Income Tax Appellate Tribunal - Mumbai
Pallonji Shapoorji And Co. (P) Ltd. vs Deputy Commissioner Of Wealth Tax on 7 June, 2006
Equivalent citations: [2006]102ITD101(MUM), [2006]287ITR81(MUM), (2006)103TTJ(MUM)155
ORDER
K.P.T. Thangal, Vice President
1. This Special Bench has been constituted by the Hon'ble President under Section 255(3). The issue referred to the Bench for the asst. yr. 1990-91 is as under:
Whether right to occupy premises belonging to a co-operative housing society are taxable assets under Section 40 of the Finance Act, 1983 in the case of a private limited company?
2. The facts leading to the dispute, briefly, are as under:
Assessee has filed its return of wealth on 9th May, 1991 declaring a net wealth of Rs. 1,20,400. Assessee is a company. AO noticed that the assessee-company has not offered the value of the flat at Sterling Bay Co-operative Housing Society Limited for wealth-tax purpose. In response to notice under Section 17 of the WT Act, assessee filed the return on 5th May, 1994 declaring a net wealth of Rs. 1,20,373. Assessee made repeated contention that the flat is not includible in the net wealth of the assessee. This is because the land and building belonged to the society and not to the assessee since it is merely an occupier of the flat. AO rejected the above contention. He held that assessee being member of a co-operative society, enjoys full power and transferable rights in the flat allotted to the assessee like any other member. Hence he held, flat is exigible to tax and Rs. 47,33,745 was the acquisition value of the property as on 15th March, 1990. Aggrieved by the above order, assessee approached the first appellate authority.
3. Before the CIT(A), assessee contended that the flat held by the assessee in the co-operative housing society is not an asset includible in the net wealth. Assessee relied upon the decisions in the case of Nowmsjee Wadia & Sons (P) Ltd., in WTA No. 1885/Bom/1989 and WTA Nos. 2213 to 2215/Bom/1989 for the asst. yrs. 1984-85 to 1986-87. Assessee also relied upon a connected case of an associate concern, M/s Cyrus Investments Ltd. for the same proposition. CIT(A) held, even when a person is not the legal title holder of a property, but only acquires a right stated in Sections 4(7) and 4(8), for the purpose of wealth-tax, such assessees are to be considered as owner. CIT(A) relied on the decision of the Hon'ble supreme Court in the case of CIT v. Podar Cement (P) Ltd. (7997) 141 CTR (SC) 67 : (1997) 226 LTR 625 (SC) for the above proposition. He held, the Hon'ble Supreme Court hopefully set at rest the position as to who should be considered as an owner for the purpose of tax liability. He also considered Section 22 of the IT Act, 1961. It reads as under:
22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property.
4. CIT(A) placed further reliance on Section 27 of the IT Act, 1961, which defines 'owner of house property', 'annual charge', etc. for the purpose of Sections 22 to 26. Reference also made to Section 27(iii). It reads as under:
27. For the purposes of Sections 22 to 26-
(i).
(iii) a member of a co-operative society, company or other AOP to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof;
5. After discussing the issue in the light of subsequent changes brought in by Finance Act, 1987, w.e.f. 1st April, 1988, whereby Section 27(iii) was amended to increase its scope and Clauses (iiia) and (iiib) were inserted, CIT(A) came to the conclusion that the person who is entitled to exercise the right of an owner, viz. a person who has possession of the property and who is free to earn from it at his own free will, should be considered the owner for the purpose of taxability under the head "Income from house property". In view of the above, he held that the AO was justified in coming to a conclusion that the value of the flat is includible in the net wealth of the assessee. Aggrieved by the above order, assessee carried the matter before the Tribunal.
6. There was a difference of opinion between the Members constituting the Bench-firstly, whether the matter is to be referred to a larger Bench as suggested by the learned JM (Vice President) or whether the decision of the learned AM is to be upheld, wherein he has rejected the appeal by the assessee. The issue was referred to the Third Member and the Third Member upheld the view of the JM and held that the matter should be referred to a larger Bench.
7. Before the Division Bench, learned Counsel for the assessee had relied upon the decision of the Delhi Bench of the Tribunal in the case of Mohan Exports (India)(P) Ltd. v. Assn. CWT (1997) 60ITD 473 (Del), which in turn followed the decision of the apex Court in the case of Late Nawab Six Mil Osman Ali Khan v. CWT , that property cannot be said to be belonging to the company unless it is owned by it. A contrary view taken by the Tribunal, Mumbai Bench, in the case of Tulsidas v. Patel (P) Ltd. v. WTO (1998) 61 TTJ (Mumbai) 282 : (1998) 65 LTD 287 (Mumbai) was also noticed by the Bench. In that case, it was held by the learned Members constituting the Bench that leasehold rights held by the assessee-company is assessable under Section 40(2) of Finance Act, 1983 because the expression "belonging to" does not denote absolute title. The Bench further held, the possession of an interest less than full ownership is sufficient to make such assessee liable to tax. The Bench placed reliance in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur , in which Hon'ble AM was a party.
8. The Hon'ble JM held, since there are contrary views of different Benches of the Tribunal on the point, the matter has to go to Special Bench/larger Bench. However, the AM did not agree with the above proposition for the reason that the Hon'blo Supreme Court in the case of CIT v. Podar Cement (P) Ltd. (supra), has decided the issue ultimately and defined the meaning of the word "owner" in the context of Section 22 of the IT Act. AM agreed with the conclusion arrived at by the Revenue authorities and held that the society has only a "husk" of the title and it cannot be called "a very important element of the husk" because the assessee has the right of defence in respect of possession not only against the society but also against the rest of the world. Hence he upheld the view taken by the Revenue authorities. He also held that the provisions of Section 40(5) of the Finance Act, 1983 does not prohibit the consideration of the provisions of Section 4(7) of the WT Act, There is no conflict between the provisions of Section 40(2) of Finance Act, 1983 and Section 4(7) of the WT Act. The provisions of WT Act cannot be excluded totally while operating the provisions of Section 40 of the Finance Act, 1983.
