TaxTMI 
TaxTMI 
2016 (5) TMI 841
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....No. 1 of 1998 is concerned. Background facts 3. The Respondent Assessee M/s Mohan Exports (I) Ltd. is stated to be the owner of the land and building at 8 and 9, Zamrudpur Community Centre, Kailash Colony, New Delhi. During the assessment proceedings, the Assessing Officer ("AO") noted that the Assessee had not disclosed the value of the property in its total taxable wealth. In response to a query raised by the AO in that regard, the Assessee stated that the property in question had not been registered in its name and therefore in terms of the Wealth Tax Act, 1957 ("WT Act") the value of the said property could not be added in computing the net wealth of the Assessee. 4. For AY 1985-86, initially the assessment was completed by an order under Section 16(3) of the WT Act for total value at Rs. 1,47,42,259 which included the value of the property at 8 and 9, Zamrudpur Community Centre, Kailash Colony as well as land in Daruhera, District Mahendargarh. 5. In an appeal filed against the said assessment order by the Assessee the Commissioner of Wealth Tax ("CWT") set aside the assessment order on the issue of the value of the aforementioned properties and remanded the matter to the ....
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....T(A) by a common order dated 30th November 1995. The CIT (A) accepted the case of the Assessee that notwithstanding the amendment to the expression 'net wealth' by insertion of Explanation 1 below Section 2 (m) of the WT Act, under Section 40 (3) of the Finance Act 1983 "all the wealth of the company has not been charged to tax but only certain specified assets have been charged to tax." Following the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan v. CWT (supra) it was held that "unless the property has been registered in the name of the Assessee, it cannot be said to be belonging to the Assessee." Appeals were filed by the Revenue before the ITAT against the aforementioned common order of the CIT(A). 10. As far as AY 1991-92 is concerned, the AO passed the assessment order on 17th March 1994, determining the value of the property at Rs. 1,14,32,574. The contention of the Assessee that the value of the property was not liable to wealth tax since it was not registered in the name of the Assessee was rejected by the AO. In the appeal before the CIT(A) it was noted that the CIT (A) had not accepted the Revenue's case on similar lines for AYs 1989-90 and 1990-91....
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....merit the same treatment on the principle of consistency as far as the Revenue was concerned. As already noticed, the decision of the CIT (A) for AYs 1986-87 and 1987-88, subsequent to AY 1985-86, has been accepted by the Revenue. In fact, even for AY 1988-89, the decision of the ITAT holding that the value of neither the land nor the building can be included in the net wealth of the Assessee, notwithstanding the amendment to Section 2 (m) of the WT Act, has been accepted by the Revenue. 15. In that view of the matter, the Assessee is justified in contending that the Revenue should not be permitted to take a different stand for AY 1985-86. Accordingly, WTA No. 8 of 2004 for AY 1985-86 is not entertained and the question framed in the said appeal for AY 1985-86 is answered in the affirmative, i.e., in favour of the Assessee and against the Revenue. WTA 7/2004 for AY 1992-93 16. As regards WTA No. 7 of 2004 relating to AY 1992-93, Mr Gupta pointed out that the CIT(A) returned a factual finding that the building on the property at 8 and 9 Zamrudpur Community Centre and consequently the land appurtenant thereto was being used for the purposes of running the Assessee's office. T....
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....4 for AY 1992-93 is also dismissed. WTAs 9, 10 and 11 of 2004 21. In order to appreciate the issue that arises in WTA Nos. 9, 10 and 11 of 2004 for AYs 1990-91, 1991-92 and 1989-90 respectively, it is necessary to refer to the legislative history of the relevant provisions. 22. Initially under Section 13 of the Finance Act 1960, it was mandated that notwithstanding anything contained in WT Act "no tax shall be charged in respect of the net wealth of a company for any financial year commencing on or after 1st April 1960". This position changed with the Finance Act, 1983. Section 30 of the said statute provided for the revival of the levy of wealth tax in the case of closely held companies. This underwent further changes by the Finance Act, 1988 with effect from 1st April 1989. Section 40 as it stands with effect from 1st April 1989 reads as under: "40. (1) Notwithstanding anything contained in Section 13 of the Finance Act, 1960, (13 of 1960) relating to exemption of companies from levy of wealth-tax under the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act), wealth-tax shall be charged under the Wealth-tax Act for every assessment year commenci....
