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TMI Blog1988 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... two firms which, in their turn, also owned immovable properties comprising business premises situate in an urban area. In respect of the assessment year 1976-77, the Wealth-tax Officer made an assessment of the net wealth of the assessee on March 30, 1981, at Rs. 19,03,120. This included the assessee's one-third share in the firm, Nagarmal Co., taken at Rs. 26,812. The Commissioner of Wealth-tax was of the opinion that the order passed by the Wealth-tax Officer was erroneous in so far as it was prejudicial to the interests of the Revenue. He, consequently, initiated proceedings under section 25(2) of the Wealth-tax Act, 1957. In the notice issued by him, the Commissioner pointed out two errors in the order of the Wealth-tax Officer. First, that in regard to the property belonging to M/s. Nagarmal and Co. in which the assessee had a share, there was an appreciation and, if taken into account, the assessee's share would work out to Rs. 1,35,724 as against Rs. 26,812 arid, therefore, there was an under valuation of the assessee's share in the aforesaid firm to the extent of Rs. 1,08,912. This observation of the Commissioner was stated to be based on the value of the property as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal observed that in the absence of any report of the Valuation Officer, it could not be legitimately inferred that there was any appreciation in the value of the property belonging to the firm, Nagarmal Co. There was no other material on record to sustain that conclusion and, consequently, it was not proper for the Commissioner to set aside the order passed by the Wealth-tax Officer and to adopt a new valuation. It is from this decision of the Tribunal that the reference has been made to us at the instance of the Commissioner. In order to appreciate the contentions of the parties, it would be convenient to have a look at the relevant statutory provisions, comprised in Part I of the Schedule to the Wealth-tax Act, the material parts of which are being extracted here : " Part I Paragraph A (2) In addition, in the case of every individual and Hindu undivided family, where the net wealth of the individual or Hindu undivided family includes the value of any asset, being building or land (other than business premises) or any right in such building or land, situated in an urban area (such asset being hereafter in this Part referred to as urban asset) :. . Paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e net wealth of an individual or Hindu undivided family owning urban asset, the business premises shall have to be excluded. Rule 1 of Paragraph B then defines 'business premises' and states that, in this Part, business premises means any building or land or part of such building or land, or any right therein owned by the assessee and used throughout the previous year for the purposes of his business or profession. We are not concerned here with the rest of that rule. We then turn to rule 3 round which the submissions of learned counsel for the parties were mainly centred. Before, however, we analyse this provision, we may briefly notice the background in which the provision was inserted. This rule was brought on the statute book under the Finance Act of 1970. Introducing the Bill, the Hon'ble Finance Minister stated before the House that the proposed legislative measure was calculated to prevent avoidance of tax by transfer from individual or joint Hindu family ownership to ownership by partnership firms, associations of persons and closely held companies. It appears that with a view to evading liability to tax, individuals and joint Hindu families who owned urban assets whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computation of the net wealth of the assessee, where the net wealth includes the value of his interest as partner in a firm and the assets of such firm comprise any urban assets, the business premises owned by the firm should be included. Indeed any possible doubt on this score is completely dispelled by the language used by the Legislature in item No. (2) of Paragraph A which is explicit and unambiguous. It states "such asset being hereafter in this Part referred to as urban asset... (emphasis added). Sri Bharatji Agarwal, learned counsel for the Commissioner, however, relied heavily on the definition of "business premises" and stressed particularly the words "his business or profession". It was urged that the Legislature was conscious of the distinction that exists between the ownership of business premises of an individual and the ownership of the business premises of a partnership firm in which the assessee has a share and, consequently, it was contended that an individual could urge for the exclusion of only those premises under rule 3 which were used for the purpose of his individual business. We are unable to agree. In the first place, upon the plain terms of rule 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. to four per cent. The maximum rate is reached when the value of urban lands and buildings exceeds Rs. 19 to Rs. 22 lakhs. It is now proposed to levy a tax of 5 per cent. on the value of urban lands and buildings in excess of Rs. 5 lakhs and at the rate of 7 per cent. on the value in excess of Rs. 10 lakhs. No distinction will be made in regard to the exemption on the basis of the population of the area in which the properties are situated. The definition of an urban area is also being enlarged to include areas within the limits of any municipality or other similar authority having a population of 10,000 or more, with powers to cover by notification, areas up to 8 kilometres outside such limits. Business premises will continue to be excluded from the proposed levy as at present. However, guest houses maintained by those liable to pay this tax will not be reckoned as business premises. Provisions are also being made to prevent avoidance of the tax by transfer, from individual or joint Hindu family ownership, to ownership by partnership firms, associations of persons and closely held companies. Another measure which is intended to serve a similar purpose, provides for the taxatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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