PRINCIAL COMMISSIONER OF WEALTH TAX - 7 vs. M/S ORIENTAL BUILDING & FURNISHING CO. LTD.
What did the High Court hold?
The High Court disagreed with the Revenue's submission that 'commercial establishments or complexes' must be interpreted in the plural. The Court found no legislative intent to restrict the exemption to properties let out to multiple tenants. Reading such a restriction would involve adding words to Section 2(ea)(i)(5) of the WTA, which is not permissible. The Court also found no qualification in the said clause suggesting that a commercial establishment must comprise more than one establishment or possess specific ancillary facilities like banking or supermarkets, as suggested by some ITAT benches. The Court concurred with the Gujarat High Court's decision in CWT, Rajkot v. Vasumati Ben Chhaganlal Virani, which held that sub-clause (5) of Section 2(ea)(i) does not require a commercial establishment or complex to be occupied by the owner or to be established in a particular manner, and that the exclusion applies to any property in the nature of a commercial establishment or complex. Therefore, the impugned order of the ITAT was found to be legally sound, and no substantial question of law arose.
What were the facts?
The Revenue (Principal Commissioner of Wealth Tax - 7) filed six appeals before the High Court of Delhi challenging an order dated October 26, 2016, passed by the Income Tax Appellate Tribunal (ITAT). The appeals pertained to assessment years 2004-05 to 2009-10 and concerned the classification of two properties owned by the respondent assessee, M/s Oriental Building & Furnishing Co. Ltd. The assessee classified its properties as residential (9, Friends Colony) and commercial (M-7, Connaught Circus and Sardar Mohan Singh Building, Connaught Lane). The Assessing Officer (AO) disagreed, considering M-7, Connaught Circus as not falling outside the Wealth Tax Act (WTA) purview as it generated rental income and was not stock-in-trade, and the Connaught Lane property as taxable because it was vacant. The CIT(A) agreed with the AO for some assessment years and disagreed for others, leading to cross-appeals before the ITAT. The ITAT ultimately held both disputed properties to be commercial establishments or complexes, thus outside the definition of 'assets' under the WTA.
What were the issues?
1. Whether the Income Tax Appellate Tribunal (ITAT) was correct in holding that the properties of the Respondent/Assessee at M-7, Connaught Circus, New Delhi and Sardar Mohan Singh Building, Connaught Lane, New Delhi were 'Commercial Establishments or Complexes' and therefore outside the purview of 'assets' under Section 2(ea)(i)(5) of the Wealth Tax Act, 1957 (WTA)? Assessee's Contention: The properties at M-7, Connaught Circus and Sardar Mohan Singh Building were commercial establishments or complexes and thus not 'assets' for WTA purposes. Revenue's Contention: The expression 'commercial establishments or complexes' should be interpreted in the plural, meaning a building must be let out to multiple tenants to qualify for exclusion. The Revenue argued that a singular commercial establishment or complex, especially one generating rental income or lying vacant, should not be excluded from the definition of 'assets'. The Revenue relied on the interpretation that the exclusion was not intended for properties like those in question.
Which sections of the Income-tax Act were involved?
Section 2(ea)(i)(5)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORDER % 18.07.2017 CM APPL. No. 18292/2017 (delay in filing) IN WTA 1/2017 CM APPL. No. 18293/2017 (delay in filingl IN WTA 2/2017 CM APPL. No. 18295/2017 (delay in filingl IN WTA 3/2017 CM APPL. No. 18297/2017 Idelav in filing! IN WTA 4/2017 CM APPL. No. 18302/2017 (delay in filing) IN WTA 5/2017 CM APPL. No. 18308/2017 (delay in filing! IN WTA 6/2017
For the reasons stated in the applications, the delay of 9 days in filing these appeals is condoned and these applications, accordingly, stand disposed of. CM APPL. No. 18294/2017 (Exemption) in WTA 2/2017 CM APPL. No. 18296/2017 (Exemption^ in WTA 3/2017 CM APPL. No. 18298/2017 (Exemption^ in WTA 4/2017 CM APPL. No. 18303/2017 (Exemption! in WTA 5/2017 CM APPL. No. 18309/2017 (Exemption^ in WTA 6/2017
Allowed, subject to all just exceptions. WTA Nos. 1/2017. 2/2017.3/2017. 4/2017. 5/2017. 6/2017
The Revenue is in appeal against an order dated 26^*^ October, 2016 passed by the Income Tax Appellate Tribunal (TTAT') in WTA Nos. 20/Del/ 2013, 28/Del/ 2013, 29/Del/ 2013, 30/Del/ 2013, 31/Del/ 2013 and 32/Del/ 2013 for the assessment years ('AY's') 2004-05 to 2009-10. 4. The question sought to be urged by the Revenue is whether the ITAT was correct in holding, in the facts of the case, that the properties of the Respondent/Assessee at M-7, Connaught Circus, New Delhi and Sardar Mohan Singh Building, Connaught Lane, New Delhi were 'Commercial Establishments or Complexes' and therefore outside the purview of 'assets' under Section 2 (ea) (i) (5) of the Wealth Tax Act, 1957 (WTA)?
