TMI Blog2007 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... l not qualify for applying the provisions of section 4(8)( b ) of the Wealth-tax Act. 3. Whether lease agreement for a period for less than one year with an extension clause which is normally an agreement of Leave and Licence, will not be covered by section 4(8)( b ) of the Wealth-tax Act and section 269UA( f ) of the Income-tax Act." 2. Facts relevant for deciding the issues under reference are that the assessee-company is the owner of the following properties: ( i )Industrial shed at Pune, which has been leased out in part to a wholly owned subsidiary of the assessee, namely, Perfect Moulds Pvt. Ltd. and another part to a joint venture company of the assessee, namely, Voltas Air International Ltd. The assessee entered into an agreement of "leave and license" on 10-11-1995 with Perfect Moulds (P.) Ltd. for a period of 11 months, which was renewed three times for a further period of 11 months each. It is stated in the said agreement that Perfect Moulds Pvt. Ltd. is going to be a wholly owned subsidiary of the licensor. Clause 1.1 of the said Agreement provides that the licensor conveys and grants to the licensee a license for a period of 11 months effective 15-11-1995 to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they have the option of renewing the lease for a further period of five years on such higher rent and security deposit and other terms and conditions as may be mutually agreed upon. It is important to observe that the parties have used the expression agreement of lease but the fact remains that what has been granted to the lessees is mere use of the premises and not the right of occupation/possession or any right in the properties under consideration. It is therefore for the Division Bench hearing the matter to decide as to whether the said transaction is, in substance, a transaction of lease or leave and licence. ( iii )Factory at Verona out of which 400 sq.ft. has been leased out to Bank of India for establishing extension/ATM counter. The assessee submits that no agreement has been entered into with Bank of India. 3. It is thus clear that all the agreements entered into by the assessee are for less than one year at a time (except the agreement with TELCO, which is for a period of five years) and that the combined period of licence/lease, after extensions, does not exceed twelve years. In the case of Bank of India, there is no lease agreement as per the assessee. Anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act is applicable to the present case and the lessees are to be treated or deemed as owners of the respective properties and wealth tax in respect of the said properties for the assessment year under appeal is to be levied on them. It is settled law that both the lessor and the lessee cannot be assessed to wealth tax in respect of the same leased property." 8. The Department, on the other hand, invited the attention of the Division Bench to the Order passed by a Division Bench of this Tribunal in Asstt. CIT v. Precision Wires India Ltd. [WT Appeal Nos. 345 and 346 (Mum.) of 2004] in which the Tribunal has held as under : "The substance of the arguments of the ld. counsel is that only deemed owner is liable to wealth-tax and not the owner. The assessee-company is receiving the rent, exercising all the powers which an owner can exercise except the possession of the property in question. As a matter of fact, the assessee-company is enjoying monthly rent in lieu of physical possession. The assessee is declaring rental income under the head Income from house property and also claiming fixed allowance under section 24( 1 )( 1 ) in respect of repair which an owner can clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty as they have acquired rights in or with respect to any building or part thereof under a lease for a period exceeding one year, in terms of the words used in the parenthesis in section 4(8)( b ) of the Wealth-tax Act. The assessee seeks to classify the leased properties into two categories. First category, according to the assessee, consists of those leases where the total period (including extended periods) of lease does not exceed one year. In such cases, the lessor, according to the assessee, continues to be the owner of the property and not the lessee. Second category, according to the assessee, consists of those leases where the total period of lease (including the extended periods) exceeds one year. In cases falling under the second category, the lessor, according to the assessee, ceases to be the owner of the property as it is the lessee who is deemed to be the owner of such properties by section 4(8)( b ) of the Wealth-tax Act. The assessee submits that its case falls under second category and hence it cannot be treated as the owner of the impugned properties. The assessee further submits that any other interpretation would make the words used in the parenthesis in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of excluding month to month leases or leases for a period not exceeding one year in such a case cannot arise on the face of it as such leases are obviously for a period of less than twelve years and to that extent the words used in the parenthesis would become redundant. The assessee reiterates its submission that it is only month to month leases and leases not exceeding one year, which have been excluded from the scope of fiction created by section 4(8)( b ) and therefore all other leases would be covered by the fiction created by section 4(8)( b ). 