2015 (5) TMI 321 - SC - Wealth-tax

Hospital property not exempt from wealth tax as 'office' under Finance Act, 1983.

The Supreme Court upheld the decision of the High Court, dismissing the appeals regarding the imposition of wealth tax on a Hospital property. The Court ... Scope and ambit of section 40(3)(vi) of the Finance Act, 1983 - Whether the Hospital property would be subjected to wealth tax under the Wealth Tax Act, 1957 - the contention of the appellant is that the Hospital building should be treated as “office” which is used for the purposes of its business. - Held that:- For the exclusion the 'hospital' must be one held by an industrial unit for the welfare of its employees. Thus the intention of the legislature as can be understood from this internal aids is that the legislature did not intend to exclude all the buildings which are used for the purpose of its business and that it was intended to exclude only such of those buildings which are specifically mentioned as excluded in clause (vi) which are used for industrial purposes and not for all business purposes - Decision of High Court in the case of High Court [2003 (3) TMI 36 - KERALA High Court] sustained - Decided against assessee. Issues:1. Whether the Hospital property is subject to wealth tax under the Wealth Tax Act, 1957.2. Interpretation of Section 40 of the Finance Act, 1983 regarding the levy of wealth tax on closely-held companies.3. Determination of whether the Hospital building falls under the excluded category for wealth tax purposes.4. Analysis of the legislative intention behind the exclusion of certain types of buildings under Section 40.Analysis:1. The appellant company operated a Hospital and contested the imposition of wealth tax on its property. The issue revolved around whether the Hospital property was liable for wealth tax under the Wealth Tax Act, 1957. The assessment years in question were 1987-1988 to 1990-1991.2. Section 40 of the Finance Act, 1983 was crucial in determining the levy of wealth tax on closely-held companies. The section mandated the imposition of wealth tax on the net wealth of companies not substantially owned by the public. The assets subject to wealth tax were specified in sub-section (3) of Section 40, which included buildings and land appurtenant thereto.3. The specific exclusion criteria under clause (vi) of sub-section (3) of Section 40 were analyzed to determine if the Hospital building fell within the excluded category. The clause excluded buildings used for specific purposes like factories, warehouses, hotels, offices, or for employee welfare facilities. The appellant argued that the Hospital building should be considered an 'office' for business purposes.4. The High Court delved into the legislative intent behind the exclusion of certain types of buildings under Section 40. It highlighted that the exclusion was not meant for all buildings used for business purposes but specifically for those used for industrial purposes. The Court emphasized that the legislative intent was to exclude buildings used for industrial activities and not all business-related structures.In conclusion, the Supreme Court dismissed the appeals, concurring with the High Court's interpretation. The Court upheld that the Hospital building, being used for business activities, did not qualify as an 'office' for wealth tax exclusion purposes as per the provisions of Section 40.