2013 (8) TMI 808 - HC - Wealth-tax

Inclusion of aircraft u/s Section 2(ea)(iv) - Computation of Net Wealth - Whether the aircraft owned by the Assessee and used for its business would be exempted from wealth tax - Held that - The use of an aircraft by the executives or directors of a company for the purposes connected with its business would amount to use by the Assessee for commercial purposes - In case the Assessee was using the aircrafts for transporting its directors or executives for excursion purposes or for personal purposes the same would not qualify as use of the aircraft for commercial purposes and would not be exempt from wealth tax - the ITAT had recorded that it was undisputed that the two aircrafts were used by the Assessee for its business - Since this was the undisputed factual position the same would be exempt from wealth tax. The use of an aircraft for commercial purposes does not necessarily entail hiring to third parties, ferrying of passengers or leasing of the aircrafts for consideration - The intention of the legislature while creating the exception by using the expression used by the Assessee for commercial purposes was not to restrict the meaning of the words commercial purposes to running the same on hire or as stock in trade - There was no infirmity in the order of the ITAT - Decided against revenue.

Summary

Issues:
1. Interpretation of section 2(ea)(iv) of the Wealth Tax Act - 1957 regarding the exemption of aircraft owned by the Assessee used for business from wealth tax.

Analysis:
The High Court was presented with an appeal filed by the Revenue challenging the order of the Income Tax Appellate Tribunal dismissing the appeal against the Commissioner of Wealth Tax's decision regarding the taxation of two aircraft owned by the Assessee for the assessment year 2004-2005. The primary issue was whether the aircraft used for the Assessee's business would be exempt from wealth tax as per the provisions of section 2(ea)(iv) of the Wealth Tax Act - 1957. The Assessing Officer initially held that the aircraft used for the Assessee's business were chargeable to wealth tax, except those used for earning business income or held as stock in trade. However, the Commissioner Income Tax (Appeal) relied on a judgment from the Income Tax Appellate Tribunal, Mumbai Bench, to conclude that the aircraft owned by the Assessee were not taxable assets under the specified provision.

The Revenue, dissatisfied with the Commissioner's decision, appealed to the Income Tax Appellate Tribunal, which upheld the previous decision as it was undisputed that the aircraft were used for the Assessee's business. The Revenue contended that the aircraft were not used for commercial purposes as they were utilized for transportation/travel of directors and executives, rather than being commercially operated for hire or as stock in trade. However, the High Court disagreed with this argument, emphasizing that the term "commercial purposes" under section 2(ea)(iv) of the Wealth Tax Act was to be construed as usage connected with the Assessee's business activities.

The Court elucidated that when directors or executives use a company-owned aircraft for business-related travel, it qualifies as usage for commercial purposes, contributing to the efficient operation and growth of the business. The intention behind the exemption for usage for commercial purposes was not limited to hiring out the aircraft but extended to any usage connected with the business. Therefore, the Court affirmed that the use of aircraft by the Assessee for business purposes falls within the ambit of commercial usage and is exempt from wealth tax. As the undisputed fact was that the aircraft were indeed used for the Assessee's business, the Court upheld the Tribunal's decision, finding no merit in the Revenue's appeal and dismissing it without costs.