By TIOL News Service

CHENNAI, OCT 07, 2016: THE ISSUE IS - Whether a vacant land held by a Bank carrying on core banking activity as an Industrial Enterprise, falls within the expressions 'industrial purposes' and, hence, the same is liable to be excluded from the purview of the expression 'asset' described u/s 2(ea) of Wealth Tax Act, till the period of 2 years from the date of acquisition. YES IS THE VERDICT.

Facts of the case:

The assessee, carrying on Banking business, had filed its Wealth Tax Return admitting the net-wealth at Rs.1,81,000/- and the same was processed u/s 16(1). Subsequently, this assessment was reopened u/s 17, to verify the correctness of the assessee's claim towards proportionate liability of Rs.1,67,29,000/- from the taxable wealth of Rs.1,69,10,000/-. In response to the notice u/s 17, the Assessee Bank filed its Return, admitting the taxable wealth as Rs.1,81,000/- only. The AO thereafter, passed orders assessing the taxable wealth as Rs.2,19,52,000/- and the tax payable thereon as Rs.2,19,520/, after taking into account the depreciation statement filed for the purpose of assessment of income tax, for determining the wealth of the 3 assets, viz., quarters, building-sites purchased during the year and the Motorcars.

High Court held:

1. Any building or land appurtenant thereto, whether used for residential or commercial purposes or for the purpose of maintaining a guest house or otherwise answers the description of an asset. But, however, 5 items are declared as not included therein. The very first item excluded clearly brings out that the house, meant exclusively for residential purposes and which is allotted to by a Company to a Whole-Time Director having a gross annual salary of less than five lakh rupees, is thus kept outside the purview of the expression 'asset'. Therefore, the AO is required to find out as to whether the building, which the Assessee, has allotted for its Chairman for residential purposes, still falls within the expression 'assets' or not. The requirement in that regard being that the Chairman should not have been remunerated as salary of less than five lakh rupees. It is hardly in doubt that the Assessee being a Company and its Chairman, is a Whole Time Director and therefore, the remuneration paid to such a Whole Time Director by the Assessee ought to have been ascertained and only in that event, if the salary so paid is more than Rs.5 lakhs, such a residential quarters can be included and be treated as an 'asset' of the Assessee for the purpose of the Wealth Tax. Unfortunately, neither the AO nor the Appellate Authority made any attempt, whatsoever, to ascertain as to how much salary is being paid by the Assessee Bank to its Chairman and hence it has not examined as to whether the residential quarters in question can still be regarded as an asset of the Assessee or not.

2. It is important to notice that any unused land, held by the Assessee for industrial purposes for a period of 2 years from the date of its acquisition, has been kept outside the purview of the meaning as ascribed to the expression 'Urban Land'. Since the AO has taken note of the value of assets from the depreciation statement filed for purposes of reckoning income tax by the Assessee wherein the building sites purchased during the year ended on 31st March 1999 have been reflected, it would be safe to infer that the Assessee has acquired those building sites during the year that ended on 31st March 1999. If that be the case, such unused land held by the Assessee for the period of 2 years from the date of acquisition falls outside the definition ascribed to the expression 'Urban Land', provided such vacant land is held for industrial purposes. That brings to the core question as to whether the Assessee is carrying on any industrial activity or not. It is now beyond any pale of doubt that Banking business activity carried on by entities like the Assessee have firmly been recognised as industrial activity, no doubt for purposes of Industrial Disputes Act, 1947, in the context of retrenchment of employees working in such Banking Institutions, the question came to be examined and it was answered that those who satisfied the definition of 'workmen' assigned to that expression u/s 2(s) of Industrial Disputes Act, are liable to be treated as workmen of the Banking Industry and the Supreme Court has applied the beneficial principles behind Section 25F r/w/s 2(oo) of Industrial Disputes Act. Therefore, carrying on the core business of Banking certainly answers industrial activity. All the more so, in the absence of any specific meaning ascribed to the expression 'industrial purposes' by the said Act, we, therefore, consider it safe to treat the Banking activity carried on by the Assessee as an Industrial Enterprise and, hence, we hold that any vacant land held by it, its usage, falls squarely within the expressions 'industrial purposes' and, hence, for a period of 2 years from the date of acquisition of such a vacant urban land, the same is liable to be kept outside the purview of the expression 'asset' described u/s 2(ea) of Wealth Tax Act.

3. One important feature which requires to be noticed is that the Assessee made a claim for proportionate liability for all the three assets which it has disclosed in its Wealth Tax Return. Though the claim for proportionate liability is accepted at the first instance, but, however, the assessment was reopened only for purposes of examining the correctness of such a claim. In the instant case, it is therefore appropriate to examine the correctness behind the claim of the Assessee with regard to the proportionate liability. A perusal of the definition of 'net wealth' u/s 2(m) clearly brings out that the aggregate value of all the assets is required to be computed in accordance with the provisions of the said Act and, in case, the aggregate value of all debts owed by the Assessee have been incurred in relation to the said assets are also required to be noticed. Section 7 has dealt with as to how the value of the assets are to be determined. Sub-section (1) thereof makes it clear that the value of any asset, other than cash, shall be its value as on the valuation date as determined in the manner laid down in Schedule-III of the said Act. Part-D of Schedule-III of the Act makes it clear that where the Assessee is carrying on a business for which accounts are maintained by him regularly, a net value of the business as a whole having regard to the Balance Sheet of such business, shall be taken as the value of such assets for purposes of the Wealth Tax Act. The Commissioner of Appeals has virtually declared that Rule 14 comprising of Part-D of the Schedule-III of the Act does, not apply only on the ground that the net value of all the assets of the business, as a whole, are not undertaken in the instant case. The reasoning assigned by the Commissioner of Appeals is hardly satisfactory. Rule 14 of Part D of the Schedule-III of the Act, dealt with valuation of the assets of the business. When the whole of the assets of the business are being assessed, the particular assets which the Assessee has declared in its Wealth Tax Return, cannot be kept outside the assets of the business.

4. When once all the assets of the business are sought to be valued, the necessity to undertake individual or proportionate distribution of the debts is not required to be undertaken separately. It is a fundamental principle of law that no part of a Statute should be construed as carrying no meaning at all. Every provision must be construed as intended to achieve some purpose or object by the Statute Maker. In other words, no provision of the Statute can be treated as otiose or useless. Keeping those principles in mind, when the Proviso to Rule 14 is examined, it becomes clear that the same will be applicable where it is not possible to calculate the amount of debt that is utilised for purposes of acquiring each of the assets and the formula contained therein brings out the theory of proportionate liability and the principle that would become applicable. In that view of the matter, the Assessee has made a claim to extend the proportionate liability to the value of the 3 assets that was initially applied by the AO, but however, it was taken up for re-examination u/s 17 of the Act. Unfortunately, the re-examination has not been confined to that specific area at all and it went into the merits of the matter. Due to lapse of more than 15 years period and also in view of the fact that the Wealth Tax Act itself has already been done away with, we find that no useful purpose would be served in remanding the matter and hence, we restore the original order passed by the AO u/s 16(1).

(See 2016-TIOL-2408-HC-MAD-WT)