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TMI Blog2005 (8) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... ey with the object of utilizing it for the welfare activities of the employees and partly as guest house to the visiting officials. According to the assessee, the premises did not belong to it and thus falls outside the purview of definition of 'asset', under section 2(ea) of the Act. It may be relevant to mention here that wealth-tax was not leviable on the assets held by the company but for the introduction of section 40 of Finance Act, 1983. The said section was omitted by the Finance Act, 1992 with effect from 1-4-1993 but the levy of tax on the companies continued by making suitable amendments in the Wealth-tax Act, whereby company was made an assessable entity. Section 3, section 2(m) and section 2(ea) make it clear that assets belonging to a company are assessable to wealth-tax subject to certain exceptions. Certain assets are treated as productive assets on which no tax is leviable. We are now concerned with section 2(ea) of the Act. Admittedly, the vacant land as well as the land occupied by buildings was not used by the company for specific purposes mentioned in section 2(ea). In other words, the impugned assets do not fall in any of the exceptions provided in clauses 1 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in view of the restrictions contained in Explanation (b) to section 2(ea) of the Act. 7. Learned CIT(A) further observed that the 'Asbestos Centre' has been formed by the employees of the assessee-company as a purely recreational and welfare centre for the employees, their family members and touring officials and thus it was for the benefit of the company to promote belongingness, and mutual welfare of employees. Therefore, it would be prudent to view the asset as a "productive asset". She further observed that irrevocable power of attorney was executed in 1975 and the property cannot vest back under any circumstance. Therefore, having regard to the ground realities and having regard to the meaning assigned to the term 'owner' under Income-tax Act, since Asbestos Centre is receiving income from the impugned property in its own right, transfer of title per se falls into insignificance and for all practical purposes the Asbestos Centre has to be treated as owner. Accordingly, the addition made by the Assessing Officer was deleted. 8. Aggrieved, revenue is in appeal before the Tribunal. Learned DR vehemently contended that the assessee-company is the owner of vacant land and ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "owner" but used the expression "belonging to". The property in question legally, however, cannot be said to belong to the vendee. The vendee is in rightful possession only against the vendor. Speaking for myself, I have deliberated long on the question whether in interpreting the expression 'belonging to' in the Act, we should not import the maxim that 'equity looks upon a thing as done which ought to have been done' and though the conveyance had not been executed in favour of the vendee, and the legal title vested with the vendor, the property should be treated as belonging to the vendee and not to the assessee. I had occasion to discuss thoroughly this aspect of the matter with my learned brother and since in view of the position that legal title still vests with the assessee and the authorities, we have noted, are preponderantly in favour of the view that the property should be treated as belonging to the assessee in such circumstances, I shall not permit my doubts to prevail upon me to take the view that the property belongs to the vendee and not to the assessee. I am conscious that it will work some amount of injustice in such a situation because the assessees would be made l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot reached the state of application of section 10(3) of ULC Act. In fact, the assessee preferred an appeal under section 33 of the ULC Act before the concerned officer who, by his order dated 4-2-2004, was pleased to remand the issue to the file of the competent authority. 11. With regard to the contention of the assessee that it is a 'productive asset', learned DR adverted our attention to pages 102, 134 of assessee's paper book to highlight that only about 11,000 sq. mtrs., was used by recreation centre and balance land continued to be vacant. Referring to the decision of the Hon'ble AP High Court in the case of CIT v. Zaibunnisa Begum [1985] 151 ITR 320 at 331, learned DR submitted that the vacant land is in excess of the appurtenant land which can be kept vacant and, thus, the Assessing Officer was justified in bringing to tax, value of the impugned property, under the Wealth-tax Act. 12. On the other hand the learned counsel Mr. Ravi submitted that the contention of the learned DR Mr. B.G. Reddy is factually incorrect. Referring to pages 124 to 148 of assessee's paper book, learned counsel submitted that land admeasuring 11,000 sq. mtrs., cannot be used and thus the useful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point to be addressed is with regard to the rights transferred by the assessee-company to Asbestos Centre and the impact of such right with regard to the assessability of the said assets in the hands of the assessee. The case of the assessee rests upon the irrevocable power of attorney dated 28-10-1975 and copy of the Board's resolution dated 26-7-1975 whereby the Asbestos Centre was allowed to hold and occupy and also to utilize the impugned property of the company for the purpose of carrying on welfare activities for the employees of the company. No doubt the expenditure on modifications, repairs, etc., has to be incurred by the Asbestos Centre but Clause-5 in the irrevocable power of attorney specifies that the assessee-company has to pay municipal taxes and levies applicable in respect of the said properties or any portion thereof. Hyderabad Asbestos has also undertaken to pay to the respective lessors of the premises described in Parts B and C of the schedule, monthly or yearly rent as per the lease agreements. The rights transferred to Asbestos Centre are limited to enjoyment of the property in various ways but there is no right to dispose of or transmit the property to othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted in para 9 our judgment. 18. Similarly, learned CIT(A) observed that the impugned property was determined as excess land under the ULC Act. With great respect it may be noticed that the provisions of section 10(3) and other provisions under the ULC Act were not considered by the learned CIT(A) in the correct perspective. The facts as brought to our notice clearly and categorically indicate that Asbestos Centre has never acted as the owner of the impugned property. On the contrary the proceedings of the Special Officer and competent authority, ULC, Hyderabad were against the assessee-company and such proceedings did not reach the stage of publication of the notification [which is mandatory under section 10(3) of the Act] and thus such land cannot be deemed to have vested absolutely with the State Government. In other words, till the date of publication of notification under section 10(3) of ULC Act, the property does not vest with the Government and the impugned property continue to belong to the assessed. It may also be noticed that the assessee preferred an appeal against the final orders passed by the Special Officer and competent authority and the said appeal, filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In other words before making an application to a concerned authority for permission to construct a building, it cannot be concluded that construction would not be permitted on such land. In the instant case, either under the ULC Act or under the MCH Act, there is no specific order denying the assessee to construct a building on the land. Therefore, it cannot be said to be a case falling under the exceptions provided in Explanation (b) to section 2(ea) of the Act. 19. Another argument raised by the learned counsel is based upon the intention of the Legislature. According to the learned counsel, the object of bringing to tax an urban vacant land is to ensure that such a land is put to productive use and not kept idle. Since welfare of the employees has to be taken care of by the assessee-company, for smooth running of the industry, land given to the Asbestos Centre can be said to have been put to productive use. This argument of the learned counsel do not commend acceptance, on a plain reading of section 2(ea) of the Act. In consonance with the object of exempting from tax any vacant land, which is put to productive use, the Legislature, in its wisdom, listed out exhaustively va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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