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2016 (5) TMI 841

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..... S. Muralidhar, J.: 1. These appeals by the Revenue are directed against a common judgment dated 29th September 2003 passed by the Income Tax Appellate Tribunal ( ITAT ) in WTA Nos. 180, 181, 431 and 691/Del/96 for the Assessment Years ( AYs ) 1989-90, 1990-91, 1991-92 and 1985-86, as well as WTA No. 286/Del/98 for AY 1992-93. 2. At the outset, it must be noticed that the impugned common judgment was also passed by the ITAT in WTA No. 1/Del/98 for AY 1992-93 in the appeal filed by the Revenue against another Assessee M/s Pawan Builders (P) Ltd., having its address at 7, Zamrudpur Community Centre, Kailash Colony, New Delhi. However, no appeal appears to have been filed by the Revenue as far as the decision of the ITAT in WTA No. 1 of 1998 is concerned. Background facts 3. The Respondent Assessee M/s Mohan Exports (I) Ltd. is stated to be the owner of the land and building at 8 and 9, Zamrudpur Community Centre, Kailash Colony, New Delhi. During the assessment proceedings, the Assessing Officer ( AO ) noted that the Assessee had not disclosed the value of the property in its total taxable wealth. In response to a query raised by the AO in that regard, the Assessee .....

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..... ncerned, the AO passed the assessment order on 31st March 1989 holding that notwithstanding that the property had not been formally registered in its name, the Assessee was the real owner of the property. It was held that the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan v. CWT (1986) 162 ITR 888 was not applicable in the facts of the case. It was further held that the building in any case was covered by Section 40 (3) (vi) of the Finance Act 1983 and the Assessee was its real owner. 8. As far as AY 1990-91 is concerned, the AO passed an order on 17th March 1993 again determining the value of property as per Schedule III of WTA at ₹ 4,19,45,260. 9. The Assessee's appeals for both AYs 1989-90 and 1990-91 were disposed of by the CIT(A) by a common order dated 30th November 1995. The CIT (A) accepted the case of the Assessee that notwithstanding the amendment to the expression 'net wealth' by insertion of Explanation 1 below Section 2 (m) of the WT Act, under Section 40 (3) of the Finance Act 1983 all the wealth of the company has not been charged to tax but only certain specified assets have been charged to tax. Following the decision of th .....

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..... was governed by Section 40 of the Finance Act 1983 as it stood prior to the amendment to Section 2 (m) of the WT Act with effect from 1st April 1988. The position as regards AYs 1986-87 and 1987-88 was no different. The decisions of the CIT (A) for the subsequent AYs 1986-87 and 1987-88 in favour of the Assessee was accepted by the Revenue. Therefore, it was submitted that on the principle of consistency the Revenue's appeal AY 1985-86 should not be entertained. 14. As noted hereinbefore the position as regards the inclusion of the building for the purposes of computation of wealth tax underwent a change with effect from 1st April 1988, on account of the insertion of Explanation 1 below Section 2 (m) of the WT Act. Therefore the assessments for the AYs prior to AY 1988-89 had to merit the same treatment on the principle of consistency as far as the Revenue was concerned. As already noticed, the decision of the CIT (A) for AYs 1986-87 and 1987-88, subsequent to AY 1985-86, has been accepted by the Revenue. In fact, even for AY 1988-89, the decision of the ITAT holding that the value of neither the land nor the building can be included in the net wealth of the Assessee, notwit .....

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..... tness of the above factual finding. Nearly twelve years later, the Court does not propose to review the aforementioned order to examine any other question that may have arisen. The fact remains that the Revenue has accepted the above finding of fact for AY 1992-93 that the building in question was used for the purposes of office. If the building was being used for office purpose, the land appurtenant thereto was also being used for the same purpose. Therefore the value of neither the land nor the building could, in terms of Section 40 (3) (vi) of the Finance Act, 1983, be included in the Assessee's net wealth. 20. As far as AY 1992-93 is concerned the above question framed in WTA 7 of 2004 is answered in the affirmative, i.e., in favour of the Assessee and against the Revenue. WTA No. 7 of 2004 for AY 1992-93 is also dismissed. WTAs 9, 10 and 11 of 2004 21. In order to appreciate the issue that arises in WTA Nos. 9, 10 and 11 of 2004 for AYs 1990-91, 1991-92 and 1989-90 respectively, it is necessary to refer to the legislative history of the relevant provisions. 22. Initially under Section 13 of the Finance Act 1960, it was mandated that notwithstanding an .....

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..... , platinum or any other precious metal or any alloy containing one or more of such precious metals[not being any such precious metal or alloy held for use as raw material in industrial production]; (ii) precious or semi-precious stones whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel; (iii) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (iv) utensils made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals; (v) land other than agricultural land [Provided that nothing in this clause shall apply to any unused land held by the Assessee for industrial purposes for a period of two years from the date of its acquisition by him;] (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 residential accommoda .....