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....sessee for industrial purposes for a period of two years from the date of its acquisition by him;] (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 or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch room mainly for the welfare of its employees or used as residential accommodation, except as provided in clauses (via) and (vib) and the land appurtenant thereto; (via) any building used a residential accommodation in the nature of a guest house and land appurtenant to such building or part; (vib) any building and the land appurtenant to such building used as residential accommodation by any director, manager, secretary or any other employee of the Assessee, such employee holding not less than one per cent of the equity share of the Assessee or by ay relative of any person who holds not less than one per cent of the equity share of the Assessee. Explanation: For the purposes of this clause, "relative" shall have the meaning assigned to it in clause (b....
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.... Subject to the provisions of sub-section (5), this section shall be construed as one with the Wealth-tax Act." 23. Specific to the issue at hand is the definition of assets for the purposes of Section 40(2) of the Finance Act, 1983 as amended by the Finance Act, 1988. Under Section 40(3) (vi) the assets shall include building or land appurtenant thereto, as well as "land appurtenant to such building or part". It is inconceivable that while a building may form part of an asset, the land appurtenant thereto will not. In the present case it is not in dispute that the building has been constructed on the land in question and the building belongs to the Assessee. It is not possible that the Assessee does not have effective control over the land appurtenant to such building. What is excluded from the definition is a building or part thereof used by the Assessee as „factory, godown, warehouse, hotel or office for the purposes of its business'. Thus for AY 1992-93, since the factual finding that the building in question has been used for an office has not been questioned by the Revenue, it stands excluded from the computation 'net wealth'. 24. Turning to the Section 2....
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....;belonging to' in Section 2(m) of the WT Act indicates "something over which a person has dominion and lawful dominion should be the person assessable to wealth tax for this purpose". It was further observed that "even in some cases the phrase 'belonging to' is capable of connoting an interest less than absolute perfect legal title." The Court referred to an earlier decision in Raja Mohammad Amir Ahmed Khan v. Municipal Board of Sitapur AIR 1965 SC 1923 where it was observed that though the expression 'belonging to' "no doubt was capable of denoting an absolute title, it was nevertheless not confined to connoting that sense. Full possession of an interest less than that of full ownership could also be signified by that expression". It was held that even though an Assessee had a mere husk of title and "as against the vendee" the Assessee had "no reality of title but as against the world, he was still the legal owner and real owner". It was further observed: "We are conscious that if a person has the user and is in the enjoyment of the property, it is he who should be made liable for the property in question under the Act; yet the legal title is important and the....
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....e of 'X', 'A' cannot escape his liability. Secondly, there can be a partnership where the partners have contributed the property and the property has become the partner-ship property, then no registration is required, the income in such a case has to be assessed in the hands of the partnership-firm and not the individuals who have contributed the property. Thirdly, the transferee who has received the income has already been assessed in respect of income derived from such property as income from the property, whether Section 22 can again be invoked against the transferor in respect of such income, fourthly, in respect of a co-operative society the members thereof are given the property on the basis of allotment letters which may or may not be registered. The members thereafter transfer the property from one hand to another and if it is considered that it is only the registered owner or the society who can be assessed to tax, then the person who has enjoyed the income would escape liability of tax. Fifthly, if it is considered that the registered owner alone is liable to pay tax while the income is received by the transferee, the transferee would enjoy the income but ....
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....r, no occasion for consideration of those provisions in the other cases referred to above. For the purpose of construing the expression "belonging to" in section 2(m) of the Act and in view of the judgment of the Supreme Court in Nawab Sir Mir Osman Ali Khan's case [1986] 162 ITR 888, the judgments of our High Court in CIT v. Nawab Mir Barkat Ali Khan [1974] Tax LR 90, Nawab Mir Barkath Ali Khan v. CIT [1988] 171 ITR 541 and CIT v. Sahney Steel and Press Works (P.) Ltd. [1987] 168 ITR 811, will not be of much assistance much less will they be binding authorities on the interpretation of the expression "belonging to" in section 2(m) of the Act for the term considered in those income-tax cases was "owner" within the meaning of section 9 of the 1922 Indian Income-tax Act (section 22 of the 1961 Income-tax Act)." 30.2 The Full Bench of the Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan v. Commissioner of Wealth Tax (supra) then discussed at length Section 2 (m) and Section 4 of the WT Act and held as follows: "A close reading of section 4, the Explanation thereto and section 2 (m) of the Act makes the intention of Parliament evident as to what should be treated as belonging ....