ORDER
U.T. Shah, Vice President
1. The issue, as to whether the value of a flat owned by a company, not being a company in which the public are substantially interested, (hereinafter referred to as a ‘closely held company’) could be considered for the purpose of determining the net wealth of such a company, is involved in these appeals filed by the assessee. The assessee is a closely held company. The assessment years are 1984-85 to 1987-88 and the relevant valuation dates are 31st of December, 1983/84/85 & 86 respectively.
2. The assessee is a wholly owned subsidiary of Bhor Industries Limited (BIL). The BIL owned 3 flats along with car parking, garages, by virtue of holding certain shares in the respective co-operative housing societies as under:–
Bldg. Flat No. Value & no. of shares Bennet Villa No. 42 5 shares of Rs. 50 each Anand Kamal No, 3 & 4 297 shares of Rs. 50 each Neelkant No. 25 5 shares of Rs. 50 each.
Under agreements all dated 4-11-1980 entered into between the assessee and BIL, the assessee purchased these flats from BIL in consideration of issuance/allocation of its fully paid-up shares to BIL. It may be mentioned that the flats in Bennet Villa and Nilkant are let out to outsiders while the flats in Anand Kamal are let out to the director of the assessec-company.
3. By Section 40 of the Finance Act, 1983, the levy of wealth-tax was revived in the case of closely held companies. In its return of net wealth (showing NIL wealth), as well as at the time of assessment proceedings, the assessee claimed that the value of the flats in question was not liable to tax as the said flats do not fall within the any of assets enumerated in Sub-section (3) of Section 40 of the Finance Act, 1983.
4. The Assit. Commissioner of W.T., however, rejected the assessee’s stand for the reason stated in his order for the assessment year 1984-85 which reads as under:–
In response to notice under Section 16(2), Shri M.D. Inamdar, C.A. attended on behalf of the assessee and explained the return. The company is not owner of land/building but owns flats in co-op, societies. No wealth-tax, it is hence claimed is leviable.
The assessee company purchased flats with tenants from the then holding company M/s. Bhor Industries in 1981-82. The flats are not occupied by employees having income of less than Rs. 18,000. The assessee’s claim for exemption from W.T. is hence not in order. Section 4(7) of W.T. Act clarifies that property includes interest in property. Section 40(e) of Finance Act 1983 clarifies that all provisions of wealth-tax except those of Sections 5,7(2) and 45 apply to limited companies. In view of this interest’ of assessee-company in flats in various co-op, societies is liable to wealth-tax. The assessee’s claim for valuation of flats u/r. IBB is accepted.
It may be mentioned that for the other years under consideration, the Asstt. Commissioner has adopted the same reasonings accepting the assessee’s claim that the provisions of Rule 1-BB of the W.T. Rules, 1957, would be applicable. The Asstt. Commissioner determined the net wealth as under:–
Assmt. yr. Value of flats W.T. payable Net wealth 1984-85 Rs. 1,98,062 Rs. 3,883 Rs. 1,94, 197 1985-86 Rs. 2,95,150 Rs. 5,787 Rs. 2,89,363 1986-87 Rs. 2,95,150 Rs. 5,787 Rs. 2,89,363 1987-88 Rs. 2,95,150 Rs. 5,787 Rs. 2,89,363 5. In appeal before the CWT (Appeals), the assessee once again agitated the issue but without success.
6. Being aggrieved by the order of the C WT(A), the assessee has come up in appeal before the Tribunal. The learned representative for the assessee reiterated the submissions which were made before the wealth-tax authorities and strongly argued that they should have accepted the assessee’s stand that the value of the flats in question was not exigible to tax. In this connection, he invited our attention to Section 40 of the Finance Act, 1983 to urge that since it is a self-contained code in every respect, the W.T. authorities were not justified in referring to Section 4(7) of the W.T. Act, 1957. According to him, Section 40 of the Finance Act, 1983, is also a charging section, and therefore there is no question of considering any other provision of the Wealth-tax Act to determine whether the value of the flats in question is liable to wealth-tax or not. Since Section 40(3)(vi) of the Finance Act, 1983 talks of ‘building’ and not a part thereof, a flat in a building cannot be treated as a building contemplated under the said section. According to the learned representative for the assessee, the flats in question, at best, be called dwelling unit but not ‘building’ as envisaged in Section 40(3)(vi) of the Finance Act, 1983. All the flats in a building are jointly treated as a complete structure which only could be brought within the purview of the said section. However, in the instant case, the assessee owns only a portion of building (flat) and therefore the value thereof could not be considered for determining its net wealth. He also submitted that since Section 40 of the Finance Act, 1983, is a charging section, the same should be construed strictly. Again, according to him, neither the intention of the legislature nor the spirit of the provision is relevant to resolve the issue involved in the present appeals. He also contended that Sub-section (5) of Section 40 of the Finance Act, 1983, clearly contemplates that certain provisions of the W.T. Act, 1957, mentioned therein would not be applicable in the case of closely held companies. He also referred to the amendment brought in Section 40 of the Finance Act, 1983, by the Finance (No. 2) Bill, 1991, with a view to urge that after the said amendment, perhaps the assets like the one with which we are concerned in the present appeals, would be roped in. Finally he submitted that the provisions of the W.T. Act, 1957, cannot over-ride the provisions of Section 40 of the Finance Act, 1983, even if we have to give the meaning to the provisions of Sub-sections (5) and (7) of Section 40 of the Finance Act, 1983. For his various submissions, the learned representative of the assessee relied on the decision in the cases of CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC), CIT v. Shahzada Nand & Sons [1966] 60 ITR 392(SC),CIT v. Provident Investment Co. Ltd. [1957] 32 ITR 190(SC), CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692 (SC), Shiv Narain Chaudhari v. CWT [1977] 108 ITR 104 (All.), Banarsi Debi v. ITO [1964] 53 ITR 100(SC) and CIT v. Prayagtal Agarwala & Co. [1986] 162 ITR 570(Pat.)(FB). He, therefore, strongly urged that the orders of the W.T. authorities should be set aside.
