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HIGH COURT OF CALCUTTA
B. N. BANERJEE, K. L. RAY
KANAN DEVAN HILLS PRODUCE CO. LTD. - Appellant
Versus
COMMISSIONER OF WEALTH-TAX, CALCUTTA - Respondent
Matter 146 Of 1963
Decided On : JULY 24, 1967
WEALTH TAX - Residential quarters - Electrical machinery (non-factory) - Taxation liability - Whether assessee, an incorporated company, requires a dwelling house - Whether electrical machinery (non-factory) used for agricultural as well as non-agricultural operations is an implement used for raising agricultural produce - Whether taxation liability not actually assessed before valuation date is a debt owed by the assessee.
Fact of the Case:
The assessee, a Sterling Company, incorporated in Great Britain, claimed that (a) a sum of Rs. 51,81,588, representing the value of residential quarters occupied by the employees and labourers of the assessee, (b) a sum of Rs. 11,93,222, representing the value of electric machinery (non-factory), (c) a sum of Rs. 3,58,996, representing the value of stationary wire ropes and crab winches, tubewells, water-supply plant, grinding machines and vehicles of conveyance and (d) a sum of Rs. 76,30,365, representing the amount of taxation liability not actually assessed before the valuation date, should be excluded from the value of the wealth of the assessee, respectively under Sections 2 (e) (ii), 5 (1) (ix) and 2 (m) of the Wealth-tax Act.
Finding of the Court:
1. An incorporated company, does not fit in with the description of a cultivator it cannot conceivably cultivate either by itself or by members of its family. It may only cause cultivation by labourers and staff employed by itself. Thus, a natural born person can only qualify as a cultivator and not an artificial parson. 2. A company does not require a dwelling house in the sense of making its home. The word 'dwelling house', when used in its application to the dweller, means his home, where the dweller requires to reside as a natural-born man. That is not the requirement of an artificial person like a company and the company does not require a dwelling house in the sense of making its home. 3. Tools and implements, which may include modern scientific and mechanised implements like transformers or switch gear, may qualify for exemption, if used for raising agricultural produce. But implements which are collaterally or partly used to energise agricultural tools implements will not so qualify.
Issues: 1. Whether on the facts and in the circumstances of the case, the value of the residential quarters aggregating to Rupees 51,81,559 is allowable as a deduction under Section 2 (e) (ii) of the Wealth-tax Act, 1957, in the computation of the net- wealth of the assessee as on the valuation date? 2. Whether on the facts and in the circumstances of the case, the value of electrical machinery (non-factory) at Rupees 11,93,222 is allowable as a deduction from the net-wealth of the assessee under Section 5 (1) (ix) of the Wealth-tax Act 1957? 3. Whether on the facts and in the circumstances of the case, the sum of Rupees 76,22,011 (Rs. 76,30,385 minus Rs. 8,374) representing the amount of taxation of taxation liability of the assessee in respect of which there had been no assessment before the valuation date was allowable as a deduction 2 (m) of the Wealth-tax Act. 1957 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in rejecting the petition of the Department under Section 24 (5) of the Wealth-tax Act for enhancement by the sum of Rs. 3,58,996?
Ratio Decidendi: 1. The assessee, an incorporated company, is not a cultivator and does not require a dwelling house. 2. The electrical machinery (non-factory) used for agricultural as well as non-agricultural operations is not an implement used for raising agricultural produce. 3. The taxation liability not actually assessed before the valuation date is a debt owed by the assessee. 4. The Tribunal was right in rejecting the petition of the Department under Section 24 (5) of the Wealth-tax Act for enhancement by the sum of Rs. 3,58,996.
Final Decision: Questions No. 1 and 2 are answered in the negative and against the assessee. Question No. 3 is answered in the affirmative and in favour of the assessee. The question referred to this Court at the instance of the Commissioner of Wealth-tax is also answered in the affirmative and in favour of the assessee.
( 1 ) THIS reference, under Section 27 (1) of the Wealth-tax Act, at the instance both of the assessee and the Commissioner of Wealth-tax, has been made in the following circumstances.
( 2 ) THE assessee is a Sterling Company, incorporated in Great Britain, and is a manufacturer of tea grown in Its own gardens in India.
( 3 ) FOR the assessment year 1957-51 (the relevant valuation date being November 30 1956 ). the assessee claimed that (a) sum of Rs. 51,81,588, representing the value of residential quarters occupied by the employees and labourers of the assessee. (b) a sum of Rs. 11,93,222, representing the value of electric machinery (non-factory), (c) a sum of Rs. 3,58,996. representing the value of stationary wire ropes and crab winches, tubewells, water-supply plant, grinding machines and vehicles of conveyance and (d) a sum of Rs. 76,30,365. representing the amount of taxation liability not actually assessed before the valuation date, should be excluded from the value of the wealth of the assessee, respectively under Sections 2 (e) (ii ). 5 (1) (ix) and 2 (m) of the Wealth-tax Act.
( 4 ) THE Wealth-tax Officer disallowed the claim. The assessee appealed before the Appellate Assistant Commissioner, who overruled the claims in respect of residential quarters, electrical machinery (non-factory) and taxation liability but allowed the claim of the assessee in so far as it concerned Rs. 3,58,996. relating to stationary wire ropes, crab winches, tubewells, water-supply plant, grinding machines and vehicles of conveyance.
( 5 ) DISSATISFIED with the order of the Appellate Assistant Commissioner, the assessee appealed before the Appellate Tribunal. The Revenue did not prefer any appeal but, shortly before the hearing of the appeal, filed a petition stating that the Appellate Assistant Commissioner was wrong in allowing exemption of Rs. 3,58,996 being the value of stationary wire ropes etc. under Section 5 (1) (ix), of the Wealth-tax Act and praying that the value thereof be included in the taxable assets of the assessee. in exercise of the powers of the Appellate Tribunal under Section 24 (5) of the Wealth-tax Act.
( 6 ) THE Tribunal agreed with the Appellate Assistant Commissioner in so far as he disallowed the claim of the assessee for deduction of the value of staff quarters and rejected the claim with the followine observations: --"the deduction is claimed on the ground that these are dwelling houses within the meaning of the proviso the Section 2 (e) (ii ). In the case of the Calcutta Stock Exchange Association Ltd. reported in (1935) 3 ITR 105. a Division Bench of the Calcutta High Court interpreted the word 'residence' used in the proviso to Section 9 (2) of the Indian In-come-tax Act to mean the place where a human being eats, drinks and sleeps. The word 'dwelling house' used in Section 2 (e) (ii) has a narrower significance than the word 'residence'. It is obvious, therefore that an impersonal entity, such as a company can-not require a dwelling house for its own occupation. There is nothing in the proviso to Section 2 (e) (ii) to suggest that the building required by a cultivator as a dwelling house for the purpose of residence of its employees or agents was also to be entitled to the exemption. "
( 7 ) THE Tribunal rejected the claim of the assessee for exemption of electrical machinery (non-factory) with the following observations:"the amount represents the value of electrical transformers, switch-gears etc. , belonging to the assessee used for the purpose of supply and distribution of energy for agricultural as well as non-agricultural operations. We think the Appellate Assistant Commissioner was justified in rejecting the claim, as these machinery do not come within the category of tools and implements used by the assessee for the raising of agricultural produce. "
( 8 ) THE Tribunal also rejected the claim of the assessee for taxation liability on the following line of reasoning: --"it appears from
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