Activities of Indore Development Authority cannot fall within purview of section 2(15) of Income-tax Act, 1961
- Since the main predominant object of the Indore Development Authority is profit making, therefore, there is no infirmity in the order of CIT in denying registration u.s 12A.12AA to the Indore Development Authority
[2010] 6 taxmann.com 132 (Indore - ITAT)
ITAT INDORE BENCH, INDORE
Indore Development Authority
v.
CIT
ITA No. 366.Ind.2008
July 6, 201
[2010] 3 taxmann.com 58 (Pune - ITAT)
A warehouse is an asset subject to tax under section 2(ea)(i) of Wealth-tax Act
A warehouse does not come either under the term 'business establishment' or within the definition of commercial complex; therefore, a warehouse can be held subject to tax for the purpose of Wealth-tax Act.
ITAT, PUNE BENCH 'B', PUNE
Nutan Warehousing Co. Pvt. Ltd.
v.
DCWT
WTA Nos. 7 to 16/PN/08
July 31, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
13. We have also carefully examined the decision of Salvinder Singh 109 ITD 241 decided by respected co-ordinate bench wherein, the provisions of section 2(ea) of Wealth-tax Act were discussed and have noted that in that case the assessee had more than one commercial establishments or complexes at different places, so the assessee has owned more than one properly which was undisputedly in the nature of commercial establishments or complexes. Therefore, after ascertaining the very nature of the property as a commercial establishment the same was held as covered under the exception of sub-section (5) of section 2(ea)(i) of Wealth-tax Act. In this decision the terms Business Complex and Commercial Establishment have been deliberated upon in the following manner
"On a plain reading of item (5), it appears that any property in the nature of commercial establishments or complexes sis not included within the definition of 'assets' for the purpose of Wealth-tax Act. To claim benefit of the aforementioned item(5), one must prove and establish that the property claimed to he excluded from the definition of 'assets', is in the nature of commercial establishments or complexes. In other words, the property should not be of any nature other than the nature of commercial establishments or complexes. In this item (5), 'complexes or establishments' are qualified with an adjective 'commercial' establishment or complex and, therefore, must be of commercial in nature. The word 'commercial' means something, which is used un or related to a business or a trade. Commercial means relating to or engaged in or used for commerce. The word 'establishment' means an organization, building , construction, shop, store, concern or corporation. Thus, commercial 'establishments' means some kind of place or building or shop or store where business or trade is carried on. The word 'complex' means composite, compounded, multiple, manifold, multi-complex or something composed of or made of many inter-related pails' for example, a multipurpose 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-ease of commercial establishment, it is not necessary that it should be composed of or made of interrelated 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 Legislatures has excluded both commercial establishments 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 item (5) of sub-clause (i) of clause (ea), a property must be of commercial complex of establishment in nature where business of trade is 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' of complex, as the case may be, appear to be used in the sense that the property must be in the nature of commercial property and the same must also be used for the purpose of trade or business and nothing else. In this sense of the term, therefore, it could be said that if any property though used for commercial purposes, yet is not in the nature of commercial property, the same would not fall within the term 'commercial establishment' or complex used in item (5) below to sub-clause (i) of clause (ea) of section 2, Having regard to the object and purpose of the said sub-clause (i) with exception thereto, any building though used for commercial purposes, yet is not in the nature of commercial property or establishments, shall not be covered by expression 'any property' as used in item (it) below to sub-clause (i) of clause (ea) of section 2. For the purpose of the aforesaid clause, the property must be of commercial nature implying thereby that the very nature of the property must be commercial and at the same time, it must be used in a business or trade and nothing else. [Para 20]"
13.1 From the above decision we have gathered that a commercial complex is a composite, compounded, multiple, multi-complex, something composed of inter-related of a building and the building can be said to be a multi purpose building. The legislature has excluded a commercial establishments and likewise also excluded commercial complexes from the definition of "asset" for the purposes of chargeability to tax under the Wealth-tax Act. A warehouse now in question do not come either under the term 'business establishment' or within the definition of commercial complex therefore can be held subject to tax for the purpose of wealth-tax Act. On the basis of the above discussion it can be adjudged that a warehouse is an asset subject to tax under the main section 2 (ea) (i) of Wealth-tax Act. While studying this case we have pandered upon a latest decisions of Hon'ble Jurisdictional High Court decided in the case of Anand Estate (P) Ltd. vs. DCIT WTA Nos. 1353 & 1354 of 2008, decided on 13-02-2009 repotted as 223 CTR 288 (Bom) wherein the question before the Hon'ble Court was as under:-
"//. Whether on the facts and in the law the Hon'ble Tribunal erred in not accepting that the principal business of the appellant is warehousing which was accepted by the A.O.
III. Whether on facts and in the law the Hon'ble Tribunal erred in holding that merely because the rental income derived therefrom was shown under the head 'Income from house property', it becomes the asset of the appellant?"
