ITAT MUMBAI BENCH `J’,
Cravatex Ltd. Vs. Addl. CIT,
ITA No. 7381/Mum/02 WTA No. 42/Mum/03 WTA No. 38/Mum/03
DECIDED ON June 30, 2010
ORDER
PER N.V. VASUDEVAN, JM :-
ITA No. 7381/Mum/02: This is an appeal by the Assessee against the order dated 16.8.2002 of CIT(A)-VI, Mumbai, relating to A.Y.98-99.
2. Ground No. 1 was not pressed and the same is dismissed as not pressed.
3. Ground No. 2 raised by the Assessee is with regard to the action of the CIT(A) in confirming the action of the Assessing Officer in assessing the service charges of Rs.83,99,300/- received from letting out business centre as Income from House property as against Income from business considered by the Assessee.
4. This issue arose for consideration in Assessee’s case in AY 97-98 and this Tribunal in ITA No. 2834/Mum/2001 held that out of the total sum of Rs.83,99,300/- received by the Assessee from letting out business centre a sum of Rs.5,00,000 can be attributed towards services charges for providing various services which was to be assessed under the head ‘income from other sources’. The remaining sum was to be assessed under the head “Income from House Property”. The AO was further directed to allow deduction u/s. 24 of the Act in respect of income from house property. The AO is directed to follow the aforesaid decision of the ITAT in assessee’s own case and determine income from house property and income from other sources. The appeal of the Assessee is thus partly allowed.
5. WTA No. 42/Mum/03 & 38/Mum/03: WTA No. 42/Mum/03 is an appeal by the Assessee against the order dated 23.10.02 of CIT(A)-VI, Mumbai relating to A.Y.97-98. WTA No. 38/Mum/03 is an appeal by the Assessee against order dated 25.10.2002 of CIT(A)-VI, Mumbai relating to A.Y.98-99. The common issues that arise for consideration in both these appeal are:-
a) Whether the immovable property at No. 6, 4th floor, ‘Sahas’, Veer Savarkar Marg, Prabhadevi, Mumbai-400 025, hereinafter referred to as “the property” owned by the Assessee can be included in the net wealth of the Assessee?
b) If yes, what is the value of the said property for the purpose of determining the net wealth of the Assessee?
6. Before dealing with the above issues, we may clarify that the property which is the subject matter of the income tax appeal and the Wealth Tax appeals is one and the same.
7. Under sec. 3 of the Wealth Tax Act, 1957 (hereinafter referred to as “the Act”) for every assessment year there shall be a charge to tax (called wealth tax) in respect of the net wealth of every individual, HUF and Company, on the corresponding valuation date at the rates specified in Schedule –I to the Act. sec. 2(m) of the Act defines “net wealth” as the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the Assessee on the valuation date, is in excess of the aggregate value of all the debts owned by the Assessee on the valuation date which have been incurred in relation to the said assets. sec. 2(ea) of the Act defines “Assets” to mean any building or land appurtenant thereto whether used for residential or commercial purposes or for the purpose of maintaining a guest house or otherwise including a farm house situated within 25 Kms from local limits of any Municipality or cantonment Board but does not include certain category of assets. For the present appeal the excluded category which is relevant is clause (3) of sec. 2(ea) of the Act which excludes “any house which the assessee may occupy for the purposes of any business or profession carried on by him”.
8. The Assessee owned the property at No. 6, 4th floor, ‘Sahas’, Veer Savarkar Marg, Prabhadevi, Mumbai-400 025. According to the Assessee the aforesaid property had all facilities of being used as a business centre. The Assessee had entered into an agreement dated 10-10-1995 (titled “Agreement for Security Deposit”)whereby the Assessee permitted M/S.Hutchison Max Telecom Pvt.Ltd. (referred to as “client” in the agreement)to use the facilities at the aforesaid property (according to Assessee a business centre) for a period of 9 years on the terms and conditions contained in a separate range of services agreement of 10-10-95. The Assessee received an interest free security deposit of Rs.6,40,00,000/-under this agreement from M/s. Hutchison Max Telecom Pvt. Ltd.. This sum was to be refunded to M/s. Hutchison Max Telecom Pvt. Ltd., by the Assessee on expiry of the period of the agreement or earlier determination of the agreement. The range of services agreement provides that the Assessee would provide air conditioned Executive Suites, “A” and “B” class cabins, conference rooms and open office area. The Assessee had arrangements to provide telephone lines, facilities for faxing, photocopying and word processing. The Assessee had agreed to provide security services and house keeping facilities. The client was at liberty to have his own furniture, office equipment etc. The Assessee agreed to provide two car parking space. The agreement in clause-3 further provides that the Business centre services shall be available to the client on all working days between 8.00 A.M. to 10.00 P.M. It has been further provided in clause-3 that in the event of the client desiring to use business centre services beyond the working hours on any working day or holiday, the centre would extend such services at no extra charges. The rates to be paid are set out in Annexure-2 to this agreement. Annexure-2 gives the following figures:
