2006 (9) TMI 246 - AT - Wealth-tax

Wealth tax assessment - let out properties u/s Assets u/s 2(ea) Or Not - Nature of commercial establishments or complexes - ground floor of the apartment - office property - HELD THAT - In the enactment provided u/s 2(ea)(i), no contrary legislative intent has been given. We are, therefore, of the view that single is included in plural, and if a plural word is used, the singular automatically comes within its ambit. Therefore, any house , or any property , or any building shall include all houses, or some of them or one of them, as the case may be. Therefore, merely because the assessee has 4 commercial establishments or complexes at 4 different places can that by itself be a basis to hold that the property in question does not come under the purview of any property in the nature of commercial establishment or complexes . If the assessee owns more than one property in the nature of commercial establishment or complexes, the exemption shall be available to all such properties and cannot be restricted to anyone of them. Thus, we now proceed to examine the facts and circumstances of the present case. With regard to the property at 1002, 2nd Floor, Budhwar Peth, Pune, we have perused the respective purchase deed, lease agreement, electricity bill. Details of the amount of rent received by the assessee in respect of this property has also been furnished by the assessee. The property is not being used for the purpose of any business or trade. No evidence as to the nature of the property supported by any municipal tax paid has been furnished. The property has been let out to the said Institute. Therefore, the property in question is also not covered by sub-clause (3) of clause (i) of sub-section (ea) of section 2 of the Act. From the point of user of this property being used by the National Eggs Research Institute of Indian Council of Medical Research, New Delhi for the purpose of dispensary-cum-laboratory, it cannot be said that it is in the nature of a commercial establishment or complex. Therefore, the assessee's claim in respect of this property at 1002, 2nd Floor, New Budhwar Peth, Pune that it does not fall within the definition of asset defined under section 2(ea)(i) as it is excluded by sub-clause (5) thereto, is not justified. With regard to the office premises at 24, East Street, Yogesh House. This property is subjected to property tax by the Pune Cantonment Board. Tax has been levied treating the property as shop premises situated at Yogesh House, East Street. East Street at Pune is a commercial area. From the facts, it is clear that the property in question is in the nature of a commercial establishment. This property is not merely used for commercial purposes, but also it is in the nature of a commercial building. Therefore, having regard to the nature of the property as well as its use the property can be classified as commercial establishment within the meaning of section 2(ea)(i)(5) of the Wealth-tax Act, and as such, value thereof is not includible in the net wealth chargeable to tax under the Wealth-tax Act. The third property is in the nature of office at Shankar Parvati Chamber. This property was purchased by the assessee on 2-11-1994. This property is situated in the apartment known as Shankar Parvati Apartment Condominium. This property has been let out by these assessees to one M/s. Ericsson Communications (P.) Ltd. for the purpose of licensee's office. The licensee is a company incorporated under the Companies Act, 1956 and having its registered office at The Great Eastern Plaza, 2-A. Since this property is in the nature of commercial building and as well as it was used for the purpose of business or trade, the same can be said to be a commercial establishment within the meaning of section 2(ea)(i)(5) of the Act and hence, it is excluded from the purview of the asset, and as such, it is not includible in the net wealth chargeable to wealth-tax. These assessees also own a property at ground floor of the same apartment known as Shankar Parvati Apartment. The sale agreement, lease agreement, and the municipal tax receipt in respect of this property has also been perused by us. The purchase deed is in respect of one room each of upper ground floor being in the nature of office. The said property has been given on rent on leave and licence basis to M/s. Golden Touch Developments (P.) Ltd., this needs further verification as to whether the property was actually used for the purpose of any business or trade by the licensee at the relevant point of time. As to the nature of the property, there is no dispute that it is in the nature of commercial property being in the nature of office premises. But the second criteria as to whether the property is used for the purpose of business or not is not established from the papers available on record so as to treat the same as a commercial establishment within the meaning of sub-clause (5) of clause (i) of sub-section (ea) of section 2 of the Act. This matter is restored back to the file of the Assessing Officer for further enquiry and verification and then to decide the matter in accordance with the observations made above, and as per law after providing reasonable opportunity of being heard to the assessee. In the result, all the appeals filed by both the assessees are partly allowed as above.

Summary

Issues Involved:

1. Whether the properties fall within the definition of "assets" under section 2(ea) of the Wealth-tax Act, 1957.
2. Whether the properties are exempt under section 2(ea)(i)(5) as commercial establishments or complexes.

Issue-Wise Detailed Analysis:

1. Definition of "Assets" under Section 2(ea) of the Wealth-tax Act, 1957:

The primary issue in these appeals is whether the properties in question fall within the definition of "assets" as defined under section 2(ea) of the Wealth-tax Act, 1957, and are thus liable to wealth-tax. The properties in question include:

- 1/2 share of office at 1002, 2nd Floor, New Budhwar Peth, Pune.
- Office at 24, East Street, Yogesh House, Pune.
- Office at Shankar Parvati Chamber, Plot No. 198/2, Dhole Patil Rd., Pune.
- 1/2 share of office at ground floor, Shankar Parvati Chamber, Plot No. 198/2, Dhole Patil Rd., Pune.

The grounds of appeal taken by the assessees argue that these properties do not fall within the definition of "assets" under section 2(ea) of the Wealth-tax Act, 1957, and are thus not liable to wealth-tax.

2. Exemption under Section 2(ea)(i)(5):

The assessees claimed that these properties are exempt under section 2(ea)(i)(5) of the Wealth-tax Act, which excludes "any property in the nature of commercial establishments or complexes" from the definition of "assets." The properties were let out to business entities, and the rent received was declared in the Income-tax Return.

Detailed Analysis:

A. Properties at 1002, 2nd Floor, New Budhwar Peth, Pune:

- The property was purchased by the assessee and let out to the National Eggs Research Institute of Indian Council of Medical Research for office purposes.
- The Assessing Officer and CIT(A) concluded that the property was not in the nature of a commercial establishment or complex but rather a commercial house property.
- The Tribunal agreed, noting that the property was used for a dispensary-cum-laboratory and not for business or trade purposes.

B. Office at 24, East Street, Yogesh House, Pune:

- The property was purchased and let out to M/s. D.S.S. Mobile Communications Ltd. for their business activities.
- The property is situated in a commercial area, and municipal taxes were paid as a commercial property.
- The Tribunal concluded that the property is in the nature of a commercial establishment, used for business purposes, and thus falls within the exemption under section 2(ea)(i)(5).

C. Office at Shankar Parvati Chamber, Dhole Patil Road, Pune:

- The property was purchased and let out to M/s. Ericsson Communications (P.) Ltd. for office purposes.
- The property is classified as commercial in municipal records and used for business activities.
- The Tribunal concluded that the property is a commercial establishment and exempt under section 2(ea)(i)(5).

D. 1/2 Share of Office at Ground Floor, Shankar Parvati Chamber, Dhole Patil Road, Pune:

- The property was let out to M/s. Golden Touch Developments (P.) Ltd.
- The Tribunal noted that further verification is needed to determine whether the property was used for business purposes.
- The matter was remanded to the Assessing Officer for further enquiry and verification.

Conclusion:

The Tribunal concluded that the properties at 24, East Street, Yogesh House, and Shankar Parvati Chamber, Dhole Patil Road, Pune, are in the nature of commercial establishments and exempt from wealth-tax under section 2(ea)(i)(5). The property at 1002, 2nd Floor, New Budhwar Peth, Pune, does not qualify for the exemption. The case of the 1/2 share of office at ground floor, Shankar Parvati Chamber, was remanded for further verification. The appeals were partly allowed.