MARUDHAR CULTIVATORS PVT LTD Vs. WEALTH TAX OFFICER
LAWS(IT)-1989-2-17
INCOME TAX APPELLATE TRIBUNAL
Decided on February 27,1989

Appellant
VERSUS
Respondents

JUDGEMENT

S.S. Mehra, Judicial Member - (1.)THE appellant-assessee, by its present appeal, challenges the order dated March 24, 1988, of the learned Commissioner of Wealth-tax, New Delhi, framed under Section 25 of the Wealth-tax Act, 1957, for the assessment year 1984-85, inter alia, on the following grounds :
" 1. THEre was no reason or justification for the Commissioner of Income-tax-II to issue a notice under Section 25 of the Wealth-tax Act, 1957. THE proceedings are invalid, illegal and bad in law.

(2.)The Commissioner of income-tax has erred in holding that the order of the Wealth-tax Officer should be set aside without himself examining the material placed before him. Therefore, the setting aside is illegal and bad in law."
The assessee, by status, in this case, is a private limited company and the relevant valuation date is December 31, 1983. Return of wealth was filed on June 30, 1984. The assessment was framed on March 31, 1986, and the building at Sunder Nagar was exempted from wealth-tax with the following observations :

" In Part IV of the return, viz., assets not included in the wealth and hence claimed to be exempt shows that the building (sic) and the assessee have stated the reason why exemption is being claimed. The reason mentioned is that the building is used for various purposes. During the course of assessment proceedings, the question was again raised about the ownership of the building and its user. It has been submitted by way of written arguments filed on March 10, 1986, that the property at 138, Sunder Nagar, is co-owned by two companies, Messrs, Marudhar Theatres (P.) Ltd. and Messrs. Marudhar Cultivators (P.) Ltd. It is also stated that the directors of both these companies are living in their own houses and these premises (138, Sunder Nagar) was being used entirely for the purpose of office. The assessee's authorised representative has also pointed out that the Income-tax Officer had allowed depreciation on the building which was being used for the purpose of office of the company. It has also been stated that the loans raised by the assessee-company are for the purpose of this property. After having seen the facts brought to my notice, I exempt the said building from tax under the Wealth-tax Act, 1957, passed at nil (sic)."

(3.)THE wealth-tax assessment record of the assessee for this year appears to have subsequently been scrutinised by the learned Commissioner of Wealth-tax. It was noted that the building was exempted presuming that the same was being used for the purpose of the assessee's business. THE said building is said to be owned by two sister concerns. It was noted by the learned Commissioner of Wealth-tax that the learned Wealth-tax Officer accepted the submissions of the assessee and completed the assessment at nil wealth without properly considering the relevant facts. It was also noted that the learned Wealth-tax Officer had observed that proper enquiry will be made during the income-tax proceedings as to whether the entire building was being used for the purpose of business. THE income-tax assessment for the year was framed on January 14, 1987, and the learned Income-tax Officer held there that no business of purchase and sale of flowers was conducted by the company during that year. In fact, the relevant observation is as under :
"It was stated that dealing in flowers was one of the businesses of the company. As is noticed from the data furnished by the assessee the total purchase of the flowers amounted to Rs. 2,814 and also Rs. 3,927. THE assessee has shown a profit of Rs. 1,113. THE assessee is a company with a paid-up capital of Rs. 9,50,330. THE assessee has purchased flowers ranging from Rs. 137 in January and Rs. 89 in December, 1983. THE assessee company has seen that a few flowers are purchased every month from the stray malis and are sold in their office building which was purchased for over a sum of Rs. 13 lakhs. THE point to be seen in this case is whether the assessee carried on any business of purchase and sale of flowers. In the next year, no such business was undertaken by the assessee-company. THE assessee did cultivation of lands and grew chillies and other articles of agriculture. THErefore, it can be said that no business was actually undertaken by the assessee. Only a few purchase and sale bills were so arranged to give colour to these transactions as business. Before Section 28 comes into operation, a business must have been carried on during the previous year. Bombay Steam Navigation Co. (1953) P. Ltd. v. CIT [1965] 56 ITR 52 (SC). THE business as contemplated by Section 28 is actually capable of producing a product which can be taxed. CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1 (SC). Ordinarily the expression ' business' connotes a customer's activity in carrying on a particular trade or a vocation. THE expression is used for taxing statutes in the sense of an occupation and profession which occupies time, attention and labour of a person normally with the object of making profit. To regard an activity as business, there must be a course of dealings either actually continued or contemplated to be continued with a profit motive and not for pleasure. Had the assessee been interested in doing business of purchase and sale of flowers, he would have set up a commercial place and employed some persons who are well trained in the sale of flowers but nothing has been done. THE assessee has only prepared certain vouchers and shown sale of certain flowers to the persons intimately known to the assessee. I, therefore, hold that no business of purchase and sale of flowers was done by the assessee-company. "



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