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TMI Blog1997 (5) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted by this Tribunal in its IT appeals. The matter, we were informed, now rests before the Hon'ble Patna High Court by way of reference under section 27 of the Wealth-tax Act, 1957. The assessee-company did not file any returns under wealth-tax for all the three years under appeal because according to the assessee it had no taxable wealth. The Assessing Officer was of the opinion that the assessee-company was liable to wealth-tax as per the provisions of section 40(3)(vi) of the Finance Act, 1983 and, therefore, issued notices for all the three years under section 17 of the Wealth-tax Act in compliance whereto returns were filed by the assessee-company declaring the value of car as its net wealth. The details of wealth declared by the assessee for each of the three years are as under:-- -------------------------------------------------------------------------- 1984-85 Rs. 61,600 1985-86 Rs. 44,344 1986-87 Rs. 39,500. -------------------------------------------------------------------------- 3. The assessee did not declare the value of let ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hotel or office for the purpose of its business... (remaining portion not relevant for our purpose) shall not be regarded as assets for the purpose of assessability to wealth-tax. 6. Admittedly the godowns in this case are not being used by the assessee for the purposes of its own business, but have been let out and used by lessees for the purpose of carrying on their businesses. The assessee-company is only earning income by way of hire charges/lease rent and this, perhaps, is one of the objects of the assessee-company as per its Memorandum of Association. The decision and direction of this Tribunal in the IT appeals in this assessee's case to assess the rental income from godowns as business income and not as income from house property does not mean that those godowns, are used by the assessee for its own business. The Tribunal's said decision conveys that it was the business of the assessee-company to construct godowns and let it out and if income results from such letting then it cannot be assessed as income from house property. The pertinent words employed by the Legislature require emphasis, namely, "used by the assessee as godowns for the purposes of its business" and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive assets in the hands of closely held companies, yet it does not render any sure and safe guide or assistance to us for interpreting the effect of the words "used by the assessee for its business" in favour of the assessees. In the same manner the Budget speech of the Finance Minister in para 67 also cannot help or guide us to interpret the abovementioned words employed in section 40(3)(vi) in favour of the assessee-company. The word used therein are very plain and simple and admit of no ambiguity or capability of two or more than two interpretations as argued by the assessee's counsel Shri Singh. 8. For the sake of clarity and amplification we give an illustration. Take the case of an assessee-company which carries on business in food grains which are stored in its own godown constructed for that purpose. The value of such godowns, in our view will not be regarded as assets for the purpose of section 40(3)(vi) of Finance Act, 1983 as the godowns are used by the assessee for its own business the business being purchase and sale of food grains and not as a means of earning income by letting out the godown as we find in the instant case. Take the case of a manufacturer who manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax on closely held companies was revived by section 40 of the Finance Act, 1983 in respect of Assessment year 1984-85 onwards. It was intended, as we will presently see, to limit the levy of wealth-tax to non-productive assets. Assets were listed out in sub-section (3) accordingly. We are concerned with clause (vi) thereto, which had already been reproduced in para 4 of my Ld. Brother's order. A building or land appurtenant thereto was listed as an asset but an exception was provided if the building or part thereof was "used by the assessee as .... godown .... for the purpose of its business". The dispute before us is whether the godowns in question, belonging to the assessee, satisfied this condition. 4. One possible view is that in order to satisfy the condition, the godown should be used as a godown in the assessee's business. This is the view favoured by my Ld. Brother. An illustration of such use, given by him, is the case of an assessee-company which carries on business in food grains which are stored in its godown constructed for that purpose. However, in case of the assessee the condition is not satisfied, since the godown this did not store the assessee's goods, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the property was constructed according to the specification of the prospective tenant. The assessee was obliged under the terms of tenancy agreement to keep the godowns as well as the approach road fit for the purposes for which it was let out. This had to be done at all times during the currency of the tenancy to the satisfaction of the tenant failing which the assessee ran the risk of paying damages. It was in these circumstances that it was held that the income from the godowns should be assessable under the head 'Business'. 7. Having noticed the factual background, the background in which section 40 of the Finance Act, 1983, was enacted, should also be noticed. The following paragraph from the Budget Speech of the Finance Minister, 1983-84, is relevant-- "It has come to my notice that some persons have been trying to avoid personal wealth-tax liability by forming closely held companies to which they transfer many items of their wealth, particularly jewellery, bullion and real estate. As companies are not chargeable to wealth-tax, and the value of the shares of such companies does not also reflect the real worth of the assets of the company, those who hold such unpro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und, it should now be seen whether the assessee's godowns can be called godowns and whether they were non-productive assets. It is not a case where the assessee already had some multi-purpose business buildings which were let out for storage purposes. The very buildings were constructed as godowns according to the specifications prescribed by the prospective tenants. They were maintained by the assessee as godowns to the satisfaction of the tenants. Thus, the buildings were specifically godowns. The purpose and use of the buildings was to enable the tenant to carry out its business by providing suitable storage accommodation for its goods. This was productive use. The godowns were, therefore, productive assets and cannot be described as nonproductive assets. 10. The Supreme Court held in CIT v. Sodra Devi [1957] 32 ITR 615, 622 that the rule enunciated in Heydon's case for the interpretation of statutes was applicable when the words in question were ambiguous and were reasonably capable of more than one meaning. In my opinion, there is sufficient ambiguity here and, therefore, Heydon's Rule can be usefully. We have to see what was the mischief for which the earlier law did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Some of the admitted facts as are relevant and necessary for the Third Member's opinion are these: The assessee by status a Private Limited Company owns certain godowns which were let by them to FCI and TDC since previous year relevant to the assessment year 1979-80. The assessment for the first year was completed by treating the rental income from godowns as "income from other sources" which underwent a change in appeal preferred by the Assessing Officer before the learned CIT(Appeals) who changed the head of assessment to "income from house property". However, the dispute got resolved by a decision of the Tribunal vide its order dated 15th September, 1985, rendered in ITA No. 202 (Pat)/1983, copy available at pages 6-14 of the assessee's paper-book, as per which the income in question was directed to be assessed under the head "Business". The issue, as is evident from the two dissenting orders, is pending before the Hon'ble High Court of Patna in reference. 4. The present dispute under the Wealth-tax Act pertains to the assessment years 1984-85 to 1986-87 and lies in a very narrow compass, namely, as to whether the godowns in question are liable to wealth-tax as per the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion should be assessed under the head "Business", the learned D.R. supporting the view taken by the learned Judicial Member contended that since the property was in the use of the tenants of the assessee and not the assessee itself, it could not be said that it was being used by it for the purposes of its business making the assessee liable to pay wealth-tax. 8. No doubt, certain other submissions were also made by both sides to buttress their respective stand but agreeing with the learned Accountant Member, I am of the view that in view of the Tribunal's order referred to supra staring, no one in law could be permitetted to dispute that the income in question earned by the assessee came to them from the head "Business", the pendency of a reference before the High Court notwithstanding. 9. Once an income is held to be assessed under section 28 of the Act under the head "Profits and gains of business or profession", there is no room for any doubt that the asset (in this case godowns) from which such income (in this case rent) is being derived has been put by the assessee to its business use. In this connection, it would be relevant to refer here to the following finding recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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