J. C. Penney Co. v. Lewisohn

Murphy, J. In this proceeding, instituted pursuant to article 78 of the CPLR, and transferred to this court, we are called upon to review a determination by respondent Finance Administrator made on February 10, 1972, after a statutory hearing, assessing the New York City Commercial Rent or Occupancy Tax (Administrative Code of City of New York, ch. 46, tit. L) on certain residential apartments leased by petitioner.* Petitioner, a well-known corporation which operates retail stores throughout the world, maintains its principal offices in New York City. It is necessary for it to call to this city, from time to time, some of its 125,000 employees for conferences, consultations, and other purposes related to its corporate activities. Since petitioner bears the burden of these traveling expenses (for which it takes income tax deductions) it decided to lease apartments for these employees rather than incur the higher cost of hotel accommodations. The 19 apartments here in issue were rented under the customary Real Estate Board of New York, Inc. standard form of apartment lease, modified to delete the restriction on occupancy only by tenant and members of his immediate family and to permit use by employees, invitees and guests of petitioner. It appears uncontradicted that these apartments are used solely as living quarters by petitioner’s employees; and that no commercial activities are conducted thereat. Nevertheless, respondent imposed the tax on the ground that the premises were “ to be used to further the objectives of [petitioner’s] business when its employees had to come into New York City in connection with their employment.” [69] The majority of us disagree with such determination and hold that the tax is not applicable to these premises, even though they were unquestionably leased for business reasons and for commercial advantage. Ñor does the fact that petitioner deducts this rental expense in computing its taxable income mandate a different result. It is the use to which the premises are put which determines the applicability of the tax here involved and not whether petitioner may also obtain benefits under other taxing statutes. The city’s Commercial Bent or Occupancy Tax defines £< Taxable premises ” as: “ Any premises in the city occupied, used or intended to be occupied or used for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity ” (Administrative Code, § L46-1.0, subd. 5). We find no ambiguity in the statute before us and its words should be construed according to their ordinary meaning and significance. (Matter of Young v. Gerosa, 11 A D 2d 67.) It clearly discloses an intent to impose a tax on those carrying on commerical activities in leased premises; and not on those using such premises solely as living quarters. As the Court of Appeals noted in Ampco Printing-Advertisers’ Offset Corp. v. City of New York (14 N Y 2d 11, 23) during the course of its opinion sustaining the constitutionality of this tax: “ As indicated above, the tax does not apply to mere ownership or possession. It applies only when the leased premises are used for commercial purposes * * #. It may, it is true, also apply before the tenant actually makes use of the premises but it will apply only where he pays rent for premises ‘ intended to be used or occupied for commercial purposes ’ ” (emphasis in original). There was no such taxable use here. Accordingly, the determination of the respondent, insofar as review is sought, should be annulled, on the law, without costs or disbursements. Footnotes [*] Although the assessment covers petitioner’s rentals in three separate buildings, we are only concerned with the assessment involving the rental of 19 apartments in a building located at 825 Seventh Avenue, also known as 159 West 53rd Street.