Ajit K.Sengupta, J. - (1.) In this reference under Section 27(3) of the Wealth-tax Act, 1957, for the assessment years 1984-85 and 1985-86, the following questions of law have been referred to this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that, for the purpose of levy of wealth-tax on the assessee-company, the property in question has to be excluded under Section 40(3)(vi) of the Finance Act, 1983 ?
(2.) Whether the finding of the Tribunal that the asset in question was a business asset is unreasonable or perverse ?" Briefly stated, the facts raising the question are that the assessee is a private limited company. It filed nil returns under the Wealth-tax Act, 1957, for the assessment years 1984-85 and 1985-86. The Wealth-tax Officer, however, brought to charge the value of certain leasehold properties on the ground that the leasehold property excluded from taxable wealth under Sub-section (3) of Section 40 of the Finance Act, 1983, which levies wealth-tax in respect of specified assets of closely held companies as the rental income from the leasehold properties had been assessed to income-tax under the head "Other sources". Therefore, the leasehold properties could not constitute business assets for the purpose of exclusion in terms of Section 40(3)(vi) of the Finance Act, 1983. On appeal, the Commissioner of Wealth-tax (Appeals) in an ex parte order confirmed the decision of the Wealth-tax Officer. In second appeal before the Tribunal the assessee contended that the asset must be regarded as one of the business assets of the assessee because in the appeal against the income-tax assessment for the assessment year 1983-84, the Commissioner of Income-tax (Appeals) had found the rental income from the leasehold properties by reason of its sub-letting to be assessable under the head "Profits and gains of business". Reliance was placed by the assessee on the decision of the Tribunal in the case of Varadaraja Theatres (P.) Ltd. v. WTO [1989] 29 ITD 29 (Mad). The Tribunal found that it was a matter of record that the assessee was earlier running a jute press. The long lease of the property in question was taken for the purpose of that business. Eventually, the whole of the property not being required for use of the business, it subleased a portion thereof and earned lease rent. The rental income was initially taxed as income under the head "Other sources". But the first appellate authority in appeal against that finding held that the rental income was taxable as profits and gains of business. So, the Tribunal concluded that the assets in question were earlier found to be business assets. 2. But, curiously enough, the self-same first appellate authority in his capacity as the Commissioner of Wealth-tax (Appeals) made a turn-about and held that the asset was not a business asset and, therefore, not entitled to exclusion from the charge of wealth-tax. The Tribunal did not approve of this duplicity of approach and held that the assets which have been treated as business assets for the purpose of income-tax and the rental income wherefrom taxed as part of the profits and gains of the business cannot but be business asset. It is not open to the Revenue to take a view for wealth-tax purposes inconsistent with and diametrically opposed to the view in the income-tax assessment. Therefore, the Tribunal concluded that the property in question has to be excluded from the charge of wealth-tax under Section 40(3)(vi) of the Finance Act, 1983.
(3.) Learned counsel for the parties reiterated before us the respective contentions urged before the Tribunal. The burden of the argument developed by learned counsel appearing for the assessee is that, having regard to the legislative intent behind the enactment of Section 40 and in the facts and circumstances of the present case, the leasehold right is not liable to be included in the net wealth. It is the undisputed position that the assessee had taken the entirety of the said premises on lease for the purposes of its business. Eventually, a portion of the leasehold property fell out of requirement. It was, therefore, sub-leased. The income therefrom has also been assessed as business income. The position is that the leasehold interest held as a commercial asset became surplus in part. It was, therefore, exploited by the assessee through a third party as a sublessee. Reliance was placed on the decision of this court in CIT v. Ajmera Industries Pvt. Ltd. [1976] 103 ITR 245 and of the Supreme Court in CIT v. Vikram Cotton Mills Ltd. [1988] 169 ITR 597.;