The Commissioner of Wealth-tax, Tamilnadu-I v. M/s. Fagun Co P Ltd.

property is at No.26, Commander-in-Chief Road, Chennai consisting of land toan extent of 26.65 grounds with a six storeyed building on a built-up areaof 469 Sq.M. There is also another old building of 818 Sq.M. at the back.Of the total area of 26.65 grounds, an extent of 10.52 grounds had beentaken as land appurtenant to the main building and the balance of 16.3grounds was treated as vacant land. The building is partly used by theassessee company for its own business and partly let out to varioustenants. The Wealth-tax Officer excluded a part of the main buildingoccupied by the assessee for its own business and assessed the rest of theproperty to wealth-tax. He also rejected the claim of the assessee that theentire building must be exempted as a building used in the business of theassessee.ii)Aggrieved by the order, the assessee filed an appeal to theCommissioner of Income Tax (Appeals). The C.I.T.(A) upheld the view taken bythe Assessing Officer, but granted certain relief which are as follows:a) Liabilities to be allowed in computing the net wealth.b) A reduction of 15% in the value of the property due to restrictedmarketability.c) Exclusion of the portion of the land appurtenant to the building whichwas used in the business. Aggrieved by the order of the C.I.T.(A), further appeals were preferred bythe Revenue as well as by the assessee. The Tribunal held that the tenantedportion of the new building was also used in the assessee's business andtherefore excluded from the operation of Section 40 of the Finance Act,1983. The Tribunal also confirmed the order of the C.I.T.(A) on the reliefsgranted by the C.I.T.(A), from the value of the property and the Tribunalreferred the following questions of law at the direction of this Court."1. Whether on facts and in the circumstances of thecase, the Appellate Tribunal was right in law in holdingthat the tenanted portion of the property at No.26,Commander in Chief Road was used in the assessee'sbusiness and was, therefore, excludible from theoperation of Section 40 of the Finance Act, 1983?2. Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right in law in holdingthat the advance amounts of rental deposits, electricitydeposit, water tax and generator deposits, etc., were tobe allowed as liabilities in computing the net wealth ofthe assessee?3. Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right in law in https://hcservices.ecourts.gov.in/hcservices/ confirming the orders of the Commissioner of Income-tax(Appeals) regarding exclusion of land appurtenant to thebuilding and reduction of market value of the propertyon account of restricted marketability?"3.Eventhough there are three questions referred to this Court, weare concerned with Question No.1 alone. The said Question No.1 arising forconsideration in the reference, appears to be covered by the Division Benchjudgment of this Court consisting of Justice P.D.Dinakaran and JusticeK.Raviraja Pandian dated 22.09.2004 in Tax Case No.207 and 208 of 1999, nowreported in 272 ITR 472, in the assessee's own case, for the earlierassessment years. However, when the present case came up for hearing beforeanother Division Bench consisting of Justice N.V.Balasubramanian and JusticeP.K.Misra, they expressed a doubt as to the correctness of the earlier benchdecision reported in 272 ITR 472 and therefore they requested the Hon'blethe Chief Justice to refer the matter to a larger bench, which reads asfollows:"2. We are of the view, the decision requiresreconsideration as the facts of the instant case showthat the main business of the assessee was letting outits premises, and in the course of its business, theassessee has let out a portion of the building. We areof the view, there are no acceptable reasons why theassessee should be denied the benefit only because itlet out a portion of the building for business purpose.In our view, the classification of income under theIncome-tax Act under various heads is not of muchrelevance while considering the question under theWealth-tax Act, whether a portion of the building letout by the assessee is its business asset or not. Weare of the view, the question has to be decided withreference to the provisions of the Wealth-tax Act.Further, the Supreme Court has taken the view that theassessee should not be denied the benefit of investmentallowance when the assessee has let out its machinery inthe course of its business. We are therefore of theview that the decision relied upon by the learnedcounsel for the Revenue (judgment in T.C. Nos.207 & 208of 1999 dated 22.9.2004) requires deeper considerationand accordingly, it requires reconsideration also. Wetherefore direct the Registry to place the matter beforethe Hon'ble the Chief Justice to place the matter beforea larger Bench to reconsider the entire issue."This is how the matter has come before the full bench. 