UNITED WHITE METAL LTD, MUMBAI V. DCWT CIR (3), THANE

CO 50/MUM/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7223 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: WT
• Next Hearing Date: 01-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KETAN L VAJANI
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI WT BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM & SHRI N K BILLAYA, AM WTA NOS. 06 & 04 /MUM/2010 (ASSESSMENT YEARS 2004-05 & 05-06 ) THE DY COMMR OF WEALTH TAX CIR 3, THANE VS UNITED WHITE METAL LTD AKULI ROAD, KANDIVALI (E) MUMBAI (APPELLANT ) (RESPONDENT) & CROSS OBJECTION NO. 50 /MUM/2010 IN WTA NBO.04/M/2010 (ASSESSMENT YEARS 2005-06 ) UNITED WHITE METAL LTD AKULI ROAD, KANDIVALI (E) MUMBAI VS THE DY COMMR OF WEALTH TAX CIR 3, THANE (CROSS OBJECTOR ) (RESPONDENT) PAN NO. AAACU0983H ASSESSEE BY SHRI KETAN L VAJANI REVENUE BY SHRI CHANDRAJIT SINGH DT.OF HEARING 1 ST MAY 2012 DT OF PRONOUNCEMENT 11 TH , MAY 2012 ORDER PER VIJAY PAL RAO, JM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST S EPARATE ORDERS OF THE CWT(A) FOR THE AYS 2004-05 AND 2005-06 RESPECTIVELY . 2 THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS FOR THE ASSESSMENT YEAR 2005-06. WTA NOS. 06 & 04 /MUM/2010 ( BY THE REVENUE): 3 THE REVENUE HAS RAISED COMMON GROUNDS IN BOTH THE SE APPEALS; THEREFORE, FOR THE SAKE OF CONVENIENCE, THE GROUNDS RAISED FOR THE ASSESSMENT YEAR 2004-05 ARE REPRODUCED HEREUNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CWT(A)-L, THANE HAS FAILED TO APPRECIATE THAT THE A SSESSEE COMPANY HAD UNITED WHITE METAL LTD 2 RENTED OUT ITS FACTORY PREMISES AND LAND APPURTENANT THEREON FOR WARE HOUSING PURPOSE, MANUFACTURING PURPOSE AND EARNED RENT AL INCOME OF RS. 33,61,355/- AND AS PER THE PROVISIONS OF SECTION 2(E A) OF THE WEALTH TAX ACT, 1957, ANY FACTORY BUILDING GIVEN ON RENT AND NOT USED FOR ASSESSEES OWN BUSINESS IS LIABLE FOR WEALTH TAX. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF WEALTH-TAX(A)-L, THANE WAS NOT JUSTI FIED IN HOLDING THAT THE ASSETS WHICH HAVE BEEN LET OUT AND HAVE FETCHED INC OME TO THE ASSESSEE COMPANY ARE NOT ASSETS WITHIN THE MEANING OF SECTIO N 2(E) OF THE WEALTH TAX ACT, 1957. 4 THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD RENTED OUT THE PREMISES WITH LAND APPURTENANT THERETO TO CERTAIN PARTIES AN D HAS EARNED INCOME OF ` 3,27,69,638/-. THE ASSESSING OFFICER ACCORDINGLY HELD THAT THE ASSET IN QUESTION IS LIABLE TO BE TAXED UNDER WEALTH TAX ACT AS THE SAME HAS NOT BEEN USED IN ASSESSEES OWN BUSINESS. 4.1 ON APPEAL, THE CWT(A) HELD THAT THE PROPERTY IN QUESTION ARE NOT THE ASSET WITHIN THE MEANING OF SEC. 2(EA) (I) OF W T ACT AS THE SAME ARE IN THE NATURE OF PRODUCTIVE ASSET. 5 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD DR HAS REL IED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT WHEN THE ASSESSEE HAS LE T OUT THE PREMISES ONLY FOR EARNING RENTAL INCOME; THEREFORE, THE SAID FACTORY PREMISES CANNOT BE HELD AS USED BY THE ASSESSEE IN ITS OWN BUSINESS ACTIVITY. 5.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE ASSESSEE IS THE OWNER OF THE FACTORY BUILDING AT KANDIVALI. THE LAND AND THE FACTORY BUILDING ARE USED FOR THE PURPOSE OF THE BUSINESS OF THE ASS ESSEE AND ONLY A PORTION OF THE SAID LAND AND BUILDING HAS BEEN LET OUT DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THE PORTION IS LET OUT BY THE ASSESS EE WITH A VIEW TO HAVE COMMERCIAL EXPLOITATION OF THE BUSINESS PROPERTY. HE HAS FURT HER SUBMITTED THAT THE RENTAL UNITED WHITE METAL LTD 3 INCOME HAS BEEN OFFERED UNDER THE HEAD PROFIT AND GAIN OF BUSINESS OR PROFESSION AND ACCEPTED BY THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) OF I T ACT FOR THE AY 2005-06. HE HAS REFERRED TH E ASSESSMENT ORDER AT PAGES 33 TO 36 OF THE PAPER BOOK AND SUBMITTED THAT THE REVENUE HA S ACCEPTED THE RENTAL INCOME AS INCOME FROM BUSINESS OR PROFESSION. HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CEPT V. SHRI L AKSHMI SILK MILLS LTD., REPORTED IN 20 ITR 451(SC). 