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TMI Blog2015 (11) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... et” within the meaning of the Act. It can be seen from the provisions of the IT Act, that “Accommodation in the nature of a guest house has been given an extended meaning under Explanation to Sec.37(4) and Sec.37(5) of the IT Act. Such extended meaning cannot be applied under the provisions of the Act, especially in the context of Sec.2(ea) of the Act, defining the term “Asset” for the purpose of the Act. We are therefore of the view that the aforesaid decision of the Hon’ble Calcutta High Court cannot be applied to the facts of the present case. We are of the view that the decision rendered by the Hon’ble Gujarat High Court referred to earlier, applies to the facts of the present case. Following the said decision which were rendered on identical facts as that of the Assessee’s case, we are of the view that the value of guest house at Chennai, cannot be considered as “Asset” under the Act. - Decided in favour of assessee. - WTA Nos.13-17/Kol/2014 - - - Dated:- 11-9-2015 - Hon ble Shri N.V.Vasudevan, JM Shri Waseem Ahmed, AM For the Appellant : Shri D.S.Damle, Advocate For the Respondent : Shri Niloy Baran Som, JCIT, Sr.DR ORDER Per Bench : These ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. On merits the Assessee submitted that in the facts of the present case, the flat at Besant Nagar was used for accommodation of company s employees who visited the assessee s factory at Chennai. Keeping in view the definition of guest house as given by the Madras High Court, it can be safely concluded that the flat in Chennai was not in the nature of guest house for the purposes of Section 2(ea)(i) of the WT Act, 1957. The appellant submits that the flat was purchased with a view to minimize the costs on boarding lodging of the employees travelling to Chennai on company's official work. The flat was purchased on pure business considerations and commercial expediency. Had the appellant not purchased transit accommodation for its employees, it would have had to incur humongous costs towards the hotel lodging expenses each time each employee visited the factory at Chennai. It was to reduce such unnecessary recurring costs that a flat was purchased in Chennai for the accommodation of appellant's employees. In the facts set out in the aforesaid, it is clearly evident that the flat at Chennai was not in the nature of guest house but was transit accommodation to hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for t he purposes of any bus i ness or profession carr i ed 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 establishment or complexes. In the facts of the present case the flat at Chennai was located near the appellant's factory and was used by its employees for accommodation purposes. The appellant therefore reiterates that the said flat was not in the nature of guest house . Without prejudice to the foregoing contention, even for the sake of argument it is assumed that the flat at Chennai was a guest house even then it is submitted that the WTO does not dispute that the said flat was used in the course and for the purposes of the appellant's business. Accordingly even presuming that the flat at Chennai was a guest house ;then also the said flat fell within the exception provided in sub-clause (3) of Section2(ea)(i)of the Income-tax Act, 1961. The provision of Section 2(ea)(i) includes any building and land apparent thereto used for the purposes of maintaining guest house but if such building or guest house is used for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt deserves to be deleted in full. 5. The WTO as well as the CWT(A) did not agree with the aforesaid submissions of the Assessee both on the question of validity of initiation of reassessment proceedings and on the question whether the flat at chennai constituted Asset within the meaning of the Act. The observations of the CWT(A) on the question whether the flat at Chennai constituted an Asset within the meaning of the Act, were as follows: I have duly considered the submissions of the appellant. The facts of the cases mentioned by the appellant in the submission are different and distinguishable. The case cited as CIT vs Gujarat Industrial Development Corporation (170 CTR 19) could not be found due to wrong citation. The issue in the cases of CIT vs Aruna Sugars Ltd. (supra) and CIT vs. Carborandum Universal Ltd. (241 ITR 407) was related to allowability of the expenses u/s 37(3) of the IT Act, 1961 and not related to Wealth Tax Act. The Wealth tax Act, 1957 section 2(ea) reproduced as under :- assets in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent year, means (i) Any building or land appurtenant thereto (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of properties. In the case of Anand Estate Pvt. Ltd. (supra), Anand Estate has leased out its godowns. Therefore, it was held that godowns were not used for business because those were occupied or used by the tenants for their businesses. In the instant case, the assessee-company has let out only a very small portion (i.e. less than 10%) of its office premises to the Directorate of Petroleum. Department of Energy and Petrochemicals and that too under directions from the Government. The main purpose of this arrangement was to have close liaison with the Directorate of Petroleum, Department of Energy and Petrochemicals in its day-to-day business liability. The decision of the Hon ble Bombay High Court in the case of Anand Estate Pvt. Ltd. (supra) relied the Ld. D.R. pertained to the assessment years 1997-98 and 1998-99 when clause (5) which was inserted in section 2(ea)(i) of Wealth Tax Act by Finance (No.2) Act, 1998 was not there. In our opinion, this property falls within the exceptions under sub-clause (5) of clause (I) of section 2(ea) because it is in the nature of commercial establishment or complex. Therefore, it is not necessary that it should be used and occupied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment of Energy and Petrochemicals. This was done by the direction of the Government. The main purpose of this arrangement was to have close liaison with the Directorate of Petroleum. It has also come on record that the guest house at Hazira was located at the distance of 30 K.M. from Surat, it was in the vicinity of the exploration site of the assessee. In the said guest house as per the need of the business, the officer of the joint venture and subsidiary companies and other officers were permitted to reside and in the process usage charges were collected. Principally the guest house constructed for the assessee s own business. 6.2. In the present case the facts on record show that the Assessee had product units located across India and a factory also existed in Chennai. The flat at Chennai was visited by Assessee s employees in connection with official work from Kolkata and Bangalore. It was used as transit accommodation for the senior executives, finance managers, administrative staff and engineers from other units. Thus the flat was used for the purpose of business of the Assessee. The decision of the Hon ble Gujarat High Court clearly supports the contention r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modation, by whatever name called, maintained, hired, reserved or otherwise arranged by the assessee for the purpose of providing lodging or boarding and lodging to any person (including any employee or, where the assessee is a company, also any director of, or the holder of any other office in the company) on tour or visit to the place at which such accommodation is situated, is accommodation in the nature of a guest house within the meaning of sub-section (4). . It can be seen from the aforesaid provisions of the IT Act, that Accommodation in the nature of a guest house has been given an extended meaning under Explanation to Sec.37(4) and Sec.37(5) of the IT Act. Such extended meaning cannot be applied under the provisions of the Act, especially in the context of Sec.2(ea) of the Act, defining the term Asset for the purpose of the Act. We are therefore of the view that the aforesaid decision of the Hon ble Calcutta High Court cannot be applied to the facts of the present case. We are of the view that the decision rendered by the Hon ble Gujarat High Court referred to earlier, applies to the facts of the present case. Following the said decision which were rendered on iden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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