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Kanan Devan Hills Produce Co. Ltd. Vs. Commissioner of Wealth-tax, Calcutta - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 146 of 1963
Judge
Reported inAIR1968Cal298,[1968]67ITR823(Cal)
ActsWealth Tax Act, 1957 - Sections 2, 5(1) and 24(5)
AppellantKanan Devan Hills Produce Co. Ltd.
RespondentCommissioner of Wealth-tax, Calcutta
Appellant AdvocateD. Pal, Adv.
Respondent AdvocateGouri Mitter and ;S. Mukherji, Advs.
Cases ReferredLajwanti Sial v. Commissioner of Income
Excerpt:
- banerjee, j.1. this reference, under section 27(1) of the wealth-tax act, at the instance both of the assessee and the commissioner of wealth-tax, has been made in the following circumstances.2. the assessee is a sterling company, incorporated in great britain, and is a manufacturer of tea grown in its own gardens in india.3. for the assessment year 1957-51 (the relevant valuation date being november 30 1956). the assessee claimed that (a)sum of rs. 51,81,588, representing the value of residential quarters occupied by the employees and labourers of the assessee. (b) a sum of rs. 11,93,222, representing the value of electric machinery (non-factory), (c) a sum of rs. 3,58,996. representing the value of stationary wire ropes and crab winches, tubewells, water-supply plant, grinding machines.....
Judgment:

Banerjee, J.

1. This reference, under Section 27(1) of the Wealth-tax Act, at the instance both of the assessee and the Commissioner of Wealth-tax, has been made in the following circumstances.

2. The assessee is a Sterling Company, incorporated in Great Britain, and is a manufacturer of tea grown in Its own gardens in India.

3. For the assessment year 1957-51 (the relevant valuation date being November 30 1956). the assessee claimed that (a)sum of Rs. 51,81,588, representing the value of residential quarters occupied by the employees and labourers of the assessee. (b) a sum of Rs. 11,93,222, representing the value of electric machinery (non-factory), (c) a sum of Rs. 3,58,996. representing the value of stationary wire ropes and crab winches, tubewells, water-supply plant, grinding machines and vehicles of conveyance and (d) a sum of Rs. 76,30,365. representing the amount of taxation liability not actuallyassessed before the valuation date, should beexcluded from the value of the wealth of theassessee, respectively under Sections 2(e)(ii), 5(1)(ix) and 2(m) of the Wealth-tax Act.

4. The Wealth-tax Officer disallowed the claim. The assessee appealed before the Appellate Assistant Commissioner, who overruled the claims in respect of residential quarters, electrical machinery (non-factory) and taxation liability but allowed the claim of the assessee in so far as it concerned Rs. 3,58,996. relating to stationary wire ropes, crab winches, tubewells, water-supply plant, grinding machines and vehicles of conveyance.

5. Dissatisfied with the order of the Appellate Assistant Commissioner, the assessee appealed before the Appellate Tribunal. The Revenue did not prefer any appeal but, shortly before the hearing of the appeal, filed a petition stating that the Appellate Assistant Commissioner was wrong in allowing exemption of Rs. 3,58,996 being the value of stationary wire ropes etc. under Section 5(1)(ix), of the Wealth-tax Act and praying that the value thereof be included in the taxable assets of the assessee. in exercise of the powers of the Appellate Tribunal under Section 24(5) of the Wealth-tax Act.

6. The Tribunal agreed with the Appellate Assistant Commissioner in so far as he disallowed the claim of the assessee for deduction of the value of staff quarters and rejected the claim with the followine observations: --

'The deduction is claimed on the ground that these are dwelling houses within the meaning of the proviso the Section 2(e)(ii). In the case of the Calcutta Stock Exchange Association Ltd. reported in : [1935]3ITR105(Cal) . a Division Bench of the Calcutta High Court interpreted the word 'residence' used in the proviso to Section 9(2) of the Indian In-come-tax Act to mean the place where a human being eats, drinks and sleeps. The word 'dwelling house' used in Section 2(e)(ii) has a narrower significance than the word 'residence'. It is obvious, therefore that an impersonal entity, such as a company can-not require a dwelling house for its own occupation. There is nothing in the proviso to Section 2(e)(ii) to suggest that the building required by a cultivator as a dwelling house for the purpose of residence of its employees or agents was also to be entitled to the exemption.'