6 AFTER CONSIDERING THE RIVAL CONTENTION AND CAREFU L PERUSAL OF THE RELEVANT MATERIAL ON RECORD, WE FIND THAT UNDER THE INCOME T AX PROCEEDINGS, THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER DATED 14 .3.2007 FOR THE AY 2005-06 ACCEPTED THE RENTAL INCOME OFFERED BY THE ASSESSEE AS INCOME FROM BUSINESS. 5.1 SINCE THE RENTAL INCOME OF THE PROPERTY IN QUES TION HAS BEEN ACCEPTED AS BUSINESS INCOME IN THE INCOME TAX PROCEEDINGS; THER EFORE, THE REVENUE CANNOT TAKE A DIFFERENT VIEW ON THE SAME PROPERTY IN THE WEALTH TAX PROCEEDINGS. 5.2 ONCE THE CLAIM OF THE ASSESSEE THAT THE PROPERT Y IN QUESTION IS USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE HAS BEEN AC CEPTED IN THE INCOME TAX PROCEEDINGS, THEN THE REVENUE CANNOT TAKE A DIFFERE NT VIEW ON THE SAME PROPERTY UNDER WEALTH TAX PROCEEDINGS AS HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS BOMBAY CONDUCTORS & ELECTRICAL LTD REPORT ED IN 258 ITR 667. THE FINDINGS OF THE HONBLE HIGH COURT READS AS UNDER: SINCE THE PROPERTY IN QUESTION WAS HELD TO BE USED FOR BUS INESS IN THE INCOME-TAX PROCEEDINGS BY THE INCOME-TAX OFFICER HIM SELF, THE SAME PROPERTY COULD NOT HAVE BEEN TREATED DIFFERENTLY IN THE WEALTH-TAX PROCEEDINGS. IF THE PROPERTY IS BEING USED FOR BUSINES S PURPOSES AND IT IS ACCEPTED TO BE SO IN THE INCOME-TAX PROCEEDINGS, SIM ILAR TREATMENT IS TO BE GIVEN IN THE WEALTH-TAX PROCEEDINGS AND AS SUCH IN T HE WEALTH-TAX PROCEEDINGS, THE VALUE THEREOF CANNOT BE INCLUDED I N THE NET WEALTH OF THE ASSESSEE AS IT IS SPECIFICALLY EXEMPT UNDER SECTION 40(3)(VI) OF THE FINANCE ACT, UNITED WHITE METAL LTD 4 1983. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION T HAT THE TRIBUNAL HAS RIGHTLY EXCLUDED THE VALUE OF THE PROPERTY FROM THE NET WEALT H OF THE ASSESSEE. WE, THEREFORE, ANSWER THE ABOVE QUESTION IN THE AFFIRMATI VE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6 IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HI GH COURT (SUPRA), WHEN THE REVENUE HAS ACCEPTED THE PROPERTY IN QUESTION AS FO R THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, THEN THE SAME FALLS UNDER THE EXCEPT ION AS STIPULATED U/S 2(EA)(I)(3) OF THE W T ACT. ACCORDINGLY, WE DO NOT FIND ANY ERRO R OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CWT(A), QUA THIS ISSUE. CROSS OBJECTION NO.50/MUM/2010 (BY THE ASSESSEE - A Y 2005-06) 7 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION FOR THE AY 2005-06: (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE COMMISSIONER OF INCOME-TAX (APPEALS), HAS ERRED IN CONFIRMING THE VA LIDITY OF THE ASSESSMENT MADE WITHOUT SERVICE OF NOTICE U/S. 16(2) OF THE WE ALTH-TAX ACT, 1957. (B) THE C.I.T.(A) HAS ERRED IN OBSERVING THAT THE AC COUNTANT OF THE RESPONDENT HAS APPEARED IN RESPONSE TO A NOTICE AND HENCE THE ASSESSMENT IS A VALID ASSESSMENT. (C) THE RESPONDENT RESPECTFULLY SUBMITS THAT NO NOTI CE HAS BEEN EVER SERVED ON IT AND THE ACCOUNTANT OF THE RESPONDENT HAS ATTEN DED IN RESPONSE TO A TELEPHONIC CALL BEFORE THE ASSESSING OFFICER. (D) IN VIEW OF THE ABOVE, THE RESPONDENT RESPECTFULLY SUBMITS THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER IS VOID AB INITIO SINCE THE SAME IS MADE WITHOUT SERVICE OF NOTICE AND HENCE THE IMPUGN ED ASSESSMENT DESERVES TO BE QUASHED. 8 SINCE THE ISSUE ON MERITS HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE; THEREFORE, WE DO NOT PROPOSE T O ADJUDICATE THE TECHNICAL ISSUES RAISED BY THE ASSESSEE IN THE CROSS OBJECTIO N AS BECOME ACADEMIC IN NATURE. UNITED WHITE METAL LTD 5 9 IN THE RESULT, THE APPEALS FILED BY THE REVENUE A S WELL AS THE CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 11 TH , DAY OF MAY 2012 SD/ SD/- ( N K BILLAYA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 11 TH , MAY 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI -