TMI Blog2006 (10) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the plain and simple language used in section 40 (3) (vi) of the Finance Act, 1983 ? 2. The facts stated are that the factory and research buildings were under the process of construction during the year under consideration. The assessee claimed exemption from wealth tax on the buildings under construction as per clause (vi) of sub-section (3) of section 40 of the Finance Act, 1983. The assessing officer took the view that buildings under construction as on the valuation date could not be held to have been used for the purpose of business. He noted the fact that the assessee itself had offered the value of both the buildings under construction for taxation in the preceding assessment year 1985-86. Accordingly, he added the value of factory and research buildings under construction in the total wealth of the assessee company. The first appellate authority, relying upon the decision of the Tribunal in Nutan Electricals Industries Pvt. Ltd. v. CIT [1991] 36 ITD 448 (Mad) and appreciating the provisions of section 40 of the Finance Act, 1983, allowed the claim of the assessee for the year under consideration. Upon the matter being carried to the Tribunal by the revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uccessfully reduce their wealth-tax liability to a substantial extent. With a view to circumventing tax avoidance by such persons, I propose to revive the levy of wealth-tax in a limited way in the case of closely held companies. Accordingly, I am proposing the levy of wealth-tax in the case of closely held companies at the rate of two per cent on the net wealth represented by the value of specified assets, such as, jewellery, gold, bullion, buildings and lands owned by such companies. Buildings used by the company as factory, godown, warehouse, hotel or office for the purposes of its business or as residential accommodation for its low paid employees will be excluded from net wealth." 6. The relevant part of the section as it appeared in the Finance Act, 1983 is as follows: "S. 40 Revival of levy of wealth-tax in the case of closely-held companies.- (1) ... (3) The assets referred to in sub-section (2) shall be the following, namely: (v) land other than agricultural land, (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 residentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as investment or stock-in-trade, guidelines by way of general or specific order will be issued by the Board.... (v) ..... ..... This amendment will take effect from 1st April, 1989 and will accordingly, apply in relation to the assessement year 1989-90 and subsequent years." 9. During the course of hearing of this reference, in absence of any representation from the assessee-respondent, we requested senior advocate Mr. S.N. Soparkar to assist the Court. He submitted that, though the amendment by way of Finance Act, 1988 was effected in the year 1988 and by the Central Board Direct Taxes Circular No.528 dated December 16, 1988 ([1989] 176 ITR (St.) 154), it was clarified that the proposed amendment to sub-section (3) would take effect from April 1, 1989 and apply in relation to the assessment year 1989-90 and subsequent years and will not have retrospective effect, the rule of reasonable interpretation required that the provisions inserted to remedy the unintended consequences or the proviso which supplied an obvious omission were read into the section; and such amendments were required to be treated as retrospective in operation. Relying upon the judgment of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not fall in the exception clause and it was incongruous and improper for the CIT (A) to hold that the land in question was not "vacant land" inasmuch as the factory building was under construction and, since the building was under construction, item (vi) was also not attracted inasmuch as incomplete building cannot be treated as a building at all. 12. The issues referred for our opinion are as to whether the value of the factory building and the research building under construction and not in actual use for business were liable to tax and whether by allowing the claim of the assessee, the appellate Tribunal had caused violation to the plain and simple language used in section 40 (3) (vi). Both the issues clearly referred to and were exclusively related with the provisions and language of clause (vi) of sub-section (3) of section 40. Therefore, the application and amendment of clause (v) are irrelevant. It requires no argument to hold that building cannot exist without land and value of the land is always included when building is to be assessed as an asset. The factory or the research building under construction, in the facts of the present case, was admittedly not used by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually used by the assessee for any of the specified purposes. Therefore, a building under construction can never fall under the exception clause. In that view of the matter, the view taken by the Tribunal on the basis that the buildings were "meant" for productive use was clearly erroneous and based upon irrelevant consideration of the purpose to which the building was slated to be put. If similar view was taken by the Tribunal in other matters on identical facts, it would not make the erroneous view on irrelevant consideration, correct, legal or binding. The assessing officer or the adjudicating authorities do not have the power, and there was no requirement in the context, to read or add adjectives like "vacant" before the word "land" and/or "fully built up" before the word "building". And, taking a reasonable view in light of the legislative intention of taxing unproductive assets in closely-held companies, such imaginative qualification of the plain words like "land" and "building" would defeat the purpose of levying wealth-tax on such assets. 14. Accordingly, we decide the reference in favour of the revenue with the opinion that the appellate Tribunal was in error in d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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