1967 (7) TMI 32 - HC - Wealth-tax

Court rules on deduction of assets under Wealth-tax Act, favoring assessee for agricultural tools

The court ruled in favor of the assessee regarding the deduction of value of stationary wire ropes and crab winches under section 5(1)(ix) of the ... Whether the value of tubewells, water supply plant amounting to Rs. 4,45,438 is liable to exclusion from the net wealth of the assessee under section 2(e)(i) or to deduction under s. 5(1)(ix) of the WT Act - Held, no Issues Involved:1. Deduction of value of stationary wire ropes, crab winches, electrical machinery, grinding mills, welding machinery, and motor cars and lorries under section 5(1)(ix) of the Wealth-tax Act.2. Deduction of value of residential quarters under section 2(e)(ii) of the Wealth-tax Act.3. Deduction of tax liabilities kept in abeyance for settlement of double income-tax relief under section 2(m) of the Wealth-tax Act.4. Exclusion of value of tube-wells and water supply plant from net wealth under section 2(e)(i) or section 5(1)(ix) of the Wealth-tax Act.5. Inclusion of amounts of Rs. 3,81,600 and Rs. 12,35,147 in the net wealth of the assessee under section 2(m)(iii) of the Wealth-tax Act.Detailed Analysis:1. Deduction of Value of Stationary Wire Ropes, Crab Winches, Electrical Machinery, Grinding Mills, Welding Machinery, and Motor Cars and Lorries:The Tribunal found that stationary wire ropes and crab winches were used solely for cultivation and should be considered tools and implements under section 5(1)(ix) of the Wealth-tax Act. However, the Tribunal disagreed, categorizing them as plant and machinery. The court, referencing its previous judgment in Kanan Devan Hills Produce Co. Ltd. v. Commissioner of Wealth-tax, held that modern mechanized and power-driven plants and machinery could also be tools and implements for agriculture. Thus, stationary wire ropes and crab winches fall within section 5(1)(ix) and are entitled to exclusion.For electrical machinery, grinding mills, welding machinery, etc., the court noted that while they may be tools and implements, their allowability for deduction depends on whether they are used for raising agricultural produce, a fact not established in this case. The Tribunal is to decide this matter further.Regarding motor cars and lorries, the court found no evidence they were used for raising agricultural produce, thus not entitled to deduction under section 5(1)(ix).2. Deduction of Value of Residential Quarters:The court, following its judgment in Kanan Devan Hills Produce Co. Ltd. v. Commissioner of Wealth-tax, answered in the negative, ruling against the assessee. The residential quarters were not used for the assessee's own dwelling but for employees, thus not qualifying for exemption under section 2(e)(ii).3. Deduction of Tax Liabilities Kept in Abeyance:The court examined the notice of demand, which stated the total demand as Rs. 44,58,015.09, with Rs. 22,00,008 kept in abeyance pending double taxation relief. The court, distinguishing this from the Standard Vacuum Oil Co. Ltd. case, held that the amount kept in abeyance was contingent and not a present demand. Thus, Rs. 22,00,008 was not deductible from the computation of the assessee's wealth, answering the question in the negative and against the assessee.4. Exclusion of Value of Tube-Wells and Water Supply Plant:The Tribunal's view that tube-wells and water supply plants, being permanently fixed to agricultural land, should be regarded as part of agricultural land under section 2(e)(i) was upheld. This view aligns with the court's decision in Tea Estates India Private Limited v. Commissioner of Wealth-tax. Thus, the value of these assets should be excluded from valuation, answering in the affirmative and in favor of the assessee.5. Inclusion of Amounts of Rs. 3,81,600 and Rs. 12,35,147:The court noted that these amounts were present demands and thus present debts. The assessee is entitled to exclude these sums in the computation of its wealth. The question was answered in the negative and against the revenue.Conclusion:The court provided a mixed outcome, affirming some claims of the assessee while rejecting others. The detailed analysis ensured that each issue was addressed comprehensively, maintaining the integrity of legal terminology and significant phrases from the original judgment.