Delhi High Court
Sita World Travel (I) (P.) Ltd. vs Deputy Commissioner Of Income-Tax. on 28 March, 1995
Equivalent citations: [1995]55ITD357(DELHI)
ORDER
Per B. S. Saluja, J. M. - The assessee is in appeal against the order of CWT (A) - XV, New Delhi dated 12-11-1990 on various grounds.
2. Ground Nos. 1 is general in nature and needs no comments.
3. Ground No. 2, 5 and 6 were not pressed by the learned counsel Shri R. Ganeshan and hence the same are rejected.
4. Ground No. 3 relates to inclusion of an amount of Rs. 16,37,000 pertaining to tourist/taxi cars in the net wealth of the assessee for levying Wealth-tax.
4.1 The brief facts in this case are that the assessee filed the return of wealth on 28-6-1985 declaring net wealth of Rs. 25,74,000. The said return was later on revised declaring wealth at Rs. 9,37,000. The WTO issued notice under section 16(2) and fixed the hearing for 16-2-1990. However, none attended. The WTO, therefore, computed the wealth at Rs. 33,73,640 as per last year.
4.2 On appeal before the CWT (A), the learned counsel for the assessee submitted that the value of cars should not be included in the assets and that the value of the cars as per last year was not justified because the cars were one year old. The CWT (A) observed that the contentions of the assessee that the cars were being used for official purposes and, therefore, should not be included in the wealth were not acceptable. He held that the cars were clearly the assets which were liable to Wealth-tax and that in the past also the value of the cars had been included in the wealth of the assessee. The CWT (A) accepted the alternative contention of the assessee that the cars had depreciated in value over a period of time. He, therefore, allowed an estimated deduction of Rs. 37,000 from the value adopted. The assessee is aggrieved.
5. The learned counsel for the assessee Shri Ganeshan submitted before us that the assessee, apart from acting as travel agents, also was organising several tours and providing tourist taxi cars to the tourists. In this connection he invited our attention to the provisions of section 40 of the Finance Act, 1983, where by Wealth-tax was revived in the case of closely-held companies. He further referred to the provisions of clause (vii) of sub-section (3) of section 40, whereby motor cars were included within the assets on which Wealth-tax was leviable. He further invited our attention to the proviso inserted at the end of sub-section (3) by the Finance Act, 1988 with effect from 1-4-1989. By virtue of proviso to sub-section (3), the assets mentioned in clause (vii), i.e., motor cars were excluded if they were held as stock-in-trade in the business carried on by the assessee or they were registered as taxis and used as such in the business of running motor cars on hire carried on by the assessee. In this connection the learned counsel further invited our attention to the Budget speech of the Finance Minister delivered by him at the time of introducing the Finance Bill, 1983, wherein the Finance Minister mentioned that "as companies are not chargeable to Wealth-tax, and the value of the shares of such companies does not also reflect the real worth of the assets of the company, those who hold such unproductive assets in closely-held companies are able to successfully reduce their Wealth-tax liability to a substantial extent. With a view to circumventing tax avoidance by such persons, I propose to revive the levy of Wealth-tax in a limited way in the case of closely held companies. Accordingly, I am proposing the levy of Wealth-tax in the case of closely-held companies @ 2% on the net wealth represented by the value of specified assets, such as, jewellery, gold, bullion, buildings and lands owned by such companies". He further invited our attention to the memorandum explaining the provisions of Finance Bill, 1988, wherein it is mentioned as under :-
"The rationale underlying the revival of levy of Wealth-tax on companies was to curb the tendency of avoidance of personal Wealth-tax liability by forming closely-held companies and transferring the unproductive assets like real estate, jewellery, etc., to such companies.
Under the existing provisions, Wealth-tax is leviable even in cases, where the assets specified in the section are held as stock-in-trade or are used for industrial purposes.
With a view to remove this unintended hardship and provide incentive for growth and modernisation, it is proposed to amend this section to provide that the following assets shall not form part of the net wealth for the purposes of levy of Wealth-tax under the section :-
** ** **
(v) Motor cars registered as taxis and used for the business of running of motor cars on hire."
