RAJENDRA RATILAL v. SECOND WEALTH TAX OFFICER
[Citation -1985-LL-1213-7]

Citation 1985-LL-1213-7
Appellant Name RAJENDRA RATILAL
Respondent Name SECOND WEALTH TAX OFFICER
Court ITAT
Relevant Act Wealth-tax
Date of Order 13/12/1985
Assessment Year 1975-76
Judgment View Judgment
Keyword Tags industrial undertaking • distribution of power • generation of steam • wealth-tax act • special bench • net wealth
Bot Summary: The terms power and Energy have become synonymous in common usage; for example electrical energy is usually referred to as electric power. With reference to the Dictionary of Physics by Gray and Alam Issacs, 1976, page 184, the learned counsel submitted that energy was of two different kinds, potential energy and kinetic energy and it assumed several forms such as electric energy, heat energy, chemical energy, energy associated with light and sound and nuclear energy. He went on to state that energy stored in the chemical reaction occurred, i.e., when a substance burnt chemical energy got converted into heat energy. According to the learned counsel, distribution of kerosene, in common parlance, could be classified as distribution of power since energy was synonymous with power. In addition to the aforesaid literature, we would refer to an interesting write up on the concept of energy in the New Encyclopaedia Britannica, 1984 edn. While 'energy' is the capacity for doing work, 'power' is the rate of doing work and is, thus, the rate of energy flow. While a fuel may be an energy source, it is not synonymous with energy itself because as stated already energy is the capacity to do work and this concept is not identical with the mere existence of a substance as such, which may be a source of energy when subjected to process, kerosene undoubtedly is a fuel and, for the reasons stated, we hold that it is not synonymous with energy and the question of examining further the propositions canvassed for by the learned counsel for the assessee that 'energy' is synonymous with 'power' does not survive.


This appeal by assessee, individual, arises out of wealth-tax proceedings and relates to assessment year 1975-76. assessee is partner in firm, Jayendra Brothers. This firm bought kerosene from Bharat Petroleum and in due course sold same to licensed dealers. firm owned, amongst other assets, tanker lorries for transporting kerosene. In substance, firm functioned as agents, stockists and distributors of kerosene. In wealth-tax return, as filed, there was no claim for exemption of interest of assessee in assets belonging to firm. WTO, therefore, completed assessment on net wealth as returned save for small addition in value of jewellery. 2. assessee appealed and before AAC claimed exemption of assessee's interest in assets of firm under provisions of section 5(1) (xxxii) of Wealth-tax Act, 1957 ('the Act'). claim of assessee was that firm was engaged in business of distribution of power and was, therefore, 'industrial undertaking' within meaning of Explanation to section 5(1) (xxxi) which governed meaning of expression 'industrial undertaking' in section 5(1) (xxxii) also. In support of plea reliance was placed on decision of Tribunal in case of Smt. V. Saraswati v. WTO [WT Appeal No. 492 (Mad.) of 1977-78, dated 6-12-1978. ] That was case where exemption was allowed in relation to assets of firm, which was distributor of liquified petroleum gas. AAC did not agree with contentions of assessee and rejected claim on ground that firm was not 'industrial undertaking'. 3. assessee appealed to Tribunal. assessee pleaded that order of Tribunal referred to would be applicable to facts of present case also. Bench before which appeal came in first instance considered that issue required reconsideration and reference was made to President under section 24(11) of Act for constitution of Special Bench. It is, thus, that appeal comes to be heard by this Special Bench, which has been constituted by President for purpose. 4. learned counsel for assessee submitted that under provisions of section 5(1) (xxxii) wealth-tax is not payable in respect of: "(xxxii) value, as determined in prescribed manner, of interest of assessee in assets (not being any land or building or any rights in any land or building or any asset referred to in any other clause of this sub-section) forming part of industrial undertaking belonging to firm or association of persons of which assessee is partner or, as case may be, member;" Such assets are also not to be included in net wealth of assessee. He further stated that Explanation to section 5(1) (xxxi) , which reads as under, gives following meaning to term 'industrial undertaking': "For purposes of clause (xxxa), this clause, clause (xxxii), and clause (xxxiv), term 'industrial undertaking' means undertaking engaged in business of generation or distribution of electricity or any other form of power or in construction of ships or in manufacture or processing of goods or in mining;" learned counsel stated that aforesaid provisions were introduced by Finance Bill, 1972 with effect from 1-4-1973 - [1972] 83 ITR (St.) 155. He invited our attention to relevant Notes on Clauses at page 165. He submitted that word 'power' had not been defined in Act and Notes on Clauses also did not amplify term any further. Reliance was placed on judgment of Calcutta High Court in CIT v. Stanton & Stavely (Overseas) Ltd. [1984] 146 ITR 405 for proposition that where expression was not defined in statute, it should be construed from commercial point of view having regard to well known concepts in trade and commerce. He referred to following extract from Columbia Encyclopaedia, Third edn., 1963: "Power, time rate of doing work. Two units of power commonly employed are horsepower, devised for use in mechanics by James Watt, and Watt, n electrical unit named after him. Horsepower is based on concept that horse can do 550 foot-pounds of work per second; foot-pound is work done when one-pd. weight (force) is moved through distance of one foot. watt is equal to one Joule per second. terms power and Energy have become synonymous in common usage; for example