WTA No.43/Kol/2014 M/s. Navin Vanijya Pvt. Ltd. IN INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (Before Shri N.V.Vasudevan, J.M. &Dr.A.L.Saini, A.M.) WTA No. 43/Kol/2014 : Asstt. Year : 2006-2007 M/s.Navin Vanijya Pvt. Ltd. Vs A.C.W.T., CC-IV, AAyakar P-221/2, Strand Road, Bhavan, Purba, 3rd floor, 110, Kolkata 700 001 Shanti Pally, PAN: AABCN 9909R Kolkata 700 107 (APPELLANT) (RESPONDENT) WTA No. 44/Kol/2014 : Asstt. Year : 2007-2008 M/s.Navin Vanijya Pvt. Ltd. Vs A.C.W.T., CC-IV, Aayakar P-221/2, Strand Road, Bhavan, Purba, 3rd floor, 110, Kolkata 700 001 Shanti Pally, PAN: AABCN 9909R Kolkata 700 107 (APPELLANT) (RESPONDENT) Assessee by: Shri B.C.Jain, A.R. Department by: Shri Rajat Kumar Kureel, JCIT,Sr.DR Date of Hearing : 04.08.2016 Date of Pronouncement :- 21.09.2016 ORDER Per Dr. A.L.Saini, A.M.: Both captioned appeals filed by assessee pertaining to assessment year 2006-07 and 2007-08, are directed against order passed by Ld.Commissioner of Income-Tax(Appeals), Central-I,Kolkata in Appeal No.153/CIT(A) C-1/CC- IV/10-11, and appeal No.154/CIT/(A) C-1/CC-IV/10-11, dated 1st July, 2014, which in turn arise out of order passed by ld. Assessing Officer under section 17/16(3) of Wealth-Tax Act, 1957 (in short, Act), dated 3/12/2010 & 2/12/2010 respectively. 1 WTA No.43 /Kol/2014 M/s. Navin Vanijya Pvt. Ltd. 2. Both these appeals (cited above) pertain to same assessee and common issues involved, therefore these have been clubbed and heard together and consolidated order is being passed for sake of convenience and brevity. 3. common issue to be decided in these appeals is, assumption of jurisdiction of ld. Assessing Officer by issuance of notice under section 17 of Act and whether in facts and circumstances of case, house property which has been let out to tenant would be outside ambit of wealth tax under section 2(ea)(i)(v) of Wealth Tax Act, 1957.The assessee raised issue that house property under consideration is not asset for purpose of wealth tax and reasons recorded by Assessing Officer are not valid. 4. appeal in WTA No.43/Kol/2014 pertaining to assessment year 2006-07, is taken as lead case. ld AO noticed that assessee company received rent of Rs.15 lakhs during assessment year 2006-07 from house property. rent so received was reflected in return of income as income from house property. As per provision of section 2(ea)(ii) of Wealth Tax Act, 1957. Asset means any building or land appurtenant thereto (hereinafter referred to as house ), whether used for residential or commercial purposes or for guest house purpose. property from which rent was received was not used by assessee for its business purpose. Therefore, value of property was chargeable to wealth tax, as property was asset within meaning of section 2(ea)(ii) of Wealth-Tax Act, 1957. AO valued said property as per Part-B of Schedule-III of Wealth Tax Act. Thus, it was clear that assessee was liable to pay wealth tax in respect of net wealth for assessment year 2006-07, but no return of wealth was filed. Therefore, reasons were recorded and notice under section 17 of Act was issued on 31st March, 2010. In response to notice under section 17 of Wealth Tax Act, 2 WTA No.43 /Kol/2014 M/s. Navin Vanijya Pvt. Ltd. 1957, return of wealth was filed on 07.05.2010, declaring net wealth of Rs. Nil . While making addition, AO assessed net wealth at Rs.59,37,500/- under section 17/16(iii) of Act. Aggrieved, assessee filed appeal before Commissioner of Income-Tax (Appeals), Central-I, Kolkata who has also confirmed order of AO, observing following: 4. Ld AR appeared for assessee and challenged impugned order by making oral and written submissions. Ld AR contested action of AO on ground that property under consideration was commercial complex and consequently same was exempt in view of section 2(ea)(i)(5). I have perused assessment order and considered submissions made on behalf of assessee. I find that assessee could bring no positive material on record to substantiate its claim that property under consideration was commercial complex. documents produced by assessee can at best suggest that property was being utilised for commercial purposes. But then, I find merit in contention of AO that property even if it was being utilised for