TMI Blog2016 (1) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... an opinion in not bringing the property to tax and the same cannot be substituted by the CIT in the proceedings u/s 25(2) of the Act - Decided in favor of assessee. - WTA Nos. 2 & 3 /Hyd/2015 - - - Dated:- 22-1-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri B. Ramakotaiah, Accountant Member For the Petitioner : Shri Mohd. Afzal For the Respondent : Smt. Mythili Rani ORDER Per B. Ramakotaiah, A. M. These two appeals are filed by assessee against the orders of CIT-II, Hyderabad, u/s 25 of the Wealth Tax Act, dated, 11/12/20145 for the Assessment Years 2006-07 2007-08. 2. At the outset, we find that these appeals were filed with a delay of 45 days. It was submitted by way of an affidavit that the order of CIT was received on 25/12/14 and the appeal should have been filed on or before 23/02/2015 and the same was filed on 09/04/15 with a delay of 45 days. The delay is on account of financial difficulties of the company, which has taken complete attention of the Executive Director, who could not prefer the appeal at the relevant point of time. It was explained that assessee company s turnover has come down from above 20 crores to ₹ 2.7 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the lessee and a monthly rent was received at ₹ 2,56,000/- from August, 2000, which was being offered and accepted/assessed as business income. The ld. CIT, however, has not accepted the contention and opined that the assessee leased out the property to a third party and did not use it for its business purposes. Accordingly, ld. CIT set aside the order of the AO and directed to consider the value of the building/property for the purpose of WT. His finding in para 5 of his order is as under: 5. The explanation filed by the AR of the assessee is examined and the explanation is not accepted. The argument of the AR that the lease property is a commercial establishment which is not in the purview of the asset is not correct. During the year, the assessee leased out the property to another company on lease basis and did not use for his business purpose. Income on such activity will become income from house property though the assessee has treated the income as business income in his return of income. The property development according to the requirements of the assessee with necessary equipment will not become a commercial establishment. Relying on the decisions in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment. Therefore, not liable for WT Act. It was submitted that after the explanation was given, the AO has accepted the same and did not make any addition, which shows that he has applied his mind, therefore, the CIT is prevented by taking a different opinion under the provisions of section 25, as held by the Hon ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd., 332 ITR 167. It was submitted that it is not a case where the AO has not enquired and framed the assessment, but, the AO has enquired and accepted assessee s contention and formed opinion and, therefore, CIT is not empowered to revise the assessment order. Ld. counsel also relied on the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, 234 ITR 83 (SC) to submit that CIT cannot substitute his opinion on an issue in the proceedings u/s 25 of the Act. Since the provisions of section 25 WT Act are in paripassu to the provisions of section 263 of IT Act, therefore, these principles will equally apply to the facts of the case. The ld. counsel further on merits submitted that the property is commercial property and incomes of which were offered and accepted as bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole- time employment, having a gross annual salary of less than two lakh rupees; (2) any house for residential purposes which forms part of stock-in-trade. (ii).............. 14. The aforesaid cl. (i) of sub-s. (ea) of s. 2 of the WT Act was substituted by the following cl. (i) by the Finance (No. 2) Act of 1996 with effect from 1st April, 1997 : (i) any building or land appurtenant thereto (hereinafter referred to as house ), whether used for residential or commercial purposes or for the purpose of maintaining a guest-house or otherwise including a farmhouse situated within twenty-five kilometers from local limits of any municipality (whether known as municipality, municipal corporation or by any other name) or a Cantonment Board but does not include- (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or director who is in whole-time employment, having a gross annual salary of less than two lakh rupees; (2) any house for residential or commercial purposes which forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -cl. (b) of cl. (69) seeks to amend sub-s. (ea) of s. 2 of the WT Act relating to the definition of assets for the purpose of wealth-tax. Vide this clause, it was proposed to exclude let out residential properties from the definition of asset in case the property has been let out for a period of at least 300 days in a year. [Sub-cl. (4) to cl. (i) of sub-s. (ea) of s. 2 of the WT Act]. It was also proposed to exclude any property in the nature of commercial establishment or complex from the definition of asset and these amendments should take effect from the 1st day of April, 1999 and would accordingly apply in relation to the