2010 (3) TMI 608 - HC - Wealth-tax

Exemption - The assessee claimed exemption under sub-clauses (4) and (5) of section 2(ea)(i) of the Act, noticing that those provisions are not there in the statute at the relevant time- sub-clauses (1) to (3) has no application on which the assessee cannot claim exemption. Sub-clause (1) deals with exemption for residential purposes ; sub-clause (2) deals with exemption for residential or commercial purposes which forms part of stock-in-trade ; sub-clause (3) deals with any house which the assessee may occupy for the purpose of any business or profession carried on by him. Thus, none of the above clauses would apply to consider the claim for exemption in the case of the assessee. Sub-clauses (4) and (5) of section 2(ea)(i) of the Act have no application, as already noticed, those are the provisions which came into force subsequent to the assessment in question. HELD - the only plea being raised on sub-clauses (4) and (5) of section 2(ea)(i) of the Act, which have no application with reference to the assessment in question and since other clauses have no application under which the assessee could claim exemption, we find that the order passed by the Commissioner of Wealth-tax is not liable to be interfered with

Issues:
1. Exemption claimed under sub-clauses (4) and (5) of section 2(ea)(i) of the Wealth-tax Act, 1957 for the assessment year 1998-99.
2. Validity of the order of the Income-tax Appellate Tribunal setting aside the Commissioner of Wealth-tax's order under section 25(2) of the Act.

Analysis:
1. The appeal challenged the Income-tax Appellate Tribunal's decision to set aside the Commissioner of Wealth-tax's order under section 25(2) of the Wealth-tax Act, 1957. The Tribunal allowed the appeal filed by the assessee based on the claim for exemption under sub-clauses (4) and (5) of section 2(ea)(i) of the Act, despite those provisions not being in force during the relevant assessment year of 1998-99. The Commissioner of Wealth-tax had issued a notice proposing to revise the order due to discrepancies in the assessee's wealth declaration related to the purchase of apartments for commercial purposes. The Commissioner contended that the property did not qualify for exemption under section 2(ea)(i) of the Act as the intended business activities were not operational during the assessment year.

2. The Tribunal upheld the assessee's appeal by emphasizing that sub-clauses (4) and (5) of section 2(ea)(i) were not applicable during the assessment year in question, rendering the exemption claim invalid. The respondent's counsel argued that none of the other sub-clauses of section 2(ea)(i) applied to grant exemption to the assessee, as the buildings were still under construction and not eligible for exemption under the Act. The Tribunal concurred that since the provisions allowing exemption were not in force during the relevant assessment year, the appeal had to be allowed solely on the grounds of inapplicability of the claimed exemptions.

3. The respondent's counsel further contended that the incomplete status of the buildings during the assessment should have been considered for exemption. However, the Tribunal noted that this argument was not raised during the proceedings and was not substantiated by the records. Given the absence of valid grounds for exemption under any relevant sub-clause of section 2(ea)(i) and the inapplicability of sub-clauses (4) and (5) to the assessment year, the Commissioner's order was deemed justified and not subject to interference.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's decision and upholding the Commissioner of Wealth-tax's order under section 25(2) of the Wealth-tax Act, 1957. The judgment emphasized the importance of applying relevant statutory provisions in determining exemptions and highlighted the inapplicability of certain clauses during the assessment year in question.

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