TaxTMI 
TaxTMI 
TaxTMI 
2006 (10) TMI 72
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....rocess of construction during the year under consideration. The assessee claimed exemption from wealth tax on the buildings under construction as per clause (vi) of sub-section (3) of section 40 of the Finance Act, 1983. The assessing officer took the view that buildings under construction as on the valuation date could not be held to have been used for the purpose of business. He noted the fact that the assessee itself had offered the value of both the buildings under construction for taxation in the preceding assessment year 1985-86. Accordingly, he added the value of factory and research buildings under construction in the total wealth of the assessee company. The first appellate authority, relying upon the decision of the Tribunal in Nutan Electricals Industries Pvt. Ltd. v. CIT [1991] 36 ITD 448 (Mad) and appreciating the provisions of section 40 of the Finance Act, 1983, allowed the claim of the assessee for the year under consideration. Upon the matter being carried to the Tribunal by the revenue, the order of the first appellate authority was confirmed. 3. In Nutan Electricals Industries Pvt. Ltd. [1991] 36 ITD 448 (Mad) the Tribunal had held that unfinished factory buildi....
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....case of closely held companies. Accordingly, I am proposing the levy of wealth-tax in the case of closely held companies at the rate of two per cent on the net wealth represented by the value of specified assets, such as, jewellery, gold, bullion, buildings and lands owned by such companies. Buildings used by the company as factory, godown, warehouse, hotel or office for the purposes of its business or as residential accommodation for its low paid employees will be excluded from net wealth." 6. The relevant part of the section as it appeared in the Finance Act, 1983 is as follows: "S. 40 Revival of levy of wealth-tax in the case of closely-held companies.- (1) ... (3) The assets referred to in sub-section (2) shall be the following, namely: (v) land other than agricultural land, (vi) building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godown, warehouse, hotel or office for the purposes of its business or as residential accommodation for its employees whose income chargeable under the head 'Salaries' is ten thousand rupees or less: 7. Subsequently, in the year 1988, under section 87 of the Finance Act, 1988, the above pro....
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....o the assessement year 1989-90 and subsequent years." 9. During the course of hearing of this reference, in absence of any representation from the assessee-respondent, we requested senior advocate Mr. S.N. Soparkar to assist the Court. He submitted that, though the amendment by way of Finance Act, 1988 was effected in the year 1988 and by the Central Board Direct Taxes Circular No.528 dated December 16, 1988 ([1989] 176 ITR (St.) 154), it was clarified that the proposed amendment to sub-section (3) would take effect from April 1, 1989 and apply in relation to the assessment year 1989-90 and subsequent years and will not have retrospective effect, the rule of reasonable interpretation required that the provisions inserted to remedy the unintended consequences or the proviso which supplied an obvious omission were read into the section; and such amendments were required to be treated as retrospective in operation. Relying upon the judgment of the Supreme Court in Allied Motors Pvt. Ltd. v. CIT [1997] 224 ITR 677, he further submitted that the amendment, which was curative and explanatory, had to be treated as retrospective. He submitted that, in the facts of the present case, the la....
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....item (vi) was also not attracted inasmuch as incomplete building cannot be treated as a building at all. 12. The issues referred for our opinion are as to whether the value of the factory building and the research building under construction and not in actual use for business were liable to tax and whether by allowing the claim of the assessee, the appellate Tribunal had caused violation to the plain and simple language used in section 40 (3) (vi). Both the issues clearly referred to and were exclusively related with the provisions and language of clause (vi) of sub-section (3) of section 40. Therefore, the application and amendment of clause (v) are irrelevant. It requires no argument to hold that building cannot exist without land and value of the land is always included when building is to be assessed as an asset. The factory or the research building under construction, in the facts of the present case, was admittedly not used by the assessee for any purpose and, therefore, could not have fallen in the exception clause provided in clause (vi) itself. Thus, the real question would be, whether the words "building or land appurtenant thereto" covered the land and the building unde....