assessment year 1999- 2000 and subsequent years. In the memorandum explaining the provisions in the Finance No. 2 Bill, 1998 under the head Incentives proposed under the WT Act , it is clarified that wealth-tax is not levied on productive assets. In view of this logic, it is proposed that wealth-tax would also not be levied on such residential properties that have been let out for a period of a minimum of three hundred days in a year, and, it is also proposed to exempt commercial establishments and complexes from the ambit of WT Act. It is, thus, clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision. In this view of the matter, we, therefore, do not find any conflict between the main enactment of cl. (i) and the exceptions provided in sub-cls. (1) to (5) thereto. In the light of the main enactment provided in cl. (i) and the exception provided thereto by way of excluding the properties or the houses enumerated in the sub-cls. (1) to (5) from the main enactment, the intention of the legislature becomes clear that the legislature did not intend to bring all buildings or land appurtenant thereto whether used for residential or commercial purposes within the ambit of assets chargeable to tax under the WT Act. Thus, the question of rendering the cl. (i) being redundant does not arise. 18. On the reading of the aforesaid definition of assets given under cl. (i) of sub-s. (ea) of s. 2 as it stood from time to time, it is clear that sub-cl. (3) below cl. (i) of sub-s. (ea) of s. 2 has been inserted by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997 and sub-cls. (4) and (5) were subsequently inserted by the Finance (No. 2) Act, 1998 w.e.f. 1st April, 1999. The assessment years involved in these appeals are asst. yrs. 1999-2000 to 2002-03, and, as such, we are conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial purposes by any person other than the assessee. 19. On the other hand, 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 for the purpose of any business or profession carried on by him as in the case covered by sub-cl. (3). Here, the nature and purpose of use of the property is material irrespective of the fact whether it is used or occupied either by the assessee himself or anybody else for the purpose of any business or profession carried on by them, as the case may be. 20. Sub-cl. (5) below cl. (i) of sub-s. (ea) of s. 2 of the WT Act reads as under : Impact Metals Ltd. (5) any property in the nature of commercial establishments or complexes; On its plain reading, it appears that any property in the nature of commercial establishments or complexes is not included within the definition of assets for the purpose of WT Act. To claim benefit of the aforesaid sub- cl. (5), one must prove and establish that the property claimed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial property, the same would not fall within the term commercial establishment or complex used in sub-cl. (5) below cl. (i) of sub-s. (ea) of s. 2 of the WT Act. Having regard to the object and purpose of the said cl. (i) with exception thereto, any building though used for commercial purposes, but is not in the nature of commercial property or establishment, shall not be covered by expression any property in the nature of commercial establishment or complexes as used in sub-cl. (5) below cl. (i) of sub-s. (ea) of s. 2 of the Act, For the purpose of the aforesaid clause, the property must be of commercial nature implying thereby that the very nature of the property must be commercial and at the same time it must be used in a business or trade and nothing else. 21. However, from the reading of the main provision contained in sub-cl. (i) of sub-s. (ea) of s. 2, which is appended above, it is clear that any building or land appurtenant thereto used for commercial purposes also comes within the definition of asset, subject to the items excluded, vide sub-cls. (1) to (5) thereto. In the main principal portion of cl. (i), the word used is any building or land appurtenant th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and use of the property being of commercial must be fulfilled. 22. We may, therefore, summarize the proposition with regard to the building used for commercial purposes as under : (1) That any building or land appurtenant thereto used for commercial purposes shall not be excluded from the asset as defined under sub-s. (ea) of s. 2 of the WT Act, unless (i) any house is occupied by the assessee for the purpose of any business or profession carried on by him [sub-cl. (3)], or (ii) the property by its very nature is in the nature of commercial establishment or commercial complex, being used in a business or trade carried on in the said premises [sub-cl. (5)], or (iii) the house for commercial purposes which forms part of stock-in-trade [sub-cl. (2)]. Therefore, for the purpose of item No. (3), any house may not necessarily be required to be in the nature of commercial establishment or complex, if it is occupied by the assessee for the purpose of any business or profession carried on by him, and in that case, the same shall stand excluded from the purview of assets defined under s. 2(ea) of the Act. Further, any property which satisfies the criteria of its being in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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