TMI Blog2004 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head 'house property income'. Due to this reason, thereafter, a notice under section 17 of WT Act was issued asking the assessee to explain why the value of these buildings should not be treated as specified assets to be taxed for wealth tax purpose. In compliance it was stated that a note was annexed with the statement of wealth filed along with the wealth tax return wherein it was stated that letting out of property being part of the business of the company hence not liable to wealth tax. For ready reference reproduced below. "The assessee owns the Building "Mafatlal House" "Mafatlal Centre" which are part of the Property Division of the Company. Part of each of the premises has been let out. It is submitted that as letting out of Property is the part of the Business of the company the portions of the premises which are let out are not liable to Wealth Tax in view of Section 2(ea)(i)(3) of the Wealth Tax Act particularly as a portion of the buildings are occupied for the purposes of its other business." It was contended that Article of Association has specified the business activities of the company which included leasing, letting or assigning of properties. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een discussed cited from the side of the assessee and the Assessing Officer has also drawn certain distinctions. With a view to keep a consistency with the income tax proceedings it was held that for wealth tax purpose the properties were 'assets' and valued the same in accordance with Part-B, Schedule-III of WT Act, 1957. Being aggrieved this issue was carried by the assessee before the first appellate authority. 4. As far as the reopening and the validity of notice under section 17 is concerned, the observation of ld. CIT(A) was that there was no change of opinion on the basis of which the case was reopened as the Assessing Officer had found that the assessee has not included the value of two immovable properties in its wealth tax return, therefore, the Assessing Officer had reason to believe that the wealth has escaped assessment so issued notice under section 17 of WT Act. A finding was also given that the reasons recorded were deemed to have been communicated because number of letters were submitted during the course of Wealth Tax proceedings by the assessee wherein the issue was discussed and nowhere in any such letter Assessing Officer was asked to supply the reasons recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened and date of forming of opinion by the ITO nothing new has happened and no new material came on record, hence it was held that reopening is not permissible depending upon the changing moods of assessing authorities. On the other hand, in the instant appeal a categorical finding of fact is on record that the assessee has declared income under the head 'house property' in income-tax proceedings in respect of these two properties which has not taken into account at the time of framing of original assessment; This is not the case of changing of moods rather depended upon the new material as well as new information came to the notice of the Assessing Officer on the basis of which reopening proceedings were initiated. As far as the case of WTO v. Bobita Choraria [1996] 56 ITD 182 (Cal.) is concerned the factual position was that the Assessing Officer has made the reference to the Valuation Officer subsequent to the completion of the assessment. So it was held that the Assessing Officer had no power to refer the matter to Valuation Officer after completion of the assessment. Consequently, the report of the Valuation Officer held not to be made the basis for reopening. What we have ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e head 'Income from house property' in the income tax proceedings. It is also an admitted position of fact that these two properties have been let out to various companies of the Mafatlal Group and also let out to Bank. A detail is furnished disclosing the names of the parties to whom these properties were let out and also providing the details of the area occupied by those parties. So far as the user of the properties is concerned the admitted position is that the same were let out during the year to certain concerns. They are 17 in number as per the details furnished on page 34 of paper book, plus assessee itself. As per the details furnished, in the building Mafatlal House, the area occupied by the assessee itself was only 14.75% and the area occupied in Mafatlal Centre by the assessee was only 16.78% of the total area. As already referred herein above rental income credited to P L Account in respect of 'Mafatlal House' amounted to Rs. 12,96,444 and in respect of 'Mafatlal Centre' rental income credited amounted to Rs. 79,10,309. There is also no dispute about this fact that the income had been disclosed in income-tax proceedings by the assessee suo motu under the head 'income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. As far as the definition of 'asset' is concerned the claim of the assessee is that "another house which the assessee may occupy for the purpose of any business or profession carried on by him" do not include within the ambits of taxability. So item No. (3) of sub-clause (i) of section 2(ea) has specified that though an asset includes any building or land appurtenant whether used for residential or commercial purposes or for the purpose of maintaining a Guest House, but does not include any house if occupied for the purpose of business or profession carried on by an assessee. So in other words if an asset is used for the purpose of business or profession then it is not an 'asset' for the purpose of taxability under WT Act. Therefore, to determine whether an asset is exempt or not one has to look into the nature of business of the assessee. In this context we have perused an order of Hon'ble Apex Court in the case of S.G. Mercantile Corpn. (P.) Ltd. v. CIT [1972] 83 ITR 700 and have found that on the facts of that case the taking of property on lease and sub-letting portion thereof was part of the business and trading activity of that assessee, so it was held that the income fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, in the present appeal though there is continuity in earning rental income systematically year after year but that alone is not the criteria so as to apply the ratio laid down by the Hon'ble Apex Court. For that purpose one has to examine the nature of the activity carried on by an assessee whether the same is within the expression 'business' or not. A distinction is required to be drawn between the two activities i.e., letting out or commercial exploitation. The various heads for the purpose of taxation has prescribed either in WT Act or IT Act are mutually exclusive and each specific head covers specific asset or source. Regardless of any arguments if the fact indicates that the property is rented out then falls under the specific head and such property cannot be treated as business asset. This view get support from an order of Jurisdictional High Court in the case of Parekh Traders v. CIT [1984] 150 ITR 310 (Bom.), wherein it was held that letting out the godown is to be assessed under the head 'income from house property'. There are certain other decisions also cited before the revenue authorities almost on identical proposition need not to be repeated again because the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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