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RKS Motor Pvt. Ltd. Versus Dy. Commissioner of Wealth tax, Circle – 3 (1) , Hyderabad

2016 (5) TMI 659 - ITAT HYDERABAD

Treatment to cars used in the business of the assessee as assets for wealth tax purpose - Held that:- There is no doubt the cars were used in the business, which are essential to run the business, which are applied in the business similar to ‘plant and machinery’. The intent of the legislature to exclude the cars which are used in the business for running them on hire. Here, these are excluded because the cars are used as ‘plant and machinery’, simply to generate revenue. Similarly in the assess .....

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l to the assessee must be adopted. In the given situation, there is no doubt the cars were utilized in the business to complement the revenue generation. The legislature intends to exclude these assets, as they are productive. In the given situation, the cars are productive, hence, these cars have to be excluded from the definition of assets as specified exclusion.

In view of the above discussion and interpretation, the cars used in the business are considered as productive and should .....

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d by the assessee are directed against separate orders of CIT(A), Hyderabad for the AYs 2006-07 to 2008- 09. As the common issues are involved in these appeals, the same were clubbed and heard together and therefore a common order is passed for the sake of convenience. 2. The assessee is a company and an authorized dealer-cumservice provider of cars manufactured by Maruti Udyog Ltd. Assessee has not filed any return of wealth as required u/s 14(1) of the Wealth Tax Act. The AO has noticed from t .....

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as exempt from W.T. Tax. In this regard, assessee has submitted as below: The above assets include WDV of Rs.l,56,21,922/- pertaining to motor cars used for running our business on which we are seeking exemption from wealth tax as they include: a) Motor cars used by us for giving demonstration and test drives required to sell new cars. These demo cars have very low resale value due to wear and tear. b) Cars used for giving driving training at our Maruti driving school c) Cars to be given tempora .....

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ch very low and almost negligible resale values. Hence we request your honour to treat them as exempted assets considering peculiar nature of our business. We have not considered our liabilities against all the above assets since gross taxable wealth itself is NIL. 2.1 AO has rejected assessee s contention and recorded as below: The assessee's submission is carefully considered. As per the provisions of section 2(ea) of the Wealth Tax Act, 1957, only those Motor cars used by the assessee in .....

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ce, there is no other alternative except to treat such vehicles as assets within the meaning of section 2(ea) of the Wealth Tax Act . 3. Aggrieved with the above order, assessee preferred an appeal before the CIT(A). The CIT(A) has given some relief to the assessee, but, has not given any finding on the definition of assets u/s 2(ea) of the Act. The finding of the CIT(A) are given below: 6. Having considered the information on record I do not find any necessity to interfere with the addition mad .....

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esponding liability has to be deducted. Further, during appeal proceedings he claimed that the liability for motor cars was ₹ 1,19,30,058/-. The appellant did not submit the basis for quantum of such liability. Therefore, the Assessing Officer is directed to verify the liability pertaining to motor cars and allow the same. 4. Aggrieved, the assessee is in appeal before us and has raised the following grounds of appeal, which are common in all the appeals under consideration except the amou .....

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CWT(A) despite agreeing to the fact that the Assessing Officer has given 9 reasons in his Assessment Order pertaining to claim of the Assessee that the Asset of Car does not fall in the category of assets mentioned in Section 2(ea) confirmed the addition made by the CWT(A). 3) The Learned CWT(A) erred in ignoring/not deciding the basic and fundamental ground of the Assessee that there is no escapement of any Wealth to warrant issue of notice u/s 17 of the Wealth Tax Act. 4) The Learned CWT(A) s .....

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Law if there is possibility of' doubt or where two interpretations are possible or there is ambiguity in the interpretation, the interpretation which favors the Assessee/tax payer should be applied and towards this the Assessee cited' 6 cases of Supreme Court. Therefore, from this point of view also the action of the Learned CWT(A) is unjustified and illegal. 6) The reasons assigned by the Authorities below are wrong, insufficient and illegal. 5. The ld. AR submitted that the Assessee i .....

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ng car driving training to customers, using them as mobile service vans, etc. Apart from this, the Assessee also keeps pick up vans for towing vehicles. 5.1 The ld. AR submitted that these cars are intrinsic part of the Business of Assessee and the Appellant cannot carry on the Business without the use of these vehicles. It is submitted that the various objectives of keeping these cars will prove that they are not used as motor cars but as equipment or plant & machinery by Appellant. 5.2 The .....

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t Wealth at NIL. 5.3 The ld. AR submitted that the Assessing Officer though convinced about the application of these vehicles in the Business of the Assessee as Equipment or Plant & machinery still included the Written down value of these vehicles on 31.03.2008 in the Net Wealth of the Assessee and accordingly assessed the Net Wealth at ₹ 1 1,56,21,922/- (WDV of these vehicles on 31.03.2008). 5.4 The ld. AR submitted that the Commissioner of Wealth Tax(Appeals)-3, Hyderabad confirmed t .....

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machinery forming part and parcel of fixed assets without which the Business of Assessee cannot be carried on. The details of these vehicles are enclosed in Paper Book at Page No. 9 of Paper Book. Therefore, in any other business these vehicles would have been classified as Motor Cars but in the kind of Business being done by assessee the vehicles are equipments or plant & machinery. 5.6 The ld. AR also submitted that the kind of interpretation by lower authorities goes against the very basi .....

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f the asset for business rather than those of the assets and the assessee is using the motor cars not as motor cars but as an equipment or plant & machinery, such motor cars do not fall under the definition of motor cars under section 2(ea)(ii) but they are productive asset falling under plant & machinery. 5.7 The ld. AR submitted that if there is any doubt in the interpretation of a provision such doubt or interpretation is to be resolved in favour of the assessee as has been held by Ho .....

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k at Page No. 13 to 16. 6. Ld. DR, on the other hand, relied upon the orders of revenue authorities. 7. Considering the submissions of both the counsels and material facts on record, it is observed that there is no doubt from the assessment order that the assessee uses the cars in his business for rendering services to customers like offering test drives/ demonstrations, providing car for learning (driving) purpose and using them for mobile services/pick up cars for repairs. These services are i .....

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the assessee in the business of running them on hire or as stock-in-trade):. From the plain reading of this subsection gives clarity that the intent of the Legislature to eliminate those cars which are used in the business and which are productive in running the business. This is the reason statute has explicitly allowed the cars which are applied in the business of running on hire or as stock-in-trade. The intention of the legislature is very clear and it should be interpreted harmoniously and .....

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ce Budget, 1992, the intention of the Finance Minister is to charge Wealth tax only on the unproductive assets as per the recommendations of the Chelliah Committee and the extract of the budget speech is given below for clarity: 67. The Wealth-tax Act, 1957 ………………. There is also no distinction at present between productive and non-productive assets. The Chelliah Committee has suggested that, in order to encourage the taxpayers to invest in productive ass .....

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