“(i) After the amendment
came into force, the Central Board of Direct Taxes issued Circular No. 762,
dated 18-2-1998, explaining the substantive provisions of the Act relating to
direct taxes. The said amended Section was in force only for two years and by
the Finance Act (No. 2), 1998, the same underwent a radical change, wherein it
is said that any property which is in the nature of commercial building or
complex do not fall within the definition of the word ‘asset’ as defined
u/s. 2(ea) of the Act.
(ii) It is in this
background, the assessee claims that, as the asset in question is the business
asset of the assessee, and as the assessee is in the business of letting out
properties, as is clear from the Explanatory Note appended to the Bill as well
as the Circular issued by the CBDT after passing of the amendment, the asset
which he had let out did not fall within the definition of the word ‘asset’
and therefore, the company is not liable to pay wealth tax.
(iii) The explanatory note
and the CBDT Circular make it very clear that prior to the Finance (No. 2)
Act, 1996, the commercial properties were not included within the definition
of the word ‘asset’. Therefore, it was felt that if residential houses have
been taken as assets, there seems to be no reason why commercial properties
other than those used by the assessee wholly and substantially in the business
or his profession, will also be not taken as assets. Therefore, by an
amendment, commercial buildings which are not occupied by the assessee for the
purposes of his business or profession other than the business of letting out
property, shall be brought to tax under the Wealth-tax Act, 1957.
(iv) Therefore, it is
clear that the intention was to stimulate investment in productive assets.
Therefore, the Parliament thought it fit to abolish the amended Act, excluding
the business assets, i.e., the commercial establishments, which are not
used by the assessee or which are let out, as they are not stimulative
investment. However, as is clear from the aforesaid Explanatory Note, the CBDT
circular and the subsequent action of further amending the said Section, it is
clear that the intention was not to tax business assets used by the assessee
for the purpose of his business or profession and also the business assets
which are let out, if the assessee is in the business of letting out
properties. All other types of commercial properties were brought to tax under
the Wealth-tax Act.
(v) Both the Appellate
Authorities after carefully going to the aforesaid Circulars, amendments,
Explanatory Note and keeping in mind the intention in enacting the Wealth-tax
Act as well as drastic amendment in the year, we are of the opinion that the
assessee was justified in claiming the exclusion of the properties which are
the subject of the matter of the proceedings, from wealth tax. We do not find
any error or illegality in the findings recorded by the Tribunal. Therefore,
no case of interference is made out.”