4.Learned Standing Counsel appearing for the revenue submitted thatSection 40 of the Finance Act, 1983 clearly provided for assessment ofclosely-held companies to wealth-tax. Further it was stated that the https://hcservices.ecourts.gov.in/hcservices/ exemption provided under clause (vi) of sub-section (3) of Section 40 of thesaid Act does not provide for exclusion of the tenanted portion of thebuilding and only the specified assets as mentioned in the said clause aloneare exempt and hence, the assessee is not entitled to exemption. The learnedcounsel for the revenue relied on the following judgments, to support hisproposition.i)260 ITR 571 in the case of Commissioner of Wealth-tax Vs. RelianceMotor Co. Ltd. (Madras).ii)260 ITR 573 in the case of Commissioner of Wealth-tax Vs. AsokaBetelnut Co. P. Ltd. (Madras).iii)260 ITR 164 in the case of K.N.Chari Rubber and Plastics P. Ltd. Vs.Commissioner of Wealth-tax. (Madras).iv)272 ITR 177 in the case of Commissioner of Wealth-tax Vs. B.R.Theatresand Industrial Concerns P. Ltd. (Madras).v) 272 ITR 472 in the case of Commissioner of Wealth-tax Vs. Fagun EstatesPvt. Ltd. (Madras).vi)254 ITR 332 in the case of Commissioner of Wealth-tax Vs. VummidiBangaru Chetty (P.) Ltd. (Madras).vii)269 ITR 203 in the case of Commissioner of Wealth-tax Vs. IndianWarehousing Industries Ltd. (Madras)viii) 265 ITR 312 in the case of Commissioner of Income-tax Vs. CosmopolitanHospitals (P) Ltd. (Kerala). 5.Learned counsel appearing for the assessee submitted that once theassets are commercial assets and used for the purpose of business, therevenue has no right to levy wealth-tax on closely held companies. Here,the Tribunal had given a finding that the assets are commercial assets andalso the same is used for leasing business and hence, the assessee cannot besubjected to wealth-tax at all. Learned counsel further submitted that onceit is a commercial asset, it is not subject to Wealth-tax Act and it is notnecessary that the assets should come within the exclusionary clause ofSection 40(3)(vi) of the Finance Act. He relied on the Bombay High Courtjudgment reported in 248 ITR 629 in the case of Commissioner of Wealth-taxVs. Cema (P) Ltd. Learned counsel further submitted that while interpretingthe provision, the Court must ascertain the intent of the Legislature andfor doing so, the speech made by the Finance Minister in Parliament isrelevant. However, it was stated that the purpose of introducing theprovision is to levy wealth-tax only on unproductive assets held by theclosely-held companies. In the present case, the assets are commercialassets and hence no wealth-tax is leviable. https://hcservices.ecourts.gov.in/hcservices/

6.Heard both the counsel. It is useful to know the background ofthe introduction of Section 40 of the Finance Act of 1983. Earlier, wealth-tax was leviable on companies under Section 3 of the Finance Act. Section13 of the Finance Act, 1960 provided that wealth-tax is not leviable on acompany with effect from April 1, 1960. Later, by the Finance Act, 1983,the exemption granted to the companies from the levy of the wealth-tax waspartially withdrawn in respect of certain categories of companies andcertain categories of assets. Section 40 provides for the charge of wealth-tax from the assessment year 1984-85 onwards in respect of net wealth ofclosely-held companies. The wealth-tax is levied at the rate of 2% on thenet wealth of the assessee. Later, the Parliament deleted the saidprovision of Section 40 of the Finance Act with effect from 01.04.1993. Thesaid amendment was introduced by Finance Act of 1992. The purpose ofintroducing Section 40 of the Finance Act was explained by the then FinanceMinister in his budget speech. The said speech is reported in 140 ITR 32(St.), which reads as under:"It has come to my notice that some persons have beentrying to avoid personal wealth-tax liability by formingclosely-held companies to which they transfer many itemsof their wealth, particularly, jewellery, bullion andreal estate. As companies are not chargeable to wealth-tax, and the value of the shares of such companies doesnot also reflect the real worth of the assets of thecompany, those who hold such unproductive assets inclosely-held companies are able to successfully reducetheir wealth-tax liability to a substantial extent.With a view to circumventing tax avoidance by suchpersons, I propose to revive the levy of wealth-tax in alimited way in the case of closely-held companies.Accordingly, I am proposing the levy of wealth-tax inthe case of closely-held companies at the rate of twoper cent on the net wealth represented by the value ofspecified assets, such a jewellery, gold, bullion,buildings and lands owned by such companies. Buildingsused by the company as factory, godown, warehouse, hotelor office for the purposes of its business or asresidential accommodation for its low paid employeeswill be excluded from net wealth."7.It is now necessary to refer to the provision of Section 40 of theFinance Act, 1983 and the same reads as follows:"Revival of levy of wealth-tax in the case of closely-held companies -(1) Notwithstanding anything contained in Section 13 ofthe Finance Act, 1960 (13 of 1960), relating toexemption of companies from levy of wealth-tax under the