Law:

Section:

Section 40 of the Finance Act, 1983 - Revival of levy of wealth-tax in case of closely held companies - Assessment year 1980-81 - Assessee was a closely held company which claimed that value of portion of building let out by it would be an exempted asset - Commissioner (Appeals) rejected assessee's claim holding that company was owing property as a landlord and, therefore, that part of building let out was exigible to wealth-tax - Whether Appellate Tribunal had not applied correct principles of law to arrive at its conclusion that letting out a portion of building by assessee would be its business and, therefore, let out portion was also used by assessee for purpose of business - Held, yes - Whether question, whether there was exploitation of business asset had to be considered not only with reference to object of assessee company as it was only one of relevant criteria but also with reference to terms and conditions of lease and all other relevant factors - Held, yes HELD The assessee was a closely held company in which the public were not substantially interested and its assets were subjected to wealth-tax. The assessee claimed that the value of the portion of the building which was let out by it in favour of PNB would be an exempted asset from the list of assets found in section 40(3). The Assistant Commissioner rejected the assessee's claim by holding that it was liable to wealth-tax. The Commissioner (Appeals) also rejected the assessee's claim 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 had 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 PNB was exigible to wealth-tax under section 40(3). The Tribunal held that the property was used by the assessee for its business as the assessee had one of the objects to let out the property, therefore, the assessee would be entitled to exemption as provided under section 40(3)(vi). On reference : HELD The Tribunal had not applied the…

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