Income Tax Appellate Tribunal - Ahmedabad
Sayaji Hotels Ltd.,, Baroda vs Department Of Income Tax on 19 June, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND
SHRI S.S. GODARA JUDICIAL MEMBER
WTA No.6/Ahd/2012
A.Y.2003-04
ACIT, Circle-4, Baroda. Vs M/s. Sayaji Hotels Ltd.,
Opp. Rajshree Talies,
Kalaghoda, Sayajigunj,
Baroda.
PAN: AADCS 2086A
(Appellant) (Respondent)
Revenue by : Ms. Abha Rani Singh,
CIT-D.R.,
Assessee(s) by : None
सुनवाई क तार ख/Date o f Hearing : 1 7/06/2015
घोषणा क तार ख /Date o f Prono unceme nt: 19 /06 /2015
आदेश /O R D E R
PER S.S. GODARA, JUDICIAL MEMBER
This Revenue's appeal for A.Y.2003-04, arises from order of CWT(A)-III, Baroda, dated 06.07.2012 passed in case no.CAB/III-179/10-11, deleting assessed wealth in respect of plots worth Rs.4,50,95,970/- by holding that the plots of land in question did not fall in the category of asset u/s.2(ea), in proceedings under section 16(3) r.w.s.17 of the Wealth Tax Act, in short 'the Act'.
WTA No.6/Ahd/2012M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -2-
2. The assessee is a company. It did not file any wealth return at the first instance. The Assessing Officer noticed it to have sold two plots for a consideration of Rs.4,50,95,970/-. He was of the view that the assessee was liable to pay wealth tax as per the said valuation of its land as on 31.3.2003. This culminated in issuance of Section 17(2) notice. The assessee filed reply. It stated to have sold two plots of land forming part of its one piece of land admeasuring 27,881.48 sq. mtr. It had acquired the same from Indore Development Authority for the purpose of a hotel on which hotel building, amenities, the two properties in question existed. It would further plead that these plots named as Vatika and Vrindavan had been issuing as party plots of its hotel for several years, income therefrom was separately recorded in the books. Ledger accounts' extracts were placed on record. And it was further claimed that its plots were not isolated parcels of land but were appurtenant to its hotel building. The assessee quoted section 2(ea)(i)(3) & (5) of the Act envisaging any building or land appurtenant thereto used as commercial establishment to be exempted from wealth tax assessment. All these pleas failed to convince the Assessing Officer. He observed in assessment order dated 21.12.2010 that the assessee's properties were in no way in the nature of commercial establishment or complex. He went on to opine that the abovestated statutory provision only referred to any property which is itself in the nature of commercial establishment or complex and the mere fact that the plots in question had been rented out on few occasion would not convert their nomenclature to commercial establishment WTA No.6/Ahd/2012 M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -3- or complexes. This resulted in impugned wealth addition of Rs.4,50,95,970/-.
3. The CWT(A) has accepted the assessee's arguments as under:
2. Brief facts of the case are that on verification of income tax records for AY 2004 - 05, the AO noticed that the appellant had sold two lands for a consideration of Rs.4,50,95,970/-. The AO further noted that based on the value of lands, the appellant company was liable to pay wealth tax in the assessment year under consideration on the value of land as on 31/03/2003. Since the appellant had not filed the return of wealth tax, hence a notice under section 17(2) of the wealth tax Act, 1957, was issued. On being asked, the AO supplied the reason to the appellant who raised objection against reopening of the assessment.
The AO disposed of the objection by passing a speaking order and after that the assessment was taken up. During the course of assessment proceeding, the appellant submitted that these lands were forming part of one piece of land acquired from Indore Development Authority long ago for the purpose of Hotel on which Hotel building, amenities building, and these 2 party plots were existing. These plots of land were named as Vatika and Vrindavan and were used by the noted for several years as party plots and incomes from this party plots were recorded in the books of account separately. Accordingly, it was submitted that the plots of land had been taxable if they were totally isolated plots of land and were not appurtenant to the Hotel building. It was also submitted that any building and land appurtenant thereto, if used for commercial purposes, the same is exempted from wealth tax. The AO did not accept the contentions of the appellant and held that the said properties are in no way in the nature of commercial establishment or complex. Further, the AO held that the appellant's argument that any building and land appurtenant thereto, if used for commercial purposes is exempt from wealth tax, is also not acceptable for the reasons that the term "land appurtenant thereto" referred in subsection is not applicable to provisions of clause 5 as here, it refers to any property which is itself in the nature of commercial establishment or complexes. Further by giving plots on rent on few occasions, it does not convert its nomenclature to commercial establishment or complexes. Accordingly, AO treated the value of these plots as net Wealth of the appellant. Besides, the motor car WTA No.6/Ahd/2012 M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -4- owned by the appellant worth rupees 1,53,442/- , was also treated as part of the net wealth. This appeal has been filed against this order.