https://hcservices.ecourts.gov.in/hcservices/ wealth-tax Act, 1957 (27 of 1957) (hereinafter referredto as the Wealth-tax Act), wealth-tax shall be chargedunder the Wealth-tax Act for every assessment yearcommencing on and from the 1st day of April, 1984, inrespect of the net wealth on the corresponding valuationdate of every company, not being a company in which thepublic are substantially interested, at the rate of twoper cent of such net wealth.Explanation - For the purposes of this sub section,"company in which the public are substantiallyinterested" shall have the meaning assigned to it inclause (18) of Section 2 of the Income-tax Act. (2) For the purposes of sub-section (1), the net wealthof a company shall be the amount by which the aggregatevalue of all the assets referred to in sub section (3),wherever located, belonging to the company on thevaluation date is in excess of the aggregate value ofall the debts owed by the company on the valuation datewhich are secured on, or which have been incurred inrelation to, the said assets:Provided that where any debt secured on any assetbelonging to the assessee is incurred for, or enures to,the benefit of any other person, or is not representedby any asset belonging to the assessee, the value ofsuch debt shall not be taken into account in computingthe net wealth of the assessee.(3) The assets referred to in sub-section (2) shall bethe following, namely:-(i) gold, silver, platinum or any other preciousmetal or any alloy containing one or more of suchprecious metals;(ii) precious or semi-precious stones whether or not setin any furniture, utensil or other article or worked orsewn into any wearing apparel;(iii) ornaments made of gold, silver, platinum or anyother precious metal or any alloy containing one or moreof such precious metals, whether or not containing anyprecious or semi-precious stone, and whether or notworked or sewn into any wearing apparel;(iv) utensils made of gold, silver, platinum or anyother precious metal or any alloy containing one or moreof such precious metals; https://hcservices.ecourts.gov.in/hcservices/ (v) land other than agricultural land;(vi) building or land appurtenant thereto, other thanbuilding or part thereof used by the assessee asfactory, godown, warehouse, hotel or office for thepurposes of its business or as residential accommodationfor its employees or as a hospital, creche, school,canteen, library, recreational centre, shelter, restroom or lunch room mainly for the welfare of itsemployees and the land appurtenant to such building orpart:Provided that each such employee is an employeewhose income (exclusive of the value of all benefits oramenities not provided for by way of monetary payment)chargeable under the head "Salaries" under the Income-tax Act, does not exceed eighteen thousand rupees;(vii) motorcars; and(viii) any other asset which is acquired or representedby a debt secured on any one or more of the assetsreferred to in clause (i) to clause (vii).(4) The value of any asset specified in sub section (3)shall, subject to the provisions of sub section (3) ofsection 7 of the Wealth-tax Act, be estimated to be theprice which, in the opinion of the Wealth-tax Officer,it would fetch if sold in the open market on thevaluation date.(5) For the purposes of the levy of Wealth-tax under theWealth-tax Act, in pursuance of the provisions of thissection, -(a) section 5, clause (a) of sub-section (2) ofSection 7 and clause (d) of Section 45 of that Act andPart II of Schedule I to that Act shall not apply andshall have no effect,(b) the remaining provisions of that Act shall beconstrued so as to be in conformity with the provisionsof this section.(6) Nothing in this section shall apply to anyinstitution, association or body, whether incorporatedor not and whether Indian or non-Indian, which theCentral Government may, having regard to the nature andobject of such institution, association or body, specify https://hcservices.ecourts.gov.in/hcservices/ by notification in the Official Gazette and everynotification issued under this sub section shall belaid, as soon as may be after it is issued, before eachHouse of Parliament.(7) Subject to the provisions of sub-section (5),this section shall be construed as one with the Wealth-tax Act."8.We are concerned with Section 40(3)(vi) of the Finance Act. Thesaid clause was later amended with effect from 01.04.1989, which reads asunder: "Building or land appurtenant thereto, other thanbuilding or part thereof used by the assessee asfactory, godown, warehouse, cinema house, hotel oroffice for the purposes of its business or as ahospital, creche, school, canteen, library, recreationalcentre, shelter, rest-room or lunch room mainly used forthe welfare of its employees or used as residentialaccommodation, except as provided in clauses (via) and(vib), and the land appurtenant to such building orpart."(via)...(vib)...(vii)...