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TMI Blog1998 (12) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is not the owner, but a mere licencee to develop and sale the property allotted by CIDCO. 4. The Learned Commissioner of Wealth-tax ought to have appreciated that it was not the intention of the appellant to treat the payments made to CIDCO on account of premium as fixed asset. 5.(a) The Learned Commissioner of Wealth-tax ought to have appreciated that the appellant hid not transferred any unproductive asset to convert it into stock-in-trade being the original allottee of the land from CIDCO. (b) The provisions could have been invoked only if the unproductive assets have been transferred to avoid the personal wealth-tax. 6. Alternatively the Learned Commissioner of Wealth-tax ought to have taken ₹ 2,142.20 per sq. mt. as the fair market value being the rate at which CIDCO has allotted land during the relevant year to other licensee." 3. The relevant facts, in this case, are that the assessee had obtained a licence of Plot No. 13, Sector 17, Vashi, New Bombay, from CIDCO for the construction of a housing complex. As per the agreement dated 22-10-1981 with CIDCO, it was agreed that the leasehold rights relating to the land would be transferred in favour of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings initiated under section 17, on the ground that there was no non-disclosure of material facts by the assessee and accordingly the proceedings could not be reopened. On merits it has been contended that the assessee being a company, is liable to tax only in respect of the assets specified under section 40(3) of Finance Act, 1983. In the specified assets under the aforementioned provisions of the Act, the land belonging to the assessee is admittedly assessable to tax. However, it is pleaded that the land in question allotted by CIDCO did not belong to the assessee. The assessee had a mere licence to construct the housing complex and after completion of the building, a Cooperative Society had been formed and CIDCO has granted the leasehold rights of the land in favour of the said Cooperative Society. CIDCO had never transferred any rights in the land in favour of the assessee and, therefore, there was no justification for including the market value of the land as land belonging to the assessee. In this connection, reliance has been placed on the decision of the Tribunal in the case of Asstt. CWT v. Anjaria Estate (P.) Ltd. [1995] 55 ITD 53 (Ahd.). It was further contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Page 646, have itself expressed a view that the position in the Income-tax Act is different that in other Acts. That decision relates to the income-tax and, therefore, is inapplicable to the wealth-tax proceedings. The learned counsel further contended that the decision of the Calcutta High Court in the case of General Marketing & Mfg. Co. Ltd. (supra) is inapplicable to the facts of this case. Reliance was also placed on the decision of the Special Bench of the Tribunal in the case of Bhilai Engg. Corpn. Ltd. v. Dy. CIT [1997] 63 ITD 223 (Nag.), where it has been held that unless the immovable property is transferred by means of a registered sale deed, the property cannot be held to belong to the assessee. The decision in the case of Podar Cement (P.) Ltd. (supra) has also been considered. It was accordingly contended that the appeals of the assessee may be allowed. 8. We have given our careful consideration to the rival contentions. The following issues emerge in these appeals :- (1) whether the proceedings under section 17 of the Wealth-tax Act, 1957 have validly been initiated. (2) whether the market value of the land allotted by CIDCO to the assessee for construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile to mention the Finance Minister's speech at the time of introduction of the Finance Bill of 1983, by virtue of which wealth-tax in the case of closely held companies was revived. This is available in 140 ITR St. 25. The then Finance Minister, with reference to section 40 of the Finance Bill, 1983, stated in the Parliament that the wealth-tax in respect of closely held companies was being revived for the purpose of assessing the unproductive assets. It is thus clear that the intention of the Parliament was to levy tax in the case of closely held companies in respect to unproductive assets. Keeping in view the intention of the Parliament, we now revert back to the main issue. 12. Section 3 of the Wealth-tax Act, 1957 is the charging section. It provides that there shall be charged for every assessment year a tax in respect of the net wealth on the corresponding valuation date of every company at the rate or rates specified in Schedule I. 13. Section 2(m) defines the term "net wealth". It reads as under : "2(m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, whereve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Explanation - Where any question arises as to whether all or any of the assets referred to in clauses (i), (ii), (iii) or (iv) are held by the assessee as stock-in-trade in a business carried on by it, the question shall be decided in accordance with such directions as the Board may, by general or special order, issue for the guidance of the Assessing Officer, having regard to the ratio which the yearly turnover of a business of trading in such assets bears to the average of the stocks of such assets held from time to time during the year in such business ordinarily and other relevant factors. (4) The value of any asset specified in sub-section (3) shall be either its value as on the valuation date determined in the manner laid down in Schedule III to the Wealth-tax Act or its value, disclosed in the balance-sheet of the company, on the valuation date, whichever is higher. Explanation - For the purposes of this sub-section, "balance-sheet", as drawn up on the valuation date, shall have the same meaning as in rule 11 of Schedule III to the wealth-tax Act." 15. It is thus seen that section 40(1) provides for the levy of wealth-tax in the case of closely h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement, which will throw light as to the natures of rights of the assessee relating to the land. The following clauses, which are considered to be important, are reproduced hereunder : "1. Grant of licence - During the period of two years from the date hereof, the licensee shall have licence and authority only to enter upon the said land for the purpose of erecting a building or buildings for residential purpose and for no other purpose and until the grant of lease as provided hereinafter, the licensee shall be deemed to be a mere licensee of the said land at the same rent and subject to the same terms including the liability for payment of service charges to the Corporation as if the lease has been actually executed. 2. Not a Demise - Nothing in these presents contained shall be construed as a demise in law of the said land hereby agreed to be demised or any part thereof so as to give to the licensee any legal interest therein until the lease hereby provided shall be executed and registered but the licensee shall only have a licence to enter upon the said land for the purpose of performing this Agreement. The licensee shall not be entitled to transfer or assign his right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n end. 5. Power of Corporation - Until the building and works have been completed and certified as completed in accordance with clause 7 hereof the Corporation shall have the following rights and powers :- (a) The right of the Managing Director and Officers and servants of the Corporation acting under his directions at all reasonable times to enter upon the said land to view the state and progress, of the work and for all other reasonable purpose. To resume deed (b) Power - (i) in case the licensee (I) shall fail to complete the said building within the time aforesaid and in accordance with the stipulations hereinbefore contained (time in this respect being of the essence of the contract) or (11) shall not proceed with the works with due diligence or shall fail to observe any of the stipulations on his part herein contained, to re-enter through the Managing Director upon and resume the said land everything thereon, and thereupon this Agreement shall cease and terminate and all erections and materials plants and things upon the said land shall not withstanding any enactment for the time being in force to the contrary belong to the Corporation without making any compensation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept a lease (which shall be executed by the parties in duplicate) of the said land and the building erected thereon for the term of 60 years from the date hereof at the yearly rent of Rupees Ten. 10. Surrender - The licensee may terminate this aforementioned surrender the license and authority granted hereunder on such terms and conditions as may be determined by the Corporation from time to, time by general or special order." 17. It is seen from clause 1 of the agreement quoted above, that the assessee has been granted a mere licence to enter upon the land for the purpose of erecting a building for residential purposes and for no other purpose until the grant of lease as provided in the agreement. The agreement makes it abundantly clear that the lease was to be granted to the assessee but only after the completion of the residential building. 17.1 Clause 2 of the agreement makes it abundantly clear that the agreement shall not be construed as a demise in law of the said land so as to give any legal interest to the assessee until the lease is executed and registered. 17.2 Clause 4 of the agreement empowers the Managing Director of CIDCO to revoke the licence in certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips of the Supreme Court held as under : "The liability to wealth-tax arises because of the 'belonging of the asset and not otherwise. Mere possession, or joint possession, unaccompanied by the right to be in possession or ownership of property, would, therefore, not bring the property within the definition of "net wealth' for it would not then be an asset 'belonging to the assessee.' 18. The decision of the Supreme Court relied upon by the revenue in the case of Podar Cement (P.) Ltd. (supra) is inapplicable to the facts of this case. The said case related to the provisions of the Income-tax Act and it would be sufficient to refer to the observations of the Hon'ble Supreme Court, in this very case, at page 646, as under :- "Though under the income-tax law, the benefit of ownership is unknown, but still if the income is assessed in the hands of the transferor who has not received the income from the property whether such a transferor can be made liable to make the payment of tax. Various decisions given by the different High Courts have taken different views. The view of the Calcutta, Bombay, Delhi and Allahabad High Courts as mentioned above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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