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ACIT, Circle-14, Pune Versus Mudhol Land Holding Pvt. Ltd.,

2015 (8) TMI 432 - ITAT PUNE

Determination of net wealth of assessee - Renting of property - Business Income or asset - Held that:- CWT(A) while treating the asset as a commercial property has followed the decision of the Tribunal in assessee’s own case [2015 (6) TMI 252 - ITAT PUNE] in the 263 proceedings and has also relied on various other decisions and since the Ld. Departmental Representative was unable to distinguish the findings given by the CWT(A) by placing any cogent material, therefore, we do not find any infirmi .....

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complex as envisaged in sub-section 5 of clause (i) of section 2(ea) of the Wealth Tax Act, the same cannot be brought into the ambit of Wealth as the same falls within the exclusions provided in clause (i) of section 2(ea) of the Wealth Tax Act. - Decided against Revenue. - WTA No.07/PN/2015 - Dated:- 31-7-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. For The Assessee : Shri D.S. Dandgaval and Shri S.N. Doshi For The Department : Shri.Dheeraj Jain ORDER PER R.K. PANDA, AM : This appeal fil .....

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of the property at Rent Capitalisation Method comes to ₹ 6,61,17,825/-. Apart from this the assessee also has motor car costing ₹ 16,18,106/-. After allowing the statutory deduction of ₹ 15 lakhs the net wealth comes to ₹ 6,62,97,931/- which had escaped assessment for which the notice u/s.17(2) was issued. On being confronted by the AO during the course of assessment proceedings, it was submitted by the assessee that it does not have any taxable wealth as on 31- 03-2008. .....

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wealth tax. The AO therefore determined the net wealth of the assessee company at ₹ 6,62,97,931/-. 3. Before CIT(A) it was submitted that the said building is a commercial property which was constructed as I.T. park and it is known as cybernex . It was argued that the property was approved as an infrastructure service provider by the Software Technology Park of India by the Ministry of Communication and Information Technology, Government of India. The Directorate of Maharastra has registe .....

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ions are provided by Cybernex as under : i. Cybernex Energy Management Services (CEMS) ii. Cybernex Information Technology Services (CITS) iii. High and Low side Air Monitoring Systems (HVAC) iv. Base Building Specifications (BBS) 4. It was argued that the lease amount is loaded with premium for these services and facilities provided. The major amount of license fees or lease rental is for the space and facilities in totality and not for the space alone and these special services provided by the .....

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hat the said condition of letting out the property for less than 300 days is applicable to a residential house and in that case the residential property will be treated as an asset. However, the building in the instant case is a commercial property. It was submitted that in the assessment completed u/s.143(3) for A.Y. 2008-09 the AO had assessed the lease charges as business income. The CIT by invoking the provisions of section 263 set aside the assessment order with a direction to complete the .....

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asset within the meaning of section 2(ea) of the Wealth Tax Act, 1957 is incorrect and therefore the same may be set aside. 6. Based on the arguments advanced by the assessee and following the decision of the Tribunal in the 263 proceedings and various other decisions as mentioned in the appeal order the Ld.CWT(A) held that the AO is not justified in including the value of the said building Cybernex in the net wealth of the assessee for the year under consideration and directed the AO to exclude .....

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ing the value of the said building 'Cybernex' in the net wealth of the assessee for the year under consideration? 3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the property in question in the nature of commercial establishment or commercial complex as envisaged in sub clause (5) of clause (i) of section 2(ea) of the Wealth Tax Act. ? 4. The appellant craves leave to add, amend or alter any of the above grounds of appeal. 8. The .....

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ommercial complex and not as residential property as held by the WTO. He accordingly submitted that this being a covered matter in favour of the assessee the order of the CWT(A) be upheld and the grounds raised by the Revenue be dismissed. 9. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO. 10. We have considered the rival arguments made by both the sides, perused the orders of the WTO and the CWT(A) and the Paper Book filed on behalf of the assessee. .....

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in ITA No. 987/PN/2013. In the first place, it may be appropriate to refer to the relevant observations of the Tribunal in the order dated 28/08/2014, which are as follows: "In this context, in our considered opinion, the issue as to whether impugned rental lease charges (rentals) is liable to be assessed as 'business income' or as 'income from house property' is an issue which is dependent upon the mode and manner in which the activities have been carried out by the assesse .....