9. In the above background, the Special Bench has been constituted to consider the question mentioned in para 1.
10. Learned Counsel for the assessee briefly narrated the facts as under:
A co-operative society, viz., "Sterling Bay Co-operative Housing Society Limited" is registered under Maharashtra Co-operative Societies Act, 1960, bearing Registration No. Bom/(W/D)HSG/TC/372/1984-85. The registered address is 103, Walkeshwar Road, Mumbai 400 006, Under the bye-laws of the society, its main object was to buy plot in Cadastral Survey No. 283 of Malabar Hill, admeasuring 3760 sq, mtrs. and to construct and give flats to its members for their use. In accordance with the Consent Decree of the Hon'ble Bombay High Court dt. 3rd Oct., 1984, the society became the absolute owner of the land and property situated thereupon and has continued to be the owner of the plot since then. On 1st June 1985, assessee purchased five shares in Sterling Bay Co-operative Housing Society Limited. Under the bye-laws of the society, the assessee has right to shares and interest in the capital and right to occupy Flat No. 7 located on the third floor of the premises. The ownership of Sterling Bay Co-operative Housing Society Limited in the property continued to belong to the society and being a registered society in accordance with Maharashtra Co-operative Societies Act, 1960, the property, i.e., land and building, is registered in the name of the society and not in the name of its members, including the assessee. The various provisions of bye-laws of the society restrict the right of the members over the property belonging to Sterling Bay Co-operative Housing Society Limited, e.g., bye-laws Nos. 24, 34, 43, 45, 47, 52, etc., which provide for limitations for the rights of the members against the land and building belonging to Sterling Bay Co-operative Housing Society Limited. The property tax is levied on the society. So also water supply bill, electricity bill and insurance policy of the premises is issued in the name of Sterling Bay Co-operative Housing Society Limited. Therefore, all the statutory and utility authorities recognise only Sterling Bay Co-operative Housing Society Limited as the owner of the land and not any of its members.
11. In view of the above, learned Counsel briefly submitted as under:
Assessee requires the permission from the society to be a member. Assessee has no full right, absolute right. Relying upon the decision of the Hon'ble Supreme Court in the case of Late Nawab Sir Mix Osman Ali Khan v. CWT (supra), learned Counsel submitted, liability to wealth-tax arises because of the belonging of the asset and not otherwise. Mere possession or joint possession unaccompanied by the right to be in possession or ownership of the property would not bring the property within the definition of "wealth" because it would not be an asset belonging to the assessee. Bringing our attention, particularly to Clause 45, learned Counsel submitted, no member of the society can assign, mortgage or create any charge on his occupancy right in the flat without the previous permission in writing of the Committee except for obtaining a loan, either for purchase of a flat or for liquidating the liability incurred for the property by way of loan or advance from the employer of the member or from Life Insurance Corporation of India or from a bank or from the society or any other agency approved by the Commr. for Co-operation and Registrar, CSMS, Pune. Learned Counsel submitted, individual is different from the company. So also individual is different from a co-operative society.
12. Learned Counsel submitted, it is settled law that in a co-operative housing society the member's rights are two-fold(a) to have a share in the society and (b) interest in the capital and right to use the part of the premises allotted. The right to occupy the premises in a co-operative housing society is movable property and a separate species of property. Learned Counsel submitted under the WT Act, particularly under Section 2(m), wealth-tax is charged on all kinds of property "belonging to" individuals including the shares in a co-operative society. Again relying upon the decision of the Hon'ble Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan (supra), learned Counsel submitted, after considering various issues including the definition of "owner" under the IT Act and the concept of "belonging" under the WT Act, their Lordships held that the word "belonging" must mean only the person who has the full legal title to the property and in whose name the property is registered. This is irrespective of whether the person has parted with the possession and agreed to sell the property, received the full consideration and even where he has put the intending purchaser in possession, who he cannot evict in view of the protection granted to the intending purchaser under Section 53A of the Transfer of Property Act. Learned Counsel submitted, as per the Hon'ble Supreme Court, the title of the legal owner is "a mere husk", still only the legal owner can be treated as the person to whom the property "belongs" as liable to wealth-tax. Learned Counsel submitted, as per the Hon'ble Supreme Court, the property can belong only to the person who exercises "rights in rem" and "not rights in personam." Learned Counsel submitted, according to the Hon'ble Supreme Court, the person in whose name the property is registered can be the only person who exercises "right in rem". This is in contrast to the intending purchaser who exercises various rights in personam qua the transferor including the rights to remain in possession. Learned Counsel submitted, the Court further held that possession cannot be equated with the concept of legal ownership and even in cases where possession is legal but the legal ownership is different, the asset does not belong to the person when in possession of the property but it belongs to the person who is the legal owner.
13. Even under the WT Act, learned Counsel submitted, by virtue of Section 2(m), a member of a co-operative housing society cannot be said to have any land or building belonging to him as it belongs to the society. It cannot belong to the assessee as well to the society, learned Counsel submitted.
14. Leaned Counsel further submitted, there are two types of co-operative housing societies, viz., (a) society in which the flats/houses legally belong to the members, society being formed primarily for financial purposes and construction/maintenance; and (b) society in which the land and building belongs to the society itself and not to any individual members to whom a flat or house was allotted for use. This led to a disparity under exemption contained in Section 5(1)(iv) of the WT Act, as the value of one residential house which was exempted from wealth-tax. The members of the second type of co-operative housing society, not being the legal owners of the property, as such the property was not belonging to them and they could not claim exemption. Therefore, by way of a beneficial deeming provision overriding the meaning of "belonging", Section 4(7) was introduced by Finance Act (No. 2) of 1971. This section introduced by Finance Act (No. 2) of 1971 is in fact a proviso contrary to Section 2(m). It is a deeming fiction only for the purpose of exemption granted by Section 5(1)(iv) of the WT Act. This is clearly explained by the Board Circular, which is evidenced at pp. 155 and 156 of the paper book (case laws).
15. Learned Counsel further submitted, by Section 40 of the Finance Act, 1983, wealth-tax was revived in an extremely limited manner only for private limited companies and it was charged only on assets belonging to the company. The contrary/deeming provision of Section 4(7) was not incorporated in Section 40 particularly since the exemption under Section 5 for which Section 4(7) was introduced was not granted to private limited companies. Learned Counsel submitted, Section 4(7) of the WT Act is contrary to the meaning of the word "belonging" as interpreted by the Hon'ble Supreme Court and also contrary to Sub-section (2) of Section 40 of the Finance Act and as a matter of law as laid down by the Hon'ble Supreme Court in the case of Late Nawab Sir Mir Osman All Khan (supra).
16. Learned Counsel further submitted, under Sub-section (5)(b) of Section 40 of Finance Act, 1983, Section 4(7) of the WT Act would not be in conformity with the charging provision, i.e., Sub-section (2) of Section 40, as the meaning of "belonging" has a different meaning in law from the fiction contained in Section 4(7) of the WT Act. Therefore, there is no scope of introducing the said fiction into Section 40. Further, when one considers the object for which the fiction was introduced under the WT Act, viz., to entitle the assessees to claim a deduction under Section 5 of the WT Act, when Section 5 of the WT Act itself is excluded from being available to private limited companies under Sub-section (5)(a) of Section 40 of the Finance Act, 1983, obviously Section 4(7) of the WT Act introduced only to implement Section 5 must also be excluded.
17. Learned Counsel further submitted, in the very case which is relied upon by the Revenue authorities, i.e. CLT v. Podar Cement (P) Ltd. (supra), at p. 101 of the case law paper book, dealing with the concept of "owner", the Hon'ble Supreme Court itself noted that the decision in the case of Late Nawab Sir Mir Osman Ali Khan (supra)(at p. 646 placitum E) is under different provision and under the context of WT Act. The decision in the case of Late Nawab Sir Mir Osman Ali Khan (supra) has been followed by different Benches of the Tribunal and the High Courts given below, including assessee's own case (in WTA No 1165/Bom/1994, dt. 13th Oct. 2003 for the subsequent assessment year:
(1) Mohan Exports India (P) Ltd. v. Asstt. CWT (supra);
(2) CIT v. Smt. Badhurani Deepinder Kaur and Ors. ;
(3) Kishore B. Setalvad v. CWT ;
(4) Anand Agencies (P) Ltd. (WTA No. 874/Mum/1998, dt. 4th July, 2003);
(5) Sterling Investments Corporation (WTA Nos. 80 to 85/Mum/1999, dt. 22nd Jan., 2003);
(6) Cyrus Investments Ltd. (WTA Nos. 1204 and 1205/Bom/1995, dt. 29th Nov., 1996 and WTA Nos. 594 and 595/Bom/1993, dt. 24th Feb., 1995);
(7) Nowrosjee Wadia & Sons (P) Ltd. (WTA No.2213 to 2215/Bom/1989, dt. 19th March, 1991);
(8) Asstt. CWT v. Park Hotel (P) Ltd. (1992) 41 TTD 501 (Cal) (9) Jayant Vegoils & Chemicals (P) Ltd. v. Dy CWT (2001) 72 1TJ (Mumbai) 474 : (2000) 72 LTD 95 (Mumbai);
(10) Nu-Stores (P) Ltd. v. Asstt. CWT (1997) 59 LTD 150 (Cal);
(11) CWT v. Saifuddin and Ors. (1995) 128 CTR (Raj) 15 : (1995) 214 ITR 207 Learned counsel, placing further reliance on the above decisions submitted, it has been held that Section 40 is a code by itself and the provisions of WT Act like Section 4(7) cannot be incorporated into Section 40 of the Finance Act, 1983.
18. Learned Counsel further submitted, the Hon'ble Bombay High Court in the case of CIT v. Presidency Co-operative Housing Society Ltd , held that where members transfer their rights in a co-operative housing society, it is not a capital receipt as the society does not transfer any of its rights in the land and building. When a member transfers his share and right to occupy the flat in the society, the rights of the society in the land and building are not changed in any manner. Learned Counsel submitted, recently the Hon'ble Gujarat High Court in the case of Kishore B. Setalvad v. CWT (supra), in a case where there was a co-operative society owning land (and not the building), which in turn had allotted the land for its members, the Hon'ble High Court hold that since the land did not belong to the members and further since the land was not covered by the deeming fiction in Section 4(7) of the WT Act, the land allotted to members cannot be included in the net wealth of the members as it was not land belonging to the members. Therefore, even under the WT Act, unless there is a specific definition to the contrary overriding the term "belonging" only when one is the full legal owner it can be said that the land/building belongs to such member/person. On the facts of the present case, there is no land or building belonging to the assessee and the assessee only has a right to occupy the flat, which is not an asset listed out in Clause (3) of Section 40 of the Finance Act, 1983. Learned Counsel further submitted, unless the charging section clearly imposes the obligation, the assessee is not liable to be taxed while interpreting Section 40 because Section 40 is a charging provision. If there is any ambiguity or doubt, interpretation should go in assessee's favour. For the above proposition, learned Counsel relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Ajax Products Ltd. (1965) 55 TTR 741 (SC). Learned Counsel further submitted, the beneficial ownership, as is the case under WT Act and especially Section 4(7) has specifically not been included within the charging provisions of Section 40 of the Finance Act, Section 4(7) cannot be applied in the case of the assessee. Again for the above proposition assessee relied upon the decision of the Tribunal in assessee's own case for the asst. yr. 1991-92 in WTA No. 1165/Bom/1994; Mohan Exports India (P) Ltd. v. Asstt. CWT (supra); Asstt. CWT v. Park Hotel (P) Ltd. (supra); Jayant Vegoils & Chemical (P) Ltd. v. Dy. CWT (supra); and Nu-Stores (P) Ltd. v. Asstt CIT (supra).
19. Learned Counsel further submitted, the legal fiction in Section 4(7) of the WT Act was introduced as a beneficial provision to be r/w Section 5 so as to entitle individuals to obtain deduction/exemption in respect of house property not belonging to them. It was not introduced at any point in time under Section 40 of the Finance Act, 1983 and in fact is in direct conflict with the meaning of "belonging" contained in the Finance Act, Clause (2) of Section 40 and, therefore, ought not to be extended for the purpose as has been done by the Revenue authorities in the instant case of the assessee. Learned Counsel submitted, the Hon'ble Supreme Court in the case of CTF v. Mother India Refrigeration Industries (P) Ltd. (1985) 48 CTR (SC) 176 : (1985) 155 HR 711 (SC) held that a legal fiction must be confined to the purpose of the fiction. The Hon'ble Supreme Court held "it is well settled that legal fictions are created only for some definite purpose and that these must be limited to that purpose and should not be extended beyond that legitimate field".
20. Inviting our attention to paper book p. 155, i.e., Board Circular No. 72, dt. 6th Jan., 1972, learned Counsel submitted, co-operative societies are exempted from the rigors of wealth-tax. The net wealth of a co-operative society is excluded from the scope of assets includible for the purpose of WT Act. Paras 98 and 99 of the Finance (No. 2) Act, 1971, which is reproduced at pp. 156 and 157 of the paper book, read as under:
98. Co-operative housing societies are becoming increasingly popular amongst members of the middle and upper-middle classes as these enable them to pool their resources and build houses or flats in multi-storeyed buildings, often with the aid of loans from State Governments, State Housing Boards and other financing bodies. Co-operative house building societies fall broadly into two classes, namely, (a) those in which the houses or flats legally belong to the members themselves, the society being only a means to secure the land, the necessary financial resources by way of loan or otherwise, arranging for the construction and attending to the maintenance of the houses or flats, (b) societies in which the building belongs to the society itself and not to individual members to whom the house or flat is merely allotted or leased for use. While in the former type of societies, the houses or flats are, for wealth-tax purposes, treated as belonging to the members themselves, in the latter type of societies, the members cannot legally be regarded as owning the houses or flats and their right vis-a-vis the society is only to the extent of the value of the shares held by them in the society, which would constitute movable property for purposes of wealth-tax. This places members of the second-mentioned type of co-operative societies at a disadvantage as compared to members of the first-mentioned type of societies inasmuch as they will not be eligible for the exemption in Section 5(1)(iv) in respect of their residential house upto a value of Rs. 1,00,000.
