ORDER
N.V. Balasubramanian, J.
1. The question of law referred by the Income Tax Appellate Tribunal for our consideration under the Wealth Tax Act, 1957 in relation to the assessment of the assessee for the assessment year 1980-81 reads as under:-
Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the property let out by the assessee was not an asset exigible to wealth tax within the meaning of section 40(3)(vi) of Finance Act, 1983?
2.The short facts are that the assessee is a closely held company in which the public are not substantially interested and its assets are subjected to wealth tax. The question that arises is whether the value of the portion of the building which was let out by the assessee in favour of Punjab National Bank would be an exempted asset from the list of assets found in Section 40(3) of the Finance Act 1983? The Assistant Commissioner of Wealth Tax rejected the claim of the assessee by holding it was liable to wealth tax. The Commissioner of Wealth Tax (Appeals) also rejected the claim of the assessee on the ground that the building in question was not used by the assessee for the purpose of company's business but it was only used for receiving rental income as owner of the property. He also held that though the company has one of its objects for letting out the properties, the company was owning the property as a landlord and therefore,that part of the building let out to Punjab National Bank was exigible to Wealth Tax under Section 40(3) of the Finance Act,1983. The Appellate Tribunal, on appeal by the assessee, however took a different view on the ground that the property was used by the assessee for the purpose of its business, as the assessee has one of the objects to let out the property. It was therefore held held that the property was used by the assessee for its business and therefore, the assessee would be entitled to exemption as provided under Section 40(3)(iv) of the Finance Act, 1983. The order of the Income Tax Appellate Tribunal is the subject matter of the reference in the Tax Case.
3. We heard Mr.T.Ravikumar, junior standing counsel for the Revenue and Mr.R.Kumar, learned counsel appearing for the assessee. We are of the view that the Appellate Tribunal has not applied the correct principles of law to arrive at its conclusion that the letting out a portion of the building by the assessee would be its business and therefore, the let out portion was also used by the assessee for the purpose of business. The Supreme Court in 'Universal Plast Ltd., .vs. C.I.T. : [1999]237ITR454(SC) after referring to the earlier decision of the Supreme Court in 'CEPT .VS. Shri Lakshmi Silk Mills Ltd.,' : [1951]20ITR451(SC) , 'Narain Swadeshi Weaving Mills .vs. CEPT' : [1954]26ITR765(SC) , 'C.I.T. .VS. Calcutta National Bank Ltd.,' : [1959]37ITR171(SC) , 'Sultan Brothers Private Ltd., .vs. C.I.T.' : [1964]51ITR353(SC) ,'New Savan Sugar and Gur Refining Co., Ltd., .vs. C.I.T.' : [1969]74ITR7(SC) , 'C.I.T. .vs. Vikram Cotton Mills Ltd.,' : [1988]169ITR597(SC) , has laid down the following test when the assets let out could be regarded as letting out in the course of business, and when it will be regarded as letting out as an owner of the property.
'1.No precise test can be laid down to ascertain whether income (referred to by whatever nomenclature,lease, amount, rents, licence fee) received by an assessee from leasing or letting out of assets would fall under the head 'Profits and gains of business or profession'.
2.It is a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case, including true interpretation of the agreement under which the assets are let out.
3.Where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same.
4.If only a few of the business assets are let out temporarily, while the assessee is carrying out his other business activities, then it is a case of exploiting the business assets otherwise than employing them for his own use for making profit for that business; but if the business never started or has started but ceased with no intention to be resumed, the assets also will cease to be business assets and the transaction will only be exploitation of property by an owner thereof, but not exploitation of business assets'.
