2011 (1) TMI 1344 - AT - Wealth-tax

Summary

Issues involved:
The judgment involves the assessment years 2003-04 & 2004-05, with common grounds of appeal by the Department, including the treatment of a warehouse as an asset u/s. 2(ea)(i)(3) / 2(ea)(i)(5) of the Wealth Tax Act, 1957, and the utilization of the warehouse by the assessee or tenant for business purposes to claim exemption u/s. 2(ea)(i)(5).

Issue 1: Treatment of warehouse as an asset
The Department appealed against the Ld. CIT(A)'s decision to allow relief to the assessee by excluding the warehouse from assessable wealth under the Wealth Tax Act. The Assessing Officer considered the warehouse as assessable wealth, but the Ld. CIT(A) reversed this decision based on the property's utilization for commercial activity, not solely by the assessee. The Ld. CIT(A) emphasized the amended provisions of the Wealth Tax Act post-Finance Act, 1992, focusing on how the property is utilized rather than who utilizes it. The Ld. CIT(A) concluded that the property is excluded from the list of assets as per Section 2(ea)(i)(3) and 2(ea)(i)(5) of the Wealth Tax Act, leading to the Department's further appeal before the Tribunal.

Issue 2: Utilization of warehouse for business purposes
The Department argued that the rental portion of the warehouse should not be excluded from computing assessable wealth, citing precedents that rented property cannot be considered used by the assessee for business purposes. However, the Ld. Authorised Representative for the assessee supported the Ld. CIT(A)'s decision. The Tribunal analyzed the relevant provisions of the Wealth Tax Act post-amendments and previous case law, emphasizing that the nature and purpose of property use for commercial activity determine its exclusion as an asset. As a part of the warehouse was used by the assessee for business and the rest let out for commercial purposes, the entire warehouse was deemed used for commercial activity, leading to its exclusion as an asset under Section 2(ea)(i)(5).

Conclusion:
The Tribunal upheld the Ld. CIT(A)'s orders for both assessment years, dismissing the Department's appeals. The judgment highlighted the importance of the commercial nature of property use in determining its classification as an asset under the Wealth Tax Act.