M/S.orient Hospital Ltdno v. The Deputy Commissioner Of Income Taxcompany Circle-Imadurai

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HON'BLE DR. JUSTICE VINEET KOTHARIandTHE HON'BLE MR. JUSTICE C.V.KARTHIKEYAN M/s.Orient Hospital LtdNo.13, Kamraj Nagar IV StreetChinna ChokkikulamMadurai. ...Appellant /Respondent ..Vs.. The Deputy Commissioner of Income TaxCompany Circle-IMadurai. ...Respondent Prayer: Tax Case (Appeal) is filed under Section 27A ofWealth Tax Act, 1957, against the order of the Income TaxAppellate Tribunal, Madras 'C' Bench, dated 15.09.2006 passed inW.T.A.No.81/Mds/2004 for Assessment Year 1998-1999 against theOrder of the Commissioner of Wealth Tax (A)I, Madurai, dated21.04.2004 made in PAN No./GIR No.AAA CO 1757D, and against theDeputy Commissioner of Wealth Tax Company Circle - I, Madurai,dated: 26/12/2002 made in PA No.AAA CO 2757 D . For Respondent : Mr.M.Swaminathan Assisted by Ms.S.Premalatha Senior Standing Counsel The Assessee has filed this Appeal, raising the purportedSubstantial Questions of Law, arising from the order of theIncome Tax Appellate Tribunal dated 15.09.2006, by which thelearned Tribunal allowed the Appeal filed by the Revenue byholding that the Assets like factory building and motor carsleased out by the Assessee to the third party was subject to https://hcservices.ecourts.gov.in/hcservices/ wealth tax as per clause (vi) of Section 40 (3) of the FinanceAct 1943. 2. The observations of the learned Tribunal are quoted belowfor ready reference: "12.After hearing both the parties, we findthat the issue has been settled in favour of theRevenue by the decision of the Hon'ble Madras HighCourt in the case of K.N.Chari Rubber & PlasticsP. Ltd. V.CWT (260 ITR 164) (Mad). In that casealso, the assessee had leased out assetsconsisting of factory, building and motor cars.The Hon'ble High Court, referred to clause (vi) ofSection 40 (3) of the Finance Act, 1983, whichreads as under:- "(vi) building or land appurtenant thereto, other than building or partthereof used by the assessee asfactory, godown, warehouse, hotel oroffice for the purpose of its businessor as residential accommodation for itsemployees or as a hospital, creche,school, canteen, library, recreationalcentre, rest room or lunch room mainlyfor the welfare of its employees andthe land appurtenant to such buildingor part:" The Hon'ble High Court clearly held that untiland unless the assets were used by the assesseefor the purpose of its own business, same were notexempt from wealth-tax and ultimately it was heldthat factory building was subject to wealth-tax.In any case, we have already held whileadjudicating the Revenue's appeal under income-taxthat the assessee cannot be said to be carrying onbusiness or profession and income has to beassessed as income from other sources. Therefore,respectfully following the decision of the Hon'bleMadras High Court in the case of K.N.Chari Rubberand Plastic P. Ltd. Vs. CWT (Supra), we decidethis issue in favour of the Revenue. 13.In the result, the appeal is allowed." 3. This Appeal was admitted by the Co-ordinate Bench of thisCourt, on 26.10.2009 on the following Substantial Questions ofLaw: https://hcservices.ecourts.gov.in/hcservices/ "Whether on the facts and in the circumstancesof the case the Tribunal was right in law infollowing the decision of this Court in the caseof K.N.CHARI RUBBER AND PLASTICS P LTD.VS.COMMISSIONER OF WEALTH TAX reported in (2003)260 ITR 164, wherein the amendment incorporated tothe word "asset" by the Finance Act, 1992 witheffect from 1.4.1993 has not been taken intoconsideration? 13.In the result, the appeal is allowed." 3. This Appeal was admitted by the Co-ordinate Bench of thisCourt, on 26.10.2009 on the following Substantial Questions ofLaw: https://hcservices.ecourts.gov.in/hcservices/ "Whether on the facts and in the circumstancesof the case the Tribunal was right in law infollowing the decision of this Court in the caseof K.N.CHARI RUBBER AND PLASTICS P LTD.VS.COMMISSIONER OF WEALTH TAX reported in (2003)260 ITR 164, wherein the amendment incorporated tothe word "asset" by the Finance Act, 1992 witheffect from 1.4.1993 has not been taken intoconsideration? 