2015 (8) TMI 186 - AT - Wealth-tax

Enhancement in value of net wealth - Denial of exemption claim - AO denied the exemption claimed on the ground that these are single immovable properties and do not quality as commercial establishment - CWT(A) allowed exemption claim - Held that - sub-clause(5) of clause(i) of section 2(ea) nowhere requires that a commercial establishment or a complex cannot be established in a house property. It only provides that any property in the nature of commercial establishment or complexes shall be excluded from the term assets as defined in clause (i) of section 2(ea). Further that it nowhere provides that only if such commercial complex is occupied by the owner then alone the exclusion shall take effect. In view of the decision of Hon ble Gujarat High Court and the decision of the Pune Bench of the Tribunal cited (2013 (9) TMI 957 - GUJARAT HIGH COURT) and 2013 (3) TMI 611 - ITAT PUNE and in view of the detailed reasoning given by the CWT(A) who has also followed the above decisions while deciding the issue in favour of the assessee we find no infirmity in the order of Ld.CWT(A) excluding the 3 properties from the ambit of net wealth. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. - Decided against Revenue.

Summary

Issues Involved:
1. Whether the properties in question qualify as commercial establishments or complexes under Section 2(ea)(i)(5) of the Wealth Tax Act.
2. Whether the rental income classification affects the exemption eligibility under the Wealth Tax Act.
3. Consideration of relevant case laws and precedents in determining the exemption status.

Detailed Analysis:

1. Qualification of Properties as Commercial Establishments or Complexes:
The primary issue revolves around whether the properties situated at Thane, Chembur, and Fort Mumbai qualify as commercial establishments or complexes under Section 2(ea)(i)(5) of the Wealth Tax Act. The assessee claimed these properties as exempt assets, arguing they were let out to branches of "The Oriental Bank of Commerce" and thus used for commercial purposes. The Assessing Officer (AO) rejected this claim, stating that single units do not qualify as commercial establishments, which denotes a wide agglomeration of many units. The CIT(A) disagreed with the AO, citing various case laws and concluding that the properties indeed function as commercial establishments or complexes, thus qualifying for exemption.

2. Impact of Rental Income Classification:
The AO contended that because the rental income from these properties was shown under "income from house property" in the income tax returns, the properties could not be considered commercial establishments for wealth tax purposes. The CIT(A) refuted this, stating that the classification of income under the Income Tax Act does not determine the nature of the property under the Wealth Tax Act. The CIT(A) referenced the Hon'ble Gujarat High Court's decision in CWT Rajkot-II vs Vasumatiben Chhaganlal Virani, which held that the usage of the property for commercial purposes by tenants qualifies it as a commercial establishment, irrespective of how the income is reported.

3. Consideration of Relevant Case Laws and Precedents:
The CIT(A) relied on several precedents, including the Pune Tribunal's decisions in Satvinder Singh vs DCWT and Dy.CWT Circle-2, Pune vs. Shri Subhash H. Lodha, which supported the view that properties let out for commercial use qualify for exemption under Section 2(ea)(i)(5). The CIT(A) also noted that the decision in Nutan Warehousing Co. Pvt. Ltd., cited by the AO, had been set aside by the Hon'ble Bombay High Court, rendering it non-binding. The Tribunal upheld the CIT(A)'s decision, agreeing that the properties in question were indeed commercial establishments used for banking business and thus exempt from wealth tax.

Conclusion:
The Tribunal concluded that the properties at Thane, Chembur, and Fort Mumbai were used for commercial purposes and qualified as commercial establishments or complexes under Section 2(ea)(i)(5) of the Wealth Tax Act. The classification of rental income under the Income Tax Act did not affect their exemption status under the Wealth Tax Act. The Tribunal dismissed the appeals filed by the Revenue, upholding the CIT(A)'s order to exclude the properties from the net wealth computation.