The Assessee classified the three properties belonging to it in the following manner: (a) 9, Friends Colony (West), New Delhi (residential) (b) M-7, Connaught Circus, New Delhi" (commercial) and (c) Sardar Mohan Singh Building, Connaught Lane, New Delhi (commercial).
Therefore, according to the Assessee, the properties at M-7, Connaught Circus, New Delhi and Sardar Mohan Singh Building, Connaught Lane, New Delhi were in the nature of 'Commercial Establishments or Complexes' and therefore not 'assets' for the purposes of the WTA . The Assessing Officer ('AO'), however, disagreed. As regards the property at M-
Connaught Circus, the AO held that the Assessee's business "is neither to let the properties on hire nor this property is a portion of stock-in-trade of the assessee. The assessee is getting only the rental income out of it, therefore, the said property cannot be considered out of the purview of the WTA." As regards the property at Connaught Lane, the AO held that since Page 4 of?
the said building was presently lying vacant and not in use by the Assessee or any third party, it was not outside the purview of the WTA.
While the CIT(A) disagreed with the AO for AY 2004-05, the CIT(A) agreed for the AYs 2005-06 to 2009-10. Therefore, the Revenue was in appeal before the ITAT for the AY 2004-05 and the Assessee for the AYs 2005-06 to 2009-10. 8. The ITAT disagreed with the AO and the CiT (A) and held that both properties formed part of larger commercial establishments. The ITAT referred to the decision dated 1st November 2013 of the Gujarat High Court in ITA No. 932 of 2012 {CWT, Rajkot v. Vasumati Ben Chhaganlal Virani).
Before us, it was urged by Mr Sanjay Kumar learned counsel for the Revenue, that the expression 'commercial establishments or complexes' should be understood only in the plural and not in the singular. In other words, in order to fall outside the purview of 'assets' under Section 2 (ea) (i) (5) WTA, the commercial building had to be let out to several tenants and not just one..
The Court is unable to agree with the above submission. It is obvious from a reading of the entire Section 2 (ea) WTA that the legislative intent was not to restrict the benefit of exemption any particular type of commercial establishments or complexes. By reading such a restrictions into the said clause, the Court would be writing into Section 2 (ea) WTA Page 5 of?
something which is not there.
The Bombay Bench of ITAT has sought to suggest that a commercial establishment means a building comprising more than one establishment meant for commercial purpose and having the infrastructure and ancillary facilities and establishments such as banking, financial institution, supermarket, bar etc. The Court is unable to find any such qualification attaching to the expression 'Commercial Establishments or Complexes' in Section 2 (ea) (i) (5) of the WTA.
In CWT, Rajkot v. Vasumati Ben Chhaganlal Virani {supra) the Gujarat High Court held as under: "To our mind sub-clause (5) of clause(i) of section 2(ea) nowhere requires that a commercial establishment or a complex cannot be established in a house property. It only provides that any property in the nature of commercial establishment or complexes shall be excluded from the term assets as defined in clause(i) of section 2(ea). Further that it nowhere provides that only if such commercial complex is occupied by the owner then alone the exclusion shall take effect. On both counts thus contention of the Revenue cannot be accepted. It is significant to note that exception sub-clause (5) of clause(i) of section 2(ea) pertains to any house which the assessee may occupy for the purposes of any business or profession carried on by him. Thus whenever legislature desired that exclusion may apply only if property is self occupied, it was so provided. Significantly, in sub- clause (5), there is no such insistence."
This Court concurs with the above view of the Gujarat High Court as regards the interpretation of Section 2 (ea) (i) (5) WTA. Therefore, we find that the impugned order of the ITAT does not suffer from any legal infirmity. No substantial question of law arises.
The appeals are dismissed. S.MURALIDHAR, J ^ Vt' PRATHIBA M. J JULY 18,2017 j/dk
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