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2016 (2) TMI 29 - ITAT KOLKATA

2016 (2) TMI 29 - ITAT KOLKATA - TMI - Inclusion of wealth - whether the ‘commercial building’ i.e. shop is falling within the scope section 2(ea)(i) of the wealth tax Act or not. - Held that:- these assets are commercial purposes which form part of stock-in-trade and these three assets have been noted as part of the stock-in-trade and acquired for the purpose of construction of flats, the nature of business of assessee is purchase and sale of immovable properties the assessee had undertaken con .....

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ahavir Singh, JM These cross-appeal by assessee and Revenue are arising out of orders of Commissioner of Wealth Tax, Kolkata-XI & Kolkata-XIX of dated 18-10-2013 & 28.11.2013. Assessment was framed by WTO, Ward-33(3), Kolkata u/s163)/17 of the Wealth Tax Act, 1957 (hereinafter referred to as the Act ) for Assessment Years 2006-07 vide his orders dated 08.10.2013 & 19.12.2011 respectively. First we take up assessee appeal in WTA No.39/Kol/2013. 2. The only issue in this appeal of asse .....

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proceeded on the basis of proposal made out by the AO and not on calling and examining the records of the appellant and this jurisdiction renders the proceedings drawn invalid. For that the appellant was not given any opportunity of being heard by the Ld. Commissioner of Wealth ax and as such the order is liable to be vacated. 4. For that, without prejudice, the submissions made by the appellant in writing ought to have been accepted by the Ld. Commissioner of Wealth Tax and proceedings drawn u .....

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g asset was not considered while computing the taxable wealth of the assessee:- Shop at Lucknow : ₹ 32,28,000/- But in the Assessment Year 2005-06, the value of the above asset was added while computing the assessee s taxable wealth. The CWT-XI, Kolkata directed the AO to include the value of shop at Lucknow to ₹ 32.28 lakh in the net wealth of assessee by observing in para-3, which reproduced as under:- 3. The submission of the assessee has been considered and it is observed that co .....

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. the year under consideration the building was lying vacant and it was leased out only w.e.f. Financial Year 2006-07. Hence, this Lease Agreement has no implication on the facts of the case in the year under consideration. The show-room being commercial building lying vacant in this year is an asset liable to wealth tax. Aggrieved, now assessee is in appeal before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. Admittedly, this is a shop which is .....

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cision of co-ordinate Bench in the case of WTO Vs. Ferrolite Products Ltd. in WTA Nos. 47 & 48/Kol/2010, AYs 2003-04 & 2004-05 dated 06.02.2015, wherein it has been held as under: 5. We have heard Ld. Sr. DR and gone through facts and circumstances of the case. We have gone through the order of coordinate bench of this Tribunal Pune Bench in the case of Satvinder Singh V Dy. CWT(2007)109 ITD 241(Pune), wherein the entire provision of section 2(ea) of the Act is discussed in para13 to 27 .....

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n to certain specified properties like commercial complexes under the Wealth-tax Act was provided. (See para 100 of Finance Minister's speech reported at page 69 (St) of 231 ITR). In the Notes on Clauses on Finance Bill No. 2, 1998, it is stated that Clause 69 of the Finance Bill No. 2. 1998, seeks to amend Section 2 of the Wealth-tax Act relating to definitions. Sub-clause (b) of Clause 69 seeks to amend Sub-section (ea) of Section 2 of the Wealth-tax Act relating to the definition of asset .....

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1999 and would accordingly apply in relation to the assessment year 99-2000 and subsequent years. In the Memorandum explaining the provisions in the Finance No. 2 Bill, 1998, under the head "Incentives proposed under the Wealth-tax 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 .....

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ile construing the meaning to Sub-clauses (4) and (5) inserted by the Finance No. 2 Act, 1998 with effect from 1.4.89. the intention of the Legislature that wealth-tax is not to be levied on productive assets is to be kept in mind. 17. On reading of the main enacting provision of Clause (i) of Sub-section (ea) of Section 2, as substituted by the Finance (No. 2) Act, 1996 with effect from 1.4.97 and by the Finance Act, 1998 with effect from 1.4.99, it is clear that any building or land appurtenan .....

