High Court Of Calcutta
Maynak Poddar (HUF) vs. Wealth Tax Officer
Sections WT 2(ea), WT 2(m), WT 3
Asst. Year 1993-94
D.K. Seth & Maharaj Sinha, JJ.
IT Appeal No. 84 of 1999
24th February, 2003
Counsel Appeared
J.P. Khaitan, for the Petitioner : M.P. Agarwalla & P.K. Bhowmik, for the Respondent
ORDER
D.K. Seth, .J. :
In this case for the asst. yr. 1993-94, the assessee’s commercial building let out to tenants was treated as an asset within the meaning of s. 2(ea) of the WT Act, 1957, as it stood then.
Mr. Khaitan, learned counsel appearing for the appellant, points out that until the provision was amended there was no scope for including a commercial building within the definition of ‘asset’ and therefore, it was not taxable under the WT Act, 1957. In elaborating his contention, he had referred to the charging section viz., s. 3 of the Act, which propose to impose tax on ‘net wealth’ exceeding a particular valuation. ‘Net wealth’ as defined in s. 2(m) means the aggregate value of all the assets subject to the provisions contained therein. The word ‘asset’ used in s. 2(m) as defined in s. 2(ea) does not include commercial building. In order to emphasize that a commercial building was not an asset Mr. Khaitan had led us through the Finance (No. 2) Bill, 1996, pointing out from cl. 54 at (1996) 133 CTR (St) 96 : (1996) 220 ITR (St) 147. He contends that the amendment has introduced something new, since explained at p. 238. According to him, the provision is clear. This is further clarified at p. 156 of 133 CTR/p. 282 of 220 ITR. Having regard to this proposition, according to him, there is no scope for taxing the commercial building let out to tenant as an asset under the WT Act. Relying on the decision in CIT vs. Ajax Products Ltd. (1965) 55 ITR 741 (SC) at p. 747, he contends that an item of property can be taxed only if it can be clearly established from the charging section that it is so chargeable and not otherwise. He also relied on the decision in CIT vs. Bhaskar Mitter (1994) 73 Taxman 437 (Cal) at p. 442 (para 8) and contended that even if the property was shown in the return as asset, yet the same will not operate as an estoppel on the assessee to claim subsequently that it is not an asset and that the taxing authority is not supposed to tax a building which is not otherwise taxable under the charging section.
The learned counsel for the Revenue, on the other hand, contends that so far as the assessee is concerned, the building is not a commercial building at the hands of the assessee. It may be a commercial building at the hands of the tenant to whom it is let out. The assessment is to be made at the hands of the assessee. For the assessee it is a building. It is immaterial whether it is used for commercial or residential purpose. If the building was let out as residential building, then it could have definitely been taxable as an asset at the hands of the assessee as a residential building. Therefore, the letting out as a commercial building when the same building could be used as residential one could not change the position and would definitely be chargeable as an asset. He also attempted to draw an analogy from the IT Act, 1961, where the income from such property is treated as an income from house property without making any distinction in between residential or commercial building so as to treat the same as an asset.
We have heard the learned counsel for the parties at length. In our view whether an item of property is chargeable to tax or not is dependent on the true construction of s. 3 of the WT Act, in the strict sense it is enacted. There cannot be any ambiguity in a charging section. If two views are possible, the one beneficial to the assessee is to be adopted. Unless a property is chargeable under the charging section, no tax can be levied thereupon.
Having regard to the definition of ‘net wealth’, we may refer to the definition of ‘asset’ and find out as to whether under the said provision, as it stood in 1993-94, the building let out to a tenant for commercial purposes could be treated to be an asset taxable under s. 3 of the WT Act. A plain reading of s. 2(ea) indicates that only a guest- house and/or residential building (including a farmhouse situated within 25 kms of the local limits of any municipality) are assets. However, an exception was carved out in respect of house meant exclusively for residential purposes and those allotted by a company to an employee or an officer or director subject to the conditions laid down therein or used for business purposes forming part of stock-in-trade. If this definition is interpreted in the manner on the principle settled by law then it is very difficult to bring within the definition a building used for commercial purpose by the tenant on being let out. Character of the building is the determining factor under the existing provision for making it an asset. Guest-house, residential buildings including farm- houses were made taxable. But commercial building was not made taxable.
