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2015 (11) TMI 76 - AT - Wealth-taxGuest House - Addition to wealth tax - meaning of Sec.2(ea)(i) - asset - the flat at Chennai was located near the appellant s factory and was used by its employees for accommodation purposes. - reopening of such assessments on the ground that the flat at Chennai was in the nature of guest house and therefore constituted an Asset under section 2(ea) of the Act, was only a conclusion arrived at on a change of opinion by the AO and on reexamination of the facts that were already on record - Held that - Assessee had product units located across India and a factory also existed in Chennai. The flat at Chennai was visited by Assessee s employees in connection with official work from Kolkata and Bangalore. It was used as transit accommodation for the senior executives, finance managers, administrative staff and engineers from other units. Thus the flat was used for the purpose of business of the Assessee. The decision of the Hon ble Gujarat High Court clearly supports the contention raised on behalf of the Assessee. We therefore hold that the flat at Chennai cannot be regarded as Asset within the meaning of the Act. It can be seen from the provisions of the IT Act, that Accommodation in the nature of a guest house has been given an extended meaning under Explanation to Sec.37(4) and Sec.37(5) of the IT Act. Such extended meaning cannot be applied under the provisions of the Act, especially in the context of Sec.2(ea) of the Act, defining the term Asset for the purpose of the Act. We are therefore of the view that the aforesaid decision of the Hon ble Calcutta High Court cannot be applied to the facts of the present case. We are of the view that the decision rendered by the Hon ble Gujarat High Court referred to earlier, applies to the facts of the present case. Following the said decision which were rendered on identical facts as that of the Assessee s case, we are of the view that the value of guest house at Chennai, cannot be considered as Asset under the Act. - Decided in favour of assessee.
Issues Involved:
1. Validity of initiation of reassessment proceedings under Section 17 of the Wealth Tax Act, 1957. 2. Determination of whether the flat at Chennai constituted an "Asset" within the meaning of Section 2(ea) of the Wealth Tax Act, 1957. Detailed Analysis: 1. Validity of Initiation of Reassessment Proceedings under Section 17 of the Wealth Tax Act, 1957: The Assessee contended that the initiation of reassessment proceedings under Section 17 of the Wealth Tax Act was invalid. The Assessee argued that the original wealth tax returns filed under Section 14 of the Act included complete details of assets, including the flat at Chennai. These returns were processed under Section 16(1) of the Act. The Assessee claimed that the reopening of assessments on the ground that the flat was a guest house was based on a change of opinion by the Assessing Officer (AO) and a reexamination of already available facts. Therefore, it was argued that there was no "reason to believe" that wealth chargeable to tax had escaped assessment, rendering the reassessment proceedings invalid. 2. Determination of Whether the Flat at Chennai Constituted an "Asset" within the Meaning of Section 2(ea) of the Wealth Tax Act, 1957: The core issue was whether the flat at Chennai used for accommodating the Assessee's employees constituted an "Asset" under Section 2(ea) of the Wealth Tax Act, 1957. The Assessee argued that the flat was used as transit accommodation for employees visiting the factory in Chennai, thus not qualifying as a "guest house" but rather as accommodation used for business purposes. The Assessee cited the Gujarat High Court's decision in CIT vs. Gujarat Industrial Development Corporation, where it was held that accommodation used exclusively for employees on official tours does not constitute a "guest house." The Wealth Tax Officer (WTO) and the Commissioner of Wealth Tax (Appeals) (CWT(A)) disagreed with the Assessee's submissions. The CWT(A) held that the flat was used for visiting employees and not for permanent stay, thus qualifying as a guest house under Section 2(ea) of the Wealth Tax Act. Consequently, the flat was deemed an asset liable for wealth tax, and the addition of Rs. 58,79,800 was confirmed. The Tribunal, however, considered the submissions and the relevant case law. It referred to the Gujarat High Court's decision in the case of Gujarat State Petroleum Corporation, where it was held that a guest house used primarily for business purposes by the Assessee's officers falls within the exceptions provided in Section 2(ea)(i)(3) and (5) of the Wealth Tax Act. The Tribunal found that the flat in Chennai was used by the Assessee's employees for business purposes, similar to the facts in the Gujarat High Court case. Therefore, the flat could not be regarded as an "Asset" under the Wealth Tax Act. The Tribunal also distinguished the Calcutta High Court's decision in Kesoram Industries and Cotton, noting that the extended meaning of "guest house" under Section 37(4) and (5) of the Income Tax Act, 1961, could not be applied to the Wealth Tax Act. The Tribunal concluded that the flat at Chennai did not constitute an "Asset" under Section 2(ea) of the Wealth Tax Act. Conclusion: The Tribunal allowed the appeals, holding that the flat at Chennai did not qualify as an "Asset" under the Wealth Tax Act, 1957. Consequently, the wealth tax demand raised on this account was deleted. Given this conclusion, the Tribunal did not find it necessary to decide on the validity of the reassessment proceedings. Order: The appeals were allowed, and the order was pronounced in the court on 11.09.2015.
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