Law:

Section:

Section 3 of the Wealth-tax Act, 1957, read with section 40(3) of Finance Act, 1983 - Charge of tax - Companies - Assessment years 1986-87 and 1988-89 - Assessee-company dealing in manufacture and sale of betelnut was also managing business of real estates, office premises, shopping and commercial complexes - Assessee constructed 57 units in a complex out of which 55 units constituted shops and one office which had been let out - Whether commercial complex of assessee did not fall within exclusionary clause mentioned in section 40(3)(vi) and, thus, was liable to be taxed - Held, yes - Whether it can be said that charge under section 40 is confined to assets transferred to closely held companies by director or his relatives - Held, no FACTS The assessee-company was dealing in manufacture and sale of betelnut as also managing the business of real estates, office premises, shopping and commercial complexes. For the assessment year 1986-87, it originally filed a nil return and, subsequently, it filed a revised return claiming that commercial complex owned by it was not exigible to wealth-tax under section 40 since the same was intended for running a hotel. The Assessing Officer rejected the assessee's claim. On second appeal, the Tribunal held that the assessee had constructed 57 units in the complex, out of which 55 units constituted shops and one office, which had been let out to tenants on the valuation date and the building was liable to be taxed as it was not used for any of the purposes mentioned in section 40(3)(vi). On reference : HELD Section 40 shows that it covers not only unproductive assets like gold, silver, platinum, stones, ornaments, utensils but also other properties like land, building appurtenant thereto and motorcars. Hence, it cannot be said that the charge under section 40 is confined to the assets transferred to closely held companies by director or his relatives as it includes within its sweep all the assets whether commercial or non-commercial belonging to the closely held companies listed in sub-section 3 of section 40. Certain specific items of assets are excluded from the scope of levy of wealth-tax and the excluded are factory, godown,…

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