1993 (7) TMI 3 - HC - Wealth-tax

Summary

Issues Involved:
1. Status of the assessee under section 3 of the Wealth-tax Act, 1957.
2. Entitlement of the assessee to exemption under section 5(1)(i) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Status of the Assessee:

The primary issue for determination was whether the assessee, a body registered under the Trade Unions Act, 1926, should be assessed as an "individual" under section 3 of the Wealth-tax Act, 1957. The Wealth-tax Officer and the Appellate Assistant Commissioner had held that the assessee, being a juristic person, could be assessed as an individual. The Tribunal upheld this view, citing that the association, consisting of members with independent corporate status, formed a distinct personality liable for assessment as an individual.

The court noted that the term "individual" in section 3 of the Wealth-tax Act has been expansively interpreted by the Supreme Court in Banarsi Dass v. WTO [1965] 56 ITR 224, to include juristic persons. This interpretation was necessary to resolve ambiguities and align with constitutional provisions. The court referenced several precedents, including Andhra Pradesh State Road Transport Corporation v. ITO [1964] 52 ITR 524, which supported the view that corporations and associations could be treated as individuals for tax purposes. Thus, the court concluded there was no error in treating the assessee-association as an individual under section 3.

2. Entitlement to Exemption under Section 5(1)(i):

The second issue was whether the assessee was entitled to exemption under section 5(1)(i) of the Wealth-tax Act, which exempts property held under trust for public charitable or religious purposes. The Tribunal had directed further investigation to determine if the assessee's activities and application of funds aligned with its claimed charitable objectives.

The court examined the object clauses of the assessee and noted that some objects were not of a charitable nature. Citing the Supreme Court's decisions in CIT v. Indian Sugar Mills Association [1974] 97 ITR 486 and Yogiraj Charity Trust v. CIT [1976] 103 ITR 777, the court emphasized that if any object of an association is non-charitable, the entire entity cannot claim exemption. The Tribunal's direction for further investigation was deemed appropriate to ensure a thorough examination of the assessee's activities and fund utilization.

The court found no perversity in the Tribunal's order and upheld its decision to set aside the matter for fresh adjudication. Consequently, both questions were answered in the affirmative and against the assessee.