COMMISSIONER OF WEALTH TAX Vs. GOVIND PRASAD KANUDIA

JUDGEMENT

(1.) By the reference application under Section 27(1) of the Wealth-tax Act, 1957, the Commissioner of Wealth-tax, Central I, Calcutta, required the Appellate Tribunal to refer the following common questions of law arising out of a consolidated order of the Appellate Tribunal in W. T. A. Nos. 87 and 88(Cal) of 1989 to this court for opinion :

(2.) The assessment years involved are 1982-83 and 1983-84. The facts, inter alia, are that, on the relevant valuation date, the assessee was a partner of a firm M/s. Kanudia Brothers, which owned Dhanbad Flour Mills, Dhanbad. It is not in dispute that Dhanbad Flour Mills is an industrial undertaking within the meaning of Section 5(1)(xxxii) of the Act. The firm, M/s. Kanudia Bros, in 1976, gave the above flour mill on leave and licence basis to M/s. Govardhandas Viswanath. The party, M/s. Govardhandas Viswanath, has been running the flour mill since August 1, 1975, and M/s. Kanudia Brothers has been receiving licence fees from the party. The leave and licence to M/s. Govardhandas Viswanath was granted by M/s. Kanudia Brothers initially for a period of three years. But, after expiry of the period of three years, M/s. Govardhandas Viswanath has been running the flour mill till now.

(3.) In the wealth-tax assessment, the Assessing Officer allowed an exemption of Rs. 1,50,000 and Rs. 1,65,000 for the assessment years 1982-83 and 1983-84 under Section 5(1)(xxxii) of the Act. On an examination of the assessment records, the Commissioner of Wealth-tax (Central I), Calcutta, was of the opinion that the assessment order was erroneous and prejudicial to the interests of the Revenue. Thus, the Commissioner of Wealth tax initiated proceedings under Section 25(2) of the Act. In the course of hearing of the proceedings under Section 25(2) before the Commissioner of Wealth-tax, the assessee, inter alia, submitted that, in view of the decision of the Andhra Pradesh High Court in the case of CWT v. C.S. Rao, the assessee was entitled to exemption under Section 5(1)(xxxii). Thus, the assessment order was not erroneous. The Commissioner of Wealth-tax considered their submissions and made a distinction on the facts of the present case of the assessee from those of the case before the Andhra Pradesh High Court on the point that, in the case of C.S. Rao [1988] 174 ITR 612, the salt pans were leased out temporarily, whereas, in the case before him, M/s. Kanudia Bros, gave the flour mills not for a temporary period. The Commissioner of Wealth tax rather relied on the decision of the Madras High Court in the case of CWT v. P.T.N. Shenbagamoorthy [19831 144 ITR 724, and on the decision of the Income-tax Appellate Tribunal, 'A' Bench, Calcutta, dated October 10, 1988, in W. T. A. Nos. 280 to 282(Cal) of 1988 in the cases of this very assessee and two other partners on the same issue arising out of the orders of the Commissioner of Wealth-tax under Section 25(2) of the Act for the assessment year 1981-82. Thus, the Commissioner of Wealth-tax passed an order under Section 25(2) of the Act directing the Assessing Officer to withdraw the exemption under Section 5(1)(xxxii) of the Act granted to the assessee earlier erroneously.