2016 (4) TMI 595 - AT - Wealth-tax

Eligibility of exemption within the meaning of section 2(ea)(i)(4) of the W.T Act on residential property of the assessee - property given on rent for more than 300 days in a year for commercial purposes - Held that - We find from the copy of lease deed that the property in question has been let out on rent to M/s. Eli Lily & Co. (India) Pvt. Ltd w.e.f 1-6-2002, which is more than 300 days in a year. Accordingly, we hold that the assessee is entitled for exemption u/s. 2(ea)(i)(4) of the W.T Act 1957. We find that the date reckoned by the ld.AO as 13/06/2002 is only the date of payment/credit mentioned in the TDS Certificate, which in our opinion should not be the determining factor for deciding the date of letting out of the property. Section 2(ea)(i)(4) of the Act does not contemplate the usage of residential property only for residential purpose. We find that this section only says the residential property that has been let out for a minimum period of three hundred days in a previous year is eligible for exemption. We also find lot of force in the arguments of the ld.AR that the ld.AO having concluded that the subject mentioned property loses its status/character as residential property and gets converted into commercial property, in view of the fact that it has been let out for commercial purpose, the ld.AO ought to have granted exemption to the assessee in terms of provisions of section 2(ea)(i)(5) of the Act. In view of the aforesaid facts and circumstances of the case, we hold that the assessee is eligible for exemption u/s. 2(ea)(1)(4) as well as u/s 2(ea)(i)(5) of the Act - Decided in favour of assessee

Summary

Issues involved: Determination of exemption under section 2(ea)(i)(4) and 2(ea)(i)(5) of the Wealth Tax Act, 1957 for residential properties let out for commercial purposes.

Analysis:
1. WTA No.19/Kol/2014 A.Y 2002-03:
The appeal was dismissed as not pressed by the assessee. No issues were discussed in detail for this appeal.

2. WTA No.20/Kol/2014 A.Y 2003-04:
The main issue was whether a residential property let out for commercial purposes qualifies for exemption under section 2(ea)(i)(4) of the Wealth Tax Act. The Assessing Officer (AO) denied the exemption as the property was not deemed let out for 300 days based on the TDS certificate date. However, the Tribunal found that the property was let out for more than 300 days in a year, entitling the assessee to exemption under section 2(ea)(i)(4). The Tribunal disagreed with the AO's date determination and allowed the appeal.

3. WTA No. 21/Kol/2014 A.Y 2003-04:
The issue was similar to the previous appeal, focusing on whether a property let out for commercial purposes for over 300 days qualifies for exemption under section 2(ea)(i)(4) and 2(ea)(i)(5) of the Act. The AO contended that the property lost its residential status due to commercial use, denying exemption. However, the Tribunal held that the property met the conditions for both exemptions, as section 2(ea)(i)(4) does not require the property to be used solely for residential purposes. The appeal was allowed based on these findings.

In conclusion, the Tribunal allowed the appeals for WTA No. 20 & 21/Kol/2014 for the A.Ys 2003-04 & 2004-05, granting exemption under sections 2(ea)(i)(4) and 2(ea)(i)(5) of the Wealth Tax Act. The judgment clarified that the 300-day requirement does not specify the exclusive residential use, and commercial use does not disqualify the property from exemption if other conditions are met.