TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 1223
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....ongs to the appellant on the valuation date so as to be includible in its net wealth?" 3 Briefly, the facts leading to the present appeal are as under:( a) The appellantassessee is closely held company i.e. a company in which the public are not substantially interested. Therefore, for the subject assessment year, it was chargeable to Wealth Tax under Section 40 of the Finance Act, 1983 (the Act); (b) On 29th September, 1978, the AppellantCompany had taken on lease a plot of land bearing nos. 18/1, Pimpri Industrial Area, village - Akrudi (the said plot) for a period of 95 years from Maharashtra Industrial Development Corporation (MIDC). The total area of the said plot under the above lease deed was 9605 sq. mtrs. On a part of the said plot, the Appellantassessee had constructed its factory building, leaving a balance area of 2175 sq. mtrs. of the said plot as open land; (c) During subject Assessment Year, the AppellantCompany filed its Wealth Tax Returns under Section 40 of the Act, returning a net wealth of Rs. 13 lacs. In its return of Wealth, the Appellant had in computing its net wealth, not taken into account its leasehold interest in the said plot or any part thereof.....
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..... 4 Mr. Mihir Naniwadekar, learned Counsel appearing for the Appellant in support of the appeal submit as under:( a) Section 40(3) of the Act defines assets inter alia as land other than agricultural land which when read with Section 40(2) of the Act have to belong to the company. This is contrasted with the definition of assets as provided at the relevant time in Section 2(e) of the Wealth Tax Act 1957 which defines assets to mean property of every description movable or immovable. Thus, a lease hold right or any other right in a property would be considered to an asset under the Wealth Tax Act 1957 but not so under the Act. This difference in language is with the purpose of giving a restricted meaning to the word assets in the Act; (b) The charge of Wealth Tax under Section 40 (1) of the Act, is on the net wealth of a closely held company such as the appellant. The net wealth in terms of Section 40(2) of the Act is the aggregate value of all assets belonging to the Company in excess of the aggregate value of all debts owed by the company. It is submitted that the open area of 2175 sq. mtrs of the said plot does not belong to Appellant as it is not owned by the Appellant. It ....
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.... plot, that it belong to the Appellant. 6 Before dealing with the rival submissions, it may be necessary to reproduce the provisions which arise for our consideration as under:( A) Finance Act, 1983: " Section 40 (1):Notwithstanding anything contained in section 13 of the Finance Act, 1960 (13 of 1960), relating to exemption of companies from levy of wealthtax under the Wealthtax Act, 1957 (hereinafter referred to as the Wealthtax Act), wealthtax shall be charged under the Wealthtax Act for every assessment year commencing on and from the 1st day of April, 1984 in respect of the net wealth on the corresponding valuation date of every company, not being a company in which the public are substantially interested, at the rate of two per cent of such net wealth. Provided .... .... .... .... (2) For the purposes of subsection (1), the net wealth of a company shall be the amount by which the aggregate value of all the assets referred to in subsection (3), wherever located, belonging to the company on the valuation date which are secured on, or which have been incurred in relation to, the said assets: Provided.... .... .... .... (3) The assets referred to in subsection (....
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....ans the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts incurred in relation to the said assets." "Section 4 Net wealth to include certain assets (1) In computing the net wealth ( a) to (7) .... .... .... .... 8 A Person (a) who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1982); (b) who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year)in or with respect to any building or part thereof by virtue of any such transaction as is referred to in clause (f) of section 269UA of the Income Tax Act. shall be deemed to be the owner of that building or part thereof and the value of such building or part shall be included in computing the net wealth of such person. Explanation:For the purposes of t....
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....movable. These words are conspicuous by their absence in Section 40(3) of the Act. In these circumstances, it is submitted that leasehold interest is not included as an asset under Section 40(3) of the Act as it is not 'property of every description' which is defined as an asset; (b) There can be no dispute that there is a difference between leasehold right and ownership right as is evident from the Transfer of Property Act. In this case, we are concerned with leasehold right. However, the absence of the words 'property of every description' movable or immovable in Section 40(3) of the Act by itself would not lead to the conclusion that only a property owned by an assessee would be covered and not property of any other kind. Be that as it may, so far as Section 40(3)(v) of the Act, which is the applicable provision, there is a proviso thereto which excludes unused land held by the assessee for an industrial purposes for a period in excess of two years from the date of its acquisition from the definition of asset. The Parliament has used the word held and not owned by the assessee in the proviso to cover a case of open land other than the agricultural land as an as....
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.... apply in cases where an issue has not specifically provided for under the Act; (f) Further, in any case, the Wealth Tax Act 1957 has to be read in conformity with the Act and not to destroy and/or restrict the meaning of Asset as given under the Act; (g) Therefore, the decision of the Himachal High Court in C.W.T. v/s. H. P. Small Industries & Export Corpn., reported in 2013 (212) Taxman 84 and the decision of the Full Bench of the Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan v/s. CWT 226 ITR 654 relied upon by the Revenue will have no application as they were dealing with the provisions of Wealth Tax Act,1957 and not that of the Act which are undisputedly different; and (h) Accordingly, it would be appropriate to hold that leasehold interest in open land will for purposes of Section 40 of the Act would be an asset as on the valuation date for A. Y. 199899. 9 Question (b): (a) The primary submission on behalf of the appellant that we have to first determine is the meaning of the word 'belonging to' and thereafter to examine whether the meaning so determined is satisfied in the context of the lease deed dated 29th September, 1978. It is submitted that the....