99. With a view to removing this disparity between members of co-operative housing societies, Section 31(c) of the Finance (No. 2) Act, 1971 has introduced a new Sub-section (7) in Section 4 under which a member of a co-operative housing society to whom a building or part thereof is allotted or leased under a house building scheme of the society will be regarded as the owner of that building or part for purposes of wealth-tax. It has also been provided that in determining the value of such building or part for purposes of inclusion in the net wealth the value of any outstanding instalments of the amount payable by the member of the society to the society towards the cost of such building or part (including the land appurtenant thereto) under the house building scheme of the society will be deducted as a debt owed by him in relation to such building or part. Accordingly, the value of the house or fiat for wealth-tax purposes will be taken to be the difference between the market value of the flat if it were free from any encumbrance and the discounted value of outstanding instalments of the amount payable by him to the society towards the cost of the building or flat. As the member will be considered as the owner of such house or flat, he will also become entitled to the exemption in respect of one house up to the value of Rs. 1,00,000 in the computation of his net wealth, under Section 5(1)(iv) as amended by the Finance (No. 2) Act, 1971 (vide para 94 of this circular).
21. Learned Counsel submitted, on a reading of Sub-section (5)(b), it is clear that the provisions of Finance Bill override the WT Act, to the extent of being contrary or not, in conformity with the WT Act. Therefore, it is necessary to come to the charging section of Finance Bill, 1983 and charging Section 3 laid out the assets chargeable. It is very clear; assets must belong to private limited company. Section 4(7) was introduced to overcome this "belonging" to a company. Finance Act should get precedent over the WT Act because some of the defects in the WT Act was intended to be cured by these steps.
22. Inviting our attention to the definition of "net wealth" and the word used in the section "belonging", learned Counsel submitted, the very object of bringing Section 4(7) of the WT Act was to help an individual. This is a beneficial section to the assessee and it helps the assessee to claim exemption under Section 5. Therefore, learned Counsel submitted, this is also to be read with Section 40(5)(a) of the Finance Act.
23. Learned Counsel submitted, the members have no full right and the members right is not a right in rem. The right in rem is with the society, just like a shareholder of a company. He particularly brought our attention to the bye-laws of Sterling Bay Go-operative Housing Society Limited; Clause 24 which deals with the member's right of occupation of flat, Clause 34 which deals with the transfer of shares and interest of the deceased member in the capital/property of the society to the nominee, and Clause 45 which restricts assignment of occupancy right in the flat. These clauses read as under:
24. (a) The member who is deemed to have been allotted the flat under the bye-law No. 76(a) of the society shall have a right to occupy the flat subject to the terms and conditions set out in the letter in the prescribed form under the said bye-law.
(b) The associate/nominal member may have a right to occupy the fiat with the consent of the member and permission of the society, subject to the conditions set out by the society.
34. Subject to the provisions of the Section 30 of MCS Act, 1960 bye-law No. 17A or 19, on the death of a member, the society shall transfer the shares and interest of the deceased member in the capital/property of the society to the nominee/nominees and in proportion with the shares and interest held by the deceased member, in case property is purchased by member and associate member jointly.
In the event of death of the member, nominee/nominees shall submit the application for membership, within six months from the death of a member.
If there are more than one nominee, on the death of a member, such nominees shall make joint application to the society and indicate the name of the nominee who should be enrolled as member. The other nominees shall be enrolled as joint/associate members unless the nominees indicate otherwise.
The nominees shall also file an indemnity bond in the prescribed form indemnifying the society against any claims made to the shares and interest of the deceased member in the capital/property of the society by one of them, in case only one nominee is indicated by the nominees for membership of the society.
45. No member of the society shall assign, mortgage or create any charge on his occupancy right in the flat without the previous permission in writing of the committee:
Provided that such permission of the society will not be required for assigning, mortgaging or creating any charge on the occupancy right in the flat for the purpose of obtaining loan, either for purchase of the flat or for liquidating the liability incurred by him for the said purpose by way of loan or advance from the employer of the member or from the Life Insurance Corporation of India or from a bank or the society or any other agency approved by the Commr. for Cooperation and Registrar CSMS, Pune.
24. Again bringing our attention to Section 29 of the Maharashtra Co-operative Societies Act, 1960, which deals with restrictions on transfer or charge of share or interest, learned Counsel submitted, the real right lies with the society and not with the assessee. Again he brought our attention to Chapter IV, which deals with incorporation, duties and privileges of societies, particularly Section 36. It reads as under:
36. Societies to be bodies corporateThe registration of a society shall render it a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to acquit, hold and dispose of property, to enter into contracts, to institute and defend suits and other legal proceedings and to do all such things as are necessary for the purpose for which it is constituted.
Learned Counsel submitted, by virtue of this, society becomes a different entity under the General/Civil law. The member's right is just a right to occupation.
25. Learned Counsel again submitted, in the case of CIT v. Podar Cement (P) Ltd. (supra), the decision of Late Nawab Sri Mil Osman Ali Khan v. CWT (supra) has been referred to and even after referring their Lordships did not follow it. Learned Counsel further submitted, the decision in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur (supra) has been distinguished by the Hon'ble Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan v. CWT (supra) and their Lordships did not apply the principles laid down in that decision. In order to buttress this argument, learned Counsel brought our attention to the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Smt Badhurani Deepninder Kaur (supra). Again learned Counsel brought our attention to the decision of the jurisdictional High Court in the case of CIT v. Presidency Co-operative Housing Society Ltd. (supra), wherein their Lordships observed that the rights of the society in its capital assets were not affected in any manner by the transfer of it by the members. Hence, it could not be viewed as a capital receipt in the hands of the society. Their Lordships further observed that the amounts received by the assessee-society were not capital receipts; as such it is assessable to tax as income of the society. Hence, the learned Counsel submitted, the orders of the Revenue authorities are liable to be set aside.
26. The learned Departmental Representative submitted that he relies mainly on the proposed order of the AM, which has dealt with the issue in great detail. He particularly brought our attention to para 14 of AM's order. The contention of the Revenue in brief is that allotment of the flat to the assesseecompany by Sterling Bay Co-operative Housing Society Limited is irrevocable and, therefore, the interest of the assessee in the flat tantamounts to the asset belonging to the assessee within the meaning of Section 40(2) of the Finance Act, 1983. Particularly, relying upon the decision of the Hon'ble Supreme Court in the case of CIT v. Podar Cement (P) Ltd. (supra), the learned Departmental Representative submitted, when an asset is owned by an assessee for the purpose of Section 22 of the IT Act, it follows that it belongs to the assessee under the provisions of Section 40 of the Finance Act, 1983 also. The learned Departmental Representative submitted, a harmonious construction is required to be given to the provisions of Section 4(7) of the WT Act and Section 40 of the Finance Act, 1983. He argued that when all the rights in the flat vest with the assessee, it is only a question of terminology or semantics to say that the ownership does not vest with the assessee. The learned Departmental Representative further submitted, the decision relied by the learned Counsel in the case of Shri Tarakeshwar S/o Thakur Jiu v. Dan Dass Dey & Co. , is not relevant for the issue before the Bench. This was a case under West Bengal Estate Acquisition Act, 1953 and the question before the Court was whether Section 6 or Section 28 of the Acquisition Act governed the case. The facts in that case was that the plaintiff had given a piece of land to the defendant for extraction of sand and the issue for consideration before the Court was whether the deal was a "lease" or "license". The Court held that it was a lease. The facts in the instant case of the assessee are entirely different. Learned Departmental Representative submitted, the observation at p. 108 to the effect that "immovable property thus includes interest in or benefits arising out of immovable property" will support the Department's stand in the instant case of the assessee.