The buildings used for business or commercial purpose was not taxable under s. 3 of the WT Act until amended. The expression used in s. 3 before amendment is clear and unambiguous. It had specified the buildings, which were included in the definition of asset. It included guest-house, residential building, farm-house situated within 25 kms of the municipal town, but did not include commercial building. It had specifically referred to some kind of building while omitted to include the other kinds. Therefore, only the kinds included are taxable and not the others.
In Ajax Products (supra), the Supreme Court, at p. 747, had relied on a passage from Cape Brandy Syndicate vs. IRC (1921) 1 KB 64 at p. 71, where Rowlatt, J. observed : “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
It was so echoed by the Supreme Court : “To put it in other words, the subject is not to be taxed unless the charging provision clearly imposes the obligation. Equally important is the rule of construction that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intentions of the legislature.
…..”
8. This position becomes clear by reason of the amendment sought to be brought about, as is apparent from the amendment effective from 1st April, 1997. The amended provision included building used for commercial purposes. This itself indicates that buildings used for commercial purposes were not subject-matter of taxation prior to the said amendment. This was explained at p. 129 of 133 CTR (St)/p. 238 of 220 ITR (St). This Explanation is self-explanatory. We would do better if we leave at that and quote the Explanation itself, viz.,
“The proposed amendment seeks to enlarge the definition of assets. Under the existing provisions, assets include guest-house, residential house and farm-house. It is proposed to include in the definition any house whether used for residential or commercial purposes or as guest-house. It is also proposed to exclude any house allotted by a company to its employees, etc., and any house, which is used as stock-in-trade or a house used by the assessee for the purpose of his business.” This is further clarified at p. 156 of 133 CTR (St)/p. 282 of 220 ITR (St), we do not think we need to explain or add anything to it except quoting it : “The term ‘assets’, on which tax is to be levied, is defined in cl. (ea) of s. 2. This definition includes any guest-house and any residential house (including a farm- house situated within 25 Kms of the local limits of any municipality) for levy of tax, except the exclusions made in items (1) and (2) of sub-cl. (i) of this clause. If residential houses have been taken as assets, there seems to be no reason why commercial properties, other that those used by the assessee wholly and exclusively in his business or profession, should also be not taken as assets. It is, therefore, proposed to tax commercial buildings, which are not used by the assessee in his business or profession, other than the business of letting out of properties.”
9. However, we are not called upon to decide the meaning of the phrase ‘other than the business of letting out of properties’, therefore, we do not make any observation with regard thereto and keep it open to decision on an appropriate time and issue. However, this explanation clearly indicates that a commercial property whether let out or not was outside the scope of the existing provision of s. 2(ea) until amended in 1997.
10. Thus, unless the definition of ‘net wealth’ r/w the definition of ‘asset’ as provided in s. 2(m) and s. 2(ea), respectively, includes a building let out to a tenant used for commercial purposes, the same cannot be subjected to wealth-tax. Even if the assessee had included the same in his return, that would not preclude the assessee from claiming the benefit of law. There cannot be any estoppel against statute. A property, which is not otherwise taxable, cannot become taxable because of misunderstanding or wrong understanding of law by the assessee or because of his admission or on his misapprehension. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. Neither there can be any waiver of the right by the assessee. The Department cannot rely upon any such admission or misapprehension if it is not otherwise taxable.
11. This question was dealt with by this Court in Bhaskar Mitter (supra) at para 8 at p. 442. In this decision, this Court observed : “……. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can he lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so, he cannot assess an assessee on an amount, which is not taxable in law, even if the same, is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law. ……..”
12. Therefore, the building in question could not come within the definition of ‘asset’ as was held by the learned Tribunal affirming the decision of the CWT(A) and the AO. Therefore, the order of the learned Tribunal cannot be sustained and is hereby set aside. The tax proposed to be imposed on the building let out to as commercial building to tenants, is not an asset within the meaning of s. 2(ea), included in net wealth defined in s. 2(m), respectively and, therefore, is not taxable under s. 3 of the WT Act, for the asst. yr. 1993-94.
The appeal is thus, disposed of.
MAHARAJ SINHA, J. :
I agree.
[Citation : 262 ITR 633]
