Income Tax Appellate Tribunal - Pune
Shri Satvinder Singh Kalra And Shri ... vs Commissioner Of Wealth-Tax on 29 September, 2006
Equivalent citations: [2007]109ITD241(PUNE), (2007)112TTJ(PUNE)489
ORDER
C.L. Sethi, Judicial Member
1. In these eight appeals, four appeals each filed by two different assessees, pertaining to the assessment years 1999-2000, 2000-01. 2001-02 and 2002-03, a common and identical issue is involved as to whether the following properties fall within the definition of ''assets" defined Under Section 2(ea) of the Wealth-tax Act, 1957 and are thus liable to wealth-tax:
a. 1/2 share of office at 1002 2nd floor.
New Budhwar Peth. Pune 411002 Rs. 5,92.493/- b. Office at 24 East Street, Yogesh Hlouse. Rs. 93,21,358/- Pune 411 001 c. Office at Shankar Parvati Chamber. Plot No. 198/2 Record Hall Rd. Dhiole Patil Rd. Pune 411001 Rs. 1,30,16.044/- d. 1/2 share of office at ground floor. Shankur Parvati Chamber. Plot No. 198/2 Sangamwadi. Dhole PatiI 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 mostiy 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 GT(A)-11 Pune erred in confirming that the following let out properties are '"assets" within meaning of Section 2(ea) of the Wealth-lax Act. 1957 and hence, liable to wealth-tax.
a. 1/2 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. Rs. 93.21, 358/- Pune 411 001 e. Office at Shankar Parvati Chamber, Plot No. 198/2 Record. Hall Rd, Dhole Patil Rd. Pune 411 001 Rs. 1,36,16.044/- f. 1/2 share of office at ground floor. Shankar Parvati Chamber. Plot No. 198/2 Sangamwadi. Dhole Patil Rd, Pune 411 001 Rs. 18,596/-
2) The ld CIT (A) erred in not appreciating that the above properties were exempt Under Section 2(ea)(i)(5) and accordingly, not includible in the total assels of the assessee for the purpose of levy of wealth tax.
3. At this stage, we also consider it useful to take note of the grounds of appeal taken by one of the assessees, i.e. Shri Satvinder Singh Kalra, before the' CIT (A) in the assessment year 99-2000, which reads as under:
The AO erred in denying the assessee's claim for excluding let out properties being one half share in four properties viz. office at 1002. 2nd floor. New Budhwar Peth, Pune valued at Rs. 5,92.493/-, office at 24 East Street. Yogesh House. Pune valued at Rs. 93,21,358/-, office at Shankar Parvati Chamber. Dhole Patil Road. Pune valued at Rs. 1,36.16,044/- and basement at Shankar Parvati Chamber, Dhole Patil Road, Pune valued al 18,596/- which were totaling to Rs. 2.35.48.491/- from computation of net wealth. The appellant pleads thal the subject properties do not fall within the definition of assets as per the specifie exclusion Under Section 2(ea)(1)(5).
4. The aforesaid properties referred to in the grounds of appeal were included in the taxable wealth of the assessee by treating them as "assets" defined Under Section 2(ea) of the Wealth-tax Act by the AO in all the years under consideration.
5. The assessee claimed that these assets are not includible within the meaning of 'assets' Under Section 2(ea)(i)(5) of the Wealth-tax Act relevant to the assessment years under consideration and thus, claimed them exempted. In support thereof, the assessee filed a letter dt 8.3.2005 before the AO explaining the matter as under:
1. The assessee has claimed four properties declared in the wealth tax return at Serial No. B1 as excluded from the definition of 'asset ' Under Section 2 (ea)(i)(5).
2. The assessee owns four properties all of which are proper commercial properties. These were let out to business entities for rent which is declared in the Income Tax Return. The rent received forms the basis for ascertaining the value for wealth purposes 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 1/2 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 properly 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 fell within the scope of Sub-clause 3 of Section 2(ea)(1).
4. The subject properties legally belong to the respective co-operative 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 of all assets belonging to the assessee as on the valuation date is in excess of debts incurred in relation to said assets. In the assessee's case the subject assets do not belong to the assessee but to the respective co-op societies.
6. Section 2(ea) brings to charge of wealth tax any building or land appurtenant thereto used for residential or commercial purpose but excludes 5 items specified in Sub-clause (1) to (5). In Sub-clauses (1) to (3) specified "house" properties have been excluded. In Sub-clause (4) residential "house" property let out for 300 days in the previous year is excluded.
7. Sub-clause (5) reads as follows: "any property in the nature of commercial establishment or complexes".
8. The word 'and ' means:
a. one or more- used to indicate an undetermined number or amount.
b. All- used to indicate a maximum number or amount.
The word property in the context of the section means any real estate which an assessee has exclusive right to possess, enjoy and dispose off. Considering the fact that in Sub-clauses (1) to (4) the words house and residential property have been used, it is obvious that the word property in this Sub-clause refers to property other than a house or residential property.
The words "in the nature of" mean bearing or having the character of.
The words commercial establishment or complexes describe the kind of property envisaged in contradistinction to residential house property or stock in trade or property used for own business. We submit that the use of the plural will included the singular. Any other interpretation would result in absurdity - for eg. A literal understanding of the words of the section would mean be follows:
One or more properties bearing the character of more that one commercial establishment or complex". This is surely not intended by the statute which was introduced with the purpose of excluding productive assets.
9. We submit that Sub-clause (5) covers a case where the assessee owns property which does not legally belong to him as it is part of a commercial establishment or complex belonging to a co-op society or a company.
10. Every word of a statute has to be assumed to have been deliberately and consciously incorporated therein by the legislature. 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 AO 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 AO'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, II nd floor, Shankar Parvati, Dhole Patil Road, and Ground floor, Shankar Parvati, Dhole Patil road. the value of which is declared at Rs. 2,35,29,894/- arc commercial properties are exempt from Wealth Tax. According to the assessee, these were let out to business entities for rent which is declared in the income Tax return. The rent received forms the basis for ascertaining the value for wealth purposes declared in the return. These offices are in commercial premises. Hence it is claimed by the assessee that the value of commercial establishment or complex would not be included in the net wealth.
5. From the submissions made by the assessee as stated in above para, the assessee has claimed the exemption Under Section 2 (ea)(5) of the W.T. Act, 1957 in respect of above mentioned properties. As per the said section, the property is not an assets Under Section 2 (ea) if the same is in the nature of commercial establishments or complexes. The provisions of this Section are applicable in the case or property as a single unit because the word used therein is "any property in the nature commercial establishments/complexes". In the case of the assessee, there is no single unit but there are four properties in four separate buildings. The contention of the assessee that the above stated properties are in the nature of commercial establishment/complexes etc. is therefore not acceptable. Moreover, on verification of income tax records of the assessee, it is pertinent to mention here that the assessee treated income derived from these properties as " Income from house Properties ". Thus, it is clear that the properties given on rent are in the nature of commercial house properties but not commercial establishment or complexes.
As the commercial house properties mentioned above arc given on rent during the year under consideration, the valuation of the properties is required to be made Under Section 7(1) of the W.T. Act, 1957 by applying Rule-3 of the Schedule-III. Accordingly the values of immovable properties as on 31/3/1999 are worked out as under and adopted for the Wealth Tax purposes on valuation date.
7. Being aggrieved with the order of the AO including the said properties in the taxable asset, the assessee had carried the matter by way of an appeal before the CIT(A). The submissions of the assessee before the CIT (A) have been noted by the CIT (A) at para 2.1 of his order, which read as under:
2.1 The submission of the appellant in this regards 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 claimed on ground that the four properties are not in a single unit but in separate buildings. This argumental by itself seems rather absurd. Further: the Assessing Officer has given weightage to the fact that the income derived form 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 arc assessable under the said under the said head of income. Moreover, the had of income does not figure in the language of Section 2(ea) of the W.T. Act.
We are enclosing copies of Department's Circular No. 636 dt. 31.8.92 and the relevant extract of Finance (No. 1) Bill, 1998 notes on clauses which throw light on the purpose for which the amendments top the Wealth Tax Act were made. He Wealth Tax Act was amended by the Finance Act, 1992 " with the view to stimulating investments in productive assets by abolishing wealth lax on all assets except certain specified assets". By the amendment of Finance (No. 2) Bill 1998 notes on clauses, it was proposed to exclude certain residential properties and any properties in the nature of commercial establishment or complexes form the definition of assets.
