COMMISSIONER OF WEALTH TAX Vs. BHAUSAHEB BALASAHEB KADAM

JUDGEMENT

(1.) In each of these four reference the same two questions have been referred to us for our opinion, namely : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the order of the Appellate Assistant Commissioner confirming the order of the Wealth-tax Officer made under section 35 of the Wealth-tax Act ? (2) Whether the Tribunal was justified in law in holding that it is a debatable point whether 'stock-in-trade' is or is not covered by the term 'business premises' used in the Explanation to clause (c) of Para. A of the Schedule of rates of wealth-tax and, therefore, it was not an error patent and obvious one capable of certification ?"

(2.) ?The facts leading to these four reference are as follows : Assessment years under consideration are assessment years 1966-67, 1967-68, 1968-69 and 1969-70. The assessee is Hindu undivided family and it possesses two buildings at Baroda, namely, Indira Nivas, which is used by it for its self-occupation and Kadam Building which is not occupied by the family. Apart from these two buildings, the assessee was also possessed of vast agricultural lands which were converted to non-agricultural use in the previous year relevant to assessment year 1966-67 and, thereafter, from time to time during the different years under consideration, the plots of land from these agricultural lands which were converted to non-agricultural land were being sold as and when convenient. The lands were treated by all taxing authorities as stock-in-trade of the HUF and the question arose under the W.T. Act as to whether these lands belonging to the HUF should be subjected to the additional rate of tax under clause (c) of Para. A of Pt. I of the Schedule as it them stood. Under the W.T. Act as it prevailed from April 1, 1965, to 31st March, 1970, clause (a) of Para. A of Pt. I laid down what may be called standard rates of tax in the case of individuals, and clause (b) laid down standard rates of tax for every HUF. Under clause (c), in the case of every individual and HUF, where the net wealth of the individual or HUF included the value of any asset being building or land (other than business premises), or any right in such building or land, situated in any area falling in category A or category B or category C or category D specified in r. 2 of Para. B, additional tax at the rates specified in clause (c) was to be levied. Now, it is common ground that the area where the agricultural lands in question were situated would fall within category D of r. 2 of Para. B of the Schedule. The main question was whether these lands which were originally agricultural lands but which were converted to non- agricultural use and were held by the assessee-family as stock-in-trade, could be said to be "business premises" because if they formed "business premises", then they would be taken out of the additional tax under clause (c) of Para. A of Part I as it then stood. For the purpose of Part I, "business premises", according to the Explanation to Part I, meant any building or land or part of such building or land, or any right in building or land or part thereof, owned by the assessee and used throughout the previous year for the purpose of his business or profession, and included any building used for the purpose or residence of persons employed in the business or any building used for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room.

(3.) When the WTO passed assessment orders for the wealth-tax in respect of each of these four years under consideration before us in this group of matters, he treated the agricultural lands converted to non-agricultural use as part of the movable assets of the assessee-family on the footing that the stock-in-trade was part of the movable assets of the HUF. After the assessments for the four years were over, the WTO issued notices under s. 35 of the W.T. Act in connection with rectification proceedings on the footing that there was a mistake apparent from the record inasmuch as the former agricultural lands converted to non-agricultural use were treated as the part of movable assets and were not subjected to the additional rate of tax under clause (c) of Para. A of Part I of the Schedule to the W.T. Act. The assessee objected to the rectification proceeding but the objections were overruled by the WTO and rectification orders were passed for each of these four assessment years under reference. Appeals for the different assessment years filed by the assessee concerned were dismissed and the AAC confirmed the orders of the WTO, but the assessee succeeded before the Tribunal, inter alia, on the ground that even on the assumption that the order of the WTO in the original proceedings was erroneous, yet the error could not be said to be an error apparent from the record in view of the decision of the Supreme Court T.S. Balaram, ITO V/s. Volkart Brothers [1971] 82 ITR 50. The Tribunal came to the conclusion that there was no mistake apparent from the record for rectification by the WTO and hence the Tribunal set aside the orders of rectification and allowed the appeals of the assessee. Thereafter, at the instance of the revenue, these four reference have been made to us by the Tribunal for our opinion.