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TR 47 has been approved. The material on record before the Assessing Officer, namely, lease arrangements with the lessees, the nature of activities undertaken by the assessee and the details of business receipts form the basis to examine whether or not the impugned intention of the assessee was to exploit the immovable property by way of complex commercial activities. All such material was before the Assessing Officer as he had duly called for such material. However, the difficulty is that there .....

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sessment order the business activities of the assessee. The business activities of the assessee has been specifically identified as leasing out floor space in the infrastructure facility, named as CYBERNEX. Though the discussion contained in the assessment order is quite short, but once the same is read in the background of the material which was 'available with the Assessing Officer as a result of his enquiries during the assessment proceedings, it cannot escape conclusion that the Assessin .....

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by the Assessing Officer. Needless to say, lack of adequate enquiry is a charge which is quite distinct and separate from the charge of lack of enquiry. As per the Hon'ble Delhi High Court in the case of CIT vs. Leisure Wear Exports Ltd. (supra) and by the Hon'ble Bombay High Court in the case of Design Automation Engg. (supra) lack of adequate enquiries cannot be a ground to hold an assessment order erroneous within the meaning of section 263 of the Act. Therefore, having regard to enti .....

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Development & Construction Co. (supra), assessee was earning license fee from letting out of premises in an IT Park, which is quite similar to the activities undertaken by the assessee in the present case. As per the appellant, the Tribunal vide its order dated 18.19.2012 (supra) considered such activities and came to conclude that the income from such activities was liable to be assessed as 'business income' and not as 'income from house property' as sought to be canvassed b .....

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pport for the stand of the Commissioner that the income from the impugned lease rentals was liable to be assessed as income from house property. While taking such a view in the matter, the Tribunal also referred to its order in the case of DCIT vs. Magarpatta Township Development & Construction Co. vide ITA No.822/PN/2011 dated 18.09.2012, wherein it is held as under: "11. .........The Hon'ble Allahabad High Court in the case of CIT vs. Goel Builders (2010) 235 CTR 472 (All.) wherei .....

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ed there from which is not separable from letting out of the building, such income shall not be treated as income from house property. ITAT Mumbai Bench in the case of Gesco Corporation Ltd. (2009) 31 SOT 32 (Mum) wherein assessee has let out commercial premises as business centre and a large number of specialized services and facilities were provided in these business centers, like air-conditioning, power backup, water filtration plant, security system through CCTV, state of art computer-teleph .....

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ess. Thus the assessee had created a commercial infrastructure and the services rendered were complex commercial /business activities. A perusal of agreements and the stipulations contained therein would not leave any doubt about the commercial character of the relationship between the parties, as distinguished from that merely of a landlord and his tenant. Occupation of space was inseparable from the provision of services and amenities." In Gesco Corporation Ltd., ITAT Mumbai Bench has dis .....

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sts, telephone operators, common waiting/ guest room with attached toilets, etc. and it was held that the receipts from such activities along with these facilities was to be assessed under the head income from business rather than the income from house property or income from other sources, as the object of the assessee was to run the business centre by exploiting the property and not merely letting out the property. The Hon'ble Gujarat High Court in the case of CIT vs. Saptarshi Services 26 .....

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plant and machinery as contended by the assessee and it has been established by the clauses of the agreements that the cost of providing these services was also included in the lease rent of ₹ 14.30 per sq. ft. The assessee also clarified that cost involved in the services provided to the particular company i.e., ex.1 Services.com was ₹ 2.83 crores which was almost 40% of the land and building cost of that tower. By no stretch of imagination such extensive and specialized services w .....

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ded within the expression building or land appurtenant thereto. Thus, the assessee has conducted systematic activity to earn profit and accordingly income was to be assessed as income from business. In view of the submissions made on behalf of the assessee, and analysis of various clauses and Schedule-II of the agreement entered with the I.T. company, CIT(A) was justified in holding that in assessee's case the said income was to be assessed as business income. This reasoned factual finding n .....

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ed by the Ld. Counsel and as noted by the ITAT in the aforesaid order, the building 'Cybernex' is not a bare tenement but it is a commercial complex with advanced specifications meant for IT Park and therefore it cannot be said to be a residential property. The building is being exploited commercially by letting out the space and other infrastructural facilities in the building to various IT enabled companies etc. and therefore in my considered opinion sub-clause (4) of clause (i) of sec .....

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