M.M. Kumar, J.
1. At the instance of the Revenue the Income-tax Appellate Tribunal, Delhi Bench 'B', New Delhi (for brevity, 'the Tribunal') has referred the following question of law under Section 256(1) of the IT Act, 1961 (for brevity, 'the Act'), which is stated to have emerged from ITA No. 675/Del/1992 from its order dt. 16th March, 1998, in respect of the asst. yr. 1987-88:
Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the factory building did not belong to the assessee company as on the relevant valuation date relating to asst. yr. 1987-88 and, therefore, the value thereof is not liable to wealth-tax in the hands of the assessee company.
2. The facts of the case are that the assessee respondent filed its return of wealth on 10th June, 1988 showing a net wealth of Rs. 3,396, which consisted of motorcycle owned by the assessee company. Subsequently, on being pointed out to the assessee that land was owned by it, a revised return was filed on 30th Nov., 1989 declaring value of the land as Rs. 2,53,396, which was leased to M/s R. Narayan Dying and Printing Mills. Lateron, vide letter dated 18th Dec, 1989, the assessee stated that it had sold a part of its building and machinery to M/s R. Narayan Printing & Dying (P) Ltd. but the land was not sold and was given on lease. It was also intimated that the market value of the land cannot be more than Rs. 25 per sq. yd. The AO made a reference under Section 16A of the WT Act, 1957 (for brevity, 'the 1957 Act') to the Valuation Officer, Rohtak, for valuation of the land. Since the order under Section 16A(5) of the 1957 Act from the Valuation Officer was not received, therefore, the value of the land was estimated for the purposes of assessment. The value of the land was taken at Rs. 200 per sq. yd. and the total value as on the valuation date was assessed at Rs. 27,00,000, which was subject to rectification. The assessee pleaded before the AO that the factory building and machinery amounting to Rs. 15,00,000 was transferred to the subsidiary company, however, no documentary evidence in support of transfer was furnished. The AO estimated the value of the building at Rs. 10,00,000 and added the same to the net wealth of the assessee. The AO also came to the conclusion that as per Section 40(3)(iv) of the Finance Act, 1983, building or land owned by an assessee is to be included in the net wealth unless the building was used by the assessee as a factory. Since in the instant case the building or land was not used as a factory by the assessee but by some other person, therefore, the AO held that the same is includable in the wealth of the assessee. The AO in the nut shell concluded that the assessee has deliberately concealed the taxable wealth in the original return, concealed the area of the land as well as suppressed its value in the revised return. The AO, accordingly, vide his order dt. 19th March, 1991 ordered that proceedings under Section 18(1)(c) of the 1957 Act be initiated against the assessee and computed the wealth of the assessee as under:
Value of vehicles as disclosed Rs. 3,396Value of land Rs. 27,00,000Value of building Rs. 10,00,000---------------Rs. 37,03,396Tax and wealth-tax liability 74,068---------------Net Wealth = Rs. 36,29,328
3. Against the order dt. 19th March, 1991, the assessee preferred an appeal before the Commissioner of Wealth-tax (Appeals), Faridabad [CWT(A)], who while relying upon the judgment of Hon'ble the Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan v. CWT : [1986]162ITR888(SC) , vide his order dt. 30th March, 1992, held that the value of the building is assessable in the hands of the assessee as no registered sale deed was executed and registered in favour of the vendees. The CWT(A) also directed the AO to determine the fair market value of the building in question at Rs. 3,50,000 instead of Rs. 10 lakhs, inasmuch as, the same amount was taken in the income-tax assessment of the assessee for the asst. yr. 1987-88. The AO was also directed to take a fair market value of the land as on 31st March, 1987 at Rs. 9,00,000 on the basis of rent capitalization method.
4. The Revenue as well as the assessee preferred further appeals against the order dt. 30th March, 1992 passed by the CWT(A) before the Tribunal. The Tribunal after exhaustively dealing with the pleadings put forth before it by the Revenue as well as the assessee, dismissed the appeal filed by the Revenue and allowed the appeal of the assessee. The findings of the Tribunal are discernible from paras 6.14 to 6.18 of its order dt. 16th March, 1998, which read as under:
6.14 It would be imperative to repeat here that the Hon'ble Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan v. CWT : [1986]162ITR888(SC) had pointed out that the legislature would remedy the hardship of the assessee in such cases if it wants to obviate the taxability of such assets in the hands of the assessee who had a mere husk of title and as against the vendee had no reply (sic) of title. The legislature has now remedied such a situation. The Hon'ble Supreme Court in the case of Podar Cement (supra) CIT v. Podar Cement (P) Ltd. : [1997]226ITR625(SC) has clearly held that similar and corresponding provisions made in Section 27 of IT Act, 1961 were declaratory and clarificatory in nature. Consequently these provisions were held to be retrospective in operation. The purpose and nature of amendment and also the language of the amended provision of Section 4(8) of WT Act are similar to the corresponding amendments made in Section 27 of IT Act. We, therefore, respectfully following the judgments of the Hon'ble Supreme Court in the case of Podar Cement (P) Ltd. (supra) hold that the aforesaid provision introduced in the WT Act should be treated as declaratory and clarificatory in nature so far as it relates to the point in issue and, therefore, the amended provision will have retrospective operation.
