Wealth tax liability
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 March 2012
ABC ltd. has a industrail property and letout the same to a call center now such industrial property is liable for wealth tax in hand of company or not ??????????
07 March 2012
Industrial land is exempt from wealth tax for first two years only.
Industrial property is taxable in the hands of ABC Ltd as it was not used for the purpose of business but let out.
Sec 2(ea)(i) Any building or land appurtenant thereto (hereinafter referred to as “house”), whether used for residential or commercial purposes or for the purpose of maintaining a guest
house or otherwise including a farm house situated within twenty-five kilometres from local limits of any municipality (whether known as Municipality, Municipal Corporation or by any other name) or a cantonment Board, but does not include:
(1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole time employment, having a gross annual salary of less than Rs.5,00,000.
(2) any house for residential or commercial purposes which forms part of stock-in-trade.
(3) any house which the assessee may occupy for the purpose of any business or profession carried on by him.
(4) any residential property that has been let out for a minimum period of 300 days in the previous year.
Industrial property is taxable in the hands of ABC Ltd as it was not used for the purpose of business but let out.
Sec 2(ea)(i) Any building or land appurtenant thereto (hereinafter referred to as “house”), whether used for residential or commercial purposes or for the purpose of maintaining a guest
house or otherwise including a farm house situated within twenty-five kilometres from local limits of any municipality (whether known as Municipality, Municipal Corporation or by any other name) or a cantonment Board, but does not include:
(1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole time employment, having a gross annual salary of less than Rs.5,00,000.
(2) any house for residential or commercial purposes which forms part of stock-in-trade.
(3) any house which the assessee may occupy for the purpose of any business or profession carried on by him.
(4) any residential property that has been let out for a minimum period of 300 days in the previous year.
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 April 2012
dear sir there is also a clause which exclude the property from the definition of building and that is "any property in the nature of commercial establishments or complexces".
since it is in the nature of commercial establishment and hence it is not taxable in the hand of ABC ltd.
however commercial establishment has not been defined in wealth tax act
since it is in the nature of commercial establishment and hence it is not taxable in the hand of ABC ltd.
however commercial establishment has not been defined in wealth tax act
03 August 2025
Here's a clear summary regarding **wealth tax liability on industrial property let out to a call center by ABC Ltd**:
---
### Wealth Tax Act Provisions Relevant Here:
1. **Definition of "House" under Section 2(ea):**
Includes buildings or land appurtenant used for residential, commercial, guest house, etc., within 25 km of municipality limits, **except** some specific exclusions like:
* Houses meant exclusively for residential use allotted to employees (with conditions)
* Houses part of stock-in-trade
* Houses occupied for business/profession carried on by the assessee
* Residential properties let out for at least 300 days in the year
2. **Industrial Property:**
* Industrial land is **exempt from wealth tax only for the first two years** after acquisition.
* After that, industrial land & buildings can become taxable if not falling under any exemption.
3. **Commercial Establishment Exclusion:**
* Some argue that properties classified as “commercial establishments or complexes” may be excluded from wealth tax liability as per an explanation or judicial interpretation, but this term is **not explicitly defined in the Wealth Tax Act**, leading to ambiguity.
---
### Applying to ABC Ltd Scenario:
* **Property Use:**
The industrial property is **let out to a call center**, i.e., rented to another business, and not used by ABC Ltd for its own business.
* **Implication:**
Since ABC Ltd **does not occupy the property for carrying on its own business**, the exemption for “house occupied for business” does **not apply**.
* **Residential Let-out Exemption:**
The property is not residential, so exemption for let-out residential property (minimum 300 days) also **does not apply**.
* **Industrial Land Exemption:**
Exemption on industrial land is only for first 2 years. If property held beyond that, it becomes taxable.
* **Commercial Establishment Argument:**
While some believe commercial establishments may be exempt, no clear legal provision or definition exists to conclusively exclude the industrial property let out as a commercial establishment from wealth tax.
---
### Conclusion:
* The **industrial property let out to a call center by ABC Ltd is likely taxable under wealth tax**, as it is an asset owned and not used for ABC Ltd's own business.
* The exemption for industrial land applies only for first 2 years; beyond that, it is taxable.
* The “commercial establishment” exemption is ambiguous and may not be relied upon without specific judicial backing.
---
---
### Wealth Tax Act Provisions Relevant Here:
1. **Definition of "House" under Section 2(ea):**
Includes buildings or land appurtenant used for residential, commercial, guest house, etc., within 25 km of municipality limits, **except** some specific exclusions like:
* Houses meant exclusively for residential use allotted to employees (with conditions)
* Houses part of stock-in-trade
* Houses occupied for business/profession carried on by the assessee
* Residential properties let out for at least 300 days in the year
2. **Industrial Property:**
* Industrial land is **exempt from wealth tax only for the first two years** after acquisition.
* After that, industrial land & buildings can become taxable if not falling under any exemption.
3. **Commercial Establishment Exclusion:**
* Some argue that properties classified as “commercial establishments or complexes” may be excluded from wealth tax liability as per an explanation or judicial interpretation, but this term is **not explicitly defined in the Wealth Tax Act**, leading to ambiguity.
---
### Applying to ABC Ltd Scenario:
* **Property Use:**
The industrial property is **let out to a call center**, i.e., rented to another business, and not used by ABC Ltd for its own business.
* **Implication:**
Since ABC Ltd **does not occupy the property for carrying on its own business**, the exemption for “house occupied for business” does **not apply**.
* **Residential Let-out Exemption:**
The property is not residential, so exemption for let-out residential property (minimum 300 days) also **does not apply**.
* **Industrial Land Exemption:**
Exemption on industrial land is only for first 2 years. If property held beyond that, it becomes taxable.
* **Commercial Establishment Argument:**
While some believe commercial establishments may be exempt, no clear legal provision or definition exists to conclusively exclude the industrial property let out as a commercial establishment from wealth tax.
---
### Conclusion:
* The **industrial property let out to a call center by ABC Ltd is likely taxable under wealth tax**, as it is an asset owned and not used for ABC Ltd's own business.
* The exemption for industrial land applies only for first 2 years; beyond that, it is taxable.
* The “commercial establishment” exemption is ambiguous and may not be relied upon without specific judicial backing.
---
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