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of the main enacting provision. It is thus clear that all building or land appurtenant thereto, which are whether used for residential or commercial purposes, may not come within the definition of "asset" as defined under Clause (i) of Sub-section (ea) of Section 2 of the Wealth-tax Act if any one of them is found to be covered by Clauses (1) to (5) below to Section 2(ea)(i) of the Act. Sub-clauses (1) to (5) qualifies the generality of the main enactment by providing an exception and .....

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Wealth-tax Act to which these Sub-clauses (1) to (5) stand as an exception. The properties or houses enumerated in these Sub-clauses (1) to (5) must not be read as alien to the main provision. In this view of the matter we, therefore, do not find any conflict between the main enactment of Clause (i) and the exceptions provided in Subclauses (1) to (5) thereto. In the light of the main enactment provided in Clause (i) and the exception provided thereto by way of excluding the properties or the h .....

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) covers any property in the nature of commercial establishments or complexes. In order to cover a case under Subclause (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 Subclause (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 assesse .....

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aim benefit of the aforesaid Sub-clause (5), one must prove and establish that the property claimed to be excluded from the definition of "assets", should be in the nature of commercial establishments or complexes. In other words, the property should not be of any nature other than the nature of commercial establishments or complexes. In this Sub-clause (5), "complexes or establishments" are qualified with an adjective 'commercial'. Establishment or complex, therefore .....

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, multiple, manifold, multicomplex or something composed of or made of many interrelated parts, as for example, a multi-purpose building. Thus, the word 'commercial complex' means the commercial multi-purpose building composed and made of inter-relating parts in contrast to a single commercial establishment. In the case of commercial establishment, it is not necessary that it should be composed of or made of interrelated parts. In the case of a property in the nature of commercial establ .....

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also be used for the purpose of any business or trade as well. A property cannot only by its very nature be classified as a commercial establishment or complex unless the same is also used in a business and nothing else. Hence, the word 'commercial establishment' or complex, as the case may be. appears to be used in the sense that the property must be in the nature of commercial property and the same must also be used for the purpose of trade or business and nothing else. In this sense o .....

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l property or establishments, shall not be covered by expression "any property in the nature of commercial establishment or complexes" as used in Sub-clause (5) below to Clause (i) of Sub-section (ea) of Section 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 .....

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xceptions provided in Sub-clauses (1) to (5) thereto. Sub-clause (3) covers only those houses, which are occupied by the assessee for the purpose of any business or profession carried on by the assessee. Sub-clause (5) covers all those properties which are in the nature of commercial establishment or complex meaning thereby that the property must be in the nature of commercial establishment or complex which in turn indicates that the property must also be actually used for the purpose of any bus .....

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) and (5). Therefore, the CIT (A)'s observation that if the interpretation canvassed by the assessee is to be accepted it would make Section 2(ea)(i) inoperative because every building or part of building used for commercial purposes shall be claimed to be a part of commercial establishment or complex, is not correctly made out. Merely because any building or land appurtenant thereto is used for commercial purposes would not that by itself is sufficient To bring it within the ambit of commer .....

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commercial establishment or complex. Under Sub-clause (5), the Legislature has excluded only the property in the nature of commercial establishment or complex from the definition of "asset" for the purpose of Wealth-tax Act and not all the properties which are used for commercial purposes. For the purpose of Sub-clause (5), both the criterias of the nature and use of the property being of commercial must be fulfilled. 22. We may, therefore, summarize the proposition with regard to the .....

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siness or trade carried on in the said premises (Sub-clause 5), or (iii) the house for commercial purposes which forms part of stock in trade (Sub-clause 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 Section .....

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e, state that mere because of the fact that any building or land appurtenant thereto used for commercial purposes would not come within the ambit of Sub-clause (2). (3). and (5) unless for the purpose of Sub-clause (2) it forms part of stock in trade, for the purpose of Sub-clause (3) it is satisfied that the house was occupied by the assessee himself for the purpose of any business or profession carried on by him and for the purpose of Sub-clause (5) property itself was in the nature of commerc .....

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there is no single unit, but there are four properties in four separate buildings. This approach taken by the AO, in our considered view, is not found to be on sound footing. In the main provisions as well as in the exception clauses, the legislature has used the words like "any building", "any house", ''any residential property", and "any property". In other words, building or houses or residential property or property are qualified with the word &quo .....

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text and the subject matter of the statute. It is often synonymous with 'either', 'every' or 'all'. Its generality may be restricted by the context. The meaning of the word "any" may therefore, imply "all", or "one of many" "some" or "one". 25. The Hon'ble Calcutta High Court in the case of CIT v. Arvind Investments Ltd. while interpreting the word "any" used in Explanation to Section 73 of the Act has observ .....

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of the Land, and, thus, observed that no case has been pointed out to them where the word "any" has been used in a restrictive sense so as not to include "all". They further held that they failed to see why "part" should not include "the whole". In this view of the matter, and in the light of the decisions referred to above, the word "any" should not be given a restricted meaning but should include "all", "some of them", &quo .....

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n to include females; and (2) words in the singular shall include the plural, and vice versa. 27. In the enactment provided under Section 2(ea)(i), no contrary Legislative intent has been given. We are, therefore, of the view that single is included in plural, and if a plural word is used, the singular automatically comes within its ambit. Therefore, "any house", or "any property", or "any building" shall include all houses, or some of them or one of them, as the ca .....

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. 6. From the proposition discussed by coordinate bench Pune Tribunal in the case of Satvinder Singh, Supra, we have to examine the facts of present case. The facts are that the assessee in its Balance Sheet filed along with return of income declared land and building at 160, B. L. Shah Road, Kolkata-700 053i.e. land and building separately. The total area of land consists of 20164 sft out of which covered area is 10771 sft namely, the factory building, courtyard, electrical substation, labour q .....

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provisions of section 2(ea)(i)(5) of the Act being the property in the nature of the commercial establishment. The AO treated the factory premise being Land & Building as taxable wealth within the meaning of section 2(ea) of the Act but CIT(A) held, in the given facts, that the factory premise was being used for productive purpose and was in the nature of commercial establishment and therefore it falls under the exception of any property in the nature of commercial establishments or complex .....

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assessed under the head Income from House Property . From the very reading of Sub-clause (5) it is clear that this covers all those properties which are in the nature of commercial establishment or complex meaning thereby that the property must be in the nature of commercial establishment or complex which in turn indicates that the property must also be actually used for the purpose of any business or trade carried on in those commercial establishments or complexes. We are of the view that this .....

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ment means some kind of place or building or shop or store where business or trade is carried on. The word "complex" means composite, compounded, multiple, manifold, multi-complex or something composed of or made of many interrelated parts, as for example, a multi-purpose building. Thus, the word 'commercial complex' means the commercial multi-purpose building composed and made of inter-relating parts in contrast to a single commercial establishment. In the case of commercial e .....

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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 Wealth-tax Act. It is, thus, clear that the Legislature has adopted a logic that wealth-tax is not levied on productive assets, and in view of that logic, it was proposed that wealth-tax would not be levied .....

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of Sub-clause (5) as inserted by the Finance No. 2 Act, 1998 with effect from 1.4.89 wealth-tax is not to be levied on productive assets. Hence, in view of reasoning given above, we confirm the order of CIT(A) and dismiss both appeals of revenue. As the issue is covered, respectfully following the above order of Coordinate bench of this Tribunal, we allow the appeal of assessee. Now coming to Revenue s appeal in WTA No.09/Kol/2014 5. The only issue in appeal of Revenue is against the order of CW .....

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ief facts stating that AO treated the following properties asset i.e. forming part of the asset u/s 2(ea) of the Act. Aggrieved, assessee preferred appeal before CWT(A)-XIX, Kolkata who deleted the disallowance by observing in para-5.2 and 5.3, which reproduced as under:- 5.2 I have considered the factual aspect of the case and taken note of the submissions made by the appellant. In section 2(ea), definitions of assets have been noted. Here is specific exclusion of house for residential or comme .....

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