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TMI Blog2006 (9) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... with a six storeyed building on a built-up area of 469 sq.m. There is also another old building of 818 sq.m. at the back. Of the total area of 26.65 grounds, an extent of 10.52 grounds had been taken as land appurtenant to the main building and the balance of 16.3 grounds was treated as vacant land. The building is partly used by the assessee-company for its own business and partly let out to various tenants. The Wealth-tax Officer excluded a part of the main building occupied by the assessee for its own business and assessed the rest of the property to wealth-tax. He also rejected the claim of the assessee that the entire building must be exempted as a building used in the business of the assessee. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) upheld the view taken by the Assessing Officer, but granted certain relief which are as follows: (a) Liabilities to be allowed in computing the net wealth. (b) A reduction of 15 per cent. in the value of the property due to restricted marketability. (c) Exclusion of the portion of the land appurtenant to the building which was used in the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larger Bench, which reads as follows: "2. We are of the view, the decision requires reconsideration as the facts of the instant case show that the main business of the assessee was letting out its premises, and in the course of its business, the assessee has let out a portion of the building. We are of the view, there are no acceptable reasons why the assessee should be denied the benefit only because it let out a portion of the building for business purpose. In our view, the classification of income under the Income-tax Act under various heads is not of much relevance while considering the question under the Wealth-tax Act, whether a portion of the building let out by the assessee is its business asset or not. We are of the view, the question has to be decided with reference to the provisions of the Wealth-tax Act. Further, the Supreme Court has taken the view that the assessee should not be denied the benefit of investment allowance when the assessee has let out its machinery in the course of its business. We are therefore of the view that the decision relied upon by learned counsel for the Revenue (judgment in T.C. Nos. 207 and 208 of 1999 dated September 22, 2004-CWT v. Fagun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Minister in Parliament is relevant. However, it was stated that the purpose of introducing the provision is to levy wealth-tax only on unproductive assets held by closely-held companies. In the present case, the assets are commercial assets and hence no wealth-tax is leviable. Heard both counsel. It is useful to know the background of the introduction of section 40 of the Finance Act of 1983. Earlier, wealth-tax was leviable on companies under section 3 of the Wealth-tax Act. Section 13 of the Finance Act, 1960 provided that wealth-tax is not leviable on a company with effect from April 1, 1960. Later, by the Finance Act, 1983, the exemption granted to companies from the levy of the wealth-tax was partially withdrawn in respect of certain categories of companies and certain categories of assets. Section 40 provides for the charge of wealth-tax from the assessment year 1984-85 onwards in respect of the net wealth of closely-held companies. The wealth-tax is levied at the rate of 2 per cent, on the net wealth of the assessee. Later, Parliament deleted the said provision of section 40 of the Finance Act with effect from April 1, 1993. The said amendment was introduced by the Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e net wealth of a company shall be the amount by which the aggregate value of all the assets referred to in sub-section (3), wherever located, belonging to the company on the valuation date is in excess of the aggregate value of all the debts owed by the company on the valuation date which are secured on, or which have been incurred in relation to, the said assets: Provided that where any debt secured on any asset belonging to the assessee is incurred for, or enures to, the benefit of any other person, or is not represented by any asset belonging to the assessee, the value of such debt shall not be taken into account in computing the net wealth of the assessee. (3) The assets referred to in sub-section (2) shall be the following, namely:- (i) gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals; (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-pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned with section 40(3)(vi) of the Finance Act. The said clause was later amended with effect from April 1, 1989, which reads as under: "Building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godown, warehouse, cinema house, hotel or office for the purposes of its business or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch room mainly used for the welfare of its employees or used as residential accommodation, except as provided in clauses (via) and (vib), and the land appurtenant to such building or part .... Provided that this section shall not apply to any asset referred to in clause (i), (ii), (iii), (iv), (v) or (vi), which is held by the assessee as stock-in-trade in a business carried on by it or, in the case of motorcars referred to in clause (vii), they are held as stock-in-trade in such business or registered as taxies and used as such in a business of running motor-cars on hire carried on by the assessee." The abovementioned amendment came into effect from April 1, 1989, and therefore we are not dealing with the same. No argument has also been advanced by learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision. These specified assets alone are excluded from taxation. The assets other than the specified assets in the exclusionary clause, are not entitled for exemption. The assessee, in this case, let out a portion of the building to various tenants. The let out portions are not coming under any of the specified assets mentioned earlier. The business of the assessee is leasing out the assets and hence the assets are commercial one. Even though the assets used are commercial assets, still the assessee is not entitled to exemption unless the assets come within the specified assets mentioned in the said clause (vi) of sub-section (3) of section 40 of the Finance Act. It is noted that Parliament has clearly specified the assets which are excluded under the said clause. All the commercial assets are not exempt from the purview of the Wealth-tax Act. If the intention is to exclude all the commercial assets, the wording in the provision would be different. Parliament need not enumerate various assets for exclusion. If they want to exclude commercial assets from the purview of the Wealth-tax Act, the section would be that all commercial assets used for the purpose of the business are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, which the statute was intended to remedy or of the circumstances that led to the passing of the statute may be looked into for the purposes of ascertaining the object which the Legislature had in view in using the words in question. A statutory provision must be construed, if possible, to see that absurdity and mischief should be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the court may modify the language used by the Legislature or even do some violence to it, so as to achieve the obvious intention of the Legislature and produce a rational construction. The court can rely on the speech made by the mover of the Bill explaining the reason for its introduction for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. When the statute is plain, clear, unambiguous and specific, the argument of the counsel for the assessee, to resort to any interpretative process to unfold the legislative intent, becomes impermissible. The need for relying on external aids ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems mentioned in section 40(3)(vi) of the Finance Act. There fore, it was held that the assessee was liable to be taxed on the value of the commercial complex under section 40(3). Merely because the assets are commercial assets, it does not mean that the assets are exempt from wealth-tax. The view expressed by the above judgment is in accordance with law and we fully agree with the said judgment. It is also held in the said judgment as follows: "The next question that arises is whether the assessee is entitled to the exemption in view of the exclusionary clause found in section 40(3)(vi) of the Finance Act, 1983. Section 40(3)(vi) while including the building and the land appurtenant thereto for levy of wealth-tax, excludes certain items of assets listed in the sub-section. In other words, certain specific items of assets are excluded from the scope of levy of wealth-tax and the assets so excluded are factory, godown, warehouse, hotel or office used for the purposes of its business. The commercial complex owned by the assessee is not one of the excluded items mentioned in clause (vi) of sub-section (3) of section 40 of the Finance Act. The latter part of the same clause only deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the net wealth of the assessee are: (a) It is a commercial asset. (b) The assessee was given the benefit of depreciation. (c) Income received by the assessee by letting out of the commercial asset had been treated as income from business. The above reasons are not at all relevant for wealth-tax purposes. The computation under the income-tax and the wealth-tax are different. Under the Income-tax Act, there are five heads of income and the income has to be computed on the basis of the heads of income. While computing the income, there are various exemptions and deductions provided under the Income-tax Act, and also for the purpose of claiming deduction or exemption, there are various conditions stipulated and the Assessing Officer has to consider the provision of the Act and allow deduction. As far as the wealth-tax is concerned, what are all the assets chargeable under the Wealth-tax Act, will be taken into consideration and if any asset is exempt as per the provisions, the same is exempted. The income-tax computation has no basis in computing the wealth of the assessee. In our opinion, the criteria mentioned in the Bombay High Court judgment is not at all relevant for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated under the provision and only the assets that are excluded under the exclusionary clause alone will be entitled to the exemption. If the leasing company let out factory, building or warehouse as stated in the exclusionary clause, the assessee is certainly entitled to the relief. All the leased assets are not entitled to exemption unless the same come under any of the specified assets, for example, if the assessee lets out the specified assets like factory, godown or warehouse in the leasing business, certainly it will come within the exclusionary clause. It is useful to refer to the Madras High Court judgment in the case of CWT v. Indian Warehousing Industries Ltd. reported in [2004] 269 ITR 203, which held as follows: "The Supreme Court in the said case had observed that a leasing company which owns machinery and leases such machinery to third parties for manufacture of articles is entitled to investment allowance of such machinery under section 32A of the Income-tax Act. Even though at the first glance such decision appears to support the contention of the assessee, but on deeper scrutiny, we are of the view that the ratio of the said decision is not applicable to the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance, equal to twenty-five per cent, of the actual cost of the ship, aircraft, machinery or plant to the assessee:" In the Finance Act, the relevant provision in section 40(3), reads as follows: "(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 accommodation for its employees or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest room or lunch room mainly for the welfare of its employees and the land appurtenant to such building or part: Provided that each such employee is an employee whose income (exclusive of the value of all benefits or amenities not provided for by way of monetary payment) chargeable under the head 'Salaries' under the Income-tax Act, does not exceed eighteen thousand rupees;" In both the provisions, one of the conditions to be satisfied by the assessee ..... 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