Law:

Section:

Section 2(ea) [as it stood prior to 1-4-1997] of the Wealth-tax Act, 1957 - Assets - Whether building let out as commercial building to tenants is an asset within meaning of section 2(ea) to be included in net wealth and, thus, taxable - Held, no FACTS For the assessment year 1993-94 the assessee's commercial building let out to tenants was treated as an asset under section 2(ea) by the WTO and included in the net wealth of the assessee. On appeal, the Commissioner (Appeals) as well as the Tribunal confirmed the findings of the WTO. On further appeal : HELD Whether an item of property is chargeable to tax or not is dependent on the true construction of section 3 in the strict sense in which it is enacted. There cannot be any ambiguity in a charging section. If two views are possible, the one beneficial to the assessee is to be adopted. Unless a property is chargeable under the charging section, no tax can be levied thereupon. [Para 4] A plain reading of section 2(ea ) indicates that only a guest house and/or residential building (including a farm house) situated within 25 km of the local limits of any municipality are assets. However, an exception is carved out in respect of houses meant exclusively for residential purposes and those allotted by a company to an employee or an officer or director subject to the conditions laid down therein or used for business purposes forming part of stock-in-trade. If this definition is interpreted in the manner on the principles settled by law, then it is very difficult to bring within the definition a building used for commercial purpose by the tenant on being let out. Character of the building is the determining factor under the existing provision for making it an asset. Guest house, residential building including farm house are made taxable. But commercial building is not made taxable. [Para 5] The buildings used for business or commercial purpose are not taxable under section 3 until amended. From the expression used in section 3 before amendment it was clear and unambiguous. It had specified the buildings, which were included in the definition of 'asset'. It included guest house, residential building, farm house situated…

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