7. The learned representative for the Revenue on the other hand, strongly relied on the orders of the W.T. authorities and justified their action. In this connection, he also submitted that construction of multi-storeyed buildings and owning a flat therein is a common occurrence in not only metropolitan cities like Delhi, Bombay, Madras & Calcutta, but also in other cities where the construction activity is picking up. Therefore, if one were to accept the stand token on behalf of the assessee, then, the flats owned by the closely held companies could never be brought to tax. According to him, since a flat is a part of the building, the value thereof would be exigible to tax under Section 40(3)(vi) of the Finance Act. Relying on the decision in the case of Prayaglal Agarwala & Co. (supra) he submitted that we should restrain from interpreting a provision of a statute which leads to absurdity. He, therefore, urged that we should uphold the order of the CWT(A).
8. We have carefully considered the rival submission of the parties and the material to which our attention was drawn at the time of hearing and we do not find any merit in the stand taken on behalf of the assessee. It is pertinent to note that when the Wealth-tax Act, 1957, was introduced for the first time, from 1-4-1957, the companies were also liable to wealth-tax in respect of all their assets. By Section 13 of the Finance Act, 1960 the wealth-tax on companies, was removed. Thereafter, by the Finance Act, 1983, the wealth-tax was again levied on closely held companies with effect from 1-4-1984. The relevant provisions of Section 40 of the Finance Act, 1983, read as under:–
40. (1). Notwithstanding anything contained in Section 13 of the Finance Act, 1960 (13 of 1960), relating to exemption of companies from levy of wealth-tax under the Wealth-tax Act, 1957(27 of 1957) (hereinafter referred to as the Wealth-tax Act), wealth-tax shall be charged under the Wealth-tax Act for every assessment year commencing on and from the 1st day of April, 1984, in respect of the net wealth on the corresponding valuation date of every company, not being a company in which the public are substantially interested at the rate of….
(2) For the purposes of Sub-section (1), the net wealth of a company shall be the amount by which the aggregate value of all the assets referred to in sub-section
(3)….
(3) The assets referred to in Sub-section (2) shall be the following, namely:–
(vi) building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godown… of its employees… and the land appurtenant to such building or part;
(4) The value of any assets specified in Sub-section (3) shall, subject to the provision of Sub-section (3) of Section 7 of the Wealth-tax Act, be estimated to be the price which, in the opinion of the W.T.O. it would fetch if sold in the open market on the valuation date ;
(5) For the purposes of the levy of wealth-tax under the Wealth-tax Act, in pursuance of the provisions of this section,–
(a) Section 5, Clause (a) of Sub-section (2) of Section 7 and Clause (d) of Section 45 of that Act and part II of Schedule I to that Act shall not apply and shall have no effect;
(b) the remaining provisions of that Act shall be construed so is to be in conformity with the provisions of this section.
(7) Subject to the provisions of Sub-section (5), this section shall be construed as one with the Wealth-tax Act.
9. On the plain reading of the aforesaid provisions, it is quite apparent that the closely held companies are required to pay wealth-tax on the assets owned by them as enumerated in Sub-section (3) of Section 40 of the Finance Act, 1983. If we closely read Clause (vi) of the said sub-section, it is quite apparent that it is not the whole building but a part thereof, would also come within the purview of the Wealth-tax Act. In this view of the matter, we are not prepared to accept the stand taken on behalf of the assessee that since the flat in a building is not a ‘building’, its value could not be brought to tax for wealth-tax purposes. Again, by virtue of Sub-sections (5) and (7) of Section 40 of the Finance Act, 1983, we have to refer to all the provisions of the Wealth-tax Act, 1957, other than stipulated in Clause (a) of Sub-section (5) of Section 40 of the Finance Act, 1983. This would be very clear from the fact that the flats in question have been valued as per Rule 1-BB of the W.T. Rules, 1957, which has been accepted by the Asstt. Commissioner. In this view of the matter, we are not prepared to accept the submissions made on behalf of the assessee that Section 40 of the Finance Act, 1983, is a self-contained code and, therefore, we have not to look into the provisions of the Wealth-tax Act, 1957 to determine whether the value of the flats in question would be exigible to the Wealth-tax Act. For all these reasons, we have no hesitation in upholding the order of the CWT (A).
10. In the result, all the appeals are dismissed.