commercial purposes is includible in net wealth in view of section 2(ea)(i). Under circumstances, I am unable to uphold contention of assessee that property at Bangalore was not assessable in its net wealth. Also, I do not find merit in submission of assessee that initiation of proceedings u/s 17 was not justified. Ground no 1 and 2 are dismissed. In ground no 3, assessee has contended that AO was not justified in adopting rental method for determining value of property under consideration. However, no arguments were made in support of this ground during course of appellate proceedings. Ground no 3 is dismissed. order of AO is upheld. Ground no 4 is general in nature. 4.1 Not being satisfied with order of ld. CIT(A), assessee is in further appeal before us on following grounds: 1. That in facts and circumstances of case ld. CIT(A) erred in confirming action of ld A.O. in initiating proceedings u/s 17 and assuming jurisdiction u/s 17. 3 WTA No.43 /Kol/2014 M/s. Navin Vanijya Pvt. Ltd. 2. That in facts and circumstances of case, Ld. C.I.T. (A) erred in confirming action of ld. Assessing Officer in treating commercial complex as asset for purpose of wealth tax. 4.2 Ld AR for assessee has submitted that Assessing Officer reopened assessment under section 17 of Wealth Tax Act, without and base, presuming that house property has escaped from wealth tax. ld. AO treated let out house property as asset under section 2(ea)(ii) of Wealth Tax Act, 1957, whereas it is productive asset and does not fall in ambit of wealth tax.The ld. AR for assessee submitted that memorandum explaining provision in finance No.2 Bill, 1998 under head incentives proposed under Wealth Tax Act , it is clarified that wealth tax is not levied on productive assets. In view of this logic, it is very much clear that wealth tax would also not be levied on such house property from which assessee is getting rent and same has been let out by assessee for period of 300 days or more. With regard to 1st ground raised by assessee and assumption of jurisdiction, we find from records that ld. AO had not rightly invoked reopening proceedings as his reason to believe that wealth tax has escaped assessment from house property belonging to assessee is not correct. Hence, ground no.1 raised by assessee is allowed. 4.3 In result, ground No.1 raised by assessee is allowed. 5.Ground No. 2: Commercial complex- whether it is asset? Ld. AR submitted that it is abundantly clear that those residential properties that have been let out for period of 300 days in year, and it is also proposed to exempt commercial establishments and complexes from ambit of Wealth-Tax Act. It is, thus, clear that Legislature has adopted logic that wealth-tax is not levied on productive assets, and in view of that logic, it was proposed that wealth-tax would 4 WTA No.43 /Kol/2014 M/s. Navin Vanijya Pvt. Ltd. not be levied on such residential property that has been let out to others. assessee has also relied on judgment rendered by Hon ble Income Tax Appellate Tribunal bench, Kolkata vide WTA Nos.45&46/Kol/14 for assessment years 2006-07 and 2007-08, relevant part of such judgment are reproduced below: 6.1. We find that issue is covered by coordinate bench decision of this tribunal in case of WTO vs Ferrolite Products Ltd reported in (2015) 55 taxmann.com 285 (Kolkata Tribunal). facts before this tribunal in said case is that assessee rented out premises to 'D' Ltd and rental income was assessed under head 'income from-house property'. assessee claimed that said property was in nature of commercial establishment as per section 2(ea)(i)(5) of Act and thus it could not be included in net wealth of assessee. AO treated factory premises being land and building as taxable wealth within meaning of section 2(ea). CIT(A) finding that factory premises was being used for productive purposes and was in nature of commercial establishment, allowed assessee's claim. On revenue's appeal to tribunal, it was held as follows:- "7. facts emerges are that total area of land consists of 20164 sft out of which area is 10771 sft namely, factory building, courtyard, electrical substation, labour quarters, office and godown etc. assessee rented out this premises to M.S Dalmia"& Co Ltd for rent of Rs..12 lakh