TaxTMI 
TaxTMI 
1997 (5) TMI 107
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.... business income and which stand of the assessee has been accepted by this Tribunal in its IT appeals. The matter, we were informed, now rests before the Hon'ble Patna High Court by way of reference under section 27 of the Wealth-tax Act, 1957. The assessee-company did not file any returns under wealth-tax for all the three years under appeal because according to the assessee it had no taxable wealth. The Assessing Officer was of the opinion that the assessee-company was liable to wealth-tax as per the provisions of section 40(3)(vi) of the Finance Act, 1983 and, therefore, issued notices for all the three years under section 17 of the Wealth-tax Act in compliance whereto returns were filed by the assessee-company declaring the value of car as its net wealth. The details of wealth declared by the assessee for each of the three years are as under:-- -------------------------------------------------------------------------- 1984-85 Rs. 61,600 &....
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.... not relevant for our purpose)-- (vi) building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godowns, warehouse, cinema house, hotel or office for the purposes of its business or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest room or lunch room mainly used for the welfare of its employees or used as a residential accommodation, except as provided in clauses (via) and (vib), and the land appurtenant to such building or part. 5. A closer reading of the above provisions tells us that any building or part of a building which is used by the assessee as factory, godown, warehouse, cinema house, hotel or office for the purpose of its business... (remaining portion not relevant for our purpose) shall not be regarded as assets for the purpose of assessability to wealth-tax. 6. Admittedly the godowns in this case are not being used by the assessee for the purposes of its own business, but have been let out and used by lessees for the purpose of carrying on their businesses. The assessee-company is only earning income by way of hire charges/lease rent and this, perhaps, is one of the objects of t....
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.... limited way in the case of closely held companies by proposing levy of wealth-tax of 2% on the net wealth represented by the value of specified assets. in the said speech the Finance Minister further clarified that building used by the companies as factory, godown, warehouse, hotel or office for the purpose of its business or as residential accommodation for low paid employees will be excluded from net wealth [Refer Finance Minister's speech. It is, therefore, no doubt, true that the Finance Minister told the parliamentarian while introducing the Finance Bill, 1983 and enacting section 40 for levying wealth-tax on closely held companies that it is for the purpose of taxing unproductive assets in the hands of closely held companies, yet it does not render any sure and safe guide or assistance to us for interpreting the effect of the words "used by the assessee for its business" in favour of the assessees. In the same manner the Budget speech of the Finance Minister in para 67 also cannot help or guide us to interpret the abovementioned words employed in section 40(3)(vi) in favour of the assessee-company. The word used therein are very plain and simple and admit of no ambiguity or ....
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.... the Finance Act, 1983, for the purpose of levy of Wealth Tax? Per Shri V.K Sinha, Accountant Member -- I have gone through the proposed order of my ld. Brother very carefully, but have difficulty in agreeing with the conclusion therein. A separate order is, therefore, being passed by me. 2. The assessee constructed godowns and let them out to FCI and TDC. The Tribunal has already held in the Income Tax Appeals that the rental income is assessable as business income, and a reference is pending before the Hon'ble Patna High Court. The dispute before us is whether the godowns in question are liable to wealth-tax as per provisions of section 40(3)(vi) of the Finance Act, 1983. 3. Wealth-tax on closely held companies was revived by section 40 of the Finance Act, 1983 in respect of Assessment year 1984-85 onwards. It was intended, as we will presently see, to limit the levy of wealth-tax to non-productive assets. Assets were listed out in sub-section (3) accordingly. We are concerned with clause (vi) thereto, which had already been reproduced in para 4 of my Ld. Brother's order. A building or land appurtenant thereto was listed as an asset but an exception was provided if the b....
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....ges the use of existing electric fittings in the godowns and nearabout places, only consumption charges will be borne by the lessee. Clause X: If at any time it is found that the godowns were not constructed as per the specifications or it was found not to be storage worthy and the lessors have failed to make the godowns storage worthy after this fact has been intimated by the lessees to the lessors and the financing bank and reasonable time and appropriate opportunities have been afforded to the lessors to so, FCI would have the right to terminate the lease by giving 15 days' notice and for recovering all the damages or losses on account of such termination from the lessor." 6. The Tribunal found that the property was constructed according to the specification of the prospective tenant. The assessee was obliged under the terms of tenancy agreement to keep the godowns as well as the approach road fit for the purposes for which it was let out. This had to be done at all times during the currency of the tenancy to the satisfaction of the tenant failing which the assessee ran the risk of paying damages. It was in these circumstances that it was held that the income from the godo....
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....ld be exempted from wealth-tax. Wealth-tax should be levied on individuals, Hindu undivided families and all companies only in respect of non-productive assets such as residential houses including farm houses and urban land, jewellary, bullion, motor cars, planes, boats and yachts which are not used for commercial purposes. The Committee has further suggested that such tax should be at the rate of one per cent, with a basic exemption of Rs.15 lakhs. I propose to accept this recommendation and hope this change will encourage investments in productive assets and discourage investment in ostentatious non-productive wealth." Here also the intention was to tax non-productive assets. 9. In the above background, it should now be seen whether the assessee's godowns can be called godowns and whether they were non-productive assets. It is not a case where the assessee already had some multi-purpose business buildings which were let out for storage purposes. The very buildings were constructed as godowns according to the specifications prescribed by the prospective tenants. They were maintained by the assessee as godowns to the satisfaction of the tenants. Thus, the buildings were speci....
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.... difference referred for my opinion run as under as per records:-- "Whether, in the facts and circumstances of the case and in law, the godowns, belonging to the assessee, can be held to be assets within the meaning of section 40(3)(vi) of the Finance Act, 1983, for the purpose of levy of wealth-tax?" "Whether in law the godowns owned by the assessee-company and leased out by it for earning income therefrom can be considered as godowns used for the purpose of business as laid down in section 40(3)(vi) of the Finance Act, 1983 and, therefore, their value is assessable for the purpose of levying wealth-tax." 2. Both the parties have been duly heard and relevant records and their reasonings considered by me. 3. Some of the admitted facts as are relevant and necessary for the Third Member's opinion are these: The assessee by status a Private Limited Company owns certain godowns which were let by them to FCI and TDC since previous year relevant to the assessment year 1979-80. The assessment for the first year was completed by treating the rental income from godowns as "income from other sources" which underwent a change in appeal preferred by the Assessing Officer before the....
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....ital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch room mainly used for the welfare of its employees or used as residential accommodation, except as provided in clauses (via) and (vib), and the land appurtenant to such building or part;" 7. While on behalf of the assessee, supporting the view taken by the learned Accountant Member, it was contended that after taking into consideration all the relevant facts including the relevant clauses of the assessee's Memorandum of Association and the agreement entered into between the assessee and their tenants, the Tribunal vide its order dated 15th September, 1985 referred to supra, held that the income earned by the assessee under consideration should be assessed under the head "Business", the learned D.R. supporting the view taken by the learned Judicial Member contended that since the property was in the use of the tenants of the assessee and not the assessee itself, it could not be said that it was being used by it for the purposes of its business making the assessee liable to pay wealth-tax. 8. No doubt, certain other submissions were also made by both sides to buttress their respective stand ....