27. Learned Departmental Representative further submitted, the judgment of the Hon'ble Bombay High Court, reported in (1989) Mh. L.J. 935 and the Hon'ble Supreme Court, , in the case of Hanuman Vitamin Foods (P) Ltd. v. State of Maharashtra are similar to the facts in the instant case of the assessee. In this case the jurisdictional High Court and the Supreme Court held that transfer of shares of a co-operative society is a conveyance of property and not instrument of transfer of shares. One of the incidents of the membership of the society is that the member had a right to occupy a specific premise in the building and the transfer of share for consideration is in fact a transfer of the concerned premises. As such, it is a conveyance and stamp duty is chargeable. In the case of the assessee presently before the Tribunal, assessee is also a member of a co-operative society, which has entitled the assessee to a specified flat in the building developed by the cooperative society. In fact the object of this society was to develop a specific plot of land and membership of the society entitled the assessee to the allotment of a flat. It is evident from the bye-laws that the assessee has all the rights over the said premises including right to occupy, assign, transfer, mortgage, etc. The non-registration of the flat in assessee's name will not suggest that the flat does not belong to the assessee. The learned Departmental Representative submitted, as has been held by the Hon'ble Supreme Court in the case of. Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur (supra) referred to by the AM at p. 36 of his order, the phrase "belonging to" is capable of connoting interest which is less than absolute perfect legal title. The learned Departmental Representative further relied on the order of the AM, pp. 39 and 40, wherein he has extracted from the order of the Hon'ble Supreme Court in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur (supra), wherein their Lordships discussed the dictionary meaning of "belonging to". The learned Departmental Representative submitted, as per this definition, "belonging to" has two meanings, i.e., (i) ownership; and (ii) absolute right of the user. It has been held that less than absolute title is also covered by the term "belonging to". In short, he supported the discussion in the dissenting order of the AM.
28. The learned Departmental Representative submitted, in fact transfer of a share is nothing but transfer of the right itself.
29. In reply to the above, the learned Counsel for the assessee submitted, the decision in the case of Hanuman Vitamins Foods (P) Ltd. v. State of Maharashtra (supra) was in a different context and it was under the Bombay Stamp Act and that the decision is not applicable in the instant case of the assessee. Learned Counsel submitted, the society under consideration was tenant co-partnership society and in that context the Court observed : "Therefore, when a member of such a co-operative housing society transfers his shares to another with the approval of the society, he not only transfers the shares but also, as a necessary incident thereof, transfers his interest in the immovable property which has been allotted to him. What Section 42, Clause (a), therefore, exempts from the rule of compulsory registration is an instrument relating to 'shares in a society' which carry with them, as a necessary incident, member's interest in the immovable property occupied by him. It is therefore difficult to uphold the argument raised by Miss Shah that with the transfer of 'shares in such a society', what are transferred are merely the shares in the society and not the right to occupy the house which necessarily flows from the allotment of the houses by the society to its members. In the case of a tenant co-partnership society, 'shares in a society' which a member holds appear to us to be in severable from his interest in the immovable property which has been allotted to him for his occupation and enjoyment. It is therefore clear that in case of a tenant co-partnership society, the transfer of shares necessarily carries with it the transfer of member's interest in the immovable property allotted to him and that such a transfer can be brought about without a registered instrument because Clause (a) of Section 42 carves out an exception to the rule enunciated in Sub-section (1) of Section 17 of the Registration Act, 1908."
30. We have heard the rival submissions and gone through the orders of the Revenue authorities and the decisions cited by the contending parties. It is the case of the assessee that the ownership right in the land and building of Sterling Bay Co-operative Housing Society Limited continued to "belong" to the society even after allotment of flats to its members since being a registered society in accordance with the provisions of the Maharashtra Co-operative Societies Act, 1960, the property (land and building) has to be registered in the name of the society and not in the name of the assessee, though the assessee is a member of the said society. The nature of status and rights of co-operative society are described in Section 36 of the Maharashtra Co-operative Societies Act, 1960, which reads as under:
36. Societies to be bodies corporateThe registration of a society shall render it a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to acquit, hold and dispose of' property, to enter into contracts, to institute and defend suits and other legal proceedings and to do all such things as are necessary for the purpose for which it is constituted.
31. The perusal of the above shows that once the society is registered, such society will have a perpetual succession and a common seal. Further, it can acquire, hold and dispose of any property in its own name. The society acts through the Committee for the management with test of its authority being in general body of members in the meeting. Assessee has produced copy of water bill, electricity bill, insurance policy, lift bill, etc. to indicate that all these are issued in the name of the society and not in the name of individual members, whether corporate body like the assessee or not. On the other hand, the right of a member of such society is to occupy the flat allotted to him so long as he holds the share as a member of the society This is apparent from Clause 26 of the bye-laws which reads as under:
A member shall have a right to occupy the flat allotted to him subject to the terms and conditions mentioned in the letter of allotment (in the prescribed form) of the flat issued under bye-law No. 78(A).
Thus, the legal ownership in the entire property vests in the society while the member enjoys the use of the flat during the period he holds the share of such society.
32. We have also recorded the contention of the learned Counsel for the assessee with regard to the right of transfer of shares and interest in the capital/property of the society. Bye-laws of the society is placed on record vide paper book pp. 13 to 141. Clause 38 enumerates transfer of shares and interest in the capital/property of the society. It reads as under:
38. (a) A member, desiring to transfer his shares and interest in the capital/property of the society shall give 15 days' notice of his intention to do so to the secretary of the society in the prescribed form, along with the consent of the proposed transferee in the prescribed form.
(b) On receipt of such notice, the secretary of the society shall place the same before the meeting of the Committee, held next after the receipt of the notice, pointing out whether the member is prima facie eligible to transfer his shares and interest in the capital/property of the society, in view of the provisions of Section 29(2)(a) of the Act.
(c) In the event of ineligibility (in view of the provisions of Section 29(2)(a) and (b) of the Act) of the member to transfer his shares and interest in the capital/property of the society, the committee shall direct the secretary of the society to inform the member accordingly within 8 days of the decision of the Committee.
(d) 'No-objection certificate' of the society is not required to transfer the shares and interest of the transferor to transferee. However in case such.
