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TMI Blog2006 (9) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... Patil Rd., Pune 411 001 Rs. 18,596." 2. The grounds of appeal taken by both the assessees in the assessment years 1999-2000 to 2002-03 are mostly identical and related to the same issue mentioned above only with a little variation as to the amount of the value of the property. Therefore, the ground of appeal taken in assessment year 1999-2000 would throw light as to the issue involved in these appeals. Therefore, grounds taken in assessment year 1999-2000 in one of the assessee's case, i.e., Shri Satvinder Singh Kalra, which is identical to that of the case of Shri Sukhminder Singh Kalra, are stated below: "On the facts and circumstances of the case and in law- (1) The ld. CIT(A)-II, Pune erred in confirming that the following let out properties are "assets" within meaning of section 2(ea) of the Wealth-tax Act, 1957 and hence, liable to wealth-tax: '(a)½ share of office at 1002, 2nd Floor, New Budhwar Peth, Pune 411 002 Rs. 5,92,493 (b)Office at 24, East Street, Yogesh House, Pune 411001 Rs. 93,21,358 (c)Office at Shankar Parvati Chamber, Plot No. 198/2, Record Hall Rd., Dhole Patil Rd., Pune 411001 Rs. 1,36,16,044 (d)½ share of office at ground floo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises of one floor of a commercial building. So also in the case of property at Dhole Patil Road the assessee owns the 2nd floor and h share in the ground floor of a building which is entirely a commercial complex. The subject properties are clearly in the nature of commercial establishment or complexes contemplated in section 2(ea)(i)(5). 3. The assessee is not owner of a single property as is commonly the case but is systematically investing in several commercial properties and letting out the same. This is in the nature of a business. We submit that the properties fall within the scope of a business. We submit that the properties fall within the scope of sub-clause (3) of section 2(ea)(1). 4. The subject properties legally belong to the respective cooperative societies and legally it is the use of the units that is available to the assessee. It therefore, follows that the properties are part of commercial complex which is not chargeable to wealth tax. 5. As per section 2(m) net wealth means the amount by which the aggregate value of all assets belonging to the assessee as on the valuation date is in excess of debts incurred in relation to said assets. In the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued to mean that any property i.e., even a singly property in the nature of a commercial establishment or complex would be excluded from computation of net wealth. 12. Considering all the facts and circumstances of the case we submit that the subject properties do not form part of net wealth and/or assets contemplated under Wealth-tax Act, 1957." 6. After considering the assessee's submissions, the Assessing Officer rejected the assessee's claim by saying that the properties given on rent were in the nature of commercial house properties but not commercial establishments or complexes. The Assessing Officer's findings are reproduced hereunder: "4. I have considered the submission of the assessee carefully. In the said letter, the assessee has claimed that all the four properties situated at 1002, 2nd Floor, New Budhwar Peth, 24, East Street, Yogesh House, IInd Floor, Shankar Parvati, Dhole Patil Road, and Ground Floor, Shankar Parvati, Dhole Patil Road, the value of which is declared at Rs. 2,35,29,894 are commercial properties are exempt from wealth-tax. According to the assessee, these were let out to business entities for rent which is declared in the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; as per specific exclusion under section 2(ea)(i)(5). The issue bolls down to whether four separate commercial properties owned and let out by the assessee are 'any property in the nature of commercial establishment or complexes'. It is the use of the plural in the section which has resulted in difficulty in interpreting the section. The Assessing Officer has denied the assessee's claim on ground that the four properties are not in a single unit but in separate buildings. This argument by itself seems rather absurd. Further, the Assessing Officer has given weightage to the fact that the income derived from the properties, declared under the head 'Income from house properties'. This is not relevant as under the Income-tax Act, income from both residential and commercial properties are assessable under the said head of income. Moreover, the head of income does not figure in the language of section 2(ea) of the Wealth-tax Act. We are enclosing copies of Department's Circular No. 636, dated 31-8-1992 and the relevant extract of Finance (No. 1) Bill, 1998 notes on clauses which throw light on the purpose for which the amendments to the Wealth-tax Act were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss annual salary of less than five lakh rupees; (2) any house for residential or commercial purpose which forms part of stock in trade; (3) any house which the assessee may occupy for the purposes of any business or profession carried on by him; (4) any residential property that has been let out for a minimum period of three hundred days in the previous year; (5) any property in the nature of commercial establishments or complexes; (ii) motor cars (other than used by the assessee in the business or running them on hire or as stock in trade); (iii) jewellery, bullion, furniture, utensils, or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals: Provided that where any of the said assets is used by the assessee as stock in trade, such asset shall be deemed as excluded from the assets specified in this sub-clause; (iv) yachts, boats and aircrafts (other than those used by the assessee for commercial purpose); (v) urban land; (vi) cash in hand, in excess of fifty thousand rupees, of individuals and Hindu undivided families in the case of other persons any amounts no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued has to be included in expression that any property in the nature of commercial establishment or complex is not acceptable submission because it will make clause (i) of section 