2018 (6) TMI 907 - AT - Wealth-tax

Tribunal Rules in Favor of Assessee on Wealth Tax Exemption & Invalid Assessment Re-opening

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision that the assessee's properties at Budge Budge and Magma House are not chargeable ... Proceedings u/s 23 of the Wealth Tax Act - Asset for the purpose of wealth tax - Commercial complex - whether it is an asset? - whether house property which has been let out to a tenant would be outside the ambit of wealth tax under section 2(ea)(i)(v) of the Wealth Tax Act? -Held that:- As decided in M/S. NAVIN VANIJYA PVT. LTD. VERSUS A.C.W.T., CC-IV, KOLKATA [2016 (10) TMI 278 - ITAT KOLKATA] wealth tax is not levied on productive assets - The subject mentioned property is a commercial complex and is a productive asset deriving rental income p.a. It is well settled from the Memorandum explaining the provisions in the Finance No. 2, 1998 under the head 'incentives proposed under the wealth tax act' that wealth tax is not to be levied on productive assets. Hence we hold that the subject mentioned property shall be exempt u/s 2(ea)(v) of the Act and therefore outside the ambit of taxable wealth. Issues Involved:1. Whether the assessee’s assets (freehold land at Budge Budge and registered office at Magma House) are chargeable wealth under the Wealth Tax Act.2. Validity of the re-opening of assessments by the Assessing Officer.Detailed Analysis:1. Chargeability of Assessee’s Assets:The primary issue involves the determination of whether the assessee’s assets, specifically the freehold land situated at Budge Budge and the registered office at Magma House, are chargeable wealth for the purpose of wealth tax assessments for the assessment years 2008-09 and 2009-10. The Commissioner of Income Tax (Appeals) [CIT(A)] had held that these properties do not constitute chargeable wealth as they are commercial establishments used for business purposes. The CIT(A) noted that the registered office at Magma House is a commercial establishment, used for business purposes, and the assessee is paying corporation tax at commercial rates. Similarly, the freehold land at Budge Budge, where the assessee’s Jute Mill is located, is also used for business purposes, with municipal tax paid at commercial rates. Consequently, the CIT(A) directed the deletion of the addition of Rs. 62,57,09,250/- from the chargeable wealth.The Revenue challenged this finding, arguing that the CIT(A) erred in law and on facts by excluding these properties from chargeable wealth. However, the Tribunal found no merit in the Revenue’s arguments, citing a coordinate bench decision in WTA 43/Kol/2014 (M/s Navin Vinijya Pvt. Ltd. vs. ACWT) which adjudicated a similar issue in favor of the assessee. The Tribunal noted that properties used for business purposes or as commercial establishments are not considered chargeable wealth under the Wealth Tax Act, as wealth tax is not levied on productive assets.2. Validity of Re-opening of Assessments:The second issue pertains to the validity of the re-opening of assessments by the Assessing Officer (AO). The assessee’s Cross Objections challenged the correctness of the re-opening of assessments, which was upheld in the lower appellate proceedings. The Tribunal referenced the case of M/s Navin Vinijya Pvt. Ltd., where the reopening of assessments was deemed invalid as the reasons to believe that wealth had escaped assessment were not substantiated. The Tribunal found that the AO had not correctly invoked the reopening proceedings, as the assumption that the house property had escaped wealth tax was incorrect. Consequently, the Tribunal allowed the assessee’s ground challenging the assumption of jurisdiction under section 17 of the Wealth Tax Act.Conclusion:The Tribunal dismissed the Revenue’s appeals, affirming the CIT(A)’s findings that the assessee’s properties at Budge Budge and Magma House are not chargeable wealth as they are commercial establishments used for business purposes. Additionally, the Tribunal found the re-opening of assessments by the AO to be invalid, rendering the assessee’s Cross Objections infructuous. The Tribunal’s order was pronounced in the open court on 08/06/2018.