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..... open market on the valuation date. (5) For the purposes of the levy of wealth-tax under the Wealth-tax Act, in but sequence of the provisions of this section,- (a) section 5, clause (a) of sub-section (2) of section 7 and clause (d) of section 45 of that Act and Part II of Schedule I to that Ad shall not apply and shall have no effect, (b) the remaining provisions of that Act shall be construed so as to be in conformity with the provisions of this section. (6) Nothing in this section shall apply to any institution, association or body, whether incorporated or not and whether Indian or non- Indian, which the Central Government may, having regard to the nature and object of such institution, association or body, specify by notification in the Official Gazette and every notification issued under this sub-section shall be laid, as soon as may be alter it is issued, before each House of Parliament. (7) Subject to the provisions of sub-section (5), this section shall be construed as one with the Wealth-tax Act. 23. Specific to the issue at hand is the definition of assets for the purposes of Section 40(2) of the Finance Act, 1983 as amended by the Finance A .....

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..... red under any agreement or arrangement , not limited to an actual deed of conveyance. 27. The ITAT has relied upon the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan (supra) in answering the question in favour of the Assessee. The facts of that case were that the Assessee was the Nizam of Hyderabad and the question arose whether immovable property in respect of which the Assessee had received the full sale consideration but had not executed any registered sale deed in favour of the vendee could be included in the Assessee's net wealth. The Wealth Tax Officer (WTO) had held that the Assessee still owned those properties and therefore the value thereof had to be included in his net wealth. The Supreme Court agreed with the High Court that in the eyes of law the purchasers cannot be and are not treated as legal owners of the property in question . It was pointed out that the expression belonging to' in Section 2(m) of the WT Act indicates something over which a person has dominion and lawful dominion should be the person assessable to wealth tax for this purpose . It was further observed that even in some cases the phrase 'belonging to' is capa .....

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..... operty without any let or hindrance on the part of the so-called vendor which, indeed, under law it was not entitled to do, as we shall presently show, shall be immune from the taxing provision in Section 22 of the Act? The answer in our view is clearly in the negative. The reason is simple. The consideration money has been paid in full. The Assessee has been put in exclusive and absolute possession of the property. It has been empowered to deal with the income as it likes. It has been empowered to dispose of and even to alienate the property . 28.2 The Supreme Court in Poddar Cement Ltd. (supra) gave the following example: The matter can be considered from another angle. Under the Income Tax Act, the assessing authority has power to assess the income in the hands of the real owner. If 'A' purchases the property in the name of 'X', simply because the property is registered in the name of 'X', 'A' cannot escape his liability. Secondly, there can be a partnership where the partners have contributed the property and the property has become the partner-ship property, then no registration is required, the income in such a case has to be asses .....

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..... on 'belonging to'. This expression, which appears to be consistently used in the statutes governing wealth tax, in their application to companies, has been interpreted, in the decisions discussed hereafter, to have a much wider scope than 'ownership' as is generally understood. 30.1 The Court now turns to the decision of the Full Bench of the Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan v. Commissioner of Wealth Tax [1997] 226 ITR 654. The Full Bench considered the decision in Nawab Sir Mir Osman Ali Khan (supra) and pointed out that the Supreme Court had, in rendering the said decision not considered the scope of Section 4 of the WT Act. The Full Bench observed: It is worth noticing here that the provisions of section 4 of the Act were not brought to the notice of the Supreme Court and were not considered in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (SC). There was, however, no occasion for consideration of those provisions in the other cases referred to above. For the purpose of construing the expression belonging to in section 2(m) of the Act and in view of the judgment of the Supreme Court in Nawab Sir Mir Osman Ali Khan s case [ .....

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..... ddar Cement (supra) and the decision of the Full Bench of the Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan (supra) held: 11.....The Assessee, in the present case, was allotted the land by the State Government. It constructed shops thereupon and rented out the same and derived income therefrom. The sheds were therefore under the domain and control of the Assessee. Even if legal ownership had not passed to the Assessee the property in question belonged to it. The Assessee was deriving rental income and collecting the same which itself shows that it was the Assessee to whom the property belonged. 12. We are therefore of the considered view that the assets in question should be deemed to belong to the Assessee and these assets are liable to be included in the assets by the Assessee. 32. In the considered view of the Court, the view taken by the Full Bench of the Andhra Pradesh High Court, as followed by the Himachal Pradesh High Court, merits acceptance. 33. Learned counsel for the Assessee sought to rely on a decision of the Special Bench of the ITAT in Pallonji Shapoorji Co. (P) Ltd. v. Dy. CWT (2006) 102 ITD 101(SB). What appears to have weighed with t .....

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