2016 (10) TMI 278 - AT - Wealth-tax

Asset for the purpose of wealth tax - whether house property which has been let out to a tenant would be outside the ambit of wealth tax under section 2(ea)(i)(v) of the Wealth Tax Act? - Held that - Considering the submission of assessee that the memorandum explaining the provision 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 very much clear that wealth tax would also not be levied on such house property from which the assessee is getting rent and the same has been let out by the assessee for a period of 300 days or more. With regard to 1st ground raised by the assessee and assumption of jurisdiction, we find from the records that the ld. AO had not rightly invoked the reopening proceedings as his reason to believe that the wealth tax has escaped assessment from house property belonging to the assessee is not correct. Hence, ground no.1 raised by the assessee is allowed. Commercial complex - whether it is an asset? - Held that - We hold that the subject mentioned property is a commercial complex and is a productive asset deriving rental income of ₹ 15,00,000/- per annum. It is well settled from the Memorandum explaining the provisions in the Finance No. 2, 1998 under the head incentives proposed under the wealth tax act that wealth tax is not to be levied on productive assets. We hold that the subject mentioned property shall be exempt u/s 2(ea)(v) of the Act and therefore outside the ambit of taxable wealth. Accordingly, the ground no.2 raised by the assessee in this regard for both the assessment years are allowed.

Summary

Issues:
Assumption of jurisdiction by Assessing Officer under section 17 of the Wealth Tax Act and whether the house property let out to a tenant falls under the ambit of wealth tax.

Analysis:
The appeals were filed against the order passed by the Commissioner of Income-Tax (Appeals) concerning the assessment years 2006-07 and 2007-08. The common issue in both appeals was the jurisdiction of the Assessing Officer under section 17 of the Wealth Tax Act and whether a house property let out to a tenant is subject to wealth tax under section 2(ea)(i)(v) of the Act. The Assessing Officer assessed the net wealth of the assessee for the assessment year 2006-07, as the property from which rent was received was not used for business purposes. The Commissioner upheld the order, stating that even if the property was used for commercial purposes, it was assessable under the Act. The assessee challenged this decision, arguing that wealth tax is not levied on productive assets. The Tribunal agreed with the assessee, holding that the property was a productive asset and exempt under section 2(ea)(v) of the Act.

In the first ground of appeal, the assessee contested the jurisdiction of the Assessing Officer under section 17. The Tribunal found that the Assessing Officer incorrectly invoked the reopening proceedings as there was no valid reason to believe that wealth tax had escaped assessment. Therefore, the first ground raised by the assessee was allowed. In the second ground, the issue was whether a commercial complex is considered an asset for wealth tax purposes. The Tribunal referred to a previous decision where it was held that wealth tax is not levied on productive assets. Following this reasoning, the Tribunal concluded that the property in question, being a commercial complex, was exempt under section 2(ea)(v) of the Act. As a result, both appeals of the assessee were allowed.

In conclusion, the Tribunal determined that the Assessing Officer lacked jurisdiction under section 17 and that the property in question, being a commercial complex, was exempt from wealth tax. The appeals were allowed in favor of the assessee, emphasizing that wealth tax is not levied on productive assets, as clarified in previous judgments and legislative provisions.