We find that the Appellate Tribunal has not adverted to the deed of lease and the terms under which the property was let out. The Supreme Cour in 'Universal Plast Ltd., .vs. C.I.T.' : [1999]237ITR454(SC) has held that the period for which the asset is let out is a relevant factor to find out the intention of the assessee whether he intends to go out of business altogether or to come back and restart the business. It was held that only where the asset was let out temporarily, it would amount to exploiting the business assets, but where there was no intention to resume the business, the transaction would only be exploitation of the property as the owner thereof. We find that the Appellate Tribunal has not gone into the nature of the lease or the terms of the lease to find out the period of lease and the terms under which the property was let out to find out the intention of the assessee viz., whether the assessee was exploiting the same as a business asset or exploit the same as a owner thereof. The Commissioner of Income Tax (Appeals) has specifically found that the property was exploited as a landlord and as the owner of the property. Though he has also not referred to the deed of lease, there is a finding by the first Appellate Authority and when the Appellate Tribunal reversed the said finding, there must be some material for the Appellate Tribunal to take a different view on the facts of the case. The Appellate Tribunal was solely guided by the object clause of the assessee company in holding that the portion of the building was exploited by the assessee as business asset. This court in 'M/s Madras Silk & Rayon Mills Pvt.Ltd., No.3, Brightons Road, Kannikapuram, Chennai.600 012 .vs. The Income Tax Officer/The Assistant Commissioner of Income Tax, Company Ward I (5) Chennai' in T.C.Nos. 171 to 173 of 2001 (in which one of us was a party) by judgment dated 11.2.2002 has held that the presence of the object clause in the memorandum of association is not relevant and what has to be seen is whether the property was let out temporarily and whether the assessee has exploited the business assset. Therefore, the view of the Appellate Tribunal that since the assessee has object in the memorandum of association to let out the property, it would amount to exploitation of the business assset is not sustainable in law. We are of the view that the question whether there is exploitation of the business asset has to be considered not only with reference to the object of the assessee company as it is only one of the relevant criteria but also with reference to the terms and the conditions of the lease and all other relevant factors. Calcutta High Court in 'C.W.T..VS. Sun Jute Press (P) Ltd.,' : [1993]203ITR350(Cal) has also taken a similar view and the Calcutta High Court and laid down the law as under:-
'As a matter of fact even where a lull falls upon a business, the business cannot be said to be non-existent. The letting out or leasing out of the commercial asset during such period of lull is accepted judicially as another mode of commercial exploitation of the assets. This view has been taken in CEPT .VS. Shri Lakshmi Silk Mills Ltd., : [1951]20ITR451(SC) . We are not furnished with the complete facts creating the situation for the part of the leasehold property becoming surplus. We are not told what the tenure of the lease is; if it is a lease for a short period, we can safely draw the inference that subletting cannot be said to have become a permanent feature. Rather, it is indicative of the intention of the assessee to resume the direct use of the part of the lease property in question in its business in future. Depending on such intention manifest in the surrounding circumstances and the document of lease or other documents connected therewith, the question whether the asset is rendered as an unproductive asset has to be answered. If the subletting is just a passing phase, the answer shall be that the part of the property sublet remains productive. The subletting in that view is a special mode of commercial exploitation of the asset'. The Calcultta High Court in the above case remanded the matter to the Tribunal for owing to the factual aspect of the matter for deciding the issue satisfactorily.
4.The learned counsel for the assessee strongly relied upon the decision of the Bombay High Court in 'C.W.T. .VS. Cema (P) Ltd.,' : [2001]248ITR629(Bom) and submitted that the income of the property was treated as business income under the Income Tax Act and therefore, the asset of the assessee should be taken as a business asset. We are unable to accept the said submission of the learned counsel for the assessee. This Court has considered a similar contention in 'M/s Madras Silk & Rayon Mills Pvt.Ltd., No.3, Brightons Road, Kannikapuram, Chennai.600 012 .vs. The Income Tax Officer/The Assistant Commissioner of Income Tax, Company Ward I (5) Chennai' in T.C.Nos. 171 to 173 of 2001 dated 11.2.2002 and held as under:-
'However, even considering the question on merits, we are of the clear opinion that an order passed in the Wealth Tax proceedings would have no effect on the income tax proceedings. The concepts of wealth tax and income tax would have to be definitely read separately. Even assuming that this property was a commercial property, we would be bound by the Supreme Court judgment, where the Supreme Court held that even a commercial property which is exploited otherwise than in the course of business by letting out, the income from such letting out could not be said to be a business income.'
Therefore, the fact that the income from the property was assessed as business income under the Income Tax Act is not conclusive. But no doubt it may be a relevant factor in deciding the question whether the asset is a commercial asset or not. It is also relevant to mention here that this Court in C.I.T. v. INDIAN WAREHOUSING INDUSTRIES LTD. : [2002]258ITR93(Mad) has held that where the source of income was the warehouses, it mattered little as to who the lessee for the time being was, whether it was the same lessee continuing over a period of time or a shifting class of lessees who occupied the spaces for shorter periods and paid rental for such use, and the income was assessable as income from property. We are, therefore, of the opinion that the Tribunal should decide the question taking into the terms of the lease, the period of lease and other relevant circumstances and then decide the question in the light of the law laid down by the Supreme Court in 'Universal Plast Ltd., .vs. C.I.T. : [1999]237ITR454(SC) , the assessee has exploited the building or part of the same as a business assset or whether the assessee has used the assset and derived rental income as an owner of the property. We are, therefore, of the opinion the matter requires to be remanded to the Tribunal for fresh consideration. As a matter of fact, the learned counsel for the assessee has not seriously disputed that the matter requires remand. Accordingly, we are not answering the question referred to us, but remit the matter to the Tribunal with direction to go into the matter afresh. It is needless to mention that it is open to the parties to adduce further evidence before the Tribunal or it is also open to the Tribunal to remit the matter to the lower authorities for fresh consideration to decide the factual issue. In the circumstances, there will be no order as to costs.