1993 (2) TMI 45 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the property in question should be excluded from wealth-tax u/s 40(3)(vi) of the Finance Act, 1983.
2. Whether the Tribunal's finding that the asset in question was a business asset is unreasonable or perverse.

Summary:

Issue 1: Exclusion from Wealth-tax u/s 40(3)(vi) of the Finance Act, 1983
The Tribunal held that the property in question should be excluded from wealth-tax under section 40(3)(vi) of the Finance Act, 1983. The assessee, a private limited company, had taken a leasehold property for its business, which was partially sub-leased when it became surplus. The rental income from the sub-leased property was assessed as business income by the Commissioner of Income-tax (Appeals). The Tribunal concluded that the assets were business assets since the rental income was taxed as profits and gains of business. The Tribunal disapproved of the Commissioner of Wealth-tax (Appeals) taking an inconsistent view and held that the property should be excluded from wealth-tax.

Issue 2: Tribunal's Finding on Business Asset
The Tribunal's finding that the asset was a business asset was challenged as unreasonable or perverse. The Tribunal noted that the property was initially used for business purposes and later sub-leased when it became surplus. The income from sub-letting was assessed as business income, indicating that the asset was considered a commercial asset. The Tribunal emphasized that the Revenue cannot take inconsistent views for income-tax and wealth-tax purposes.

Additional Observations:
The court noted that the legislative intent behind section 40 was to curb tax avoidance through closely held companies holding unproductive assets. The court emphasized that a commercial asset, even if temporarily surplus, should not be considered unproductive. The court referred to judicial precedents supporting the view that leasing out commercial assets during a business lull is a mode of commercial exploitation.

Remand for Further Examination:
The court found the statement of the case insufficient and remanded the matter to the Tribunal for further factual examination, including the terms of the lease and the intention of the assessee to resume business use of the property. The Tribunal was directed to decide the issue more comprehensively, allowing parties to adduce further evidence if necessary.

Conclusion:
The court declined to answer the questions and remanded the matter to the Tribunal for a more detailed examination of the factual aspects. There was no order as to costs.