33. From the reading of the above, it makes clear that the member have to give 15 days' notice and then it is considered whether the member is prima facie eligible to transfer his shares and interest or not, in accordance with the provisions of Section 29(2)(a) of the Act. Section 29 of the Maharashtra Co-operative Societies Act, 1960, reads as under:
29. Restrictions on transfer or charge of share or interest(1) Subject to the provisions of the last preceding section as to the maximum holding of shares and to any rules made in this behalf, a transfer of, or charge on, the share or interest of a member in the share capital of a society shall be subject to such conditions as may be prescribed.
(2) A member shall not transfer any share held by him or his interest in the capital or property of any society, or any part thereof, unless-
(a) he has held such share or interest for not less than one year;
(b) the transfer is made1'to a member of the society or to a person whose application for membership has been accepted by the society, or to a person whose appeal under Section 23 of the Act has been allowed by the Registrar, or to a person who is deemed to be a member under Sub-section (1A) of Section 23.
(3) Notwithstanding anything contained in Sub-sections (1) and (2), where a member is allowed to resign, or is expelled, or ceases to be a member on account of his being disqualified by this Act or by the rules made thereunder or by the bylaws of the society, the society may acquire the share or interest of such member in the share capital by paying for it at the value determined in the manner prescribed provided that the total payment of share capital of a society in any financial year for such purposes does not exceed ten per cent of the paid-up share capital of the society on the last day of the financial year immediately preceding.
Explanation I: The right to forfeit the share or interest of any expelled member in the share capital by virtue of any bye-laws of the society, shall not be affected by the aforesaid provision.
Explanation II: In this section, the expression 'financial year' means the year ending on the 31st day, of March or, in the case of any society or class of societies the accounts of which are with the previous sanction of the Registrar balanced on any other day, the year ending on such day (4).
34. It restricts the right of the member to transfer. Firstly, he should hold the shares for not less than one year. Secondly, the transfer is to be made to a member of society or to a person whose application for the membership has been accepted by either society or by a person who has been authorised/permitted by the Registrar of Societies under Section 23 or a deemed member. However, Sub-section (3) of Section 29 further restricts the right of transfer of the shares. In case of a member who has been allowed to resign or expelled or ceased to be a member on account of his being disqualified by the Act or by rules framed thereunder or by the bye-laws of the society, the society has a right to acquire the share or interest of such member in the share capital by paying for it at the value determined. The above discussion also shows that the member of society does not have any legal title in the flats allotted to him. The legal title always remains with the society.
35. Before going any further, now we have to see the decision of the Hon'ble Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan v. CWT (supra). In this case the Hon'ble Supreme Court held "the liability to wealth-tax arises because of the belonging of the asset and not otherwise. Mere possession, or joint possession, unaccompanied by the right to be in possession or ownership of property, would, therefore, not bring the property within the definition of 'net wealth' for it would not then be an asset 'belonging' to the assessee." The expression "belonging to the assessee on the valuation date" has been elaborately discussed by their Lordships. First the "ownership" is considered as discussed by Salmond on Jurisprudence. According to Salmond, "ownership" denotes the relation between a person and an object forming the subject-matter of his ownership. It consists of a complex of rights, all of which are rights in rem, being good against all the world and not merely against specific persons. Their Lordships observed, "an owner may not necessarily have possession. Secondly, the owner normally has the right to use and enjoy the thing he owned; the right to manage it, i.e., the right to decide how it shall be used, and the right to the income from it. Thirdly, the owner has the right to consume, destroy or alienate the thing. Fourthly, ownership has the characteristic of being indeterminate in duration. The position of an owner differs from that of a non-owner in possession in that the latter's interest is subject to be determined at some future time. Fifthly, ownership has a residuary character". Of course, even the Revenue had no case that the assessee in the instant case is having all its rights. The Revenue's case is that though the assessee is not fully the owner but it belongs to. Their Lordships again discussed the issue in the light of its own decision in the case of CWT v. Bishwanath Chatterjee . In this case, the Nizam had received full consideration for certain immovable properties from the purchasers but he had not executed any registered sale deeds in favour of the vendees. Their Lordships held that the property belongs to the assessee as he is the legal owner, though the vendee put into possession, and also has received full consideration. However, referring to the decision of the apex Court again in the case of Raja Mohammad Amir Ahmed Khan v. Municipal Board of Sitapw (supra), their Lordships observed that "though the expression 'belonging to' is capable of denoting an absolute title, it was nevertheless not confined to connoting that sense. Full possession of an interest less than that of full ownership could also be signified by that expression". The main thrust of the reasoning of the Hon'ble Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan (supra) was that Revenue itself had taken one view in the past and now suddenly they were changing that stand, which was not approved. Finally, Their Lordships summarized the legal position as under:
Salmond's conception of 'ownership' has been noted. The meaning of the expression 'belonging to' has also been noted. We have discussed the cases where the distinction between 'belonging to1 and 'ownership' has been considered. The following facts emerge here : (1) the assessee has parted with the possession which is one of the essentials of ownership; (2) the assessee was disentitled to recover possession from the vendee and the assessee alone until the document of title is executed was entitled to sue for possession against others, i.e., other than the vendee in possession in this case. The title in rem vested in the assessee; (3) the vendee was in rightful possession against the vendor; (4) the legal title, however, belonged to the vendor; and (5) the assessee had not the totality of the rights that constitute title but a mere husk of it and a very important element of the husk.
36. The judgment of the Hon'ble Supreme Court in the case of Podar Cement (P) Ltd. (supra) relied on by the learned CIT-Departmental Representative, in our opinion, is not in conflict with the judgment of the apex Court in the case of Late Nawab Sir Mir Osman Ali Khan (supra) for the reason that the Hon'ble Supreme Court in the case of Podar Cement (P) Ltd. (supra) was concerned with the concept of ownership in terms of Sections 22 and 27 of the IT Act, 1961, which is quite different from the expression "belonging to" appearing in Section 2(m) of the WT Act, 1957 as well as in Section 40 of the Finance Act, 1983. This fact has been noted by Their Lordships at p. 646 of 226 ITR. Therefore, this judgment does not help the Revenue. Further, judgment of the apex Court in the case of Raja Mohammad Amir Ahmed Khan v. Municipal Board of Sitapur (supra), relied upon by the Revenue for the proposition that expression "belonging to" need not confine to absolute title also does not help the Revenue since this judgment was considered by the apex Court in the case of Nawab Sir Mir Osman Ali Khan (supra) but it was still held that for the purpose of Section 2(m) of WT Act, 1957, the expression "belonging to" would denote only an absolute title in rem. Hence, the aforesaid judgment stands distinguished by the apex Court itself.
37. The judgment of the Hon'ble Supreme Court in the case of Hanuman Vitamin Foods (P) Ltd. (supra), relied upon by the learned CIT-Departmental Representative also, in our opinion, does not help the Revenue inasmuch as the issue involved in that case was quite different than the issue before us. In that case, the question before the Court was "whether transfer of shares in a cooperative society is subject to levy of stamp duty under the Bombay Stamp Act, 1958." The Court noted that co-operative society was the owner of building "Dalamal Tower" and the appellant was holding 5 shares and one of the incidents of membership was that the member had a right to occupy the premises No. 904 on 9th Floor. The appellant sought to transfer the said shares through an instrument dt. 31st March, 1986. The question arose whether stamp duty is payable under Article 25 of Bombay Stamp Act. The Court held that such instrument amounted to a conveyance of property and, therefore, stamp duty was leviable. The above discussion shows that issue before the apex Court was entirely different and has no bearing on the issue decided by the apex Court in the case of Late Nawab Sir Mir Osman Ali Khan (supra).
38. The decision relied upon by the Revenue in the case of CIT v. Shree Nirmal Commercial Ltd. (1994) 120 CTR (Bom)(FB) 124 : (1995) 213 FTR 361 (Bom)(FB), we are afraid, has no applicability in the instant case of the assessee. In this case the dispute was under which head the income is to be taxed, as business income or income from house property. Hon'ble High Court noted that the Revenue itself in assessee's own case treated the income as income from business, which was accepted by the High Court (sic-Revenue) and no appeal was filed against that Hon'ble High Court held, Revenue cannot take a somersault in subsequent assessment years and treat the income as income from house property. Thus, the ratio laid down by the Hon'ble High Court has no bearing on the issue before us and, therefore, the said decision stands distinguished.
39. In view of the above discussions, it has to be held that unless the title of the property is vested in a person, it cannot be said that such property belongs to him even though he may be owner of the property in terms of Section 22 r/w Section 27 of the IT Act, 1961.
40. Finance Act, 1960 (No. 13 of 1960), Section 13 states that "notwithstanding anything contained in the Wealth-tax Act, 1957 (27 of 1957)(hereinafter referred to as the WT Act), no tax shall be charged in respect of the net wealth of a company for any financial year commencing on or after the 1st day of April, 1960". This led to a disparity. Under the WT Act, a member of a co-operative housing society cannot be said to have any land or building belonging to him as it belonged to the society. The impact of sections introduced by Finance (No. 2) Act, 1971, w.e.f. 1st April, 1972 has been explained and mentioned vide Circular No. 72, dt. 6th Jan., 1972.
41. Section 4(7) was introduced, as explained above, so as to remedy the disparity that exemption contained in Section 5(1)(iv) of the WT Act that was available for one type of members of the co-operative housing society while to the other it was not. In this context, we have to agree with the learned Counsel's contention, particularly keeping in view the above Explanatory Note on Section 40 of the Finance Act, 1983. Wealth-tax was revived in an extremely limited manner for private limited companies and it was charged only on assets belonging to the company. The deeming provision of Section 4(7) was not incorporated into Section 40 of the Finance Act, 1983, especially since exemption under Section 5(1)(iv) for which Section 4(7) was introduced was not granted to private limited companies. Under Sub-section (5)(b) of Section 40 of Finance Act, 1983, Section 4(7) of the WT Act unable to be treated in conformity with the charging section, i.e., Sub-section (2) to Section 40, since "belonging" has different meaning in law from fiction contained in Section 4(7) of the WT Act. By virtue of Section 4(7) of the WT Act, where the assessee is a member of a cooperative society, company or other AOP and a building or part of the building is allotted or leased to the member under a house building scheme of the society, company or association, the assessee is deemed to be the owner of such building or part thereof notwithstanding anything contained in this Act (WT Act) or any other law for the time being in force. So the assessee is to be treated as deemed owner for a limited purpose; There is no scope for introducing this fiction into Section 40 of the Finance Act, 1983.
42. We have to consider the decision of the Hon'ble Gujarat High Court in the case of Kishore B. Setalvad v. CWT (supra). This was a case wherein three brothers owned three open plots in co-operative housing society. Each of the brothers had a 1/4th interest in all the plots. The total value of the plots assessed was at Rs, 1,60,500. Assessee's net wealth was Rs. 40,125. Assessee's stand was that the valuer had not taken various restrictions contained in the bye-laws of the society while fixing the taxable income. AssesDee contended that only the deposit amounting to Rs. 20,000 made with the society could be considered as asset for the purpose of wealth-tax. AO negatived the contention. CWT(A) upheld the additions made. The issue arrived before the Tribunal. It was one of the contentions of the counsel that legislature intended to include in the net wealth only the buildings or part thereof owned by a cooperative housing society and allotted/let out to its members along with the land appurtenant thereto but open plots of land as such were not to be included in the net wealth. This was particularly so since the provisions of Section 45(g) of the Act specifically provided that no tax shall be levied under this Act in respect of net wealth of any co-operative society by virtue of Section 5(1)(xxviii). The contention of the Revenue was that as per the provisions of charging section, i.e., Section 3 of the Act, wealth-tax is chargeable in respect of the net wealth of every individual. Net wealth is defined by Section 2(m), i.e., as the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by the assessee on the valuation date except certain specified categories of debts. Section 2(e) defines "assets" as including property of every description, movable or immovable and interest in the property where the interest available to an assessee for a period exceeding six years.
43. Discussing the issue, the Hon'ble High Court held, in Section 4(7) which came into effect from 1st April, 1972, the expression used is building or part thereof and not property. Property has an expression of wide amplitude, whereas building or part thereof is much narrower, ft does not include plot or land. Discussing the issue, Hon'ble High Court held that in a case where cooperative society owns land (not building), which in turns allotted the land for use of its members, the land did not belong to the members and further, land is also not covered by the deeming fiction in Section 4(7) of the Act, the land allotted to the members cannot be includible in the net wealth of the members as it was not belonging to the members. Therefore, even under the WT Act, unless there is a specific definition to the contrary overriding the term "belonging" the land and building cannot be treated as belonging to an individual/person. Section 40 of the Finance Act, 1983, is a charging provision. Unless the charging section clearly imposes an obligation, assessee cannot be treated as liable to be taxed.
44. The next question for our consideration is whether provisions of Sub-section (7) of Section 4 can be made applicable to the assessment of net wealth of a company. It has been vehemently contended by the Revenue that Sub-section (7) of Section 4 of WT Act provides that where assessee is member of a co-operative society and a building or part thereof is allotted or leased to him under a home building scheme of society, then such assessee shall be deemed to be the owner of such building or part thereof and value of such building or part thereof shall be included in computing the net wealth of the assessee. Therefore, value of the flat allotted to the member of a society is liable to be included in the net wealth of such member irrespective of the fact whether it belongs to the assessee or not. According to him, this aspect was not brought to the notice of the Hon'ble Supreme Court in the case reported as (1986) 57 CTR (SC) 89 : (1986) 162 TTR 888 (SC)(supra) but the same has been considered by the Hon'ble Andhra Pradesh High Court. Reliance has been placed on the Full Bench judgment of the Hon'ble Andhra Pradesh High Court in the case of Nawab Mir Barkat Ali Khan v. CWT . We are unable to accept such contention of Revenue for the reasons given hereafter.