There is no doubt that the assessee's properties are productive, commercial assets. It is also significant to note that in the Notes on Clauses Finance (No. 2) Bill, 1998 the words used are "It is proposed to exclude any properly in the nature of commercial establishment or complex form the definition of asset". The use of singular in the notes clearly support our submissions that the use of the plural in Section 2(ea)(i)(5) includes the singular. Even other wise a literal understanding of the section results in a dilemma, if not an absurdity. In case of an absurdity the statute needs to be interpreted reasonable and in consonance with justice adopting a purposive approach. In the event of two views being possible. It is well settled that the view favourable to assessee should be adopted.
8. After considering the assessee's submissions, the CIT (A) held that the properties in question were "assets" within the meaning of Section 2(ea) of the Wealth-tax Act by observing and holding as under:
2.2 I have carefully considered the submission of the appellant and perused the material on record. Section 2(ea)(i) of the Wealth Tax Act. 1957 which contains the law. Which is subject matter of appeal is reproduced as under:
(ea) "assets" in relation to the assessment year commencing on the 1st day of April 1993 or any subsequent assessment year means
i) any building or land appurtenant thereto (hereinafter referred to as "house"), whether used for residential or commercial purpose or for the purpose of maintaining a guest house or otherwise including a farm house situated within twenty live kilometers form local limits of any municipality (whether knows 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 that live lakh rupees;
(2) any house for residential of 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 assessee as stock in trade, such asset shall be deemed as excluded from the assets specified is this Sub-clause;
iv) yachts, boats and aircraft's (other than those used by the assessee for commercial purpose);
v) urban land
vi) cash in hand, in excess of fifty thousand rupees, of individuals and Hindu undivided families in the case of other persons any amounts not recorded in the books of account.
2.3 From the reading of provision of law adduced above, it is clear that any building or land appurtenant thereto whether used for residential or commercial purposes is an asset. Thus, the definition of assets as contained in Section 2(ea) is exhaustive definition because the word used is means. Now from the exhaustive definition of assets as contained in Section 2(ea) of the Wealth Tax Act, 1957, it is absolutely clear that assets means any building or land appurtenant thereto whether used for residential or commercial purposes. Items excluded from definition of assets are contained in Sub-clauses (5) of Clause (i) of Section 2(ea) and Sub-clauses (5) says that assets docs not included any property in the nature of commercial establishment or complexes. Thus, it is absolutely clear that by Parliament intendment which is expressed in wordings of Section 2(ea) reproduced hereinbefore, commercial establishment or complexes are different from building used for residential or commercial purposes. It is settled rule of interpretation that harmonious interpretation is to be given in interrupting words/clauses in an enactment. If the interpretation canvassed by the appellant as mentioned above is to be accepted it will make Section 2(ea)(i) inoperative because every building or part of building used for commercial purposes shall be claimed to be part of commercial establishment or complexes. This is not correct way to interpret law. This is so because as per settled principles of interpretation no redundancy can be attributed to provisions of law enacted by the Parliament. If harmonious interpretation is adopted which is the right way to proceed in the matter which is sub matter of appeal, it would be clear that commercial establishment and complexes are different from any building whether used for commercial purposes. In this view of the matter, I am of the considered view that the asset which is subjected to wealth lax by the learned 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 arc 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 assets 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 property which comprise of Office at 1002, 2nd floor, New Budhwar Peth, Pune, Office at 24 East Street, Yogesh House, Pune, office at Shankar Paravti Chamber, Dhole Patil Raod, Pune and basement at Shanker Paravti Chamber, Dhole Patil Road, Pune Cannot be said to be part of commercial complex or commercial establishment within the meaning of Section 5 Section 2(ea)(i) of the Wealth Tax Act, 1957.
Sub-clause (3) of Clause (i) of Section 2(ea) exclude "any house which the assessee my occupy for the purpose of any business or profession carried on by him'. Thus, it is clear that any house which is used for commercial purposes by an assessee other than the purpose of his own business or profession is an asset within the meaning of Section 2(ea) of the Wealth Tax Act, 1957.
In view of the foregoing discussion and taking into account the provisions of law. it is held that office at 1002, 2nd floor. New Budhwar Peth. Pune office at Shankar Parvati Chamber, Dhole Patil Road, Pune and basement at Shankar Parvali Chamber, Dhole Patil Raod, Pune are assets within the meaning of Section 2(ea) of Wealth Tax Act and correctly taxed by the Assessing Officer. Thus, ground No. 1 has no merit and it fails.
