TMI Blog1993 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... lth under sub-section (3) of section 40 of the Finance Act, 1983, which levies wealth-tax in respect of specified assets of closely held companies as the rental income from the leasehold properties had been assessed to income-tax under the head "Other sources". Therefore, the leasehold properties could not constitute business assets for the purpose of exclusion in terms of section 40(3)(vi) of the Finance Act, 1983. On appeal, the Commissioner of Wealth-tax (Appeals) in an ex parte order confirmed the decision of the Wealth-tax Officer. In second appeal before the Tribunal the assessee contended that the asset must be regarded as one of the business assets of the assessee because in the appeal against the income-tax assessment for the assessment year 1983-84, the Commissioner of Income-tax (Appeals) had found the rental income from the leasehold properties by reason of its sub-letting to be assessable under the head "Profits and gains of business ". Reliance was placed by the assessee on the decision of the Tribunal in the case of Varadaraja Theatres (P.) Ltd. v. WTO [1989] 29 ITD 29 (Mad). The Tribunal found that it was a matter of record that the assessee was earlier running a ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Supreme Court in CIT v. Vikram Cotton Mills Ltd. [1988] 169 ITR 597. It was submitted that it could not have been the intention of the Legislature to bring within the tax net commercial or business assets even if held by a closely held company. Intrinsic evidence of this intention is available in clause (vi) of section 40 itself. The object of section 40 was only to curb the device adopted by persons to hold their unproductive assets through the medium of closely held companies for reduction of their tax liability. A commercial asset or a business asset even if held by a closely held company would obviously not fall within the said clause. The said commercial asset of the assessee in the facts and circumstances of this case cannot be said to be an unproductive asset held through the medium of the assessee for tax avoidance. The assessee had taken the lease for its jute press. Subsequently, the assessee did not require the entire premises for its use. It sub-leased a portion of it and thus continued its commercial exploitation in a different manner. Further, in terms of clause (vi), a building or part thereof used by the assessee as factory, godown, warehouse, hotel or offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house, etc. Therefore, the admitted position in this case is that the leasehold building which had been used beforehand wholly for business, however, came to be used partly for business purposes as referred to in clause (vi). It is further admitted on both hands that there has been cessation of use in a part of the leasehold property and it has been sublet to a third party. Even if the third party used it for the specified business purposes that makes no dent in the Revenue's case because the exclusionary part of clause (vi) requires the use of the property for the said purposes of business by the assessee and in this case the part of the property questioned is not used by the assessee. The Revenue's case is that the way the case has been sought to be made out in favour of the assessee for exclusion of the tenanted part of the property from the charge of tax amounts to reading into something more to the provision than could be read in a straight manner and on plain meaning of the language of clause (vi). There is nothing involved in the language which is quite plain and simple. If one reads that the expression "used by the assessee" would also mean "used by the sub-tenant of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty has fallen surplus in part incidentally but, on that score, it cannot be said to have been transmuted into an unproductive asset in the hands of the company. The moment such a contingency takes place, a literal construction as urged by the Revenue would be unduly rigid. May be, the present non-user is just a passing phase. If it is a passing phase, it cannot be said that part of the property has become unproductive or surplus to the business. Its surplus status, if for a temporary spell, shall not undermine its character as a productive commercial asset. As a matter of fact, even where a lull falls upon a business, the business cannot be said to be non-existent. The letting out or leasing out of the commercial asset during such period of lull is accepted judicially as another mode of commercial exploitation of the assets. This view has been taken in CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC). We are not furnished with the complete facts creating the situation for the part of the leasehold property becoming surplus. We are not told what the tenure of the lease is ; if it is a lease for a short period, we can safely draw the inference that subletting cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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