(viii)..."Provided that this section shall not apply to any assetreferred to in clause (i), (ii), (iii), (iv), (v) or(vi), which is held by the assessee as stock-in-trade ina business carried on by it or, in the case of motor-cars referred to in clause (vii), they are held asstock-in-trade in such business or registered as taxiesand used as such in a business of running motor-cars onhire carried on by the assessee."The above mentioned amendment came into effect from 01.04.1989 and thereforewe are not dealing with the same. No argument has also been advanced bylearned counsel for the assessee in respect of the effect of the amendment. 9.From a reading of Section 40 of the Finance Act, it is clear thatthe wealth tax is levied on closely held companies. The wealth-tax ischargeable under the Wealth-tax Act for every assessment year commencingfrom 01.04.1984. The wealth-tax is chargeable on the assets of the companyat the rate of 2% of such net wealth. The explanation also make it clearthat "company in which public are substantially interested" shall have thesame meaning assigned to, under clause (18) of Section 2 of the Income-taxAct. Sub Section (2) contemplates the computation of net wealth of thecompany, which says that the amount by which the aggregate value of all theassets referred to in sub-section (3), wherever located, on the valuation https://hcservices.ecourts.gov.in/hcservices/ date is in excess of the aggregate value of all the debts owed by thecompany on the valuation date. The excess asset over liability on thevaluation date is taxable. Sub section (3) enumerates the assets. Section40 of the Finance Act indicates that it covers not only unproductive assetslike gold, silver, platinum, stones, ornaments, utensils, but also otherproperties like land and building appurtenant thereto and motor cars.Clause (v) of deals with the land other than agricultural land. Clause (vi)deals with the building or land appurtenant thereto. Clause (vii) dealswith motor cars. Clause (viii) deals with any other asset which areacquired or represented by a debt secured on any one or more of the assetsreferred to in clause (i) to clause (vii). It is no doubt that only certaincommercial assets alone are mentioned for the purpose of exemption. It doesnot exempt all the commercial assets. Clause (vi) of sub-section 3 ofSection 40 of the Finance Act, specifically excludes buildings or partthereof used by the assessee as factory, godown, warehouse, cinema house,hotel or office for the purposes of its business or as residentialaccommodation for its employees and it also provides for exclusion ofbuildings or part thereof used as a hospital, creche, school, canteen,library, recreational centre, shelter, rest-room or lunch room mainly forthe welfare of its employees and the land appurtenant to such building orpart. 10.Unless and until the assets are used by the assessee as factory,godown, warehouse, hotel or office, the assessee cannot claim exemptionunder the provision. These specified assets alone are excluded fromtaxation. The assets other than the specified assets in the exclusionaryclause, are not entitled for exemption. The assessee, in this case, let outa portion of the building to various tenants. The let out portions are notcoming under any of the specified assets mentioned earlier. Business ofthe assessee is leasing out the assets and hence the assets are commercialone. Eventhough the assets used are commercial assets, still the assessee isnot entitled to exemption unless the assets come within the specified assetsmentioned in the said clause (vi) of sub section (3) of Section 40 of theFinance Act. It is noted that Parliament has clearly specified the assetswhich are excluded under the said clause. All the commercial assets are notexempt from the purview of the Wealth-tax Act. If the intention is toexclude all the commercial assets, the wording in the provision would bedifferent. The Parliament need not enumerate various assets for exclusion.If they want to exclude commercial assets from the purview of Wealth-taxAct, the section would be that all commercial assets used for the purpose ofthe business is exempt or excluded from wealth-tax. Instead of using thesame, they have only picked and chosen the specified assets for the purposeof excluding from wealth-tax. So, the intention of the Parliament is alsovery clear to exclude only particular type of buildings used as factory,godown, warehouse, hotel or office and also residential accommodation forits employees, buildings or part thereof used as a hospital, creche, school,canteen, library, recreational centre, shelter, rest-room or lunch roommainly for the welfare of its employees and the land appurtenant to suchbuilding or part. Clause (vi) of sub section (3) of Section 40 is very https://hcservices.ecourts.gov.in/hcservices/ plain, clear, unambiguous and it is also specific. When the statute isplain, clear, unambiguous and specific, it is not necessary to rely on thestatement of object and reason or refer to the speech made by the FinanceMinister. The argument of the learned counsel for the revenue relying onthe Finance Minister's speech for the purpose of introducing the impugnedprovision is not relevant, as the impugned provision is plain, clear,unambiguous and specific. The statement of objects and