2012 (6) TMI 909 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the property at Worli, Mumbai, owned by the assessee, falls within the definition of "assets" u/s 2(ea) of the Wealth Tax Act, 1957.
2. Whether the property can be subjected to wealth tax for the assessment year 1996-97.

Summary:

Issue 1: Definition of "Assets" u/s 2(ea) of the Wealth Tax Act, 1957

The core issue was whether the property at Worli, Mumbai, owned by the assessee, falls within the definition of "assets" u/s 2(ea) of the Wealth Tax Act, 1957. The Tribunal held that the property was a commercial asset and not a non-productive asset, thus it could not be valued as an asset under the Wealth Tax Act. The court noted that prior to 01.04.1997, the definition of "assets" did not include buildings used for commercial purposes. It was only with effect from 01.04.1997 that the words "commercial purposes" were inserted in clause (i) of section 2(ea) of the Act. Therefore, a building used for commercial purposes was not considered an asset under section 2(ea)(i) of the Act before this date.

Issue 2: Subjecting the Property to Wealth Tax for Assessment Year 1996-97

The assessee filed its return of wealth for the assessment year 1996-97, showing the value of the Worli property as Rs. 73,756/-. However, the Special Audit Report estimated its market value at Rs. 1,24,42,237/-. The assessment was reopened u/s 17 of the Act, and the market value was reassessed at Rs. 1,24,42,237/-. The Commissioner (Appeals) upheld this valuation, stating that the property was not a business asset and thus not exempt from wealth tax. However, the Tribunal found that the property, being a commercial asset, was outside the purview of "assets" as defined u/s 2(ea)(i) of the Act for the relevant assessment year. The court agreed with the Tribunal, stating that the property was a commercial property and not included in the definition of "assets" as it stood prior to 01.04.1997.

The court also referenced the Calcutta High Court's decision in Maynak Poddar (HUF) Vs. Wealth Tax Officer, which held that buildings used for commercial purposes were not taxable under section 3 of the Wealth-tax Act until the amendment in 1997. The court concluded that the property in question was outside the purview of "assets" as defined u/s 2(ea)(i) of the Act and thus could not be subjected to wealth tax for the assessment year 1996-97.

Conclusion:

The appeal was dismissed, affirming that the property at Worli, Mumbai, was not an "asset" u/s 2(ea) of the Wealth Tax Act, 1957, for the assessment year 1996-97, and thus could not be subjected to wealth tax.