Case: Kapri International (P) Ltd Vs. Commissioner of Wealth Tax

can construe the language in accord with the object sought to be achieved. Going by the plain language it is clear that the learned Senior counsel appearing on behalf of the appellant is only partially correct in that user of the building is established on the facts of the case and, therefore, the asset of the company is being used productively and not otherwise. However, super-added to this condition is another condition, namely, that such user must be "by the assessee". Not only must it be by the assessee but it must also be "for the purpose of its business". It is clear on the facts here that the appellant before us and M/s Dior International Pvt. Ltd are doing their own business and are separately assessed as such. Mr. Guru Krishan Kumar, learned Senior counsel is right in contending that on facts the charging of Rs. 20,000/- per month as licence fee by the appellant assessee from M/s Dior International Pvt. Ltd. changes the complexion of the case. It is clear that once this is done, the two companies, though under the same management, are treating each other as separate entities. Also, he correctly pointed out that for the job work done by M/s Dior International Pvt. Ltd., M/s Dior International Pvt. Ltd. was charging the assessee company and this again established that two companies preserved their individual corporate personalities so far as the present transaction is concerned. 7. Shri Sabharwal cited a judgment of this Court reported in 53 ITR 140 (SC) in the case of Commissioner of Income Tax, Kerala v. Malayalam Plantations Ltd., and brought to our notice a passage at page 150 which reads as follows:- "The aforesaid discussion leads to the following result: the expression "for the purpose of the business" is wider in scope than the expression "for the purpose of earning profits". Its range is wide: it may take in not only the day to day running of a business but also the rationalisation of its administration and modernisation of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on a business; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business." 8. It is true that the expression "for the purpose of the business" may be wide but as the judgment says its limits are also clear. The expenditure incurred therefore, will have to be for the carrying on of the business and the assessee shall incur it in its capacity as a person carrying on the business. On facts here it is clear that the assessee, namely, M/s. Kapri International (P) Ltd., the appellant before us, has not incurred anything in its capacity as the person carrying on the business. On the other hand, it is clear on facts that it is M/s Dior International Pvt. Ltd. in its separate individual capacity that is carrying on its own business. This case is, therefore, clearly distinguishable on facts. 9. He also cited before us a judgment reported in 20 ITR 451 (SC) in the case of Commissioner of Excess Profits Tax, Bombay City v. Shri Lakshmi Silk Mills Ltd. where the controversy was whether, when a dyeing plant of a company remains idle because of difficulty in obtaining raw material, and it was temporarily let out, the amount received in the hands of such company could be treated as business income. The passage cited at page 455-456 of the report again makes it clear that this judgment does not in any manner further the argument of the assessee in the present case. It goes as far as saying that on the facts here Rs. 20,000/- licence fee per month ought to be treated as business income. This may well be correct but as we have pointed out herein above, this fact does not further the assessees case in that the very factum of charging Rs. 20,000/- per month makes it clear that the assessee treated itself as a corporate personality separate from its subsidiary. 10. Learned counsel for the appellant then cited a judgment of this Court reported in 288 ITR 1 (SC), namely, S.A. Builders Ltd. v. Commissioner of Income Tax in which a question arose in the context of Section 36 of the Income Tax Act as to whether an interest free loan given to a sister concern can be said to be "for the purpose of business". This does not take the assessee very much further. An interest free loan may well on facts be treated to be "for the purposes of business" so far as Section 36 of the Income Tax Act is concerned. However, on facts here we are concerned with a very different provision in which user of premises has to be by the assessee itself and not by its sister concern. This case is also distinguishable on facts. 11. Learned counsel also cited a full Bench judgment of the Madras High Court in the case of Commissioner of Wealth Tax v. Fagun Co. P. Ltd. reported in 286 ITR 297 (FB) and drew our attention to a passage at page 313-314 of the report. In that case, assets were let out by a leasing company doing leasing business. On the facts therefore, it was held that such leased assets would be treated as being for the purpose of business in that case. This judgment also does not carry the appellants case any further.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. It is true that the expression "for the purpose of the business" may be wide but as the judgment says its limits are also clear. The expenditure incurred therefore, will have to be for the carrying on of the business and the assessee shall incur it in its capacity as a person carrying on the business. On facts here it is clear that the assessee, namely, M/s. Kapri International (P) Ltd., the appellant before us, has not incurred anything in its capacity as the person carrying on the business. On the other hand, it is clear on facts that it is M/s Dior International Pvt. Ltd. in its separate individual capacity that is carrying on its own business. This case is, therefore, clearly distinguishable onpassage cited at pageof the report again makes it clear that this judgment does not in any manner further the argument of the assessee in the present case. It goes as far as saying that on the facts here Rs. 20,000/licence fee per month ought to be treated as business income. This may well be correct but as we have pointed out herein above, this fact does not further the assessees case in that the very factum of charging Rs. 20,000/per month makes it clear that the assessee treated itself as a corporate personality separate from itsthat case, assets were let out by a leasing company doing leasing business. On the facts therefore, it was held that such leased assets would be treated as being for the purpose of business in that case. This judgment also does not carry the appellants case anydoes not take the assessee very much further. An interest free loan may well on facts be treated to be "for the purposes of business" so far as Section 36 of the Income Tax Act is concerned. However, on facts here we are concerned with a very different provision in which user of premises has to be by the assessee itself and not by its sister concern. This case is also distinguishable on facts.