13.2 While deciding this appeal there was an observation that the Tribunal has recorded a finding of fact that the godown in question were given on rent and as such occupied by the lessee for their business and it was not occupied by the appellant for its business. The Hon'ble Court has thus held that in view of the said finding of the Tribunal the revenue department was correct to include the value of the godowns in the wealth of the assessee. The Hon'ble Court has discussed the definition of 'asset' as defined in sec. 2(ea) and the exceptions granted therein and then came to the conclusion that once there was a finding o! fact that the assessee was not using the building for his business but property had given on lease then there was no error of law committed by the Tribunal or by the authorities below which gives rise to the substantial question of law Hence those appeals of the assessee were dismissed. Though cited on out own but the law pronounced there in gives us a clear unambiguous guideline and being a decision of the Jurisdictional High Court has to be followed by us and do not exparte that the parties before us can raise a question about following a decision of a Jurisdictional High Court. Thus, the totality of the circumstances leads to a conclusion that the property in questions subject to tax under Wealth-tax Act being an asset as per sec. 2(ea) (i) of Wealth-tax Act. Grounds in this regard of the assessee are dismissed.
14. Ground no. 5 is as follows:-
"5. Without prejudice to the above, the Learned Commissioner of Wealth-tax (A) erred in sustaining the computation of net wealth without appreciating that Rule 8 to Schedule III of W.T. Rules were applicable in the present case of the appellant and that the valuation of the property was determined without making any reference to the Valuation Officer and the net wealth was computed merely by adopting warehouse charges as gross maintainable rent and hence, the computation of net wealth is without any justification, arbitrary and liable to be deleted "
14.1 The A.O had adopted the procedure as laid out in rule 3 of schedule III (Part B) for the purpose of valuation of the impugned immovable property. This rule prescribes that the value of the immovable property being a building shall be the amount arrived at by multiplying the net maintainable rent by the figure of 12.5. This schedule also prescribes the method of computation of 'net maintainable rent'. On the other hand the contention of the assessee was that the A.O should have applied Rule 8 of schedule III to determine the market value of the property. When this issue was raised before the first appellate authority the A.O's action was affirmed. However, it was directed that if there was ambiguity in respect of total receipts of rent the A.O be direct to allow appropriate rehel in case proof is furnished, that some of properties for which rent was being received were taken on lease by the assessee. However, it was upheld that there was no necessity of making a reference to the valuation officer and rule 3 of schedule III was correctly applied by the Wealth Tax Officer We have examined this aspect carefully and in our considered opinion once the property in question was let out and rent amount is not in dispute then the to that amount of gross maintainable rent, can easily be determined as prescribed in Rule A of schedule III (Part-B). On ascertaining this figure certain amounts such-as tax etc are to be reduced, as prescribed, to arrive at the figure of net maintainable rent This schedule provides proper assistance even for determination; of gross maintainable rent as per Rule 5 of schedule III therefore In such a situation there was no necessity to jump to an another rule specially when Rule 8 starts with obstante clause that nothing contend in Rule 3 of schedule III shall apply having regard to the circumstances that it is not practicable to apply the provisions of the said Rule to determine the value of the property. If the assessee wanted to apply Ru|e 8 then it was his duty to demonstrate that why Rule 3 of schedule Ml was not practicable to apply. No such fact or evidence was placed by the assessee rather contrary to the impugned contention there was justification as also a cogent reason for A.O to apply Rule 3 of Schedule II! (Part B) because as per the records of the assessee the gross maintainable rent was know to him It is also not the case that the asset in question had fallen under the residuary clause of Rule 20 (Part A) of schedule III for valuation of assets in such other cases We find no force therefore dismiss this ground. All the appeals of the assessee are hereby dismissed
B] Revenue's Appeal:-
15 Grounds number one and two are substantive grounds which are
reproduced below:-
"1. The Ld. CIT(A) erred in holding that the rental warehouses/godown owned by M/s. Nutan Warehousing Co.. Pvt. Ltd. situated at Pune-Saswad Road, Phursungi, Pane and from which M/s. Hindustan Lever Ltd., was carrying on business activity of manufacturing and export of tea bags to the overseas customers and, therefore, to that extent (he godowns cannot be treated as asset under exception 5 of section 2(ea)(i) of the W.T. Act.
15.1 While discussing the appeal of the assessee we have already taken the view that the manufacturing activity of tea bags for export purposes was the business activity of M/s Hindustan Lever Ltd It was an admitted fad that the said export activity had nothing to do with the assessee but exclusively ol M/s. Hindustan Lever Ltd. Even the report of the inspector on site visit was that the machines were installed by M/s. Hindustan Lever Ltd., the lessee: of the assessee. We have also held that Id. CIT(A) has went judicially wrong in introducing the word 'any other person' in sub sec. (3) of see 2(ea) (i). fhis subsection clearly states that property in question should be occupied for the purpose of any business of the assessee Therefore, Id. CIT(A) went wrong in directing to exclude the amount of that portion of the properly from valuation which was rented out to Hindustan Lever Ltd. and used for the business by Hindustan Lever Ltd. The directions of the CIT (A) are therefore reversed and the objection raised by the revenue is hereby sustained. The grounds of the revenue are allowed.
----- Forwarded Message -----
From: CA. V.M.V.SUBBA RAO <vmvsrao@gmail.com>
To: Kanigalla <kanigalla@hotmail.com>
Sent: Saturday, 20 October 2012 9:25 AM
Subject: CBDT ON ARREAR DEMAND GRIEVANCES
From: CA. V.M.V.SUBBA RAO <vmvsrao@gmail.com>
To: Kanigalla <kanigalla@hotmail.com>
Sent: Saturday, 20 October 2012 9:25 AM
Subject: CBDT ON ARREAR DEMAND GRIEVANCES
Dear Members,
CBDTs letter on Resolving All Arrear Demand Grievances
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Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
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Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
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