2007 (10) TMI 250 - HC - Wealth-tax

Wealth-tax - annual letting value - assessee had given premises on licence and the licensee is giving the premises on sub licence to Reliance for higher consideration held that rent/licence fee paid by Reliance (sub-licensee) or by the ultimate sub lessee to the Licensor or lessee is immaterial annual value will be calculated on basis of amount received or receivable by the owner - no infirmity or error in the findings recorded by the Tribunal

Summary

Issues:
1. Interpretation of rent and deposits received by an intermediary tenant for the computation of net wealth under the Wealth Tax Act, 1957.

Analysis:
1. The case involved a dispute regarding the computation of net wealth for the assessment year 1998-99. The Assessing Officer determined that the amount receivable by the Assessee Company was the sum paid by the sub-licensee, M/s. Reliance Industries Ltd., to the Licensee. The Commissioner of Wealth Tax (Appeals) allowed the appeal, stating that the rent paid by the ultimate user and the deposit cannot be considered for working out the annual rent. The ITAT, following a previous decision in favor of the assesses, ruled in favor of the assessee and against the revenue.

2. The High Court considered a similar case under the Income Tax Act and concluded that the annual value received by the owner is crucial, irrespective of any higher consideration received by the licensee or lessee on sub-letting the premises. The court noted that the provisions of the Income Tax Act and the Wealth Tax Act are similar, making the question raised in this case irrelevant.

3. Section 3(2) of the Wealth Tax Act charges wealth tax based on the net wealth of the assessee. "Net wealth" is defined as the excess of the aggregate value of assets over the aggregate value of debts. The court emphasized that for the purpose of wealth tax, only the rent received or receivable by the owner is relevant, regardless of any higher consideration received by the licensee or lessee.

4. The court analyzed the provisions of the Wealth Tax Act and highlighted that the amount received or receivable by the owner is the key factor for determining annual value and deposits. The court dismissed the appeal, stating that the question of law raised lacked merit, and affirmed the findings of the Tribunal.

In conclusion, the High Court upheld the decision in favor of the assessee, emphasizing that for wealth tax purposes, the crucial factor is the amount received or receivable by the owner, irrespective of any intermediary transactions or higher considerations received by sub-licensees.