TMI Blog2015 (12) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... is held for industrial purposes in excess of over two years. There is no need to compare and contrast the provisions of the Act with the provisions of the Wealth Tax Act, 1957, when there is sufficient indication in the Act itself to include the property in land to be an asset even if it is not owned. Under Section 2(m) of the Wealth Tax Act, 1957, net wealth as defined does not only mean asset belonging to the assessee but by an inclusive definition includes all assets which are set out in Section 4 of the Wealth Tax Act, 1957 which invokes a lessee in excess of one year the deemed owner. There is no such inclusive provision found in Section 40(2) of the Act nor any deeming provision of ownership. Therefore, the net wealth under the Act, has to be restricted in terms of the definition of assets as provided under the Act and cannot artificially include assets not includable under the Act. Section 40(5) of the Act may apply in cases where an issue has not specifically provided for under the Act; - leasehold interest in open land will for purposes of Section 40 of the Act would be an asset as on the valuation date for A. Y. 1998-99. Various clauses of the terms of lease deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 26th July, 2000 was admitted on 29th July, 2002 on the following substantial questions of law: ( a) Whether on the facts and in the circumstances and on a proper interpretation of Lease Deed dated 29/9/1978, the tribunal was right in law in holding that for the purposes of S. 40 of Finance Act 1983, the expression land will include any interest in land also? (b) Whether on a fair interpretation of the lease deed dated 29/9/1978 the tribunal was right in law in holding that the demised land belongs to the appellant on the valuation date so as to be includible in its net wealth? 3 Briefly, the facts leading to the present appeal are as under:( a) The appellantassessee is closely held company i.e. a company in which the public are not substantially interested. Therefore, for the subject assessment year, it was chargeable to Wealth Tax under Section 40 of the Finance Act, 1983 (the Act); (b) On 29th September, 1978, the AppellantCompany had taken on lease a plot of land bearing nos. 18/1, Pimpri Industrial Area, village Akrudi (the said plot) for a period of 95 years from Maharashtra Industrial Development Corporation (MIDC). The total area of the said pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal dismissed the Appellant's appeal. The impugned order holds that even though the legal ownership of the open land in the plot is vested in MIDC, yet it also belonged to the appellant as the lease hold rights therein for a period of 95 years was with the Appellant. Therefore, the imugned order holds the value of the open area of land in the plot taken on lease will form part of the assets belonging to Appellant for the purposes of determining the net wealth of the Appellant. Accordingly, Appellant's appeal was dismissed. 4 Mr. Mihir Naniwadekar, learned Counsel appearing for the Appellant in support of the appeal submit as under:( a) Section 40(3) of the Act defines assets inter alia as land other than agricultural land which when read with Section 40(2) of the Act have to belong to the company. This is contrasted with the definition of assets as provided at the relevant time in Section 2(e) of the Wealth Tax Act 1957 which defines assets to mean property of every description movable or immovable. Thus, a lease hold right or any other right in a property would be considered to an asset under the Wealth Tax Act 1957 but not so under the Act. This difference in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords 'all assets belonging to the company' used in Section 40(2) of the Act has been advisedly used by the Parliament as opposed to 'owned by the Company'. This with a view to include interest less than full ownership. Thus, a leasehold interest of the appellant for 95 years even if not accompanied by legal title, would belong to the company; and (d) On examination of the lease deed dated 29th September, 1978 entered into between the MIDC and the appellant would clearly establish that the open land of 2175 sq.mtrs of the said plot, that it belong to the Appellant. 6 Before dealing with the rival submissions, it may be necessary to reproduce the provisions which arise for our consideration as under:( A) Finance Act, 1983: Section 40 (1):Notwithstanding anything contained in section 13 of the Finance Act, 1960 (13 of 1960), relating to exemption of companies from levy of wealthtax under the Wealthtax Act, 1957 (hereinafter referred to as the Wealthtax Act), wealthtax shall be charged under the Wealthtax Act for every assessment year commencing on and from the 1st day of April, 1984 in respect of the net wealth on the corresponding valuation date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st day of April, 1973] (i) (ii) . . . (iii) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee. Provided that in relation to the assessment year commencing on the 1st day of April, 1981 and the assessment year commencing on the 1st day of April, 1982, this subclause shall have effect subject to the modification that for item (i) thereof, the following item shall be substituted( 1)(a) . . . . 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 excess of the aggregate value of all the debts incurred in relation to the said assets. Section 4 Net wealth to include certain assets (1) In computing the net wealth ( a) to (7) . . . . 8 A Person (a) who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of determining its net asset chargeable to Wealth Tax under the Act. 8 Question (a): (a) It is submitted on behalf of the Appellant a lease hold interest in open land is not includable in net wealth under Section 40(2) of the Act as it is not an asset in terms of Section 40(3) of the Act. Thus, it cannot be included for computing the net wealth under Section 40(2) of the Act. In support, attention is invited to the definition of asset in Section 2(e) of the Wealth Tax Act, 1957 as then existing which includes within its fold property of every description movable or immovable. These words are conspicuous by their absence in Section 40(3) of the Act. In these circumstances, it is submitted that leasehold interest is not included as an asset under Section 40(3) of the Act as it is not 'property of every description' which is defined as an asset; (b) There can be no dispute that there is a difference between leasehold right and ownership right as is evident from the Transfer of Property Act. In this case, we are concerned with leasehold right. However, the absence of the words 'property of every description' movable or immovable in Section 40(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1957, net wealth as defined does not only mean asset belonging to the assessee but by an inclusive definition includes all assets which are set out in Section 4 of the Wealth Tax Act, 1957 which invokes a lessee in excess of one year the deemed owner. There is no such inclusive provision found in Section 40(2) of the Act nor any deeming provision of ownership. Therefore, the net wealth under the Act, has to be restricted in terms of the definition of assets as provided under the Act and cannot artificially include assets not includable under the Act. Section 40(5) of the Act may apply in cases where an issue has not specifically provided for under the Act; (f) Further, in any case, the Wealth Tax Act 1957 has to be read in conformity with the Act and not to destroy and/or restrict the meaning of Asset as given under the Act; (g) Therefore, the decision of the Himachal High Court in C.W.T. v/s. H. P. Small Industries Export Corpn., reported in 2013 (212) Taxman 84 and the decision of the Full Bench of the Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan v/s. CWT 226 ITR 654 relied upon by the Revenue will have no application as they were dealing with the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the individual members to the extent it was owned by the individual members and not to the Hindu Undivided Family. Thus in the context of the Dayabhaga School of Hindu law, it was held that the inherited property even if possessed jointly by all the coparceners constituting the Hindu Undivided Family, it was owned by individual coparcener to the extent of his definite share. It was in the above facts that the Court held that the property concerned did not belong to the Hindu Undivided Family in the context of Section 2(m) of the Wealth Tax Act 1957 but to the individual coparceners to the extent of their share. (b) According to us, the above decision in Bishwanath Chatterjee(supra) would not apply to the present facts as it was rendered in the backdrop of the Dayabhaga school of law where inherited property though possessed jointly was individually owned to the extent of a particular share by each coparcerner. On the facts before it, the Court took the view that mere possession of the property jointly by all the members of Hindu Undivided Family, without anything more, would not render the property as belonging to the Hindu Undivided Family. In the present facts the open lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wealth Tax 162 ITR 888 as under: Even in some cases the phrase 'belonging to' capable of connecting interest which is less than absolute perfect legal title. In this connection, the observations of this Court in Raja Mohammad Amir Ahmed Khan v/s. Municipal Board of Sitapur, AIR 1965 SC 1923. This Court observed in that case 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 of full ownership could also be signified by that expression. (emphasis supplied) (e) In fact, the Apex Court in (late) Nawab Sir Osman Ali (supra) after making the above observations, finally held itself bound by the restricted meaning to the word 'belonging to' i. e. possession coupled with legal ownership, even though it does observe that it may result in injustice. In the aforesaid case before the Supreme Court, the Commissioner of Wealth Tax sought