3. The Grounds of appeal are as follows:
i) The Ld. AO has made the Assessment order in violence of the principles of natural justice and without giving sufficient opportunity of explaining the matter. The order made is against the law and facts and circumstances of the case.
ii) That the Ld. AO has erred in understanding the facts of the matter under consideration.
iii) That the Ld. AO has not interpreted Sec, 2 (ea) (i)(5) of the Wealth Tax Act, 1957 correctly.
iv) That both the plots sold were forming part of the Hotel Complex since the beginning of the Hotel and were used commercially.
v) That both the plots were not situated at any isolated place but were the part of the Hotel land. The entire piece of land was acquired in the year 1994 on which the Hotel was constructed and plots were appurtenance to the Hotel Building,
vi) That there is no provision in the Act which attracts wealth tax on land which is appurtenant to the Commercial building,
vii) Your appellant begs your honour's leave to add/delete/amend any grounds of Appeal and make written submissions to your honour and an opportunity of personal appearance before your honour to explain the facts of the case in detail.
4. During the course of the appellate proceedings, the appellant submitted as follows: ~ "1. Introduction Sayaji Hotels Ltd. a Public Limited Company having hotels and restaurants at Vadodara and at Indore and having restaurants in several towns of India, files its Return of Income from time to time. Return of Net Wealth was not filed as Company had no taxable wealth.
A notice u/s 17(1A) dt.25.03.2010 was received stating escarpment of Wealth. On 16th Aprii 2010, the assessee wrote asking reasons of the reopening of the assessment and also wrote that as the net wealth was below taxable limit, no Return of Net Wealth was required to be filed. However, the Learned Assessing Officer (Ld. AO) wrote on 2nd August 2010 to file the Return of Net Wealth and in its response the Return of Net Wealth was filed on 05.05.2010 declaring Wealth Rs. 1,53,442/- being cost of the Motor Cars below the taxable limit. Thereafter, during the assessment proceedings all the required documents and details were filed. On 22nd December, 2010, an WTA No.6/Ahd/2012 M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -5- order made u/s 16(3) r.w.s. Sec. 17 was received in which the Net Wealth assessed has been Rs. 4,52,49,512/-. It has been stated inter alia in the order that the two plots sold in AY 2004- 04 were includible in the Net Wealth.
Being aggrieved by such untenable addition, your appellant has preferred this Appeal before Your Honour.
2. FACTS OF THE ISSUE UNDER DISPUTE:
The two pieces of land of Your Appellant were sold in the Financial year 2003-04 and from the assessment records for the AY 2004-05, the auditors-of the I. Tax Dept presumed that these pieces of land were taxable under the Wealth tax Act and as a result the Ld. AO issued a notice u/s 17(1A) of the Wealth Tax Act on 25.03.2010 (Enclosed as Annexure I) requiring to file the return of income for the AY 2003-04. Your Appellant replied on 16th April, 2010 (Enclosed as Annexure II) that the assessee Company was not liable to the Wealth Tax and no Return of Wealth was required to be filed. Then, a letter dt. 02.08.2010 (Enclosed as Annexure III) was received in which the Ld AO stated that even if net wealth has been below taxable limit, a Return of Wealth stating Nil wealth may also be filed and otherwise an ex parte assessment will be made. AS a result your Appellant filed a Return of Wealth on 5th August, 2010 stating WDV of cars owned by it as Rs. 1,53,442/-. Then the Ld. AO wrote on 06.10.2010 (Enclosed as Annexure - IV) that the two pieces of land sold for prices aggregating Rs. 4,50,95,970/-
in the Financial Year 2003-04 were taxable under the Wealth tax Act and then he proceeded with the assessment disregarding several submissions made before him. He eventually added sale prices of these two pieces of land to the net wealth.
This is the only issue of dispute before Your Honour.
3. SUBMISSIONS:
The two pieces of land which were named as VATIKA and Vrindavan by Your Appellant were sold in FY 2003-04 which were forming part of a single piece of Land totally admeasuring 27,881,48 sq. mtrs. Which was acquired from Indore Development Authority of Your Appellant long ago for the purpose of constructing a Hotel complex on which Hotel Building, amenities Building and these two pieces of land which were used as party plots by Your Appellant were existing.WTA No.6/Ahd/2012
M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -6- (Map of the entire piece of land as well as a statement showing division of the said land in the entire Hotel Complex enclosed as Enclosed as Annexure-V and VI).
Both these plots of land named as Vatika and Vrindavan were used by the hotel for several years as party plots. Income from these party plots were recorded in the books of accounts separately and extracts of their ledger accounts have been submitted to Ld. AO enclosed as Annexure-VII).
