Case Law Details

Case Name : ACIT Vs M/s. Prasad Machinery Pvt. Ltd. (ITAT Ahmedabad)
Appeal Number : WTA No. 1/Ahd/2012
Date of Judgement/Order : 12/06/2015
Related Assessment Year :

Brief of the case:  In case of ACIT vs. M/s. Prasad Machinery Pvt. Ltd.  (ITAT Ahmedabad) assessee was owner of factory building. It allotted certain space therein to its sister concern for enabling it to carry on their business in lieu of charging rent. It claim exemption under Wealth Tax Act u/s 2(ea)(5). A.O. treated said property taxable under Wealth Tax Act. CIT (A) held that in terms of Section 2 (ea) (5), it is not necessary that property in nature of commercial establishment should be occupied by assessee himself. Thus, even if building was not let out to its sister concern , still it would be eligible for  exemption. Tribunal upheld same.

Facts of the case:  The assessee was owner of the factory building utilizing it for the purpose of manufacturing plastic processing machinery. It had allotted certain space therein to its sister concern for enabling them to carry on their business in lieu of charging rent. The assessee claimed exemption under section 2(ea)(3) on ground that such houses/buildings occupied for the purpose of business or profession. The Assessing Officer noticed the assessee company did not file wealth tax return at the first instance. The assessee had received rent pertaining to two new sheds totalling Rs.84,28,800/-. He adopted rent capitalization method as per the schedule III of the Act and computed assessee’s taxable wealth of Rs.9,43,22,800/- .

HELD by CIT(A):  He CIT (A) held both the factory buildings as business assets carrying on the activities of a commercial nature, both was held as exempt from Wealth tax.

HELD by ITAT:  The Revenue seeks to restore the Assessing Officer’s findings treating assessee’s industrial sheds in question as taxable under the provisions of wealth tax law. It has come on record that the assessee is utilizing the same in its business of plastic processing machineries and generates revenue there from. The lower appellate authority has exempted these sheds from being assessed by quoting section 2(ea)(5). It also quotes case law of the tribunal (supra) holding only nature and purpose of the property’s usage as material irrespective of the user. The Revenue neither places on record any material rebutting the CIT(A) view holding the assessee’s sheds being utilized in its business nor does its quote any case law to the contrary. The court uphold the CIT(A) findings in these circumstances and reject the Revenue’s ground.

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