to bring the property which had not only been sold by the assesse but possession also given to the transferee on receipt of consideration, to the charge of wealth tax in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly against vendor. In the circumstances, the property should be treated as belonging to the assessee i.e. the vendor. Even though, the same may work some injustice to the assessee as he would be liable to tax without having enjoyment of the property in question. In the circumstances, it concludes that the legal title is important in the Scheme of Wealth Tax Act as it stands and the legislature may consider the suitability of amendment. Therefore the observations of the Apex Court relied upon by the impugned order were only observations, at the highest in nature of obiter and though worthy of the highest respect will not displace the ratio of the decision viz. Possession coupled with legal ownership would alone amount to 'belonging to' in the facts before the Court. In these circumstances, the issue would appear to be concluded against the Revenue and in favour of the Appellantassessee. (g) However the decision in the (Late) Nawab Sir Mir Osman Ali Khan (supra) may not ipso facto apply to the case at hand as there are factual differences as pointed out hereinafter. In the present facts, the assets i.e. open land though owned by the MIDC is in the possession of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it occurs. An identical test would satisfy the laws of interpretation of statutes i.e. to read the statute as a whole and interpret its provisions in the context in which it occurs to determine the meaning of the word 'belonging to' in Section 40(2) of the Act. (i) We find that the word 'belonging to the company' has advisedly been used by the Parliament in Section 40 (2) of the Act. In case the Parliament sought to equate the word 'belonging to' mean ownership then in such a case, there would be no reason to use the word 'belonging to' and in stead use the word 'owner of''. The intent in using the word 'belonging to' is to include within the provisions of the Act, assets in possession of the Company without full ownership, but sufficient domain over it, to exercise the powers which would otherwise normally vest in the owner on the valuation date. Therefore, the concept of less than full ownership is sought to be introduced by the use of the word 'belonging to'. However whether the asset belong to an asessee or not would have to be determined on the facts of each case, depending upon the documents executed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than a casual relationship but includes a right to possession and user subject to fulfillment of conditions of the lease on a continues basis on the part of lessee. Therefore, even if, the lessee is not the owner of the open plot of land, yet he would certainly have some interest in the open plot of land for the period of lease in this case 95 years and certainly so on the date of valuation, for the purposes of the Act. However, the issue still is whether the interest is sufficient to satisfy the test of 'belonging to' to the lessee. (l) The question as framed for our consideration is whether in terms of the lease deed,it could be said that the open land of 2175 sq.mtrs. of the said plot was belonging to the Appellant. Therefore, the lease deed is to be examined in the context of determining whether the clauses indicate that a lease in fact was created in the land or not in the so called lease deed dated 29th September, 1978. (m) The Appellant places reliance upon various clauses in the lease deed, in particular, the clauses which oblige the Appellant to pay rent during terms of the lease, not to excavate any part of the land which is held on lease, the full rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from the agreement being a lease. In fact, the terms of the lease deed establishes that the Appellant has a right to use the property provided the terms and conditions of the lease, are adhered to by the Appellant. Much was said on behalf of the Appellant that lease is only for 95 years with rights of a single renewal. This according to us, would have no impact in holding; (a) the document dated 29th September, 1978 is, in fact, a lease deed for a period of 95 years; and (b) during that period of 95 years, subject to lease being in existence; the Appellant has interest in the land of which it can claim protection on satisfying its obligation under the deed. (p) The Appellant certainly has an interest in the property for a period of 95 years. This is sufficient to hold that on the valuation date, this land belongs to the Appellant, notwithstanding the fact that the ownership in the land would belong to MIDC. For this purpose, the valuation of the leasehold land is as computed in terms of Section 7 read with Schedule III part (b) of the Wealth Tax Act, 1957. Thus, the value of the leasehold interest in land has to be included for in determining the net wealth under the ..... 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