6.15 It may also be worthwhile to make a useful reference to a decision of Tribunal Mumbai Bench 'A' in the case of Tulsidas V. Patel (P) Ltd. v. WTO WTA No. 1063/Bom/1994 dt. 17th June, 1997) reported at (1998) 61 TTJ (Mumbai) 282-Ed. The Tribunal in the said decision has observed as under:
Under Sub-section (2) of Section 40 the Finance Act, 1983; the crucial words which require interpretation are belonging to the company'. The legislative mandate is that all the assets enumerated in Sub-section (3) of Section 40 belonging to the assessee company should be considered to be assets of that company for the purpose of levy of wealth-tax. The Calcutta Tribunal unfortunately did not bestow its pointed attention on the crucial words 'belonging to the company' and also did not interpret the correct meaning of words before deciding that leasehold interest of the assessee company for more than six years is not covered under Section 40 and simply it is covered by Section 2(e) of the WT Act. It would appear that these words 'belonging to the company.' It is enough in order to bring the asset under Finance Act, 1983 that the asset should be belonging to the company and not necessarily the company should be the owner of it. These crucial words 'belonging to the company' bear specific legal connotation.6.16 The Tribunal in the aforesaid decision also relied upon the judgment of Hon'ble Supreme Court in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur and Anr. : AIR1965SC1923 . In the said judgment, the Hon'ble Supreme Court has held that even possession of an interest less than that of full ownership should be signified by the words 'belonging to'. After quoting the extract from the said judgment of the Hon'ble Supreme Court, the Tribunal observed as under:
Therefore, it is clear from the above decision of the Hon'ble Supreme Court that 'belonging to' does not denote absolute title. Even possession of an interest less than that of full ownership could be signified by those words. Therefore, from the above, it is clear that for an asset belonging to the company need not necessarily mean that the assessee should be full owner of that asset. It also includes the possession of an interest less than that of full ownership.6.17 In view of the aforesaid facts and decisions, we are of the opinion that the value of the factory building which had already been transferred by the appellant company in favour of M/s R. Narayan Co. (P) Ltd. cannot be assessed in the hands of the appellant company. The appellant company had received the full consideration for transfer of the said factory building. It has also handed over the physical possession of the property to the vendee. The vendee is using and enjoying the said property without any hindrance or obstruction on the part of any one including the vendor, which the vendor could not do in view of Section 53A of the Transfer of Property Act. The asset in question cannot, therefore, be treated as belonging to the appellant company. On the facts and circumstances of the present case, the vendee will be regarded as owner of the said factory building in conformity with the principles of law laid down by the Hon'ble Supreme Court in the case of Podar Cement (P) Ltd. (supra) and in the light of discussion made in the earlier part of this order. The vendee has been accepted as owner of the factory building for purposes of income-tax assessment and depreciation on the cost of factory building has been granted to them.
6.18 In view of the aforesaid facts and discussion, it cannot be said that the factory building belongs to the appellant company as on the relevant valuation date. We, therefore, direct the AO to delete the said addition of Rs. 3,50,000, in the hands of the assessee company.
A perusal of the order passed by the Tribunal would reveal that it' has mainly relied upon the judgment of Hon'ble the Supreme Court in the case of Podar Cement (P) Ltd. (supra), which squarely covers the controversy in hand.
5. We have heard learned Counsel for the parties at some length and find that the controversy is squarely covered against the Revenue and in favour of the assessee by the judgment of Hon'ble the Supreme Court in the case of Podai Cement (P) Ltd. (supra). It may be true that the amendment in Section 4(8) of the 1957 Act has been incorporated in the year 1997 but by virtue of the judgment in Podar Cement case (supra) the amendment has to operate retrospectively because similar amendment in respect of Section 27 of the Act has been regarded as declaratory in nature by their Lordships. A Division Bench of this Court in the case of CIT v. Badhurani Deepinder Kaur has followed and applied the judgment of Podar Cement case (supra) while construing the provisions of Section 4(8) and Section 2(m) of the 1957 Act. Therefore, the question necessarily has to be answered against the Revenue and in favour of the assessee.
6. In view of the above, the question is answered against the Revenue and in favour of the assessee.