1978 (5) TMI 69 - AT - Wealth-tax

Summary

Issues Involved:
1. Exemption under Section 5(1)(xxxii) of the Wealth-tax Act, 1957.
2. Deduction of the value of factory shed and factory office building.
3. Compliance with the directions of the Appellate Assistant Commissioner (AAC).

Detailed Analysis:

1. Exemption under Section 5(1)(xxxii) of the Wealth-tax Act, 1957:
The primary issue in the appeal was the exemption claimed under Section 5(1)(xxxii) of the Wealth-tax Act, 1957. The assessee claimed exemption for the capital invested in Tainwala Engineering & Foundry Works, Ranchi. The Wealth-tax Officer (WTO) initially denied the exemption on the grounds that the net wealth of the assessee was in the negative figure. The AAC, in his order dated 13th August 1975, directed the WTO to reconsider the claim after obtaining the required particulars from the assessee. However, the WTO, in his subsequent order dated 12th March 1976, again denied the exemption, interpreting that the value of land and building should be deducted from the assets of the firm to arrive at the net interest of the assessee, which resulted in a negative figure.

2. Deduction of the Value of Factory Shed and Factory Office Building:
The WTO deducted the value of the factory shed (Rs. 2,49,021) and the factory office building (Rs. 31,023) from the total assets of the firm, which led to the conclusion that the assessee's assets were in the negative figure. The AAC, in his earlier order, had found that the WTO was not justified in deducting these values for the purpose of determining the exemption. The AAC held that the exemption under Section 5(1)(xxxii) would not be available to lands or buildings exempt under other clauses of Section 5, but the WTO should not have deducted the value of the factory shed and office building.

3. Compliance with the Directions of the AAC:
The WTO did not comply with the AAC's directions from the order dated 13th August 1975. Instead of reconsidering the claim based on the required particulars, the WTO reinterpreted the legal provisions and denied the exemption again. The AAC had given a clear finding that the value of the factory shed and office building should not be deducted, and the WTO was supposed to follow this direction. The Tribunal found that the WTO was bound by the AAC's order and should not have conducted a fresh assessment or reinterpreted the legal provisions.

Conclusion:
The Tribunal concluded that the WTO was not justified in deducting the value of the factory shed and office building from the total assets of the firm. The AAC's order dated 13th August 1975 had already provided a clear direction, which the WTO failed to follow. The Tribunal directed the WTO to allow the necessary exemption under Section 5(1)(xxxii) of the Wealth-tax Act, 1957, after recalculating the assets without deducting the value of the factory shed and office building. Consequently, the orders of the WTO dated 12th March 1976 and the AAC dated 28th June 1977 were set aside, and the appeal was allowed.