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ACIT (OSD) , Circle-5, Ahmedabad Versus M/s. Prasad Machinery Pvt. Ltd.

2015 (6) TMI 728 - ITAT AHMEDABAD

Valuation - Addition in net wealth - Held that:- Revenue seeks to restore the Assessing Officer’s findings treating assessee’s industrial sheds in question as taxable under the provisions of wealth tax law. It has come on record that the assessee is utilizing the same in its business of plastic processing machineries and generates revenue therefrom. The lower appellate authority has exempted these sheds from being assessed by quoting section 2(ea)(5) of the Act. It also quotes case law of the tr .....

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nt : Shri Parin Shah, A.R. ORDER Per Shri S. S. Godara, Judicial Member This Revenue s appeal for A.Y.2005-06, arises from order of the CWT(A)-XI, Ahmedabad dated 28.11.2011, passed in case no.CWT(A)-XI/346/ACWT-Cir.5/10-11, deleting addition of ₹ 9,58,22,800/-, in proceedings u/s.16(3) r.w.s. 17 of the Wealth Tax Act, 1957 in short the Act . 2. Facts of the case are in a narrow compass. The assessee is a company. It did not file wealth tax return at the first instance. The Assessing Offic .....

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s attention towards section 2(ea)(3) of the Act exempting such houses/buildings occupied for the purpose of business or profession. The Assessing Officer did not agree. He adopted rent capitalization method as per the schedule III of the Act and computed assessee s taxable wealth of ₹ 9,43,22,800/- in assessment order dated 20.12.2010. 3. The CWT(A) has reversed the Assessing Officer s action as under: 2. The only effective ground of appeal is against addition in net wealth of ₹ 9,5 .....

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her taxes to the appellant. Net wealth of these assets was assessed at ₹ 9,58,22,800/- by rent capitalization method as per provisions of Schedule III of the Wealth-tax Act, 1957. 2.1 During the appellate proceedings, appellant submitted as under: "(1)'. As regards the factory buildings owned.:- That, your appellant is the owner of two factory buildings constructed on plot nos. 14 & 16 of the lease-hold land of 99 years obtained from G.l.D.C. at Vatva. It may please be noted t .....

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ing being under the occupation and ownership of your appellant, right from the beginning it has been shown as business asset and hence depreciation thereon is also claimed and allowed as such; whereas the new factory building though owned but not so occupied, is shown as an asset only. (2). About the Rental Income earned from two factory buildings.:- Your appellant at this stage respectfully invites Your Honour's attention on the crucial user of two factory buildings for commercial purposes; .....

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e intention of the owner of the premises is to use it either for his own business purpose or to use it commercially by giving it on hire and thereby to earn rental income; the characteristic whereof is as good as a business income only. Now for the year under reference certain space on hire was given in the old factory building to (1) Prasad Koch Technik Pvt. Ltd. on a total rent of ₹ 33 lakhs in a year and (2) KHS Machinery Pvt. Ltd. on total rent of ₹ 24 lakhs in a year; both toget .....

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lso allowed, is taxed as business income in Income-tax; whereas the rental income of ₹ 39,28,800/- being from a new factory building though owned but not occupied is taxed under the head Income from house property. (3). Legal submissions.:- In view of the above Your Honou's attentation is invited on S.2(ea) of Wealth-tax Act '57 which reads about the definition of " assets " chargeable to Wealth-tax, wherein it is also stated as to what is not included within the meaning .....

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overed under Clause (5) and thus both the factory buildings having been used and meant for carrying out the business activities, both are exempt from Wealth-tax. (4). As regards the application of Sch. Ill R. W. Rule 3 of W.T. Rule'57. Without prejudice to the above if however the value of the above said two factory buildings is required to be taxed on the basis of Gross maintainable rent which is finally arrived at to Net maintainable rent then in such a case it should be worked out on the .....

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aid at ₹ 35,640. Here it be further noted that rental income of the old factory building being taxed as business income since years on the ground of it being a business asset with depreciation allowed thereon since years; such an asset should not be brought to Wealth - tax through Sch. Ill rule 3 of the W.T. Rule '57. In view of the above Your Honour is requested to please treat both the factory buildings as business assets carrying on the activities of a commercial nature both should .....

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ambiguous, because it had specified the buildings which were included in the definition of" asset", such as guest house, residential building, farm house situated within 25 kilometers of the municipal town, but it did not include commercial building and hence buildings used for business or commercial purposes were not taxable u/s. 3 of the W.T. Act '57. Thus, in the case of "Mavnak Poddar HUF v/s. W.T.O. reported in 262 I.T.R. p 633 it was held that " even prior to the am .....

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There is no conflict between the main enactment of C. (i) of s. 2(ea) and the exceptions provided in sub. clauses (1) to (5) which covers any property in the nature of commercial establishment or complex; and hence if the assessee owns more than one property in the nature of commercial establishments or complexes, the exemption shall be available to all such properties and it cannot be restricted to any one of them. Thus, in the light of main enactment in Cl. (i) and the exception provided ther .....

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ex, should be occupied by the assessee for the purpose of any business or profession carried on by him as in the case covered by Sub. Cl. (3): because the nature and, purpose of use of the property is material, irrespective of the fact,: whether it has been used or occupied either by assessee himself or by anyone else for the purpose of any business or profession carried on by them. " In view of the above, Your Honour is requested to please consider the factual and legal aspect of this case .....

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ed view, both these plots are exempt as per the provisions of section 2(ea) (5) of W.T. Act. This proposition is supported by the ratio of Satvinder Singh Kalra V/s. DCWT reported on (2007) 112 TTJ (Pune) 489, wherein it was held: "Sub-cl. (5) covers any property in the nature of commercial establishments or complexes. In order to cover a case under sub cl.(5), it is not necessary that the property in the nature of commercial establishments or complexes should be occupied by the assessee fo .....

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, should be in the nature of commercial establishments or complexes. In this sub-cl.(5), complexes or establishments are qualified with an adjective commercial, establishment or complex, therefore, must be of a commercial in nature. The word commercial means something which is used in or related to, a business or a trade. Commercial means relating to or engaged in or used for commerce. The word establishment' means an organization, building, construction, shop, store, concern or corporation. .....

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