4. The learned counsel for the Appellant had urged that thesaid provisions of Section 40 A(3) introduced by the FinanceAct, 1983 were omitted with effect from 01.04.1993 by FinanceAct, 1992 for the Assessment Year 1998-1999, involved in thepresent case. The learned counsel for the Assessee submittedthat the Tribunal was bound to consider the definition of'Asset' under Section 2 (ea) of the Wealth Tax 1957 with effectfrom 01.04.1993 which reads as under: "Section 2(ea): "assets" in relation to the assessment year commencing on the 1st day of April, 1993, or land appurtenant thereto (hereinafter referred to as "house"), whether usedfor residential or commercial purposes or for thepurpose of maintaining a guest house or otherwiseincluding a farm house situated within twenty-fivekilometres from local limits of any municipality(whether known as Municipality, Municipal Corporation or by any other name) or a Contonment Board, but does not include- (1) a house meant exclusively for residentialpurposes and which is allotted by a company to anemployee or an officer or a director who is inwhole-time employment, having a gross annualsalary of less than five lakh rupees; (2) any house for residential or commercialpurposes which forms part of stock-in-trade. (3) any house which the assessee may occupy forthe purposes of any business or profession carriedon by him; (4) any residential property that has been let-outfor a minimum period of three hundred days in theprevious year; (5) any property in the nature of commercialestablishments or complexes;" 5. He submitted that the Clause 5 of the said definitionexcludes from the ambit of 'Asset' i.e, any property in thenature of commercial establishments or complexes. He further https://hcservices.ecourts.gov.in/hcservices/ submitted that since the Assessee Hospital and equipmenttherein amounts to commercial establishments or complexes, thesame is not subject to wealth Tax. But the learned Tribunal hasfailed to consider the definition and proceeded on the basis ofold law relied upon by the Judgment of this Court in K.N.CHARIRUBBER AND PLASTICS P LTD. VS.COMMISSIONER OF WEALTH TAXreported in (2003) 260 ITR 164. Therefore, he submitted thatthe Appeal may be restored back to the Income Tax AppellateTribunal for deciding the Appeal afresh in accordance with law. 6.The learned counsel for the Revenue submitted that thisaspect of the matter appears to have been escaped from thenotice of the learned Tribunal. 7. In view of the aforesaid facts and circumstances of thecase, we are of the opinion that the matter deserves to beremanded back to the Income Tax Appellate Tribunal and thelearned Income Tax Appellate Tribunal is requested to look intothe amended position of law with effect from 01.04.1993 byinsertion of definition of 'Asset' under Section 2 (ea) of theWealth Tax 1957. We are not making any observations on themerits of the claim of the Assessee here. 6.The learned counsel for the Revenue submitted that thisaspect of the matter appears to have been escaped from thenotice of the learned Tribunal. 7. In view of the aforesaid facts and circumstances of thecase, we are of the opinion that the matter deserves to beremanded back to the Income Tax Appellate Tribunal and thelearned Income Tax Appellate Tribunal is requested to look intothe amended position of law with effect from 01.04.1993 byinsertion of definition of 'Asset' under Section 2 (ea) of theWealth Tax 1957. We are not making any observations on themerits of the claim of the Assessee here. 8. Therefore, without answering the Substantial Questions ofLaw as framed above, We set aside the order passed by thelearned Tribunal on 15.09.2006 and restore the appeal to thefile of Income Tax Appellate Tribunal to consider the sameafresh, in accordance with law, within a period of six monthsfor the Assessement Year 1998-1999 only. 9. In the result, this Tax Case Appeal is disposed of. Noorder as to costs. arr Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To 1.The Deputy Commissioner of Wealth Tax, Company Circle-I, Madurai. Company Circle-I, Madurai. 2.The Commissioner of Wealth-Tax (Appeals)-I, Madurai. https://hcservices.ecourts.gov.in/hcservices/ 3. The Income Tax Appellate Tribunal 'C' Bench, Chennai. +1cc to Mr.Subbaraya Aiyar Padmanabhan, Advocate, SR.No.35478 +1cc to Mr.M.Swaminathan, Advocate, SR.No.35477 T.C.A.No.986 of 2009 Kak(27/05/2019)