Case: Anand Estate Private Limited Vs. Deputy Commissioner of Income Tax

F.I. REBELLO, J.Both these Appeals preferred by the assessee raise the following substantial questions of law. Hence both these appeals are being disposed of by this common order.2. Appeals raise the following substantial questions of law:-"I. Whether on the facts and in law the Honble Tribunal erred in not deciding the issue in the explanations to section 40 of the Finance Act, 1983. II. Whether on the facts and in the law the Honble Tribunal erred in not accepting that the principle business of the appellant is ware-housing which was accepted by the Assessing Officer.III. Whether on facts and in law the Honble Tribunal erred in holding that merely because the rental income derived there from was shown under the head "Income from House Property", it becomes the asset of the appellant"The assessee is in the business of ware-housing. These appeals are in respect of the order passed in respect of assessment year 1997-98 and 1998-99.3. There were two appeals before the Appellate Tribunal being W.T.A. 257 and 258 of 2004 for the assessment years 1997-98 and 1998-99. The learned Tribunal has recorded a finding of fact that the godowns in question are given on rent for both assessment years under appeal and as such occupied by the lessee for their business and were not occupied by the appellants for their business. In view of this finding the learned Tribunal held, that the A.O. and the lower Appellate Authority were correct in their view to include the value of the godowns in the net wealth of the assessee. 4. We have heard learned Counsel for the parties. In so far as the closely held company is concerned, by virtue of Finance Act, 1983, Section 40 as introduced deals with revival of levy of wealth-tax in the case of closely held companies. Section 40(3)(vi) is relevant for our discussion and the same reads as under:-"40(3)(vi) building or land appurtenant thereto, other than building or part thereof used by the assesse 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 and the land appurtenant to such building or part."From a plain and literal reading of the above sub-section, it is clear that it is only the building or land appurtenant thereto other than building or part thereof used by the assessee for the purpose of his business or as residential accommodation for his employees and the like which would be excluded. If the asset is not used, as in the instant case, but given on lease, then the said asset would be considered for computing net wealth. 5. On behalf of the assessee their learned Counsel draws our attention to the definition of "assets" as contained in Section 2(ea) and the substitution by the Finance Act, 1996 with effect from 1st April, 1997. The definition of assets as amended reads as under:-"(ea) in relation to the assessment year commencing on the 1st day of April. 1993, or any subsequent assessment year, means(i) any guest house and any residential house (including a farm house situated within twenty five kilometres from the local limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board) but does not include(1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than two lakh rupees;(2) any house for residential purposes which forms part of stock-in-trade;""(i) any building or land appurtenant thereto (hereinafter referred to as "house"), whether used for residential or commercial purposes or for the purpose of maintaining a guest-house or otherwise including a farmhouse situated within twenty-five kilometres from local limits of any municipality (whether known as municipality, municipal corporation or by any other name) or a cantonment board, but does not include(1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or director who is in whole-time employment, having a gross annual salary of less than two lakh rupees; (2) any house for residential or commercial purposes which forms part of stock-in-trade; (3) any house which the assessee may occupy for the purposes of any business or profession carried on by him." It is pointed out that from a reading of sub-clause (1) the word house means the building occupied by the assessee for the purpose of any business or profession carried on therein. The business of the assessee it is submitted is of running a warehouse. The said building therefore, would not fall within the expression "asset" for the purpose of computing net wealth. Our attention is also invited to the explanatory notes, to the provisions of Finance Act, 1996. 6. After hearing the learned Counsel, we are clearly of the opinion that the substitution of definition of "asset" by Finance Act 2 of 1996 with effect from 1st April, 1997, would be inapplicable in so far as the assessee is concerned. The Wealth Tax Act itself has treated a closely held company differently from other assessees for the purpose of the Wealth Tax. Once there be a specific provision in so far as closely held company is concerned which deals with the expression "asset" then the general definition would be excluded. In this case admittedly the assessee is closely held company and as such for the purpose of computing net wealth it will be the provisions of Section 40(3) of the Finance Act, 1983 which are relevant.

Decision:
0[ds]From a plain and literal reading of the aboveit is clear that it is only the building or land appurtenant thereto other than building or part thereof used by the assessee for the purpose of his business or as residential accommodation for his employees and the like which would be excluded. If the asset is not used, as in the instant case, but given on lease, then the said asset would be considered for computing netis pointed out that from a reading of(1) the word house means the building occupied by the assessee for the purpose of any business or profession carried on therein. The business of the assessee it is submitted is of running a warehouse. The said building therefore, would not fall within the expression "asset" for the purpose of computing net wealth. Our attention is also invited to the explanatory notes, to the provisions of Finance Act, 1996.After hearing the learned Counsel, we are clearly of the opinion that the substitution of definition of "asset" by Finance Act 2 of 1996 with effect from 1st April, 1997, would be inapplicable in so far as the assessee is concerned. The Wealth Tax Act itself has treated a closely held company differently from other assessees for the purpose of the Wealth Tax. Once there be a specific provision in so far as closely held company is concerned which deals with the expression "asset" then the general definition would be excluded. In this case admittedly the assessee is closely held company and as such for the purpose of computing net wealth it will be the provisions of Section 40(3) of the Finance Act, 1983 which are relevant.