Commissioner of Wealth Tax v. Sohna Forge Pvt. Ltd.

1. Whether Reporters of Local newspapers may be allowed to see the Judgment?

2. To be referred to the Reporter or not?

3. Whether the Judgment should be reported in the Digest? A.K. SIKRI, J. (ORAL)

1. These appeals are filed challenging the orders of the Income Tax Appellate Tribunal (hereinafter referred to as „the Tribunal‟) under Wealth Tax proceedings granting the respondent/assessee benefit of Section 2(ea) of the Wealth Tax Act, 1957 holding that since the property in question held by the assessee is use for business purposes, it would be exempt from the wealth tax.

2. The assessee had been allocated land in question at Plot No.14/6, Site-IV, Sahibabad Industrial Area, Ghaziabad on 99 years lease by Uttar Pradesh State Industrial Corporation for its business. The Wealth Tax Officer denied the exemption under the aforesaid provision and subjected the property to Wealth Tax on the ground that the assessee was not doing any business therefrom for last number of years. The contention of the assessee that it had been doing business and had done job work, which was not accepted by the Wealth Tax Officer.

3. The CIT (A) took note of the details of job work furnished by the respondent/assessee. However, he was of the view that this claim of the assessee that the assessee had done job work did not repose any confidence in absence of requisite details and there was no proof submitted by the assessee that it had done some job work. The CIT (A) even called upon the AO to look into the issue of reopening of the income tax proceedings to disallow depreciation, as according to him, no commercial activities were carried out by the assessee.

4. The Tribunal has, as noticed above, accepted the appeal of the assessee holding that the assessee had been doing the business in the form of aforesaid job work and therefore, the property in question would be exempt from the Wealth Tax, as per Section 2(ea) of the Wealth Tax Act, which defines “asset” and specifically excludes the asset occupied by the assessee for the purpose of any business or profession carried on by him.

5. The Tribunal took note of a very crucial fact, viz., for the Assessment Years 2001-02 to 2006-07, the assessee had filed income tax returns in which the assessee had shown business income. It had also claimed depreciation on the aforesaid building constructed by the assessee on the leasehold land in question and this depreciation was allowed by the AO in all these years. The Tribunal further found that though no regular assessment under Section 143(3) of the Act for the Assessment Years 2001-02 to 2004-05 had been made by the AO and in those Assessment Years, the assessment was completed under Section 143(1) of the Act, insofar as the Assessment Years 2005-06 to 2006-07 are concerned, the case of the assessee for these years was selected for scrutiny and regular assessment under Section 143(3) of the Act had been made wherein the assessee‟s claim of depreciation on the building @10% on Written Down Value had been allowed. As mentioned above, in these Assessment Years, the assessee had shown income under the head “Profits & Gains of Business or Profession”, which was also accepted by the AO. Even when the CIT (A) while discussing the case of the assessee under the Wealth Tax Act had opined that the case of the assessee under Income Tax Act be reopened, no such steps were taken by the AO under the provisions of the Act which shows that the assessments under the Act had become final. This fact was specifically taken note of by the Tribunal.

6. From the aforesaid narration, it is clear that not only in the Assessment Years in question, the assessee had carried on its business utilizing the aforesaid asset for this purpose, but this decision was even accepted by the Department as well.

7. In these circumstances, we are of the opinion that the order of the Tribunal is without blemish. We are, thus, of the view that no substantial question of law arises. These appeals are accordingly dismissed.

(A.K. SIKRI) JUDGE (M.L. MEHTA)

JUDGE JULY 18, 2011 pmc