reasons should beused only for limited purposes and cannot be used to construe the provisionsof statute. When the words in the statute are clear, it is not open to theCourts to fall back upon statement of objects and reasons and to construethe provisions of the Act in the light of the statement of objects andreasons. The Supreme Court judgment reported in AIR 1976 SC 1654 in thecase of State of Haryana Vs. Chanan Mal, held that the statement of objectsand reasons cannot control the plain and obvious meaning which the sections,obviously convey; it cannot be referred to as an aid to interpretation whenthe language of the operative provisions of the Act is clear andunambiguous. The Supreme Court judgment reported in AIR 1998 SC 2120 in thecase of Narasimha Rao (PV) Vs. State (CBI/SPE), held that the speech of theMinister should not be looked into, except for the limited purpose ofascertaining the mischief which the Act seeks to remedy. Normally, theCourts will not rely on statement of Minister or explanatory notes onclauses of a bill for construing the provision except in cases where thelanguage is vague, capable of different interpretations. When the statue isambiguous, uncertain, clouded or more than one meaning, the external lightsif any, which the statute was intended to remedy or of the circumstancesthat led to the passing of the statute may be looked into for the purposesof ascertaining the object which the Legislature had in view in using thewords of question. A statutory provision must be construed, if possible, tosee that absurdity and mischief should be avoided. Where the plain literalinterpretation of a statutory provision produces a manifestly absurd andunjust result which could never have been intended by the legislature, theCourt may modify the language used by the legislature or even do someviolence to it, so as to achieve the obvious intention of the legislatureand produce a rational construction. The Court can rely on the speech madeby the mover of the Bill explaining the reason for its introduction for thepurpose of ascertaining the mischief sought to be remedied by thelegislation and the object and purpose for which the legislation is enacted.When the statute is plain, clear, unambiguous and specific, the argument ofthe counsel for the assessee, to resort to any interpretative process tounfold the legislative intent, becomes impermissible. The need for relyingon external aids arises only if the statute is ambivalent. The Court willnot refer to intention of the Legislature, debate in the Parliament, speechof the Finance Minister and notes on clauses, if the statute is plain,clear, unambiguous and specific. Recently, the Supreme Court in the case ofK.P.Sudhakaran and another Vs. State of Kerala & Others, reported in 2006(5) SCC 386, held that the alleged intention behind a provision could not beused to defeat the express words of the provision. Once, statutory rule ismade without providing any exceptions, no exceptions can be carved out tosuch rule by judicial interpretation. All that the Court has to see at the https://hcservices.ecourts.gov.in/hcservices/ very outset is what does that provision to say. If the statute is clear,plain, specific and unambiguous, the Court need not call into aid the otherrules of Constitution of Statutes. We are of the view that Section 40(3)(vi) of the Finance Act, is plain, clear, unambiguous and specific andhence, referring the Finance Minister's speech in introducing the provisionis not relevant for the purpose of interpretation. Hence, the argument ofthe counsel for the assessee is rejected. 11.It is useful to refer to this Court judgment reported in 260 ITR573 in the case of Commissioner of Wealth-Tax Vs. Asoka Betelnut Co. P.Ltd., wherein it was held that unless the business assets fall within theexclusionary clause of Section 40(3)(vi) of the Finance Act, 1983, thebusiness assets would be liable to be taxed under the Wealth-tax Act, 1957.In that case, there was a claim that the building owned by it was notexigible to wealth-tax under Section 40 of the Finance Act, 1983. So, themain argument advanced by the assessee was that the shopping complex was acommercial asset and the assessee was exploiting the commercial asset byletting it out. Hence, the property used should be considered to be used inthe assessee's business and therefore it was not liable for levy under thewealth-tax. The Court rejected the contention and held that Section 40 ofthe Finance Act, 1983 covers not only unproductive assets like gold, silver,platinum, stones, ornaments, utensils but also other properties like landand the building appurtenant thereto and motorcars. Hence, the commercialcomplex owned by the assessee, namely, building with the land appurtenantthereto, fell within clause (vi) of sub-section (3) of Section 40 of theFinance Act, 1983 and it did not fall within any of the excluded itemsmentioned in section 40(3)(vi) of the Finance Act. Therefore, it was heldthat the assessee was liable to be taxed on the value of the commercialcomplex under section 40(3). Merely because the assets are commercialassets, it does not mean that the assets are exempt from wealth-tax. Theview expressed by the above judgment is in accordance with law and we fullyagree with the said judgment. It is also held in the said judgment asfollows:"The next question that arises is whether the assesseeis entitled to the exemption in view of the exclusionaryclause found in section 40(3)(vi) of the Finance Act,1983. Section 40(3)(vi) while including the buildingand the land appurtenant thereto for levy of wealth-tax,excludes certain items of assets listed in the sub-section. In other words, certain specific items ofassets are excluded from the scope of levy of wealth-taxand the assets so excluded are factory, godown,warehouse, hotel or office used for the purposes of itsbusiness. The commercial complex owned by the assesseeis not one of the excluded items mentioned in clause(vi) of sub-section (3) of section 40 of the FinanceAct. The latter part of the same clause only deals withthe building let out to employees and it has noapplication. The submission of learned counsel for the https://hcservices.ecourts.gov.in/hcservices/ assessee that all buildings used for the purpose of thebusiness are exempt is not acceptable and the acceptanceof the said submission would mean that the expression insection 40(3)(vi) of the Finance Act, factory, godown,warehouse, hotel or office used for the purpose ofbusiness would become redundant. Hence, the primarycondition for the assessee to claim that certain assetsare excluded from levy of tax is that the assets must bethe building and the land appurtenant thereto and itshould be a factory or a godown or warehouse, hotel oroffice used for the purpose of the business. Thecommercial complex of the assessee does not fall withinany of the excluded items mentioned in section 40(3) ofthe Finance Act, 1983. We are of the view that sincethe case of the assessee does not fall within theexclusionary clause mentioned in section 40(3)(vi) ofthe Finance Act, 1983, the assessee is liable to betaxed on the value of the commercial complex undersection 40(3) of the Finance Act, 1983."12.Learned counsel appearing for the assessee relied on the BombayHigh Court judgment reported in 248 ITR 629 in the case of Commissioner ofWealth-tax Vs. Cema (P) Ltd., wherein it was held as follows: "The Tribunal, on facts, came to the conclusion that theabovementioned office premises was a business asset notliable to wealth-tax. That, merely because the saidoffice premises have been leased out for five years, didnot change the commercial character of the said asset.Apart from the order of the Tribunal which is passed, onfacts, we ourselves examined the returns filed by theassessee right from the assessment year 1985-86 whichclearly indicate that even under the Income-tax Act, theassessee has been given the benefit of depreciation andthe income received by the assessee has been treated asincome from business. Taking into account the abovefacts and circumstances of the case, we are of the viewthat a pure finding of fact has been recorded by theTribunal. Hence, no interference is called for. Appealdismissed."With great respect, we are unable to agree with the view of the Bombay HighCourt judgment cited supra. They have not considered the scope of Section40 of the Finance Act, 1983. The reasons given in the said Bombay HighCourt judgment that the assets are not includible in the net wealth of theassessee are:a) It is a commercial asset.b) The assessee was given the benefit of depreciation. https://hcservices.ecourts.gov.in/hcservices/ c) Income received by the assessee by letting out of the commercial assethad been treated as income from business.The above reasons are not at all relevant for wealth-tax purposes. Thecomputation under the income-tax and the wealth-tax are different. Underthe Income-tax Act, there are five heads of income and the income has to becomputed on the basis of the heads of income. While computing the income,there are various exemptions and deductions provided under the income-tax,and also for the purpose of claiming deduction or exemption, there arevarious conditions stipulated and the Assessing Officer has to consider theprovision of the Act and allow deduction. As far as the wealth-tax isconcerned, what are all the assets chargeable under the Wealth-tax Act, willbe taken into consideration and if any asset is exempt as per theprovisions, the same is exempted. The income-tax computation has no basis incomputing the wealth of the assessee. In our opinion, the criteriamentioned in the Bombay High Court judgment is not at all relevant for thepurpose of excluding from wealth-tax, unless the assets come within theexclusionary clause as contemplated under Section 40(3)(vi) of the FinanceAct and hence, eventhough the let out portion is a commercial asset, it isnot exempt because the same is not coming within the scope of exclusionaryclause contemplated under Section 40(3)(vi) of the Finance Act. Hence, weare unable to agree with the view of the Bombay High Court judgment citedsupra. 13.In the case of Commissioner of Income-tax Vs. Shaan Finance (P.)Limited, reported in 231 ITR 308, the Apex Court held as follows:"We have already set out the three requirements ofsection 32A(1) which entitle an assessee to claiminvestment allowance. One of the requirements is thatthe machinery must be wholly used for the purpose ofsuch assessee's business. When the business of theassessee is leasing of such machines, the machines soleased out are being used for the purpose of theassessee's business. The income by way of hire chargeswhich the assessee receives is also taxed as businessincome of the assessee."The above judgment considered the scope of Section 32A of the Income-tax Actand held that the assessee is entitled to the investment allowance on plantand machinery let out to the third parties. Further it was held that thelet out plant and machinery, were used in the business of leasing. Hence,the Apex Court granted investment allowance under Section 32A of the Income-tax Act. In the present case, the Article of Association indicates the mainobject, which is extracted hereunder:"2. To acquire by purchase, lease, exchange or otherwisefarms, lands, buildings and hereditaments of any tenureof description and any estate or interest therein, and https://hcservices.ecourts.gov.in/hcservices/ any rights over or connected with lands so situated andto turn the same to account as many seem expedient andin particular by preparing building sites and byconstructing, reconstructing, altering, improving,decorating, furnishing and maintaining offices, flats,houses, hotels, restaurants, shops, factories,warehouses, wharves buildings works and conveniences ofall kinds and by consolidating or connecting orsubdividing properties and by leasing and disposing ofthe same."From the object, it is clear that the assessee is carrying on leasingbusiness. No doubt the assets are used in the leasing business. Section 40of the Finance Act levy tax on the assets as enumerated under the provisionand only the assets that are excluded under the exclusionary clause alonewill be entitled to the exemption. If the leasing company let out factory,building or warehouse as stated in the exclusionary clause, the assessee iscertainly entitled to the relief. All the leasing assets are not entitledto exemption unless the same comes under any of the specified assets, forexample, if the assessee lets out the specified assets like factory, godownor warehouse in the leasing business, certainly it will come within theexclusionary clause. It is useful to refer to the Madras High Courtjudgment in the case of Commissioner of Wealth-Tax Vs. Indian WarehousingIndustries Ltd. reported in 269 ITR 203, which held as follows: "The Supreme Court in the said case had observed that aleasing company which owns machinery and leases suchmachinery to third parties for manufacture of articlesis entitled to investment allowance of such machineryunder section 32A of the Income-tax Act. Even though atthe first glance such decision appears to support thecontention of the assessee, but on deeper scrutiny, weare of the view that the ratio of the said decision isnot applicable to the present case. To attract theprovisions under section 32A, as observed by the SupremeCourt, the assessee must satisfy the followingconditions (page 312):"(1) the machinery should be owned by the assessee; (2) it should be wholly used for the purposes ofthe business carried on by the assessee and (3) the machinery must come under any of the categoriesspecified in sub-section (2) of section 32A."The relevant provision in section 32A is to theeffect that the machinery should be wholly used for the https://hcservices.ecourts.gov.in/hcservices/ purpose of the business carried on by the assessee.Even though it can be said that leasing out of godownswas for the purpose of carrying out of the business bythe assessee in the present case, as per section 40(3)(vi) there is an additional requirement that thebuilding should be used by the assessee as godown orwarehouse for the purpose of its business. The natureof use by the assessee as godown or warehouse is animportant aspect. There is no such similar provisioncontained in section 32A of the Income-tax Act. Theratio of the Supreme Court is, therefore, inapplicableto the present case." In Wealth-tax Act, in computing the net wealth of the assets, all commercialassets as per the provision of Section 40 of the Finance Act are taxable andonly particular assets as specified in the exclusionary clause alone areexempt from taxation. If the leasing companies let out the factory,warehouse or godown, the same is exempt from taxation. The Supreme Courtjudgment in the case of C.I.T. Vs. Shaan Finance Limited cited supra, heldthat the assessee is entitled to investment allowance under Section 32A ofthe Income-tax Act on the ground that the let out plant and machinery wereused for the purpose of the leasing business and the income derived fromleasing out, was assessed under the head "Income from business". As theconditions enumerated in Section 32A of the Income-tax Act were satisfied,the Supreme Court granted investment allowance. Section 32A of the