By TIOL News Service

KOLKATA, OCT 15, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether rental income earned from warehouses let out for commercial purposes, which was already offered as income from house property under Income tax Act, falls within the exclusion clause of section 2(ea) of Wealth tax Act. YES IS THE ANSWER.

Facts of the case:

The assessee company is engaged in the business of warehousing, transportation, container yard, tanker repairing & C&F agency. For the year under consideration, the assessee filed its wealth tax return declaring net wealth of Rs 57,91,335/-. The AO upon the scrutiny of assessment records, noted that the assessee owned two warehouses at Howrah and in the P&L A/c, the assessee credited Rs 2,22,34,670/- as 'Warehouse Rent'. He was however of the opinion that the warehouse did not come under the term 'business establishment' or within the definition of commercial complex and therefore it was chargeable to wealth tax u/s 2(ea). Accordingly, he applied the rent capitalization method in accordance with the provision of Part B of Schedule III of Wealth tax Act and determined the value of warehouse at Rs 23,62,43,375/- and added the same to the net wealth of the assessee company.

On appeal before the CIT(A), the assessee submitted that it had duly offered the rental income from the warehouses amounting to Rs 2,22,34,670/ -as income from house property in its income tax returns and the same had been assessed as such by the AO u/s 143(3). The CIT(A) after analysing the contentions of assessee and on perusal of the agreements, held that the warehouse owned by assessee would fall under the exclusion clause of section 2(ea)(i) of the Act and accordingly the same was not liable for wealth tax. He held that there was no dispute to the fact that a part of the warehouse was used by the assessee for its own business purposes and part of warehouse had been let out by the assessee, out of which, the assessee had derived rental charges.

Tribunal held that,

++ it is found that all the documents filed by the assessee more particularly the rent agreements and the name of the tenants occupying the warehouses were already part of income tax assessment records and that the income tax assessment for the very same assessment year was completed by the AO u/s 143(3). Moreover, the AO himself in his wealth tax assessment order states 'on scrutiny of assessment records'. Hence all the details that were duly appreciated by the CIT(A) were already part of income tax assessment records. It is also found that the Revenue had disputed only Rule 46A violation and had not disputed the fact and finding of CIT(A) on the ground that the subject mentioned warehouses fall within the exclusion clause of definition of assets u/s 2(ea) of the Act. In these facts and circumstances, the warehouses owned by the assessee squarely falls within the exclusion clause of section 2(ea) and accordingly not liable to wealth tax.

(See 2018-TIOL-1809-ITAT-KOL)