7. The Tribunal rejected the claim of the assessee for exemption of electrical machinery (non-factory) with the following observations:

'The amount represents the value of electrical transformers, switch-gears etc., belonging to the assessee used for the purpose of supply and distribution of energy for agricultural as well as non-agricultural operations. We think the Appellate Assistant Commissioner was justified in rejecting the claim, as these machinery do not come within the category of tools and implementsused by the assessee for the raising of agricultural produce.'

8. The Tribunal also rejected the claimof the assessee for taxation liability on the following line of reasoning: --

It appears from the statement that a sum of Rs. 39,103 was due by the appellant as a Central Income-tax (demand?) for the assessment year 1947-48 but the recovery was kept in abeyance pending the settlement of the Double Taxation Relief (D. I. T.). Subsequently, however, the (D I. T) relief was granted by the Income-tax Officer under an order under Section 49. dated 29-9-1956, before the expiry of the valuation date (30-11-1953) for Rs. 30,724 The balance of Rs. 8,374, therefore, represents not only a liability of the assessee but also a debt 'owed by the assessee' within the meaning of Section 2(m) of the Wealth-tax Act With regard to the rest of the amount claimed by the assessee it is conceded that there was no assessment much less a demand for taxes due to the Central or Provincial Governments, before the valuation date and, therefore, it cannot be allowed as a debt owed by the assessee within the meaning of Section 2(m) of the Wealth-tax Act'

9. The application made by the Revenue for correction of the alleged error of the Appellate Assistant Commissioner in allowing Rs. 3,58,996, claimed by the assessee as the value of the stationary wire rope etc., was dismissed by the Tribunal on the ground that the same was outside the subject-matter of the appeal and, therefore, beyond the scope of Section 24(5) of the Wealth-tax Act.

10. Against the order of the Tribunal, the assessee and the Revenue both applied for a reference to this Court on certain points. Thereupon the Tribunal referred the following questions at the instance of the assessee: --

'(1) Whether on the facts and in the circumstances of the case, the value of the residential quarters aggregating to Rupees 51,81,559 is allowable as a deduction under Section 2(e)(ii) of the Wealth-tax Act, 1957. in the computation of the net- wealth of the assessee as on the valuation date?

(2) Whether on the facts and in the circumstances of the case, the value of electrical machinery (non-factory) at Rupees 11,93,222 is allowable as a deduction from the net-wealth of the assessee under Section 5(1)(ix) of the Wealth-tax Act 1957?

(3) Whether on the facts and in the circumstances of the case, the sum of Rupees 76,22,011 (Rs. 76,30,385 minus Rs. 8,374) representing the amount of taxation of taxation liability of the assessee in respect of which there had been no assessment before the valuation date was allowable as a deduction 2(m) of the Wealth-tax Act. 1957'

11. The Tribunal also referred the following question of law at the instance of the Commissioner of Wealth-tax:

'Whether on the facts and in the circumstances of the case, the Tribunal was right in rejecting the petition of the Department under Section 24(5) of the Wealth-tax Act for enhancement by the sum of Rs. 3,58,996?'

12. We take up the first question, referred to us, at the instance of the assessee, for consideration first of all. Section 2(e)(ii) of the Wealth-tax Act reads as follows:

13. Section 2(e)(ii). 'Assets includes property of every description, movable orimmovable, but does not include-

* * * * *

(ii) Any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land:

Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of hisconnection with the land requires as a dwelling house or a store-house or an outhouse.'

14. If we analyse the section we find that the building must fulfill the following conditions:--

(1) must be owned or occupied by a receiver of rent or revenue out of agricultural land.

(2) must be on or in the immediate vicinity of the land,

(3) must be a building which the cultivator or the receiver of rent or revenue requires as a dwelling house, store-house or as an outhouse,

(4) must be a building required by the cultivator or the receiver of rent or revenue by reason of his connection with the land.

15. The first conditions specifies the person who can claim exclusion. The second, third and the fourth conditions specify the character of the building which can be ex-empted. In the instant case, there is no dispute that condition (2) is satisfied. The dispute is, firstly, whether the assessee, an incorporated company, fulfils the description of a cultivator, and secondly, whether the assessee, an incorporated company, requires or can require the quarters for its dwelling house. If the assessee is a cultivator and requires the quarters as its dwelling house, there is no dispute that the requirement is by reason of its connection with the cultivated land.

16. Now, the word 'cultivate' means to till or produce by tillage. Thus, a cultivator is a person who tills the soil and produces crops by tillage. The process of cultivation need not be carried on by the cultivator personally He may do so by himself, by members of his family, by servants or labourers with the aid of partners. 'Raivats', in this country, are indisputably cultivators and the definition of 'Raivat' in the Bengal Tenancy Act (Act VIII of 1885) indicates the meaning in the following language:--

'Raiyat means primarily a person who has acquired such a right to hold the land for the purpose of cultivating it by himselfor by members of his family or by servants or labourers or with the aid of partners, and includes also the successor-in-interest of persons who have acquired such a right.'

17. The definition first in with the description of a human being, who is capable of doing manual work and is blessed with a family, the members of which co-operate with him in tillage and cultivation. A juristic person like an incorporated company, does not fit in with the description of a cultivator it cannot conceivably cultivate either by itself or by members of its family. It may only cause cultivation by labourers and staff employed by itself. Thus, a natural born person can only qualify as a cultivator and not an artificial parson. An incorporated company may run the industry of agriculture or of cultivation by legal fiction. But just as by carrying on a business, a commercial company doss not become a businessman, so also a company does not become a cultivator merely because its business consists of agriculture. We are inclined to hold that the assessee does not fulfil the condition set out above and is not a cultivator. But in the circumstances of this case, we do not propose to base our decision on that aspect of the matter because there is another aspect of the matter, which negatives the claim of the assessee in a more forceful manner. That aspect is whether an incorporated company requires a house for its dwelling. This point came up for consideration of this Court in the case entitled Re Calcutta Stock Exchange Association Ltd. : [1935]3ITR105(Cal) . In that case the assessee, a Mutual Benefit Limited Liability Company, owned a four storeyed building No. 7, Lyons Range, in the town of Calcutta, part of it occupied itself and part whereof was occupied by its members. The Income-tax Officer proposed to include a notional value of the property in income of the assessee. The assessee objected thereto on the ground that it occupied the premises for its own residence and invoked the proviso of Section 9(2) of the Indian Income-tax Act in support of its claim. That proviso is couched in the following language:

'Provided that, where the property is in the occupation of the owner for the purpose of his own residence such sum shall, for the purposes of this section be deemed not to exceed 10 per cent of the total income of the owner'

18. In dismissing the claim of the assessee Calcutta Stock Exchange Association Limited, for relief under Section 9(2) Proviso if the Indian Income-tax Act. Lort-Williams J, (Jack J. agreeing with him) observed:

'In my opinion, the word 'residence in its simple and ordinary meaning signifies the place where a human being eats, drinks, and sleeps or where his family and servant eat, drink and sleep and where there is some permanence or continuance, of such eating, drinking and sleeping, and the statement of Bayley, J. in the case of The King v. Inhabitants of North Curry, (1825) 4 B and C 953 is, in my opinion, an authority for that proposition. In that case, the learned Judge said that 'where there is nothing to show that it is used in a more extensive sense, the word 'residence' denotes the place where an individual eats, drinks and sleeps or where his family or his servants eat, drink and sleep. It is true that in certain circumstances and in certain statutes, a more extended meaning has been given to the word, for example, it has been held that a limited liability company can 'reside' for the purpose of income-tax legislation. That was decided by Lord Loreburn in the case of De Beers Consolidated Mines. Ltd. v. Howe, (1906) AC 455. wherein it is stated that 'a company cannot eat or sleep, but it can keep house and do business. We ought, therefore, to see whether it really keeps house and does business. The decisions of the Chief Baron Kelly and Baron Huddles-ton in the Calcutta Jute Mills v. Nicholson, and Cesena Sulphur Company v. Nicholson, (1876) 1 Tax Cas 83. now 30 years ago, involved the principle that a company resides for purposes of income-tax where its real business is carried on'. Moreover, it has been decided that a company is a person who can reside within the meaning of the word 'reside as used in the Income-tax Act and other statutes. But, in my opinion, a Company can only 'reside' within that extended meaning of the term, when it resides for the purpose of carrying on business 'and it cannot reside apart from carrying on business.' Thus in both Sections 4 and 42 of the Indian Income-tax Act, it is clear that the word 'reside' is only used in connection with the carrying on of a business and not otherwise.' (Underlined (here in ' ') for emphasis).

We respectfully agree with the view expressed by Lort-Williams J. that the word 're-side' when applied to an incorporated company means that the company carries on business from a particular address and does mean anything more. It does not dwell at house like an ordinary human being, with family members and servants and agents.

19. Dr. Pal, learned counsel for the assessee, however, submitted that Lort-Williams J. had no ocassion to consider the meaning of the word 'dwelling house'; he merely considered the expression 'residence' and came to the above conclusion. He, therefore, submitted that the decision in : [1935]3ITR105(Cal) (Cal) (supra) should not be used as an authority for negativing the contention of the assessee. He further argued that the use of the word 'own' in Section 9(2). Proviso weighed the balance against the assessee in the case of : [1935]3ITR105(Cal) (Cal) (supra) and he invited our attention to the following further passage in the judgment :--

'In this connection, it is to be noticed that the word 'own' has been inserted between the words 'his' and 'residence'. I think that the object of inserting that word was to indicate that the phrase applied only to a human person or persons and not to a fictional person, such as a limited liability company'.

20. Dr. Pal also invited our attention to Section 2(1)(c) of the Indian Income-tax Act, which defines 'agricultural income' and Section 4(3)(viii) which exempts agricultural income from the computation of Income-tax. Section (2)(1)(c) is almost in pari materia with Section 2(e)(ii) of the Weatlth Tax Act and reads as follows:

'2 (1). Agricultural income means -

(a) * * * *

(b) * * * *

(c) any income derived from any building owned and occupied by the receiver of the rent of revenue of any such land, or occupied by the cultivator, or the receiver of rent-in-kind, of any such land with respect to which, or the produce of which, any operation mentioned in Sub-clauses (ii) and (iii) of Clauses (b) is carried on :

Provided that the building is on or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue or the cultivator or the receiver ofthe rent-in-kind by reason or his connectionwith the land, requires as a dwelling house,or as a store-house, or other out-building'.

21. Dr. Pal drew our attention to a Full Bench decision of Patna High Court, explaining the above quoted proviso, in Rajendra Narayan Bhanja Deo v. Commissioner of Income-tax, Bihar AIR 1929 Pat 449. In that case, the assessee the Raja of Kanika owned a large residential palace in his estate, which estate extended over 400 Square Miles, and derived more then one half of his large income from agricultural land. The palace contained the usual rooms to be found in a royal palace, including drawing room, dining room, billiard-room and bed rooms, there was also a small detached guest house containing one public hall and two bed rooms The Income-tax Officer in making his assessment took Rs. 3,000 as the proportionate valuation of the portion of this palace which was not required for agricultural purposes. The assessee objected to the inclusion of Rs. 3,000/- as the proportionate value of the place in Its income but did not succeed. When the matter came up before the High Court, the Revenue contended that the words 'by reason of his connection with the land requires as a dwelling house' meant that the proviso was only to apply to such portion, if any, of the building as would be needed as a dwelling house, store-house or out-buildings. for the purpose of receiving of rents or cultivation or receiving of rent in kind as the case may be. The Full Bench of the Patna High Court overruled this contention with the following observation:

'The argument more shortly put is that the word 'requires' is used in the sense of 'needs' and that the words 'by reason of his connection with the land' mean as applied to this case:

'for the purposes of ..... collecting the rent or revenue'.

This interpretation, if correct, would leave the taxable proportion of the notional income from the building to be assessed by the Income-tax Officer as a matter of fact and without appeal. Now, I can see no indication in the Act of any circumstances which are to guide the officer in assessing the taxable proportion.

There is for instance no indication whether the dwelling house is to be of such a kind as to enable the owner to reside in it for such time as may be necessary for the collection by him of his rents, or whether his family may properly be expected to accompany him, or whether the distance from such other dwelling as he may own ought to be considered or whether his social prestige or the need of displaying it to his tenants is to be taken into account All these considerations and many others are according to the department to be left to the officer as matters of fact within his sole discretion. Had this been the real intention of the legislature one would have expected to find in the Act a set of guiding pinciples. On the other hand for assessing the revenue of a business the Act provides elaborate guides. For this reason alone I am of opinion that the legislature had no such intention as suggested by the department.

But apart from this consideration the words of the provisio are not capable of the construction suggested. The word 'requires' means that the assessee demands to appropriate the building for the purpose of a dwelling house or as a store-house or other out-building and the words 'by reason of his connection with the land' mean that only the fact of his being a receiver of rent or revenue or the fact of his being a cultivator or the fact that he is a receiver of rent in kind entitled him to claim any building as a dwelling house, a store-house or an outbuilding. If he should not occupy any of these positions in connection with the land he is not entitled to claim, as tax free, accommodation of the kind specified In other words, the expression 'by reason of his connection with the land' is merely used to explain the nature of the class of persons entitled to exemption. It has been said that punctuation must not be used in construing a statute other than as a mere 'temporanea expositis' and for this limited purpose it may be noticed that the words are not separated by a comma or otherwise from the words:

'the receiver of the rent or revenue or the cultivator or the receiver of the rent in kind' whereas the verb 'requires' is separated by a comma from the grammatical subject and the phrase 'by reason of his connexion with the land'.

My conclusion is that this phrase has a qualitative and not a quantitative significance. Of course there must be a bona fideuse of the building as hi dwelling house, store-house or out-building and the asses-see is not at liberty to claim arbitrarily the exception of any building which may at his own choise describe as a dwelling house, store-house or out-building without regard to the actual facts. For these reasons I am in agreement with the decision arrived at in the case of Maharajadhiraja of Darbharga v. Commissioner of Income-tax, B and O. AIR 1928 Pat 468 ; ILR 7 pat 550'.

22. Dr. Pal drew considerable inspiration from the above judgment and submitted that even if the assessee company did not itself reside in the quarters but allowed its staff to occupy the quarters, nevertheless, the building was such as qualified itself for exemption under Section 2(e)(ii) of the Wealth-tax Act. We are unable to agree. If the assessee at all requires a dwelling house, for its own dwelling, then it may be conceived that the quarters occupied by its servants, in the outhouses or is parts of the dwelling house fulfil the requirement of Section 2(e)(ii); but ii the assessee does not or cannot require a dwelling house at all, then the quarters built by itself for accommodation of its servants, labourers and staff will not be its own dwelling house by any stretch of imagination. In the case if Rajendra Narayan Bhanja Dev (supra) the palace was the dwelling house of the Raja himself but was much too big for his personal occupation. The fact that other parts of the palace were not actually used for the Raja's own residenial purposes did not detract from its value as a dwelling house of the Raja, who was a receiver of rent. In the instant case, we have to deal with an artificial person, an incorporated company: which does not require a dwelling house as a natural-born person does. We respectfully agree with the observation of Lord Williams J. in Calcutta Stock Exchange Association Ltd. case : [1935]3ITR105(Cal) (supra) that a company resides in a house for taxation purposes within its extended meaning, that is to say, that it does business from that place. But apart from that, it does not reside far less dwell in a house or in a particular place. The word 'dwelling house', when used in its application to the dweller, means his home, where the dweller requires to reside as a natural-born man. That is not the requirement of an artificial person like a company and the company does not require a dwelling house in the sense of making its home. In the instant case, we find that the registered address of the assessee is No. 2. Netaji Subhas Road, in the town of Cacutta That is the place from where it carries on its business and that may be its residence for taxation purposes. The staff quarters of the assessee. built in its tea gardens, far away from its registered address, are not its dwelling house or residence in any sense. Thus, although the assessee company may require the staff quarters by reason of its connection with theland, they cannot be regarded as its dwelling house, residential place or home.

23. Dr. Pal argued that the use of the word 'owned' inserted between the words 'his' and 'residence' in Section 9(2) proviso of the Indian Income Tax Act may justify the conclusion, which Lort-Williams. J. arrived at in the case of Calcutta Stock Exchange Ltd. case : [1935]3ITR105(Cal) (supra) but in the absence of such an additional word, the same conclusion should not be reached in interpreting Section 2(e)(ii) of the Wealth-tax Act. We do not agree. If a dwelling house means the home of the as-sessee, then his home must be his own home and not anybody else's home. We are, therefore, of the opinion that the absence of the word 'owned' before 'dwelling house' does not make any difference. We, therefore, propose to answer question No. 1, referred to this Court at the instance of the as-sessee. in the negative and against the as-sessee.

24. Question No. 2 calls for an interpretation of Section 5(1)(ix) of the Wealth-tax Act. Which reads as follows:--

''5. (1). Wealth-tax shall not be payable by an assessee in respect of the following assets and such assets shall not be includedin the net wealth of the assessee:--

(i) ..... to ..... (viii) * * * *(ix) The tools and implements used by theassessee for the purpose of raising of agricultural produce:

Explanation -- For the purpose of this clause, tools and implements do not include any plant or machinery used in any tea or other plantation in connection with the processing of any agricultural produce or in the manufacture of any article from such pro-duce'

25. Dr. Pal submitted that the word 'implement' meant an instrument of labour and was wide enough to include even plant or machinery alternatively he argued that the explanation to Section 5(1)(ix) made it abundantly clear that plant and machinery used in any tea or other plantation in connection with the processing of any agricultural produce or in the manufacture of any article from such produce were only excluded from the expression tools and implements, others were included. He argued that in the instant cast the finding was that the electrical transformer and switch gear (which were the machinery involved in this reference) were used for the purpose of supply and distribution of energy for agricultural as well as non-agricultural operations and were, as such, implements used at least partly in raisine agricultural produce. 'Implements' according to Murray's New English Dictionary means 'the apparatus, or a set of utensils, instruments etc. employed in any trade or in executing any piece of work; now chiefly in agricultural implements or as synonym of 'tools''. If by the above meaning power driven andmechanised tools and implements of agriculture were sought to be excluded, the meaning given in Murray's dictionary must be treated as somewhat primitive and out of tune with modernism. Today, tools and implements of agriculture, include all instruments used in ancient times and in modern times, e.g., bullock drawn ploughs, manually operated spades, shovels and sickles as well as power driven tractors, earth movers, mechanism of irrigating fields and lifting water by electrically operated water pumps from deep tubewells, mechanical sprayers and insecticidal instruments etc. Thus, if electrical transformers and switch gears supply energy for raising agricultural produce, they will be implements used for raising agricultural produce. But plant and machinery used in plantations in connection with the processing of any agricultural produce or in manufacture of any articles from such produce (after such agricultural produce has been raised and collected from the ground) will not qualify for exemption under Section 5(1)(ix) of the Wealth Tax Act. In this case as already stated, we have the finding that the implements in question were being used for agricultural operations, which include operations for raising of crop and also for non-agriculture operations. While the use of the implements for raising agricultural produce would qualify for exemption under Section 5(1)(ix), their use in non-agricultural purposes would disqualify them. Dr. Pal argued that because of the user of the implements in both the operations there should be apportionment made of the value of the tools and implements and that part of the value of the implement used for agricultural purposes should be excluded from computation of the wealth of the assessee. We are not impressed by this argument. Tools and implements, which may include modern scientific and mechanised implements like transformers or switch gear, may qualify for exemption, if used for raising agricultural produce. But implements which are collaterally or partly used to energise agricultural tools implements will not so qualify. We, therefore, answer question No. 2 in the negative and against the assessee.

