discuss the exemption claimed by the assessee, indicating a lack of enquiry and application of mind.
- The assessment orders were erroneous and prejudicial to the interests of the revenue, as they did not include the value of the land surrounding Umed Bhavan Palace.

Conclusion:
The assessment orders passed by the WTO were erroneous and prejudicial to the interests of the revenue because the WTO did not make any enquiry or apply his mind to the exemption claimed under section 5(1)(iii). The orders did not include the value of the land surrounding Umed Bhavan Palace, which should have been considered for taxation.

Final Decision:
The appeals are allowed, and the orders of the Commissioner are vacated. The WTO is directed to re-assess the wealth of the assessee, considering the exemption under section 5(1)(iii) for the Umed Bhavan Palace building and the land appurtenant thereto necessary for proper use and enjoyment, but not the entire land surrounding the palace.