Dismissing the petition the Court held that , S. 40(3) of the Act bringing to tax land and building which is not used for business purposes by companies in which public are not substantially interested to tax under the Wealth Tax Act and leaving out those land and buildings which are used for business purposes by companies in which public are not substantially interested from the charge of wealth tax under the Act is a reasonable classification. Therefore, the legislation bringing to tax land and buildings owned by the companies in which public are not substantially interested without any reference to the manner in which such companies came into ownership of the land and buildings is a decision taken by the legislature and cannot be faulted on the touchstone of Article 14 of the Constitution of India. The speech of the Finance Minister while introducing the bill points out the mischief which was existing namely persons transferring land and buildings owned by them to closely held companies i.e. companies in which the public are not substantially interested so as to evade payment of wealth tax. Therefore, the legislation to cure the mischief was to bring to tax all companies in which public are not substantially interested to the extent it held land and buildings which are not used for business purposes, without determining the source and manner of acquisition.
In fact, the Finance Minister’s speech itself indicates that it is proposed to levy wealth tax in case of closely held companies inter alia in respect of land and buildings owned by such companies and not used for the business purposes. The object of introducing the bill was in terms of the Finance Minister’s speech not restricted only to bring to tax those companies in which public are not substantially interested to which the land and building has been transferred by its members. The Parliament has decided to bring to tax the land and buildings not used for the purposes of business and owned by the companies in which the public are not substantially interested.
The Parliament has thus made a reasonable classification between the companies in which public are substantially interested from the companies in which public are not substantially interested. This classification cannot be found fault with because the petitioners want further classification to have been done by the Parliament.
The remedy of the petitioners, if any, in matters such as this, is to have the Parliament to amend the law so as to meet what according to the petitioners would be the most just and appropriate classification, by adding further classification and restricting its applicability only where the assets have not been acquired by the company in which the public are not substantially interested out of its own profits.
The legislature has in its wisdom decided that the executive should not be burdened with finding out the manner in which the land and buildings has been acquired by the company, to bring it to tax. The mere fact that there is land and building owned by the company and it is not used for the purposes of business is sufficient to hold that these assets to be taken into account under Section 40(3) of the Act for the purposes of wealth tax under the Wealth Tax Act. Therefore ,the challenge to Section 40(3) of the Act is not sustainable. .( WP. No. 2983 of 1987, dt. 02.04.2018)