2(ea) totally inoperative because in respect of every building which is used for commercial purposes, a claim shall be made that it is commercial asset which is productive in nature. From the wording of section 2(ea)(i) it is absolutely and this list of exclusion includes property in nature of commercial establishments or complexes purposes or shops or godowns or house properties which are not in nature of commercial establishment or complexes. What is commercial establishment or complexes is to be found out with reference to facts of each case. On the facts of the cases, it is held that the let out property which comprise of Office at 1002, 2nd Floor, New Budhwar Peth, Pune, Office at 24, East Street, Yogesh House, Pune, office at Shankar Parvati Chamber, Dhole Patil Road, Pune and basement at Shanker Parvati Chamber, Dhole Patil Road, Pune cannot be said to be part of commercial complex or commercial establishment within the meaning of section 5 and section 2(ea)(i) of the Wealth-tax Act, 1957. Sub-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial establishment' given in Law Lexicon defining that only those premises can be said to be a commercial establishment where two minds meet to strike a business deal for profit. It is hardly material by what means they meet. Any trade or business requires two or more individuals dealing with one another and if such does take place in any given premises, or is intended to take place therein, they can be said to be a commercial establishment but not otherwise. The purpose of the meeting of the two minds is to be for profit, though the profit may not be the necessary result. It is necessary that any trade, business or profession is carried on for profit in the premises. In this definition, reference was made to a decision of Ram Chander Baru Ram v. State AIR 1963 Punj. 148 at page 154 (FB). In Law Lexicon, 'commercial establishment' under the Kerala Shops & Commercial Establishments Act, 1960 has also been referred to. The ld. counsel for the assessee further submitted that all these properties are in the nature of commercial property and are in the commercial area where the business is being carried on. He further submitted that all these properties have been assessed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. We have deliberated upon the relevant provisions of law as well as the various other legal propositions referred to by both the parties in the course of hearing of the appeals. 13. In order to appreciate the issue, it is necessary to have a look to the definition of 'assets' defined under section 2(ea) along with the amendments made from time to time therein. The definition of 'assets' in relation to assessment year commencing from the 1st day of April, 1993 or any subsequent assessment year before the same was substituted by Finance (No. 2) Act, 1996 with effect from 1-4-1997, stood as under: "(ea) 'assets', in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means (i) any guest house and any residential house [including a farm house situated within twenty five kilometers from the local limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name)] or a cantonment board but does not include- (1) a house meant exclusively for residential purposes and which is allotted by a company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee may occupy for the purposes of any business or profession carried on by him; (4) any residential property that has been let out for a minimum period of three hundred days in the previous year; (5) any property in the nature of commercial establishments or complexes;" 16. The exception provided in sub-clauses (4) and (5) below to clause (i) of sub-section (ea) of section 2 has been inserted by the Finance (No. 2) Act with effect from 1-4-1999. In the Budget Speech of Minister of Finance, the Hon'ble Finance Minister has stated that housing is an area which requires our utmost attention, and, therefore, he proposed several incentives to encourage house building activity. Amongst several incentives to encourage house building activities, an exemption to certain specified properties like commercial complexes under the Wealth-tax Act was provided. In the Notes on Clauses on Finance (No. 2) Bill, 1998, it is stated that clause 69 of the Finance Bill (No. 2), 1998, seeks to amend section 2 of the Wealth-tax Act relating to definitions. Sub-clause (b) of clause 69 seeks to amend sub-section (ea)of section 2 of the Wealth-tax Act relating to the definition of assets for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act. In other words, sub-clauses (1) to (5) carve certain properties or houses out of the main enacting provision. It is thus clear that all building or land appurtenant thereto, which are whether used for residential or commercial purposes, may not come within the definition of "asset" as defined under clause (i) of sub-section (ea) of section 2 of the Wealth-tax Act if anyone of them is found to be covered by clauses (1) to (5) below to section 2(ea)(i) of the Act. Sub-clauses (1) to (5) qualify the generality of the main enactment by providing an exception and taking out from the main provision a portion which but for the exception provided in sub-clauses (1) to (5) would be the part of the main provision. The properties or the houses of a nature specified in sub-clauses (1) to (5) below to clause (i) of sub-section (ea) of section 2 are an exception to the main provision. The exception provided in sub-clauses (1) to (5) must, therefore, be considered in relation to the main or principal enactment of clause (l) of sub-section (ea) of section 2 of the Wealth-tax Act to which these sub-clauses (1) to (5) stand as an exception. The properties or houses enumerated in these sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried on by him is only excluded from the "asset" vide sub-clause (3) below to clause (i) of sub-section (ea) of section 2 of the Act. Therefore, in order to claim benefit of this clause, the assessee has to prove that the house was being occupied by him for the purpose of any business or profession carried on by him only and nothing else. This condition is to be satisfied only in case the assessee wants to claim the exemption in respect of "any house" under sub-clause (3). In sub-clause (3), the word used is "any house" and not the 'house or property in the nature of commercial establishments or complexes'. In other words, any or all houses whether in the nature of commercial house or not but occupied by the assessee for the purpose of any business or profession carried on by him, would be covered by this sub-clause. In order to bring the case to be covered by this item, the only requirement is to prove that the house was occupied by the assessee for the purpose of any business or profession carried on by him. The nature of the house is not material. What is material is that the house must be occupied by the assessee for the purpose of any business or profession carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building. Thus, the words 'commercial complex' mean the commercial multi-purpose building composed and made of inter-relating parts in contrast to a single commercial establishment. In the case of commercial establishment, it is not necessary that it should be composed of or made of inter-related parts. In the case of a property in the nature of commercial establishment, it is not necessary that it should be also in the nature of commercial complex. The Legislature has excluded both commercial establishment as well as commercial complexes from the definition of "asset" for the purpose of chargeability to tax under the Wealth-tax Act. Therefore, for the purpose of sub-clause (5) of clause (i) of sub-section (ea), property must be of commercial complex or establishment in nature where business or trade are being carried on and the property must also be used for the purpose of any business or trade as well. A property cannot only by its very nature be classified as a commercial establishment or complex unless the same is also used in a business and nothing else. Hence, the words 'commercial establishment' or complex, as the case may be, appear to be used in the sense t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on not by the assessee but by somebody-else, shall be included in the definition of "asset" as would be clear from reading together the main provisions contained in clause (i) together with exceptions provided in sub-clauses (3) and (5). Therefore, the CIT(A)'s observation that if the interpretation canvassed by the assessee is to be accepted it would make section 2(ea)(i) inoperative because every building or part of building used for commercial purposes shall be claimed to be a part of commercial establishment or complex, is not correctly made out. Merely because any building or land appurtenant thereto is used for commercial purposes would not that by itself is sufficient to bring it within the ambit of commercial establishment or complex unless it is also established and proved that the said building by its very nature is in the nature of commercial establishment or complex. The correct meaning of sub-clause (5) would thus be that any property which is merely used for commercial purposes would not by itself be sufficient enough to classify the same as commercial establishment or commercial complex, unless it is also proved and established that the property by its ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny business or profession carried on by him and for the purpose of sub-clause (5) property itself was in the nature of commercial establishment or complex and used in a business or trade carried thereon. 23. One of the reasons given by the Assessing Officer in rejecting the assessee's claim of treating the properties in question as exempted, was that the provisions of sub-clause (5) of clause (i) of sub-section (ea) of section 2 are applicable only in the case of property as a single unit because the word used there is "any property in the nature of commercial establishments or complexes", but in the case of the assessee there is no single unit, but there are four properties in four separate buildings. This approach taken by the Assessing Officer, in our considered view, is not found to be on sound footing. In the main provisions as well as in the exception clauses, the Legislature has used the words like "any building", "any house", "any residential property", and "any property". In other words, building or houses or residential property or property are qualified with the word "any". 24. In the case of Shri Balaganesan Metals v. M.N. Shanmugham Chetty [1987] 2 SCC 707, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 28. In the light of the view we have taken, we now proceed to examine the facts and circumstances of the present case. 29. The following properties were claimed by the assessee as not falling within the definition of clause of "assets" defined under section 2(ea)(i)(5) as the properties were in the nature of commercial establishment or complex, and hence, the assessee excluded the value thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was also not in use and occupation of the assessee for the purpose of any business carried on by the assessee. 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. 32. With regard to the office premises at 24, East Street, Yogesh House, we have gone through the purchase deed, lease agreement, cantonment tax receipt. This property was purchased by these assessees in the month of September, 1994 from M/s. Elegant Marbles (P.) Ltd. In this agreement, it is stipulated that the parties have agreed to sell and purchase these office premises specified therein. The assessee-purchaser was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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, Bhikaji Cama Place, New Delhi. It is thus clear that the property in question were used for the purposes of business carried on by a private limited company. The nature of the property is also of a commercial in nature being office apartments used for the purpose of carrying on business activities by a business concern or a trader. Pune Municipal Corporation has been realizing the taxes treating the same as commercial property. 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. 34. These assessees also own a property at ground floor of the same apartment known as Shankar Parvati Apartment. The sale agreement, lease agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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