45. To deal with the above contentions of the Revenue, it would be appropriate to refer both the definitions of "net wealth" provided in Section 2(m) of WT Act, 1957 and Section 40(2) of Finance Act, 1983, which are reproduced as under:
Section 2(m) Section 40(2) "net wealth" means the amount by For the purposes of Sub-section (1), the which the aggregate value computed net wealth of a company shall be in accordance with the provisions of the amount by which the aggregate this Act of all the assets, wherever value of all the assets referred to in located, belonging to the assessee on Sub-section (3), wherever located, the valuation date, including assets belonging to the company on the required to be included in his net valuation date is in excess of the wealth as on that date under this Act, aggregate value of all the debts is in excess of the aggregate value of owed by the company on the all the debts owned by the assessee. valuation date which are secured on, or which have been incurred in relation to, the said assets.
A comparative study of both the definitions shows that under Section 2(m) of the WT Act, net wealth include two types of properties, i.e., (i) assets belonging to the assessee and (ii) assets required to be included in the net wealth of assessee, while under Section 40(2) of Finance Act, 1983, net wealth includes only assets belonging to assessee. So, there is deliberate departure by the legislature. The assets required to be included are mentioned in Section 4 of WT Act. Had the legislature intended to include assets falling under Section 4, then it could have easily incorporated similar words in Section 40(2) of the Finance Act, 1983. Further, inclusion of two types of assets in Section 2(m) of the WT Act, itself shows that assets falling under Section 4 of WT Act, 1957, do not fall within the ambit of the expression "belonging to". If the flat occupied by a member of a co-operative society could be brought within the ambit of the expression "belonging to", then there was no need for the legislature to provide in Section 2(m) "including assets required to be included in the net wealth" and consequently there was no need for the legislature to insert Sub-section (7) in Section 4. However, Section 40(2) of Finance Act, 1983 does not provide for inclusion of any asset except "belonging to" the company. Accordingly, we are of the view that scope of Section 40(2) of the Finance Act, 1983 is narrower than the scope of Section 2(m) of the WT Act, 1957 and, therefore, Section 40(2) of the Finance Act, 1983 would not include assets mentioned in Section 4 of the WT Act, 1957.
46. The judgment of Full Bench of Andhra Pradesh High Court in the case of Nawab Mir Barkat Ah Khan (supra) is distinguishable on the ground that the Court was concerned with the net wealth of an individual under Section 2(m) r/w Section 4 of WT Act, 1957 and, therefore, the said judgment cannot be applied for determining the net wealth of a company under Section 40(2) of the Finance Act, 1983.
47. For the reasons given above, it is not necessary for us to go into the question whether Section 40 of the Finance Act, 1983 is self contained code or not, Even assuming for the sake of argument that Section 40 of the Finance Act, 1983 is not a self-contained code, the settled legal position is that no person can be taxed unless case of assessee falls within four corners of the charging provisions of the Act Parimisetti Seetharamamma v. CIT . Section 40 of the Finance Act, 1983 is a charging section for determining the net wealth of a company while Section 3 r/w Section 2(m) are charging provisions for assessment of net wealth of person other than company. Assets mentioned in Section 4 are required to be included in net wealth of assessee under Section 2(m) of the WT Act, 1957, but there is no such provisions under Section 40 of the Finance Act, 1983. Thus, assets falling under Section 4 of the WT Act, 1957 cannot, by any logic, be brought within the ambit of Section 40 of the Finance Act, 1983.
48. Reliance has been placed on the provisions of Sub-sections (5) and (7) of Section 40 of the Finance Act, 1983, which provides as under:
5. For the purpose of the levy of wealth-tax under the WT Act, in pursuance of the provisions of this section-
(a) Section 5 and Clause (d) of Section 45 of that Act and Part 11 of Schdule I to that Act shall not apply and shall have no effect;
(b) the remaining provisions of that Act shall be construed so as to be in conformity with the provisions of this section.
7. Subject to the provisions of Sub-section (5), this section shall be construed as one with the WT Act;
It has been contended that by virtue of these provisions, Section 4 would be applicable in the case of a company. We are unable to accept the contention of Revenue for the reasons given in preceding para. Further, Sub-section (5) provides that remaining provisions of WT Act, 1957 shall be construed to be in conformity with the provisions of Section 40. That means, that any provision which is not in conformity with Section 40 would not apply. The provisions of Section 4 of the WT Act, 1957 are not in conformity with the scope of the expression "belonging to" as explained by us in earlier paras and, therefore, Section 4 cannot be applied to the case of company.
49. We have already noted hereinabove that the legal fiction brought in by virtue of Section 4(7) was a beneficial provision to be r/w Section 5, so as to entitle individuals to obtain deductions/exemptions in respect of house property, strictly not belonging to them. It was not introduced under Section 40 of the Finance Act, 1983. It cannot be extended any further. A legal fiction must be confined to what it was strictly intended for. This deeming section cannot be again further extended and treated as a charging section.
50. For the reasons given in our order, we are unable to approve the contrary view expressed by the Tribunal in the cases relied on by the Revenue.
51. In view of the above discussion, it is held as under:
(i) That a property cannot be said to be belonging to assessee unless the legal title absolutely vests in the assessee despite the fact such assessee may be the owner of property in terms of Section 22 and Section 27 of the IT Act, 1961.
(ii) That Section 40 of the Finance Act, 1983 and Section 3 r/w Section 2(m) of WT Act are differently worded and, therefore, certain assets falling under Section 4 of WT Act cannot be included in the net wealth of a company even though such assets are includible in the net wealth of non-company assessee.
(iii) That provisions of WT Act would apply to the assessment of companies to the extent they are in conformity with the provisions of Section 40 of the Finance Act, 1983.
(iv) That provisions of Section 4 are not in conformity of Section 40(2) of the Finance Act, 1983 and, therefore, cannot be applied to assessment of net wealth of a company.
52. In the present case, the land is registered in the name of society. The building was also constructed by it. Further, property tax is levied on the society, water supply bill, electricity bill and insurance policy of the premises are in the name of society. Considering these facts coupled with the legal position discussed in the preceding paras, we answer the question in favour of the assessee by holding that the flat occupied by the assessee continues to belong to society and, therefore, the value of the same cannot be included in the net wealth of the assessee-company.
53. Since no other issue is involved in this appeal, we dispose of the appeal itself. The order of the learned CWT(A) is hereby set aside and the AO is directed to exclude the value of flat from the net wealth of the assessee.
54. In the result, appeal of the assessee stands allowed.