9. Still aggrieved, the assessees have preferred these appeals before us.
10. The Id counsel for the assessee has submitted that the properties in question are not liable to be included within the definition of "assets" as defined Under Section 2(ea) of the Wealth-tax Act, 1957, inasmuch as they are covered by exception under Sub-clause (5) of Clause (i) of sub-sec (ea) of Section 2 of the Wealth-tax Act as these are the properties in the nature of commercial establishments or complexes. He further submitted that Sub-clauses (4) and (5) to Clause (i) of Sub-section (ea) of Section 2 of Wealth-tax Act has been inserted by the Finance (No. 2) Act, 1998 with effect from 1.4.1999. In this connection, the Id counsel for the assessee invited our attention to the Notes on Clauses and Memorandum explaining the provisions in the Finance (No. 2) Bill 1998 with a view to point out that the object and the purpose for which these amendments were made in the Wealth-tax Act. He further contended that it would be clear from the notes and memorandum explained by the Board, this amendment was proposed to exclude certain residential properties (Sub-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 v. State . In Law Lexicon, commercial establishment' under the Kerala Shops & Commercial Establishments Act, 1960 has also been referred to. The Id counsel for the assessee further submitted that all these properties are in the nature of commercial property and are in the commercial area where the business is being carried on. He further submitted that all these properties has been assessed to municipal tax as commercial property. In other words, he submitted that all these properties have been classified as commercial property in the local municipal records and municipal taxes have accordingly been paid from year to year. Supporting his case, the Id counsel for the assessee has furnished number of documents, which are listed as below:
1. Purchase deed in respect of property at 1001 2nd floor, Budhwar Peth.
2. Copy of lease agreement in respect of Budhwar Peth property.
3. Copy of electricity bill in respect of Budhwar peth properly wherein it is clearly mentioned as commercial.
4. Copy of purchase deed in respect of office at 24. East. Street. Yogesh House.
5. Copy of lease agreement in respect of Yogesh House property.
6. Copy of municipal tax receipt in respect of Yogesh House property.
7. Copy of purchase of deed in respect of office at Shankar Parvali Chamber, Plot No. 198.
8. Copy of lease agreement in respect of office at Shankar Parvati Chamber.
9. Copy of municipal tax receipt in respect of office at Shankar Parvali Chamber.
10. Copy of purchase deed in respect of office at ground floor, Shankar Parvali Chamber.
11. Copy of lease agreement in respect of office at ground floor. Shankar Parvati Chamber.
12. Copy of municipal tax receipt in respect of office at ground floor. Shankar Parvati Chamber.
The assessee has also filed following documents:
1. Copy of municipal tax bill in respect of offices al Shankar Parvuti Chamber and Yogesh House.
2. Details of rent received for AY 99-00 to 02-03 by Shri Satvinder kalra.
3. Details of rent received for AY 99-00 to 02-03 by Shri Sukhminder Kalra.
11. The Id DR, on the other hand, supported the orders of the authorities below and contended that the properties in question were not in the nature of 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 Id 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 relation to the assessment year commencing on the 1st day of April, 1993 or any subsequent assessment year, means-
(i) any guest house and any residential house (including a farm house situated within twenty live kilometers front the local limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board but does 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 two lakh rupees;
(2) any house for residential purposes which forms part of stock-in-trade;
(ii)...
14. The aforesaid Clause (i) of Sub-section (ea) of Section 2 of the Wealth-tax Act was substituted by the following Clause (i) by the Finance (No. 2) Act of 1996 with effect from 1.4.1997:
(i) any building or land appurtenant thereto (hereinafter referred to as 'house'), whether used for residential or commercial purposes or 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 does not include (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or director who is in whole time employment, having a gross annual salary of less than two 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 of profession carried on by him.
15. The aforesaid Clause (i) substituted by the Finance (No. 2) Act, 1996 with effect from 1.4,97 has been further substituted by the Finance (No. 2) Act, 1998, with effect from 1.4.99, which reads as under
(ea) "assets", in relation to the assessment year commencing on the 1st day of April. 1993, or any subsequent assessment year. means-
(i) any building or land appurtenant thereto (hereinafter referred to as 'house"), whether used for residential or commercial purposes or 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 does 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 live 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 of profession carried on by him:
(4) any residential properly 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 1.4.99. In the Budget Speech of Minister of Finance, the Hon'ble Finance Minister has stated that housing is an area which requires our utmost attention, and, therefore, he proposed several incentives to encourage house building activity. Amongst several incentives to encourage house building activities, an exemption to certain specified properties like commercial complexes under the Wealth-tax Act was provided. (See para 100 of Finance Minister's speech reported at page 69 (St) of 231 ITR). In the Notes on Clauses on Finance Bill No. 2, 1998, it is stated that Clause 69 of the Finance Bill No. 2. 1998, seeks to amend Section 2 of the Wealth-tax Act relating to definitions. Sub-clause (b) of Clause 69 seeks to amend Sub-section (ea) of Section 2 of the Wealth-tax Act relating to the definition of assets for the purpose of Wealth-tax. Vide this clause, it was proposed to exclude let-out residential properties from the definition of asset in case the property has been let out for a period of at-least 300 days in a year. (Sub-clause (4) to Clause (i) of Sub-section (ea) of Section 2 of the Wealth-tax Act). It was also proposed to exclude any property in the nature of commercial establishment or complex from the definition of asset and these amendments should take effect from the 1st day of April, 1999 and would accordingly apply in relation to the assessment year 99-2000 and subsequent years. In the Memorandum explaining the provisions in the Finance No. 2 Bill, 1998, under the head "Incentives proposed under the Wealth-tax Act", it is clarified that wealth-tax is not levied on productive assets. In view of this logic, it is proposed that wealth tax would also not be levied on such residential properties that have been let out for a period of a minimum of three hundred days in a year, and, it is also proposed to exempt commercial establishments and complexes from the ambit of Wealth-tax Act. It is, thus, clear that the Legislature has adopted a logic that wealth-tax is not levied on productive assets, and in view of that logic, it was proposed that wealth-tax would not be levied on such residential property that has been let out for a period of minimum 300 days in a year and to exempt commercial establishments and complexes from the ambit of wealth-tax. Therefore, while construing the meaning to Sub-clauses (4) and (5) inserted by the Finance No. 2 Act, 1998 with effect from 1.4.89. the intention of the Legislature that wealth-tax is not to be levied on productive assets is to be kept in mind.
17. On reading 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 1.4.97 and by the Finance Act, 1998 with effect from 1.4.99, 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 there-under. 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 any one 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) qualifies the generality of the main enactment by providing an exception and taking out from the main provision a portion which but for the exception provided in Sub-clauses (1) to (5) would be the part of the main provision. The properties or the houses of a nature specified in Sub-clauses (1) to (5) below to Clause (i) of Sub-section (ea) of Section 2 are an exception to the main provision. The exception provided in Sub-clauses (1) to (5) must, therefore, be considered in relation to the main or principal enactment of Clause (i) of Sub-section (ea) of Section 2 of the Wealth-tax Act to which these Sub-clauses (1) to (5) stand as an exception. The properties or houses enumerated in these Sub-clauses (1) to (5) must not be read as alien to the main provision. In this view of the matter we, therefore, do not find any conflict between the main enactment of Clause (i) and the exceptions provided in Sub-clauses (1) to (5) thereto. In the light of the main enactment provided in Clause (i) and the exception provided thereto by way of excluding the properties or the houses enumerated in the Sub-clauses (1) to (5) from the main enactment, the intention of the Legislature becomes clear that the Legislature did not intend to bring all buildings or land appurtenant thereto, whether used for residential or commercial purposes within the ambit of "assets" chargeable to tax under the Wealth-tax Act. Thus, the question of rendering the Clause (i) being redundant does not arise.
18. On the reading of the aforesaid definition of 'assets' given under Clause (i) of Sub-section (ea) of Section 2 as it stood from time to time, it is clear that Sub-clause (3) below Clause (i) of Sub-section (ea) of Section 2 has been inserted by the Finance (No. 2) Act, 1996 with effect from 1.4.97, and Sub-clauses (4) & (5) were subsequently inserted by the Finance (No. 2) Act. 1998 with effect from 1.4.99. The assessment years involved in these appeals are A Ys 99-2000 to 2002-03, and, as such, we are concerned with the definition of 'assets' as substituted by Finance (No. 2) Act, 1998 with effect from 1.4.99. In the light of the aforesaid definition of "assets" as it stood from time to time, any house which the assessee may occupy for the purposes of any business or profession carried on by him was not excluded from the purview of "asset" before the insertion of Sub-clause (3) by the Finance (No. 2) Act, 1996 with effect from 1 4.97. In other words, upto the assessment year 96-97, 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 1.4.97 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 'house or property in the nature of commercial establishments or complexes'. In other words, any or all houses whether in the nature of commercial house or not but. occupied by the assessee for the purpose of any business or profession carried on by him, would be covered by this Sub-clause. In order to bring the case to be covered by this item, the only requirement is to prove that the house was occupied by the assessee for the purpose of any business or profession carried on by him. The nature of the house is not material. What is material is that the house must be occupied by the assessee for the purpose of any business or profession carried on by him. Thus, any house being not occupied by the assessee for the purpose of any business or profession carried on by him would not be covered by this Sub-clause (3) even though the same may be used for commercial purposes by any person other than the assessee.
19. On the other hand, Sub-clause (5) covers any property in the nature of commercial establishments or complexes. In order to cover a case under Sub-clause (5), it is not necessary that the property in the nature of commercial establishments or complexes should be occupied by the assessee for the purpose of any business or profession carried on by him as in the case covered by Sub-clause (3). Here, the nature and purpose of use of the property is material irrespective of the fact whether it is used or occupied either by the assessee himself or anybody else for the purpose of any business or profession carried on by them, as the case may be.
20. Sub-clause (5) below Clause (i) of Sub-section (ea) of Section 2 of the Wealth-tax Act reads as under:
(5) any property in the nature of commercial establishments or complexes;
On its plain reading, it appears that any property in the nature of commercial establishments or complexes are not included within the definition of "assets" for the purpose of Wealth-tax Act. To claim benefit of the aforesaid Sub-clause (5), one must prove and establish that the property claimed to be excluded from the definition of "assets", should be in the nature of commercial establishments or complexes. In other words, the property should not be of any nature other than the nature of commercial establishments or complexes. In this Sub-clause (5), "complexes or establishments" are qualified with an adjective '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 interrelated parts, as for example, a multi-purpose building. Thus, the word 'commercial complex' means 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 interrelated 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 establishment as well as commercial complexes from the definition of "asset" for the purpose of chargeability to tax under the Wealth-tax Act. Therefore, for the purpose of Sub-clause (5) of Clause (i) of Sub-section (ea), property must be of commercial complex or establishment in nature where business or trade are being carried on and the property must also be used for the purpose of any business or trade as well. A property cannot only by its very nature be classified as a commercial establishment or complex unless the same is also used in a business and nothing else. Hence, the word 'commercial establishment' or complex, as the case may be. appears to be used in the sense that the property must be in the nature of commercial property and the same must also be used for the purpose of trade or business and nothing else. In this sense of the term, we may, therefore, say that if any property though used for commercial purposes, but is not in the nature of commercial property, the same would not fall within the term 'commercial establishment' or complex used in Sub-clause (5) below to Clause (i) of Sub-section (ea) of Section 2 of the Weath-tax Act. Having regard to the object and purpose of the said Clause (i) with exception thereto, any building though used for commercial purposes, but is not in the nature of commercial property or establishments, shall not be covered by expression "any property in the nature of commercial establishment or complexes" as used in Sub-clause (5) below to Clause (i) of Sub-section (ea) of Section 2 of the Act. For the purpose of the aforesaid clause, the property must be of commercial nature implying thereby that the very nature of the property must be commercial and at the same time it must be used in a business or trade and nothing else.
21. However, from the reading of the main provision contained in Sub-clause (i) of Clause (ea) of Section 2, which is appended above, it is clear that any building or land appurtenant thereto used for commercial purposes also comes within the definition of asset, subject to the items excluded, vide Sub-clauses (1) to (5) thereto. In the main principal portion of Clause (i) the word used is "any building or land appurtenant thereto whether used for residential or commercial purpose" but it is always subject to the exceptions provided in Sub-clauses (1) to (5) thereto. Sub-clause (3) covers 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 establishment or complex, is not correctly made out. Merely because any building or land appurtenant thereto is used for commercial purposes would not that by itself is sufficient To bring it within the ambit of commercial establishment or complex unless it is also established and proved that the said building by its very nature is in the nature of commercial establishment or complex. The correct meaning of Sub-clause (5) would thus be that any property which is merely used for commercial purposes would not by itself be sufficient enough to classify the same as commercial establishment or commercial complex, unless it is also proved and established that the property by its very nature is also in the nature of commercial establishment or complex. Under Sub-clause (5), the Legislature has excluded only the property in the nature of commercial establishment or complex from the definition of "asset" for the purpose of Wealth-tax Act and not all the properties which are used for commercial purposes. For the purpose of Sub-clause (5), both the criterias of the nature and use of the property being of commercial must be fulfilled.
22. We may, therefore, summarize the proposition with regard to the building used for commercial purposes as under:
(1) That any building or land appurtenant thereto used for commercial purposes shall not be excluded from the "asset" as defined under Sub-section (ea) of Section 2 of the Wealth-tax Act, unless i) any house is occupied by the assessee for the purpose of any business or profession carried on by him (Sub-clause 3), or ii) the property by its very nature is in the nature of commercial establishment or commercial complex, being used in a business or trade carried on in the said premises (Sub-clause 5), or (iii) the house for commercial purposes which forms part of stock in trade (Sub-clause 2). Therefore, for the purpose of Item No. (3), any house may not necessarily be required to be in the nature of commercial establishment or complex, if it is occupied by the assessee for the purpose of any business or profession carried on by him, and in that case, the same shall stand excluded from the purview of assets defined Under Section 2(ea) of the Act. Further, any property which satisfy the criteria of its being in the nature of commercial establishment or complex and also used in a business or trade carried thereon 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 used for commercial purposes would not come within the ambit of Sub-clause (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 AO 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 the word used there is "any property in the nature of commercial establishments or complexes", but in the case of the assessee there is no single unit, but there are four properties in four separate buildings. This approach taken by the AO, in our considered view, is not found to be on sound footing. In the main provisions as well as in the exception clauses, the legislature has used the words like "any building", "any house", ''any residential property", and "any property". In other words, building or houses or residential property or property are qualified with the word "any".
24. In the case of Shri. Balaganesan Metals v. M. N. Shanmugham Chetty the Hon'ble Supreme Court held as follows at page 718:
The word 'any' has the following meaning : some : one of many: an indefinite number. One is indiscriminately of whatever kind or quantity. Word 'any' has a diversity of meaning and may be employed to indicate 'all' or 'every" as well as 'some' or 'one' and its meaning in a given statute depends upon the context and the subject matter of the statute. It is often synonymous with 'either', 'every' or 'all'. Its generality may be restricted by the context.
The meaning of the word "any" may therefore, imply "all", or "one of many" "some" or "one".
25. The Hon'ble Calcutta High Court in the case of CIT v. Arvind Investments Ltd. while interpreting the word "any" used in Explanation to Section 73 of the Act has observed that "any" is a word which excludes limitation or qualification. It connotes wide generality. Its use points to distributive construction. It was further observed that the word "any" should be given a meaning as wide as possible in the context. The words "any ward of the Municipal Borough" is understood to mean "every ward of the Municipal Borough. The Hon'ble Calcutta High Court has referred to number of decisions of the foreign Courts as well as Courts of the Land, and, thus, observed that no case has been pointed out to them where the word "any" has been used in a restrictive sense so as not to include "all". They further held that they failed to see why "part" should not include "the whole". In this view of the matter, and in the light of the decisions referred to above, the word "any" should 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 hold that the property in question does not come under the purview of "any property in the nature of commerical establishment or complexes". If the assessee owns more than one property in the nature of commercial establishment or complexes, the exemption shall be available to all such properties and cannot be restricted to any one of them.
28. In the light of the view we have taken, we now proceed to examine the facts and circumstances of the present case.
29. The following properties were claimed by the assessee as not falling within the definition clause of "assets" defined Under Section 2(ea)(i)(5) as the properties were in the nature of commercial establishment or complex, and hence, the assessee excluded the value thereof from the computation of net wealth:
1) Office premises at 1002, 2nd floor, New Budhwar Peth, Pune,
2) Office at 24, East Street, Yogesh House, Pune.
3) Office at Shankar Parvati Chamber, Dhole Patil Road, Pune.
4) Basement at Shankar Parvati Chamber, Dhole Patil Road. Pune.
30. Both these assessees have one-half share each in these properties.
31. With regard to the property at 1002, 2nd floor. Budhwar Peth, Pune, we have perused the respective purchase deed, lease agreement, electricity bill. Details of the amount of rent received by the assessee in respect of this property has also been furnished by the assessee. This property was purchased by the assessee vide Agreement dt 3.9.1994 from the promoter of the building M/s Venkateshwar Associates. The assessee has purchased part of the premises situated at 2nd floor in the multi-storeyed building situated at 1002 New Budhwar Peth, Pune. In this agreement, it is mentioned that certain flat/shop/office or godown has been constructed by the promoter. The area purchased by the assessee is 625 sq.ft. along with the terrace. At the upper portion of page 6 of the agreement, it is mentioned that the assessee purchaser has agreed to purchase and acquire from the promoters an office No. 2 on 2nd floor measuring 625 sq.ft. along with the terrace built up in the said building for the price of Rs. 2,25,000/-. However, in para No. 3 at page 6. it is mentioned that the assessee agrees to discharge the consideration of Rs. 2,04,070/- for the acquisition of the said flat. It is thus not clear as to whether this is a part of commercial complex or establishment. On perusal of the plan annexed thereto it appears that living room, kitchen, WC etc. are mentioned therein. This property has been give 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-laboratory, it cannot be said that it is in the nature of a commercial establishment or complex. Therefore, the assessee's claim in respect of this property at 1002, 2nd floor, New Budhwar Peth, Pune that it does not fall within the definition of "asset" defined Under Section 2(ea)(i) as it is excluded by Sub-clause (5) thereto, is not justified.
32. With regard to the office premises at 24 East Street, Yogesh House, we have gone through the purchase deed, lease agreement, cantonment tax receipt. This property was purchased by these assessees in the month of September, 1994 from M/s Elegant Marbles P Ltd. In this agreement, it is stipulated that the parties have agreed to sell and purchase these office premises specified therein. The assessee purchaser was in need of acquiring an office which has been accordingly purchased by this purchase agreement. The floor plan is also attached to the agreement, which indicates that the premises are in the nature of office premises. The assessee has let out these premises on rent on leave and licence basis to M/s D SS Mobile Communications Ltd. who is allowed to use the said premises for their business of radio paging services and related activities. The licensee is thus using the said premises for carrying on their business of radio paging services and related activities. This property is subjected to property tax by the Pune Cantonment Board. Tax has been levied treating the property as shop premises situated at Yogesh House. East Street. East Street at Pune is a commercial area. The property where the shop is situated is consisting of a basement, ground floor and two upper floors, i.e. a multi-storeyed building. The property has shops and offices therein. The property purchased and owned by the assessee is in the nature of office premises, which has been let out for the purpose of business carried on by the lessee. In the light of these facts, it is, therefore, clear that the property in question is in the nature of a commercial establishment. This property is not merely used for commercial purposes, but also it is in the nature of a commercial building. Therefore, having regard to the nature of the property as well as its use the property can be classified as commercial establishment within the meaning of Section 2(ea)(i)(5) of the Wealth tax Act, and as such, value thereof is not includible in the net wealth 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 2.11.94. 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 units No. 29 to 38 which were rearranged into offices consisting of the entire rear portion of the seqond floor. The assessee has purchased the apartment unit No. 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 Dellhi. 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 of the property is also of a commercial in nature being office apartments used for the purpose of carrying on business activities by a business concern or a trader. Pune Municipal Corporation has been realizing the taxes treating the same as commercial property. Since this property is in the nature of commercial building and as well as it was used for the purpose of business or trade, the same can be said to be a commercial establishment within the meaning of Section 2(ea)(i)(5) of the Act and hence, it is excluded from the purview of the asset, and as such, it is not includible in the net wealth chargeable to wealth-tax.
34. These assessees also own a property at ground floor of the same apartment known as Shankar Parvati Apartments. The sale agreement. Iease agreement, and the municipal tax receipt in respect of this property has also been perused by us. The purchase deed is in respect of one room each of upper ground floor being in the nature of office. The said property has been given on rent on leave and licence basis to M/s Golden Touch Developments P Ltd. From the leave and licence agreement, it is not clear as to whether the property was given for the purposed of carrying on business by establishing an office by M/s Golden, Touch Developments P Ltd or for the purpose of residence of its any employee. No other documents are on record to verify as to whether this property in question was used in a business or trade carried on by the licensee. Therefore, this needs further verification as to whether the property was actually used for the purpose of any business or trade by the licensee at the relevant point of time. As to the nature of the property, there is no dispute that it is in the nature of commercial property being in the nature of office premises. But the second criteria as to whether the property is used for the purpose of business or not is not established from the papers available on record so as to treat the same as a commercial establishment within the meaning of Sub-clause (5) of Clause (i) of Sub-section (ea) of Section 2 of the Act. This matter is restored back to the file of the AO for further enquiry and verification and then to decide the matter in accordance with the observations made above, and as per law after providing reasonable opportunity of being heard to the assessee.
35. In the result, all the appeals filed by both the assessees are partly allowed as above.
36. This judgment was announced in the open Court on 29.9.2006.