R.V. Easwar, Judicial Member -
(1.) THE appeals are by the department and the cross-objections are by the assessee. THE assessment years involved arc 1984-85 to 1986-87. Since the appeals and the cross-objections were heard together they are disposed of by this common order for the sake of convenience.
(2.) The facts leading to the appeals by the department are these : The assessee is a closely-held company. In respect of the assessment years 1984-85 to 1986-87 the assessee was liable to wealth-tax by virtue of the provisions of Section 40 of the Finance Act, 1983 which revived in a limited way, the levy of wealth-tax relating to companies. According to the said provisions, closely-held companies were liable to wealth-tax for and from the assessment year 1984-85. In the assessments to wealth-tax, the WTO included a sum of Rs. 3,65,37,350 as value of the immovable property at No. 15, Park Street, Calcutta. The assessee-company is having a leasehold interest in the said property for a period exceeding six years. This fact is not in dispute before us. The WTO also included the value of jeeps in the assessments. Against the assessment the assessee-company filed appeals before the CWT(A). It was contended before the CWT(A) that the assessee company was not liable to wealth-tax in respect of the leasehold interest under Section 40 of the Finance Act, 1983. The inclusion of the value of jeeps was also contested on the ground that they had no market value. The CWT(A) passed an order for the assessment year 1984-85 on 19-3-1990. He accepted the contention of the assessee-company that the leasehold property was not to be included in the wealth-tax assessment. However, he rejected the assessee's contention regarding inclusion of the value of jeeps. For the assessment years 1985-86 and 1986-87 the CWT(A) passed a separate order. However, in this order he has adopted the reasons contained in the appellate order for the assessment year 1984-85.
The department is in appeal against the orders of the CWT(A) contending that the CWT(A) erred in directing the exclusion of the value of the leasehold property at No. 15, Park Street, Calcutta from the assessment. Sri. R.K. Singh, the learned departmental representative, referred to the provisions of Section 2(e) of the Wealth-tax Act and submitted that since the lease tenured for a period of more than 6 years the same was liable to be included in the wealth-tax assessments. Dr. Pal, the learned counsel for the assessee, however, contested the above submission of the learned departmental representative. He submitted that Section 40 of the Finance Act, 1983 revived the levy of wealth-tax only in a limited way in respect of companies. He further submitted that the said provision was a self-contained and separate code by itself and it was not permissible to refer to the provisions of Section 2(e) of the Wealth-tax Act to bring to assessment the value of the leasehold interest which the assessee held in the property at No. 15, Park Street, Calcutta. He invited our attention to the provisions of Section 40 of the Finance Act, 1983 particularly to Sub-sections (2), (3) and (5) of the same. Referring to the provisions of Sub-section (5) he submitted that the said provision contained a mandate that except the provisions of Section 5, Section 7(2)(a) and Section 45 of the Wealth-tax Act which have no application to the provisions of Section 40 of the Finance Act, 1983, the remaining provisions of the Wealth-tax Act should be construed so as to be in conformity with the provisions of Section 40 of the Finance Act, 1983. In his submission Section 2(e) of the Wealth-tax Act cannot be referred to while invoking the provisions of Section 40 of the Finance Act, 1983 since that would amount a construction which is not in conformity with the provisions of Section 40 of the Finance Act, 1983. Dr. Pal submitted that Sub-section (2) of Section 40 of the Finance Act, 1983 itself defined what "net wealth" was. Sub-section (3) enumerated the assets that were referred to in Sub-section (2). When Sub-section (3) of Section 40 of the Finance Act, 1983 itself enumerated the various assets that were the subject of wealth-tax, it is not open to the departmental authorities to invoke and apply the provisions of Section 2(e) of the Wealth-tax Act which would be against the mandate contained in Sub-section (5) of Section 40 of the Finance Act, 1983. He further submitted that Sub-section (1) of Section 40 of the Finance Act, 1983 itself was the charging section and when Section 40 of the Finance Act, 1983 has itself provided for the charge of wealth-tax, the definition of "net wealth" and the various assets that were subject to wealth-tax, it is not possible to bring to tax the leasehold interest by invoking Section 2(e)of the Wealth-tax Act. In this connection he also referred to the object of introducing Section 40 of the Finance Act, 1983 as contained in the memorandum explaining the provisions of the Finance Bill, 1983 at 140 ITR/Statute p. 141 at page 175. He, therefore, commended for our acceptance the decision of the CWT(A) on this point.
(3.) ON a consideration of the rival submissions we are of the view that the order of the CWT(A) on this point has to be upheld. The Finance Act, 1960 suspended the levy of wealth-tax on companies from 1961 to 1983. In the year 1983 Finance Act, 1983 revived the levy of wealth-tax on companies but in a limited way. Public companies were not subject to wealth-tax but closely-held companies were subject to wealth-tax. While reviving the wealth-tax on closely-held companies, in his Budget speech the Finance Minister said:
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 unproductive assets in closely-held companies are able to successfully reduce their wealth-tax liability to a substantial extent. With a view to circumventing tax avoidance by such persons, I propose to revive the levy of wealth-tax in a limited way in the case of closely-held companies. Accordingly, I am proposing the levy of wealth-tax in the case of closely-held companies at the rate of 2 per cent on the net wealth represented by the value of specified assets, such as, Jewellery, gold, bullion, buildings and lands owned by such companies. Buildings used by the company as factory, godown, warehouse, hotel or office for the purpose of its business or as residential accommodation for its low paid employees will be excluded from the net wealth.
It is clear from this speech that the object of the provisions of Section 40 of the Finance Act, 1983 is to curb the attempts made by individuals to reduce the wealth-tax liability by transferring their wealth to closely-held companies formed by them.;