per annum and this rent was assessed under head 'Income from House Property. From very reading of Sub-clause (5) it is clear that this covers all those properties which in nature of commercial establishment or complex meaning thereby that property must be in nature of commercial establishment or complex which in turn indicates that property must also be actually used for purpose of any business or trade carried on in those commercial establishments or complexes. We are of view that this Sub-clause (5) "complexes or establishments" are qualified with adjective 'commercial'. Establishment or complex, therefore, must be of commercial in nature. word 'commercial' means something which is used in or related to, business or trade. Commercial means relates to or engaged in or used for commerce or trade. word 'establishment' means organization, building, construction, shop,store, concern or corporation. Thus; commercial establishment means some kind of place or building or shop or store where business or trade is carried on. word "complex" means composite, 5 WTA No.43 /Kol/2014 M/s. Navin Vanijya Pvt. Ltd. compounded, multiple, manifold, multi-complex or something, composed of or made of many interrelated parts, as for example, multi-purpose building. Thus, word 'commercial complex'. means commercial multi-purpose building composed and made of inter- relating parts in contrast to single commercial establishment. In case of commercial establishment, it is not necessary that it should be composed of or made of interrelated parts. Legislature has excluded both commercial establishment as well as commercial complexes from definition of "asset" for purpose of chargeability to tax under Act. Further, Memorandum explaining provisions in Finance No. 2 Bill, 1998, under head "Incentives proposed under Wealth-tax Act", it is clarified that wealth-tax is not levied on productive assets. In view of this logic, it is proposed that wealth tax would also not be levied on such residential properties that have been let out for period of three hundred days in year, and, it is also proposed to exempt commercial establishments and complexes from ambit of Wealth-tax Act. It is, thus, clear that Legislature has adopted logic that wealth-tax is not levied on productive assets, and in view of that , it was proposed that wealth- tax would not be levied on property that has been let out for period of minimum 300 days in year and to exempt commercial establishments and complexes from ambit of wealth- tax. Therefore, while construing meaning to Sub-clauses (4) and (5) inserted by Finance No. 2 Act, 1998 with effect from 1.4.89, intention of Legislature is that wealth-tax is not to be levied on productive assets and that is to be kept in mind. In view of facts of this case and discussion in view of insertion of Sub-clause (5) as inserted by Finance No. 2 Act, 1998 with effect from 1.4.89 wealth-tax is not to be levied on productive assets. Hence, in view of reasoning given above, we confirm order of CIT(A) and dismiss both appeals of revenue. " facts of instant case and decision rendered by this tribunal (supra) are identical. We hold that subject mentioned property is commercial complex and is productive asset deriving rental income of Rs. 15,00,000/- per annum. It is well settled from Memorandum explaining provisions in Finance No. 2, 1998 under head "incentives proposed under wealth tax act" that wealth tax is not to be levied on productive assets. 5.1. Hence respectfully following said decision, we hold that subject mentioned property shall be exempt u/s 2(ea)(v) of Act and therefore outside 6 WTA No.43 /Kol/2014 M/s. Navin Vanijya Pvt. Ltd. ambit of taxable wealth. Accordingly, ground no.2 raised by assessee in this regard for both assessment years are allowed. 5.2 In result, both appeals( WTA No. 43/Kol/2014 & WTA No. 44/KOL/2014) of assessee are allowed. Order Pronounced in Open Court on 21-09-2016 Sd/- Sd/- (N.V.Vasudevan) (Dr. A.L.Saini) Judicial Member Accountant Member Dated: 21/09/2016 Talukdar (Sr.PS) Copy of order forwarded to: 1. Revenue 2 Assessee 3. CIT-I, 4. CIT(A)-I, 5. DR, Kolkata Benches, Kolkata True Copy, By order, Asst. Registrar, ITAT, Kolkata Benches 7 M/s.Navin Vanijya Pvt. Ltd. v. A.C.W.T., CC-IV, Kolkata