26. The third question is now covered by the decision of the Supreme Court in Keshoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth Tax : [1966]59ITR767(SC) and must be answered in the affirmative and in favour of the assessee.

27. We now turn to the question, raised at the instance of the Commissioner of Wealth Tax, with regard to the exemption granted to the assessee by the Appellate Assistant Commissioner in respect of stationary were ropes, crab winches, tube wells etc. valued at Rs. 3,58,996. The Revenue did not appeal against the order of the Appellate Assistant Commissioner but filed an application, shortly before the hearing of the appeal, stating that the Appellate Assistant Commissioner was in error in allowing ex-emption under Section 5(1)(ix) in respect of the stationary wire ropes etc. valued at Rs. 3,58,996. We do not have that application before us. The newly introduced Section 24(2-A) did authorise the Revenue to prefer a cross-objection to the appeal preferred by the assessee in respect of the assessment year with which we are concerned. At the point of time when the application was made, it was possibly too tate for a cross-objection, if such a cross objection could at all be made. The grounds taken by the assessee in the Memorandum of Appeal did not cover the point on which the Appellate Assistant Commissioner allowed the claim of the assessee in respect of stationary wire rope etc. valued at Rs. 3,58,996. Thus the point was not before the Tribunal and was not the subject matter of the appeal Section 24(5) of the Wealth Tax Act reads as follows:--

'The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit and in any such orders may include an order enhancing the assessment or penalty '

28. Explaining a somewhat analogous provision in Section 33(4) of the Indian Income-tax Act, Chagla C. J. observed in the case of New India Life Assurance Co. Ltd. v. Commissioner of Income-tax, Excess Profit Tax. Bombay City. : AIR1958Bom143 :

'...... The expression 'thereon' has come in for considerable judicial comment and observation and the authorities lay down that the power of the Tribunal is confined to dealing with the subject-matter of the appeal and the subject-matter of the appeal is constituted by the grounds of appeal preferred by the applicant. This subject-matter cannot be expanded even by the appellant unless leave is granted to him to doso by the Appellate Tribunal. The subject-matter can certainly not be expanded by the respondent as already pointed out. if he has not either appealed or cross-objected.................'

29. The Bombay Court repeated thesame view in the case of Lajwanti Sial v. Commissioner of Income-tax. Madhya Pradesh : [1957]32ITR526(Bom) (Bom). We respectfully agree with the view expressed by the Bombay High Court and hold that it was not given to the Commissioner of Wealth-tax to try to expand the scope of the appeal by application made at the time of the hearing of the appeal. In that view, we hold that the Tribunal was right in rejecting the application.

30. In the result, we answer questions No. 1 and 2 in the negative and against the assessee. We answer question No, 3 in the affirmative and in favour of the assessor we also answer the question referred to this Court at the instance of the Commissionerof Wealth-tax in the affirmative and in favour of the assessee.

31. In view of the divided success. we make no order as to costs.

K.L. Roy, J.

32. I agree.


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