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.... extent of their share. (b) According to us, the above decision in Bishwanath Chatterjee(supra) would not apply to the present facts as it was rendered in the backdrop of the Dayabhaga school of law where inherited property though possessed jointly was individually owned to the extent of a particular share by each coparcerner. On the facts before it, the Court took the view that mere possession of the property jointly by all the members of Hindu Undivided Family, without anything more, would not render the property as belonging to the Hindu Undivided Family. In the present facts the open land is not only possessed by the appellant but it is coupled with further rights (short of ownership) as provided in the lease deed. Therefore, the decision of the Apex Court in Bishwanath Chatterjee(supra) does not deal with the issue arising for our consideration and is completely distinguishable on facts. This is so as in the Bishwanath Chatterjee (supra), though the possession was jointly with all the coparcerners, it was at the sufferance of each coparcerner. Any coparcerner can at his will and fancy transfer his share of the property jointly held to the third parties. As against that, in t....
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...." (emphasis supplied) (e) In fact, the Apex Court in (late) Nawab Sir Osman Ali (supra) after making the above observations, finally held itself bound by the restricted meaning to the word 'belonging to' i. e. possession coupled with legal ownership, even though it does observe that it may result in injustice. In the aforesaid case before the Supreme Court, the Commissioner of Wealth Tax sought to bring the property which had not only been sold by the assesse but possession also given to the transferee on receipt of consideration, to the charge of wealth tax in the hands of the assessee. This was because the registered sale deed with regard to the property had not been executed. On the aforesaid facts the Court was concerned with the meaning of the word 'belonging to' as found in Section 2 (m) of the Wealth Tax Act, 1957 which define net wealth. The Apex Court held that in the facts and circumstances of the case and in the eyes of the law, the purchaser cannot be and is not treated as legal owner of the property in question. To reach the above conclusion, the Apex Court noted the ingredients of ownership as given in Salmond on Jurisprudence as under: " .... .....
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....pect will not displace the ratio of the decision viz. Possession coupled with legal ownership would alone amount to 'belonging to' in the facts before the Court. In these circumstances, the issue would appear to be concluded against the Revenue and in favour of the Appellantassessee. (g) However the decision in the (Late) Nawab Sir Mir Osman Ali Khan (supra) may not ipso facto apply to the case at hand as there are factual differences as pointed out hereinafter. In the present facts, the assets i.e. open land though owned by the MIDC is in the possession of the Appellant under the lease deed for a period of 95 years which has been executed. This document of lease admittedly evidenced transfer of some interest. Further, the decision of the Apex Court in (Late) Nawab Sir Mir Osman Ali Khan (supra) dealt with a situation where there was no legal document, evidencing transfer of any interest which would entitle the vendee to claim some right and/or rights in respect of land in its possession so as to claim that the land belongs to him albeit not owned. Therefore, the facts in the present case are distinguishable as the Appellant on the basis of document executed by the lessor....
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....r of''. The intent in using the word 'belonging to' is to include within the provisions of the Act, assets in possession of the Company without full ownership, but sufficient domain over it, to exercise the powers which would otherwise normally vest in the owner on the valuation date. Therefore, the concept of less than full ownership is sought to be introduced by the use of the word 'belonging to'. However whether the asset belong to an asessee or not would have to be determined on the facts of each case, depending upon the documents executed and the nature of domain the lessee exercises over the asset. The determination of the same in the present facts would require examination of the lease deed. Of course, the occasion to examine the same would only arise when there is some right more than mere possession, even if it is not full ownership. It is only on examination of the document, if any, under which the possession is held would the issue whether the property/asset can be said to belong to the person who is being charged to wealth tax can be determined. (j) As pointed out herein above, the words 'belonging to' is capable of being construed as p....
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....the lease deed,it could be said that the open land of 2175 sq.mtrs. of the said plot was belonging to the Appellant. Therefore, the lease deed is to be examined in the context of determining whether the clauses indicate that a lease in fact was created in the land or not in the so called lease deed dated 29th September, 1978. (m) The Appellant places reliance upon various clauses in the lease deed, in particular, the clauses which oblige the Appellant to pay rent during terms of the lease, not to excavate any part of the land which is held on lease, the full rights of the lessor to enter upon the leased premises and to inspect the same, to use the leased premises by the Appellant only for the purposes of a factory, the objections of the Appellant at expiration of the lease or sooner determination thereof to hand over the leased premises to MIDC and the Appellant not to sub let or part with possession of the leased premises or any part thereof without previous written consent of the MIDC. On the other hand, the lessor has full rights to enter upon the plot and inspect the same with proper notice. If any breach of the clauses contained in the lease deed is committed, the lessor wou....