electrical energy is usually referred to as electric power." (p. 1712) He stated that 'power' is defined as rate or measure of doing work, and in this technical sense one could not speak of power being distributed. Therefore, it was that it is said that in common usage 'power' and 'energy' have become synonymous. With reference to Dictionary of Physics by Gray and Alam Issacs, 1976, page 184, learned counsel submitted that energy was of two different kinds, potential energy and kinetic energy and it assumed several forms such as electric energy, heat energy, chemical energy, energy associated with light and sound and nuclear energy. He went on to state that energy stored in chemical reaction occurred, i.e., when substance burnt chemical energy got converted into heat energy. His submission, therefore, was that kerosene was comprised of latent chemical energy, which became patent chemical energy o n ignition. He referred to Columbia Encyclopaedia, page 1127, for stating that kerosene was mixture of hydrocarbons and it is mixture, which represented latent chemical energy. Therefore, according to learned counsel, distribution of kerosene, in common parlance, could be classified as distribution of power since energy was synonymous with power. Various judicial pronouncements were also referred to for proposition that if interpretation of fiscal enactment was open to doubt, then that interpretation should be given, which was most favourable to taxprayer. 5. learned departmental representative referred to meanings of terms 'form' and 'power' as occurring in Chambers' Twentieth Century Dictionary, 1983 edn. He submitted that kerosene had to be construed as source of power but source of power was something different from power itself. He submitted that by purchasing and distributing kerosene, it could not be held that assessee was carrying on business of distribution of form of power. He stated that in terms of Explanation concern would be industrial undertaking if it generated power or distributed power or did both. In present case, he submitted that concern did not satisfy any of aforesaid criteria. learned departmental representative emphasised that there could be many instances of generation of power apart from generation of electricity. Such instances would be generation of steam, generation of mechanical power, etc. If concern was engaged in such generation, it would qualify for exemption. Even if there was any difficulty in readily finding out examples of distribution of power in actual practice other than distribution of electricity, he submitted that there was no superfluity in language used in Explanation because concerns generating various forms of power, of which instances had been given, were well known. He, therefore, submitted that distributing of kerosene would not come within term 'distribution of any other form of power'. 6. We have considered rival submissions. Both parties have placed before us considerable literature to support their respective stands on what would be true concept of term 'power'. In addition to aforesaid literature, we would refer to interesting write up on concept of energy in New Encyclopaedia Britannica, 1984 edn., Vol. 6 starting from page 849. It is stated (p. 849) that energy is usually and most simply defined as equivalent of or capacity for doing work. Further on (page 854) it is mentioned that 'energy sources' as term covers all fuels, flowing, water, sun light and winds with which man, by use of appropriate conversion devices, provides himself with necessary energy. primary sources of energy include (page 857) nuclear fusion, nuclear fission, radioactivity and motion of earth and moon. All forms of energy can be traced to these origins. While 'energy' is capacity for doing work, 'power' is rate of doing work and is, thus, rate of energy flow. From aforesaid it would be seen that fuels are in fact energy source. They release stored chemical energy by combustion with natural oxygen or by other means. This concept fits in with common understanding of role played by fuels. While fuel may be energy source, it is not synonymous with energy itself because as stated already energy is capacity to do work and this concept is not identical with mere existence of substance as such, which may be source of energy when subjected to process, kerosene undoubtedly is fuel and, for reasons stated, we hold that it is not synonymous with energy and, therefore, question of examining further propositions canvassed for by learned counsel for assessee that 'energy' is synonymous with 'power' does not survive. Distribution of kerosene, in our view in light of aforesaid discussion, cannot be considered to be distribution of 'any other form of power'. 7. There is one more reason for not accepting proposition advanced on behalf of assessee. Explanation to section 5(1) (xxxi) uses expression 'an undertaking engaged in business of generation or distribution of electricity or any other form of power'. This, according to us, means that electricity or any other form of power contemplated in Explanation should be capable of both generation and distribution; though it will be sufficient for assessee to be industrial undertaking if it is either engaged in business of generation or distribution of one or other. question, therefore, arises whether kerosene oil, which assessee is supplying in case before us, is capable of generation in sense in which electricity can be generated. answer to this question, to our mind, cannot but be in negative. At best kerosene oil can be extracted from coal or from wells, etc. It cannot certainly be generated. Therefore, considered from this angle also it is not possible to hold that supplier of kerosene oil will fall within meaning of 'industrial undertaking' as per Explanation to section 5(1) (xxxi) . Thus, firm is not 'industrial undertaking' within meaning of section 5(1) (xxxii) and assessee as partner is not entitled to any relief in terms of aforesaid section. 8. result is, appeal is dismissed. *** RAJENDRA RATILAL v. SECOND WEALTH TAX OFFICER
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