Income

The CIT(A) was justified in deleting the addition in computing the wealth tax of the assessee made on account of rental income from properties since the same was used primarily for the purpose of assessee’s business and they were neither created nor let out for earning rental income, as held by GujHC in CIT v Gujarat State Petroleum Corpn Ltd — In favour of: The assessee.

The CIT(A) as well as the Tribunal have both concurrently come to the conclusion that the said two immoveable properties were utilised by the assessee for the purpose of its own business. The assessee, a government-owned company, had pointed that the property at Udyog Bhavan was permitted to be used by the Government Officer for a short period and usage charges were collected. It has come on record that only a small portion of the properties, ie less than 10% of the premises, were thus used by the Office of the Directorate of Petroleum, Department of Energy and Petrochemicals. This was done by the direction of the Government.

The main purpose of this arrangement was to have close liaison with the Directorate of Petroleum. It has also come on record that the guest house at Hazira was located at a distance of 30 km from Surat and it was in the vicinity of the exploration site of the assessee. In the said guest house, as per the needs of the business, the officer of the joint venture and subsidiary companies and other officers were permitted to reside, and in the process, usage charges were collected. Principally, the guest house was constructed for the assessee’s own business. Thus, the CIT(A) and the Tribunal committed no error in holding that both the properties were used by the assessee’s own business and not for creating rental income.

Decided on: 16 August 2011.