In view of the foregoing the learned counsel submitted that the amendment made by the Finance Act, 1988 in section 40(3) is clarificatory in nature and is meant to remove unintended hardship and provide incentive for growth and modernization. He, therefore, urged that the said amendment should apply in the case of the assessee for the assessment year 1985-86 and the value of the tourist cars which operated as taxis on hire to the extent of Rs. 16,37,000 should be excluded from the computation of net wealth. He further urged that the words "Motor cars" should otherwise exclude taxis, as the popular meaning of an expression should be adopted where the said expression "Motor cars" in this case, is not defined by the statute. In support of this contention he relied on the decision of the Honble Supreme Court in the case of CIT v. Taj Mahal Hotel [1971] 82 ITR 44. In the said case the assessee, which ran a hotel, installed sanitary and pipeline fittings in one of its branches. In respect of these fittings it claimed depreciation allowance under the head "furniture and fittings". The question was whether the sanitary and pipeline fittings installed fell within the definition of "plant" in section 10(5) of the Indian Income-tax Act, 1922, and the assessee was entitled to development rebate in relation thereto. It was held that the sanitary and pipeline fittings fell within the definition of "plant" in section 10(5) and that the assessee was entitled to development rebate in respect thereof. The fact that the assessee claimed depreciation on the basis that the sanitary and pipeline fittings fall under "furniture and fittings" in rule 8(2) of the Income-tax Rules, 1922, did not detract from this position. It was further held that the intention of the Legislature was to give the word "plant" a wide meaning. The learned counsel further invited our attention to the observations made in paragraph 2 of the said decision at page 47, where it is observed that "It is well-settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of every day use. Popular sense means that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it." He further invited our attention to the observations made in the last paragraph at page 48 of the said decision, wherein it is observed, "to have sanitary fittings, etc., in a bathroom is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. If the partitions in Jarrolds case could be treated as having been used for purpose of the business of the trader, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier". He further relied on the decision of the Honble Supreme Court in the case of C. W. S (India) Ltd. v. CIT [1994] 208 ITR 649 for the proposition that literal interpretation should not be adopted if it leads to discriminatory or incongruous results or unintended results as in the present case. In this context he submitted that the tourist taxis were not unproductive assets as contemplated by the Legislature for the purposes of levy of Wealth-tax. He further relied on the decision of the Honble Supreme Court in the case of CWT v. Smt. Binapani Chakravarty [1995] 80 Taxman 97 reports, wherein it is mentioned that Explanation 1 to section 5(1) (viii) introduced by the Finance (No. 2) Act, 1971 insofar as it includes ornaments made of gold, silver, platinum or any other precious metals or alloy, is merely clarificatory in nature. Merely because ornaments made of gold and sliver are now expressly included in Explanation 1, it is not possible to hold that they were earlier excluded from the meaning of the term Jewellery. Therefore, even before coming into force of the Explanation 1, the term Jewellery included gold ornaments. In view of the foregoing the learned counsel reiterated that the value of tourist cars/taxis computed at Rs. 16,37,000 ought to be excluded in the asst. year 1985-86.
6. The learned departmental representative Shri Rajeshwar Yadav relied heavily on the orders of the lower authorities and submitted that the law in force in the relevant asst. year should only be applied and that section 40(3) (vii) of the Finance Act, 1983 referred to "Motor cars" as an asset includible in the wealth which was chargeable to Wealth-tax. He further submitted that the amendment made by the Finance Act, 1988 was with effect from 1-4-1989 and could not be applied to the asst. year 1985-86 on the plea that the same was clarificatory in nature. He further submitted that the assessee had shown the cars as assets in the original return.
7. We have carefully considered the rival submissions in the light of case law relied upon by the learned counsel and the intention underlying the introduction of the provisions of section 40 of the Finance Act, 1983 and the amendment made by the Finance Act, 1988 in the said section 40. We feel that the submissions made by the learned counsel have force as it is clear from the extracts from explanatory memorandum to the Finance Bill, 1988 (as reproduced above) that the intention of the Legislature was clearly to exclude motor cars registered as taxis and used for the business of running of motor cars on hire from the assets liable to be included in computing the wealth for the purpose of levy of Wealth-tax and that the said amendment had been brought with a view to remove unintended hardship. Having regard to the said underlying intention and the ratio of the case law relied upon by the learned counsel, we feel that the said amendment is clarificatory in nature and that the benefit of the said amendment should be admissible to the assessee during the asst. year 1985-86. In this connection we also get support from the decision of the Honble Patna High Court in the case of Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70, whereby the provisions of the first proviso to section 43B, which were inserted by the Finance Act, 1987, with effect from 1-4-1988, were held to be explanatory in nature and retrospective in operation. A Special Leave Petition filed against the said decision has also been dismissed by the Honble Supreme Court vide 191 ITR 8 (Statutes). In this view of the matter, we direct that the amount of Rs. 16,37,000 relating to tourist/taxi cars should be excluded from the computation of wealth during the asst. year 1985-86. The WTO may, however, verify the factual details as to whether the tourist/taxi cars were registered as taxis on the valuation date as required by the provisions of the proviso to section 40(3) of the Finance Act, 1983; as inserted by the Finance Act, 1988.
8. Ground No. 4 urged by the assessee read as under :-
"4. The learned Commissioner of Wealth-tax, it is submitted in the alternative, and without prejudice to the above, has further erred in granting deduction of only Rs. 37,000 from net wealth on account of depreciation and reduction in value of such tourist/taxi cars on an estimated basis."
8.1 The said ground is consequential in nature and in view of our decision with reference to ground No. 3, the same is rejected. However, it is observed from the order of learned CIT (A) that he had reduced the value of the cars by an estimated amount of Rs. 37,000. It is further observed from the computation of net wealth filed by the assessee at page 2 of the paper book that apart from tourist/taxi cars, there are office cars which have been valued at Rs. 2,94,000. The Assessing Officer may, therefore, withdraw the proportionate amount relatable to the value of Rs. 16,37,000 which represents the value of tourist/taxi cars out of Rs. 37,000 allowed by the CIT (A) on account of depreciation and reduction in value of the cars.
9. In the result, the appeal is allowed in part.