IncomeTax Act reads as follows:"32A. (1) In respect of a ship or an aircraft ormachinery or plant specified in sub-section (2), whichis owned by the assessee and is wholly used for thepurposes of the business carried on by him, there shall,in accordance with and subject to the provisions of thissection, be allowed a deduction, in respect of theprevious year in which the ship or aircraft was acquiredor the machinery or plant was installed or, if the ship,aircraft, machinery or plant is first put to use in theimmediately succeeding previous year, then, in respectof that previous year, of a sum by way of investmentallowance, equal to twenty-five per cent of the actualcost of the ship, aircraft, machinery or plant to theassessee:"In the Finance Act, the relevant provision in Section 40(3), reads asfollows:"(vi) building or land appurtenant thereto, other thanbuilding or part thereof used by the assessee asfactory, godown, warehouse, hotel or office for thepurposes of its business or as residential accommodation https://hcservices.ecourts.gov.in/hcservices/ for its employees or as a hospital, creche, school,canteen, library, recreational centre, shelter, restroom or lunch room mainly for the welfare of itsemployees and the land appurtenant to such building orpart:Provided that each such employee is an employeewhose income (exclusive of the value of all benefits oramenities not provided for by way of monetary payment)chargeable under the head "Salaries" under the Income-tax Act, does not exceed eighteen thousand rupees;In both the provisions, one of the conditions to be satisfied by theassessee is that, the assets must be used in the assessee's business. Thereis no dispute in the present case that the let out assets are used in theleasing business. That alone is not sufficient to claim exemption from theWealth-tax Act. The yardstick of the Income Tax Act cannot be applied inthe present case for the purpose of exemption under the Wealth-tax Act. Theexemptions or exclusionary clause are different from granting deduction orallowance under the Income-tax Act. Not all the business asset used in thebusiness are exempt from the purview of the wealth-tax. Once the let outassets comes within the specified clause as contemplated under Section 40(3)(vi) of the Finance Act, the assessee is certainly entitled to exemptionfrom Wealth-tax Act. The Division Bench judgment of this Court reported in269 ITR 203 in the case of Commissioner of Wealth-tax Vs. Indian WarehousingIndustries Ltd., following the principles enunciated by this Court judgmentreported in 260 ITR 164 in the case of K.N.Chari Rubber and Plastics P. Ltd.Vs. Commissioner of Wealth-tax, held that, as per Section 40(3)(vi) of theFinance Act, there is an additional requirement that the building should beused by the assessee as godown or warehouse for the purpose of its business.We are of the view that the let out assets are used by the assessee in itsleasing business. If the leased out assets such as, godown, warehouse,hospital or other assets, come within the specified assets in Clause 40(3)(vi) of the Finance Act, certainly the assessee is entitled to theexemption, because the same is used in leasing business. The view of theDivision Bench judgment that the leased assets are not used for the purposesof business, is contrary to the Supreme Court judgment cited supra. Hence,we are unable to agree with the Division Bench judgments reported in 260 ITR164 in the case of K.N.Chari Rubber and Plastics P. Ltd. Vs. Commissioner ofWealth-tax and 269 ITR 203 in the case of Commissioner of Wealth-tax Vs.Indian Warehousing Industries Ltd. In the present case, the let out portionare not coming in any of the specified assets. Hence, the earlier judgmentreported in 272 ITR 472 is correctly decided. The remaining judgmentsrelied on by the learned standing counsel for the revenue are not relevantto the facts of the present case and hence we are not referring the same.Hence, we are of the view that since the case of the assessee does not fallwithin the exclusionary clause mentioned in Section 40(3)(vi) of the FinanceAct, 1983, the assessee is liable to be taxed on the value of the tenantedportion of the building under Section 40 of the Finance Act, 1983. 14.In view of the foregoing reasons, the question No.1 referred to https://hcservices.ecourts.gov.in/hcservices/ us is answered in favour of the revenue and against the assessee. QuestionNos.2 and 3 are referred back to the Division Bench as they are not thesubject matter of the Full Bench. No costs. kmSd/-Asst. Registrar//true copy//Sub Asst.RegistrarTo1.The Asst. RegistrarIncome Tax Appellate TribunalRajaji BhavanIII FloorBesant NagarChennai-9 (5 copies)2.The SecretaryCentral Board of Direct TaxesNew Delhi (3 copies)3.The Commissioner of Wealth Tax Tamilnadu IVMadras.4.The Commissioner of Income Tax (Appeals) VI, Madras.5.The Deputy Commissioner of Income Tax Spl. Range VI, Madras.6.The Commissioner of Income Tax (Appeals) VMadras-34.+ one cc to M/S.Pushya Sitaraman, Advocate Sr.No.42308.KM (CO)RSM/17.10.2006TC.(REF)NOS.371 TO 373 OF 2000 AND192 OF 2000