Question 1: “Whether the value of an immovable asset owned by an assessee is includible in the net wealth of the owner/assessee or the lessee in terms of section 4(8)(b) of the Wealth Tax Act read with section 269UA(f) the I-T Act where the term of the lease is (i) exceeding 12 months but less than 12 years;and/or (ii) exceeding 12 years.”
Answer : It is the legal owner (i.e. the assessee in the case before us) who is liable to the wealth-tax levy on the value of specified assets licensed/leased by him for a term of less than twelve years as laid down in section 269UA(f). However, the legal owner shall not be liable to wealth-tax levy on the value of specified assets leased by him for a term of not less than twelve years by virtue of any such transaction as is referred to in section 269UA(f) of the Income-tax Act. It is in fact the person acquiring any rights (i.e., lessee) in or with respect to any building under a lease for a term of not less than twelve years by virtue of any such transaction as is referred to in section 269UA(f) of the Income-tax Act who shall be deemed to be the owner thereof in terms of the provisions of section 4(8)(b) of the Wealth-tax Act.
Question 2: “Whether the words in parenthesis in section 4(8)(b) of the W.T. Act “(excluding any rights by way of lease from month to month or for a period not exceeding one year)” in fact relate to the nature of the lease agreement, which will not qualify for applying the provisions of section 4(8)(b) of the, W-T Act.”
Answer: The words in parenthesis are clear enough to indicate that any rights acquired by the lessee by way of lease from month to month or for a period’ not exceeding one year shall not affect the legal ownership of the owner and that the legal owner in such a case shall be liable to the wealth tax levy notwithstanding the fact that he has transferred the rights to the lessee by way of lease from month to month or for a period not exceeding one year. Legal ownership will remain unaffected so long as the term of lease is less than twelve years in terms of the provisions of section 269UA(f) of the Income-tax Act.
Question 3: “Whether lease agreement for a period for less than one year with an extension clause which is normally an agreement of Leave and Licence, will not be covered by section 4(8)(b) of the W-T Act and section 269UA(f) of the I-T Act.”
Answer: The fiction created by section 4(8)(b) applies to leases and not to leave and licence agreements. Leave and licence agreements are clearly outside the scope of section 4(8)(b) of the Wealth-tax Act. In a leave and licence arrangement, the legal owner shall continue to be the owner of the licensed premises and assessable to wealth-tax as such.
IN THE INCOME TAX APPELLATE TRIBUNAL
SPECIAL BENCH (WT), MUMBAI
W.T.A. Nos. 100 & 101/Mum/2005
Assessment Years: 1997-98 & 1998-99