14. We have heard the parties and considered their rival submissions including the authorities referred to by them. Section 3 of the Wealth-tax Act creates charge of wealth tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company. According to section 2( m ), Net wealth means 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 exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any such transaction as is referred to in clause ( f ) of section 269UA, shall be deemed to be the owner of that building or part thereof for the purposes of sections 22 to 26 of the Income-tax Act. Section 269UA( f ) of the Income-tax Act reads as under : "269UA. In this Chapter, unless the context otherwise requires, ( f ) transfer , ( i )in relation to any immovable property referred to in sub-clause ( i ) of clause ( d ), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882). Explanation - For the purposes of this sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to be a lease for a term, of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years; ( ii )in relation to any immovable property of the nature referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms, shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years. It is therefore clear that it is the lessee who will be deemed to be the owner of any building or part thereof and the value of such building or part thereof shall be included in computing his net wealth only if he acquires the requisite rights in or with respect to any building or part thereof under a lease for a term of not less than twelve years. Section 4(8)( b ) enacts a deeming provision and therefore it requires to be strictly construed. A lessee cannot be deemed to be the owner under section 4(8)( b ) if the term of lease is less than twelve years. In such a case, the legal owner shall continue to be liable to wealth-tax by virtue of the provisions of section 2( m ) of the Wealth-tax Act. This position is quite evident on bare perusal of section 4(8)( b ) of the Wealth-tax Act read with section 269UA( f ) of the Income-tax Act. 18. We shall now deal with the submission of the learned Authorized Representative for the assessee regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to real owner, namely, the lessee. It is also plainly clear from the language of section 4(8)( b ) that the rights acquired under a lease from month to month or for a period not exceeding one year and also those acquired by virtue of any transaction not falling under section 269UA( f ) are clearly outside the scope of the fiction created by section 4(8)( b ) of the Wealth-tax Act. Since the aforesaid position emerges clearly and plainly on bare perusal of section 4(8)( b ), it is not necessary, as stated earlier, to elucidate the possible intention of the Legislature in inserting the words in the parenthesis appearing in section 4(8)( b ). It is a cardinal principle of interpretation that plain and natural meaning should be given to the language employed by the Legislature where there is no ambiguity in such language, and the Courts should not unnecessarily take recourse to find out the intention of the Legislature. Reference can be made to the judgment of the Hon ble Supreme Court in the case of Keshavji Raoji Co. v. CIT [1990] 183 ITR 1 wherein their Lordships have observed as under: " As long as there is no ambiguity in the statutory language, resort to any interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal owner to what it considers to be the real owner by deeming the lessee as owner. Crawford in Statutory Construction has stated: ". . . the exception is also subject to the rule of strict construction; that is, any doubt will be resolved in favour of the general provision and against the exception, any one claiming to be relieved from the statute s operation must establish that he comes within the exception. . ." In Desu Rayudu v. Andhra Pradesh Public Service Commission AIR 1967 AP 353, 357, it has been held that it is obvious that an exception cannot be so interpreted as to nullify or destroy the main provision. In Shree Raghuthilakathirtha Sreepadangalavaru Swamiji v. State of Mysore [1963] 2 SCR 226, 236, it has been held that the exception cannot swallow the general rule. The operation of general rule cannot be ousted unless the exception covers the issue of ownership. The moment the applicability of the Exception fails, the general rule will automatically come into operation. The lessee cannot be deemed to be the owner unless he acquires the lease made by a registered instrument for a term of not less than 12 years. The legal owner cannot be divested of his owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a license is a purely personal privilege or right enabling the licensee to do something on the land of the licensor, which would otherwise be unlawful. It is an excuse by reason of consent of the licensor for an act, which would otherwise be unlawful. It is merely leave to do a thing, which enables a licensee to do lawfully what he could not otherwise do except unlawfully. A dispensation or licence neither passes any interest nor alters nor transfers property in anything but only makes an action lawful, which without the licence would have been unlawful. A licence to use the property is traditionally distinguished from a lease in the respect that a licensee does not have possession or any interest in the property. Leave and licence is thus materially different from lease and therefore clearly outside the scope of the fiction created by section 4(8)( b ). In case of licence, all the ingredients of ownership including the right to possession vest in the owner-licensor and not in the licensee. Since a leave and licence is not lease and also does not transfer any interest in the property to the licensee, it will obviously be outside the scope of section 4(8)( b ) of the Wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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