TMI Blog2004 (1) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee-company has constructed office buildings with godowns. The godown buildings, which are not immediately required for the business of the assessee were let out to other business concerns and assessee is earning lease rental income. 3. The assessee-company did not file returns of wealth for the impugned assessment years on the ground that the right in the leasehold property and the value of the structures thereon did not qualify to be assessed under the Wealth-tax Act. The Assessing Officer issued notices under section 17 calling for filing the returns of wealth. The notices were complied with. The assessee filed returns. The assessee did not return any value for its leasehold right of land and for the structures building thereon. The assessee returned only the value of movable properties in the nature of motor cars. 4. The Assessing Officer found that the assessee-company was receiving rent by sub-leasing the godown and the lease rent was declared for income-tax purposes under the head "Income from house property". Even though the Central Government has restricted the extension of the lease beyond a period of 30 years, the Government has not evicted the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated against the assessee-company. Therefore, he held that the assessee is liable to wealth-tax. He accordingly computed the net maintainable rent under Rule 4 of Schedule III and capitalized the same at eight times under Rule 3 of Schedule III. The wealth-tax assessments for all these years were completed in that manner. 7. The assessments were taken in first appeal before the CWT (Appeals). The assessee reiterated the objections before the CWT (Appeals) also. The CWT (Appeals) agreed with the Assessing Officer that even though the automatic extension of the lease right is not available, the assessee is in fact enjoying the property, including receiving the rent. When the lease-hold rights are renewed, the same would be retrospective in nature and, therefore, there is no much force in the contentions advanced by the assessee. He held that Rule 3 and Rule 4 of Schedule-III will apply in this case and accordingly upheld the assessments. 8. The assessee is aggrieved and, therefore, these second appeals before us. The common grounds raised by the assessee are extracted below : "The CWT(A), Cochin erred in finding that Rules 3 and 4 of the Schedule III of the Wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the land and is required to remove all the structures erected by it whenever requisitioned to do so. He submitted that the building constructed by the assessee being merely godowns built of brick masonry and asbestos roofing, the cost of removal would exceed the salvage value of the structures, if any. The learned Chartered Accountant submitted that the provisions of valuation of an asset need to be applied in the present case in the light of the above facts. He submitted that according to section 7( i ) of the Wealth-tax Act, the value of any asset other than cash for the purpose of the Act shall be its value as on the valuation date, as determined in the manner laid down in Schedule-III. As per rule 3 of Schedule-III, the value of any immovable property constructed on leasehold land, where the unexpired period of lease is more than fifty years, shall be the amount arrived at by multiplying the net maintainable rent by the figure of 8. The learned Chartered Accountant explained that the above rule will not apply in the present case. He explained that this is because of the application of clause C of Rule 8 of Schedule-III. As per the said rule, the provisions of Rule 3 shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to renew the lease agreement has been taken away by the Government of India, as explained in its letter dated 8-7-1986 addressed to the Chairman of the Cochin Port Trust. It is the case of the assessee-company that after the expiry of the initial 30 years period, there is no option for extending the life of lease and, therefore, on the respective valuation dates, the assessee had no right on the leasehold properties. 15. We have gone through the communications sent by the Department of Surface Transport to the Chairman of the Cochin Port Trust through its letter dated 8-7-1986. As per the communication, under the second proviso to section 34(1) of the M.P.T. Act, 1963, no contract for the lease of any property of Major Port Trust for a term exceeding 30 years shall be made unless it has been previously approved by the Central Government. The legal position explained in the said letter is that if the lease of the same property is being extended or renewed for a further period after the initial 30 years period, then it would attract the second proviso to section 34(1) of the MPT Act, 1963 and, therefore, the Central Government s prior approval should be taken. The extension claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government. They are not served with any eviction notice either by the Central Government or by the Port Trust. No litigation is pending before any Courts of law. The sub-letting of the leasehold property is still continued. The assessee-company is earning income by way of lease rent. In these circumstances, we have to see the facts in a practical and realistic manner. As feared and argued by the assessee-company, the communication of the Government of India dated 8-7-1986 did not altogether prohibit the extension of the lease beyond a period of initial 30 years. Therefore, there is no question of automatic termination of the leasehold right of the assessee-company on the properties. The clarification issued by the Central Government only invited the attention to a fetter contained in the MPT Act, 1963, whereby the extension of an agreement could be executed only with the prior approval of the Central Government. But for this procedural stipulation, the clarification issued by the Government does not anywhere state that the lease could not be extended beyond the period of initial 30 years. 18. At this point of time, the learned Chartered Accountant submitted before the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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