Wealth-tax Act, 1957, S. 2(ea)(i)(5) — Where the assessee owns a warehouse which is let out on rental basis and used by the tenant for its business, the warehouse is to be excluded as an asset.

The assessee was the owner
of a warehouse, a part of which was used by the assessee for the purposes of its
own business and a part was let out. Warehousing charges received were offered
for taxation under the head ‘Income from House Property’. The assessee
considered the let out portion of the warehouse as being used for commercial
activity and accordingly did not consider it as an ‘asset’ chargeable to tax.
The Assessing Officer (AO) relying on the decision of the Madras High Court in
the case of Indian Warehousing Industries Ltd. (269 ITR 203) (Mad.) held that
merely because warehouse is let it cannot be said that the assessee is using it
for its business purposes and commercially. He considered it to be an ‘asset’
chargeable to tax.

Aggrieved the assessee
preferred an appeal to CWT(A) who observed that the decision of the Madras High
Court was in the context of S. 40(3) of the Finance Act, 1983, whereas the
present case is covered by the law as amended by the Finance Act, 1992 w.e.f.
1-4-1993. He held that after the amendment, the moot point is how the property
is utilised and not who utilises it. Even if the lessee utilised the property as
a commercial establishment or complex it will be excluded from the list of
assets. He allowed the appeal filed by the assessee.

Aggrieved the Revenue
preferred an appeal to the Tribunal.

The Tribunal observed that
the decision of the Madras High Court in the case of Indian Warehousing
Industries Ltd. (supra) and also the decision of the Kolkata Bench of the
Tribunal in the case of T. P. Roy Chowdhury & Co. Ltd. (69 ITD 135) (Cal.),
dealt with the provisions of S. 40(3) of the Finance Act, 1983. The Tribunal
noted that the definition of asset as applicable to assessment years under
consideration has been amended by the Finance Act (No. 2), 1996 w.e.f. 1-4-1997
and subsequently items 4 and 5 were inserted by the Finance Act (No. 2) w.e.f.
1-4-1999. Upon considering the ratio of the decision of the Pune Bench of ITAT
in the case of Satvinder Singh v. DCWT, (109 ITD 241) (Pune), which dealt with
the amended Section, the Tribunal noted that since a part of the warehouse was
used by the assessee for the purposes of its own business and the part let out
was used by the lessee for commercial purposes, the entire warehouse is held to
be used by the assessee for commercial purposes and in view of the provisions of
S. 2(ea)(i)(5) of the Act the said property is to be excluded as an asset for
the purposes of computing taxable net wealth. The Tribunal upheld the order
passed by the CIT(A).