Hence not only these plots were commercial properties. From the map enclosed your Honour will observe that the entire piece of land is one and there has been no isolated land aloof from the Hotel Premises. It Is further submitted that in the Hotel Premises, these party plots were used for a big dinner functions as part of its business and in the Books of Accounts the income generated from these plots were credited separately. Copies of ledger accounts mentioning day wise incomes earned from both these party plots have been enclosed for Your Honour's perusal as (Enclosed as Annexure-VII). In F.Y. 2003-04, both these party plots "Vatika" and "Vrindavan" were sold.
From the above facts, your Honour will easily conclude that the plots sold were commercial properties and were forming part of the Hotel Complex. Your Honour! There has been no provision in the Wealth Tax Act on account of which b y any stretch of imagination wealth tax would be attracted on these pieces of land.
The Section 2(ea) (i)(3) and Section 2(ea)(!)(5) of the Wealth Tax Act state as under:
Any building or land appurtenant thereto, if used for commercial purposes the same is exempted from Wealth Tax. Further, the same section says any property in the nature of commercial establishment is exempt from Wealth Tax. The company's case is squarely out of this section as plots sold were forming part of the Hotel Premises and were used for business. Hence when these two plots were forming part of the Hotel Complex, it is obvious that there is no question of levying wealth on such plots.WTA No.6/Ahd/2012
M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -7- The Ld. AO has mentioned in the first three paragraphs on page 4 of his impugned order that these two pieces of land cannot be called commercial complex. But your Honour! The Ld. AO ha s not given any reasons for his such belief. Ld. AO has not categorically explained that if plots were not part of commercial complex than were where they situated? His derivation is of a general in nature and has no foundation and has been made on surmises. The Ld. AO either has failed in understanding the facts of the case or the law of the wealth tax. He has failed to understand the meanings of the words "Property", and "Commercial Establishment and Complexes" appearing in the clause (5). Due to these reasons and facts, the impugned order therefore is vague and lacs support of any provision of the Wealth Tax Act for bringing the two pieces of land within the ambit of Wealth Tax Act for attracting wealth tax.
Your Appellant encloses (Annexure - VIII) prints of the relevant provision of the Wealth Tax Act for Your Honour's ready reference."
5. I have considered the appellant's submissions and the observations made by the AO. Section 2(ea)(i) refers to any building or land appurtenant thereto at the beginning, and after this, these terms have been referred to as "house". Thus a reference to the term "house" in the clauses meant for excluding such houses from being treated as assets, refer to any building or land appurtenant thereto. Accordingly, clause 3, which states that any house which the assessee may occupy for the purposes of any business or profession carried on by him, it means that any building or land appurtenant thereto which the assessee may occupy for the purposes of any business or profession carried on by him. In the present case, the plots of land were part of the Hotel building and were also being used as party plots by the Hotel business carried on by the appellant. Under such circumstances, these plots of land do not fall within the definition of assets as per section 2(ea) of the Wealth tax act, 1957.
6. Accordingly, it is held that the AO was not correct in levying wealth tax on these 2 plots of land. Hence the appellant's appeal is allowed and the additions made by the AO are directed to be deleted.
7. As a result, the appeal is allowed."WTA No.6/Ahd/2012
M/s. Sayaji Hotels Ltd.
For A.Y.2003-04 -8-
4. We have heard the Revenue and gone through the case file. Its pleadings in the ground are very elaborate and also contain the virtual graphics of the site in question. It strongly reiterates findings of the Assessing Officer that the mere fact of the plots being used for party purposes on rent would not change their nomenclature to commercial establishment. It fails to rebut CWT(A) findings that the assessee's plots are part of the hotel building, were being used for commercial purposes and income therefrom being accounted regularly. There is no evidence much less a substantive one placed o record. We quote co-ordinate bench decision of the ITAT Pune Bench decision in Satvinder Singh Kalra Vs. DCWT (2007) 109 ITD 241 holding that when only usage of the asset in question is material irrespective of its user. The Revenue fails to point out any distinction on facts or law. We affirm the CWT(A) order and reject the Revenue's sole substantive ground.
5. The Revenue's appeal is dismissed.
Order pronounced in the Court on this day, the 19th June, 2015 at Ahmedabad.
Sd/- Sd/-
(N.S. SAINI) (S.S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 19/06/2015
Prabhat Kr. Kesarwani, Sr. P.S.
आदेश क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
WTA No.6/Ahd/2012
M/s. Sayaji Hotels Ltd.
For A.Y.2003-04
-9-
4. आयकर आयु त(अपील) / The CIT(A)-III, Ahmedabad
5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदेशानुस ार / BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad