1969 (8) TMI 22 - HC - Wealth-tax

Whether buildings and premises along with garages, sheds for tractors, kitchens, shops, etc., could be treated as out-houses within the meaning of section 2(e)(ii) of the WT Act, 1957, and as such exempted from wealth-tax - Held, no

Summary

Issues Involved:
1. Exemption of manager's bungalow, staff quarters, and labor lines as "dwelling houses" under Section 2(e)(ii) of the Wealth-tax Act, 1957.
2. Classification of the above buildings and premises as "out-houses" under Section 2(e)(ii) of the Wealth-tax Act, 1957.
3. Justification of allowing exemption for only 60% of the value of store-houses used for both agricultural and non-agricultural purposes.
4. Treatment of electrical machinery, batteries, transmission lines, grinding machinery, motor cars, and lorries as tools and implements under Section 5(1)(ix) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Exemption of Manager's Bungalow, Staff Quarters, and Labor Lines as "Dwelling Houses":
The assessee claimed exemption under Section 2(e)(ii) of the Wealth-tax Act, 1957, for the value of certain buildings, including the manager's bungalow, staff quarters, and labor lines, as "dwelling houses." The Tribunal held that the term "dwelling house" is narrower than "residence" and applies only to human residences. Since a limited company cannot have a dwelling house, the Tribunal rejected the claim. The High Court referenced the case of Kanan Devan Hills Produce Co. Ltd. v. Commissioner of Wealth-tax and answered the question in the negative, ruling against the assessee.

2. Classification as "Out-Houses":
The assessee alternatively argued that the buildings could be classified as "out-houses." The Tribunal and the High Court examined the definition and context of "out-house" and concluded that an out-house must be connected to or near a main building. The Tribunal found no evidence that the buildings in question were connected to any main building. The High Court agreed, stating that the term "out-house" must be understood in its common dictionary meaning, which implies a connection to a main building. Consequently, the High Court answered this question in the negative and against the assessee.

3. Exemption for 60% of the Value of Store-Houses:
The Tribunal had allowed 60% exemption for store-houses used for both agricultural and non-agricultural purposes. However, Dr. Pal, representing the assessee, did not press for an answer to this question during the reference. Therefore, the High Court declined to answer this question.

4. Treatment of Machinery and Vehicles as Tools and Implements:
The Tribunal found that none of the items of machinery, including motor cars and lorries, could be treated as "tools and implements" under Section 5(1)(ix) of the Act. The High Court referenced the case of Commissioner of Wealth-tax v. Anglo American Direct Tea Trading Co. Ltd., concluding that motor cars and lorries do not qualify for exemption. However, electrical machinery, batteries, transmission lines, and grinding machinery may qualify as "tools and implements" if used exclusively for raising agricultural produce. The High Court noted the absence of a definite finding by the Tribunal on the exclusive use of these items for agricultural purposes and remanded the matter for further findings.

Conclusion:
The High Court ruled against the assessee on the questions of exemption for manager's bungalow, staff quarters, and labor lines as "dwelling houses" and "out-houses." It declined to answer the question on the 60% exemption for store-houses and remanded the issue of machinery and vehicles as tools and implements for further findings on their exclusive use for agricultural purposes. Each party was ordered to bear its own costs.