2004 (2) TMI 30 - HC - Wealth-tax

Warehouses leased by assessee not exempt from wealth-tax under specific requirement; Tribunal decision overturned

The court held that the warehouses leased by the assessee were not exempt from wealth-tax under section 40(3)(vi) of the Finance Act, 1983. Despite the ... Exclusion from wealth-tax under section 40(3)(vi) of the Finance Act, 1983 - building or part thereof used by the assessee as godown or warehouse for the purposes of its business - use by the lessee does not amount to use by the assessee for the purposes of its business - business assets and assessable wealth - investment allowance under section 32A not analogous to exclusion under section 40(3)(vi)Exclusion from wealth-tax under section 40(3)(vi) of the Finance Act, 1983 - building or part thereof used by the assessee as godown or warehouse for the purposes of its business - use by the lessee does not amount to use by the assessee for the purposes of its business - Whether godowns let out to the Food Corporation of India were excluded from wealth-tax under section 40(3)(vi) of the Finance Act, 1983. - HELD THAT: - The Court held that section 40(3)(vi) excludes from wealth-tax only those buildings or parts thereof that are used by the assessee as a factory, godown or warehouse for the purposes of its own business. Merely because leasing of godowns is an object in the memorandum of association or the letting yields business income does not satisfy the separate statutory requirement that the assessee itself must be using the building as a godown or warehouse. Reliance on the Division Bench decision in K. N. Chari Rubber and Plastics (P.) Ltd. established that where the lessee alone actually uses the premises for carrying on business, that use cannot be attributed to the lessor for the purpose of exclusion under clause (vi). The Supreme Court decision in CIT v. Shaan Finance (P.) Ltd. concerning investment allowance under section 32A was held inapplicable, because section 32A lacks the specific requirement present in section 40(3)(vi) that the asset be used by the assessee for the purposes of its business. Applying these principles, the Tribunal's conclusion that the warehouses were exempt under section 40(3)(vi) was erroneous as the buildings were used by the lessee and not by the assessee.The warehouses let out to the Food Corporation of India are not excluded from wealth-tax under section 40(3)(vi); the Tribunal's view was incorrect.Final Conclusion: The question is answered in the negative: the value of the warehouses let out to the Food Corporation of India is not exempt under section 40(3)(vi) of the Finance Act, 1983, and the Tribunal was wrong to hold otherwise. Issues:Whether the assessee engaged in construction and leasing of warehouses is liable to wealth-tax under section 40(3) of the Finance Act, 1983.Detailed Analysis:The case involved a company that had let out godowns to the Food Corporation of India. The main contention was whether the warehouses let out to the Food Corporation of India would be excluded under section 40(3)(vi) of the Finance Act, 1983. The Assessing Officer held that income from letting out godowns is income from house property and wealth-tax was leviable. However, the appellate authority and the Tribunal accepted the assessee's contention that the warehouses were business assets and exempt under section 40(3)(vi) of the Finance Act, 1983. The question referred for consideration was whether the warehouses could be excluded under the provisions of section 40(3)(vi) of the Finance Act, 1983.The key provision in question, section 40(3)(vi), states that buildings or land used by the assessee as a factory, godown, warehouse, etc., for the purpose of its business shall be excluded from wealth-tax. The Department argued that the building was not used by the assessee as a godown or warehouse for its business, relying on a Division Bench decision. The Division Bench decision highlighted the importance of actual use by the assessee for exclusion under section 40(3)(vi).The court noted that although leasing out of godowns was part of the business, the requirement that the building should be used by the assessee as a godown or warehouse was not met. Merely because the lessee used it as a godown or warehouse did not mean the assessee was using it as such. Therefore, the Appellate Tribunal was deemed wrong in holding the warehouse value exempt under section 40(3)(vi) of the Finance Act.The assessee relied on a Supreme Court decision regarding investment allowance, but the court found it inapplicable to the present case. The Supreme Court's conditions for investment allowance did not align with the specific requirement under section 40(3)(vi) regarding the actual use of the building as a godown or warehouse by the assessee. As the Division Bench decision was deemed applicable, the court answered the question in the negative, indicating that the warehouses were not exempt from wealth-tax under section 40(3)(vi) of the Finance Act, 1983.