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 leasing being part of the business, the requirement that the building should be used by the assessee as a godown or warehouse was not met. The court distinguished a Supreme Court decision cited by the assessee, stating it did not align with the specific requirement under section 40(3)(vi). Consequently, the Appellate Tribunal's decision granting exemption was overturned, and the warehouses were deemed liable for wealth-tax.

---

---

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.

---