TaxTMI 
TaxTMI 
2006 (9) TMI 246
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....nkar Parvati Chamber, Plot No. 198/2, Sangamwadi, Dhole 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....
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....oses declared in the return. Budhwar Peth office is a small office in the commercial complex. The East Street property comprises 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 o....
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....e. Interpretation of a section should not result in absurdity. Tax dues have to be interpreted reasonably and in consonance with justice adopting a purposive approach. 11. We submit that the section should correctly be construed 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, S....
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.... as under: "2.1 The submission of the appellant in this regard is as under: The only issue in the appeal relates to denial of the assessee's claim for exclusion of let out properties which was claimed as not falling within the definition of 'assets' 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 lan....
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....local limits of any municipality (whether known as municipal corporation or by any other name) or a Cantonment Board, but does not include (1) any house meant exclusively for residential purpose and which is allotted by a company to an employee or an officer or a director who is in whole time employment, having a gross 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....
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....d Assessing Officer is in the nature of building used for commercial purposes. It cannot be said to be property in the nature of commercial establishment or complex and therefore, the action of the Assessing Officer is in accordance with law and fully justified on facts. The submission of the appellant that appellant's properties are productive commercial assets and therefore should be so construed 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 pr....
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....b-clause (4)] and properties in the nature of commercial establishment or complexes [sub-clause (5)] from the definition of assets for the reason that, wealth-tax is not levied on productive assets. He thus contended that this amendment was made with a view to stimulating investments in productive assets by abolishing wealth-tax on all assets except certain specified assets. He also referred to the definition of 'commercial 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 19....
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....f commercial establishment and complexes, but were in the nature of building which were used for commercial purposes and, as such, the same is not covered by sub-clause (5) to clause (i) of sub-section (ea) of section 2 of Wealth-tax Act, 1957 and as such, the assessee's claim has been rightly rejected by the learned authorities below. The reasons given by the authorities below were reiterated by the ld. DR. 12. Rival contentions considered, orders of the authorities below as well as various papers and documents have been perused. 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 ....
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....for the purpose of maintaining a guest-house or otherwise including a farmhouse situated within twenty-five kilometers from local limits of any municipality (whether known as municipality, municipal corporation or by any other name) or a cantonment board, but dues not include- (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than five lakh rupees; (2) any house for residential or commercial purposes 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;" 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 h....
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....g of the main enacting provision of clause (i) of sub-section (ea) of section 2, as substituted by the Finance (No. 2) Act, 1996 with effect from 1-4-1997 and by the Finance Act, 1998 with effect from 1-4-1999, it is clear that any building or land appurtenant thereto whether used for residential or commercial purposes fall within the meaning of "assets", however, subject to the exceptions provided thereunder. Some of the building or land appurtenant thereto whether used for residential or commercial purposes have been taken out from the main provision as envisaged under sub-clauses (1) to (5) to clause (i) of sub-section (ea) of section 2 of the Wealth-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 enac....
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....No. 2) Act, 1996 with effect from 1-4-1997. In other words, up to the assessment year 1996-97, any house which the assessee may occupy for the purpose of any business or profession carried on by him was treated to be a part of the asset. But, the same has now been excluded with effect from 1-4-1997 vide sub-clause (3) of clause (i) of sub-section (ea) providing thereby that, any house which the assessee may occupy for the purpose of any business or profession carried on by him shall not be included within the definition of the "assets". It is further clear that only that house which the assessee may occupy for the purpose of any business or profession carried 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....
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....ive 'commercial'. Establishment or complex, therefore, must be of a commercial in nature. The word 'commercial' means something which is used in 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 establishment 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 parts, as for example, a multi-purpose 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 establishmen....
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....rs only those houses, which are occupied by the assessee for the purpose of any business or profession carried on by the assessee. Sub-clause (5) covers all those properties which are in the nature of commercial establishment or complex meaning thereby that the property must be in the nature of commercial establishment or complex which in turn indicates that the property must also be actually used for the purpose of any business or trade carried on in those commercial establishments or complexes. This would mean that any house, which is not by its very nature in the nature of commercial establishment or complex, but is occupied for the purpose of any business or profession carried 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 es....
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....n shall be covered by sub-clause (5) below to section 2(ea)(i) of the Act. Furthermore, any house used for commercial purposes forming part of stock in trade also stand excluded from the purview of asset vide exception provided in sub-clause (2) below to section 2(ea)(i) of the Act. In this sense, we may, therefore, state that mere because of the fact that any building or land appurtenant thereto is used for commercial purposes would not come within the ambit of sub-clauses (2), (3) and (5) unless for the purpose of sub-clause (2) it forms part of stock in trade, for the purpose of sub-clause (3) it is satisfied that the house was occupied by the assessee himself for the purpose of any 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....
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....uld not be given a restricted meaning but should include "all", "some of them", "one of any", or "an indefinite number". 26. It is also well-settled that "singular" is included in "plural". If a plural word is used, singular automatically comes within its ambit. In this connection, we may refer to section 13 of the General Clauses Act, 1897, which reads as under: "13. Gender and number.- In all Central Acts and Regulations, unless there is anything repugnant in the subject or context,- (1) words importing the masculine gender shall be taken to include females; and (2) words in the singular shall include the plural, and vice versa. 27. In the enactment provided under section 2(ea)(i), no contrary 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 ho....
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....ablishment. On perusal of the plan annexed thereto, it appears that living room, kitchen, WC etc. are mentioned therein. This property has been given on rent on leave and licence basis to National Eggs Research Institute of Indian Council of Medical Research, New Delhi for office purpose. The National Eggs Research Institute of Indian Council of Medical Research, New Delhi has taken the premises for the purpose of their dispensary-cum-laboratory and not for the purpose of carrying on any business or trade. The property is not being used for the purpose of any business or trade. No evidence as to the nature of the property supported by any municipal tax paid has been furnished. The property has been let out to the said Institute. Thus, it is clear that the property 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-laborat....
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....th chargeable to tax under the Wealth-tax Act. 33. The third property is in the nature of office at Shankar Parvati Chamber. This property was purchased by the assessee on 2-11-1994. This property is situated in the apartment known as Shankar Parvati Apartment Condominium. The vendor, who has sold this property to these assessees had seized and possessed of and were the exclusive owners of the apartment unit Nos. 29 to 38 which were rearranged into offices consisting of the entire rear portion of the second floor. The assessee has purchased the apartment unit Nos. 34 to 38 which were rearranged into three independent offices. On perusal of the said agreement, it is thus clear that the property in question is in the nature of office apartments. This property has been 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 o....