2006 (1) TMI 534 - AT - Wealth-tax

Tribunal excludes 'Zeba Bagh' property from net wealth citing lack of possession & non-urban land criteria.

Nawab Mir Barkath Ali Khan Bahadur Versus Deputy Commissioner of Wealth-tax, Circle 9(1), Hyderabad

Nawab Mir Barkath Ali Khan Bahadur Versus Deputy Commissioner of Wealth-tax, Circle 9(1), Hyderabad - [2007] 13 SOT 227 (HYD.) Issues:Assessment of immovable property as net wealth under Wealth-tax Act, 1957.Detailed Analysis:1. Issue of Assessability as Net Wealth:The appeals were filed against the order of the CWT (Appeals) VI, Hyderabad, for assessment years 1998-99 to 2001-02 regarding the assessment of the property known as 'Zeba Bagh' as the net wealth of the assessee under the Wealth-tax Act, 1957. The main contention was whether the property should be included in the assessee's net wealth, considering it was handed over to a housing society and subsequently sold to various members who constructed buildings on the land. The assessee argued that as per section 4(8) of the Act, the property should only be included in the net wealth of the person who retains possession, and not the original owner. Additionally, the assessee claimed that the property did not qualify as urban land under section 2(ea) as it was occupied by approved buildings. The Revenue, however, contended that the legal ownership still vested with the assessee, and previous Tribunal orders supported the inclusion of the property in the net wealth.2. Interpretation of Legal Provisions:The Tribunal analyzed section 4(8) of the Wealth-tax Act, which deems a person as the owner of a building if possession is retained in part performance of a contract under section 53A of the Transfer of Property Act. The Tribunal noted that previous Tribunal orders were based on the law before the introduction of section 4(8) and could not be applied to the current assessment years. The Tribunal also highlighted that the property was no longer in the possession of the assessee and was being utilized by multiple individuals, which aligned with the provisions of section 4(8). Moreover, the Tribunal emphasized that the term 'building' in the Act included land, and the property in question could not be considered an asset within the meaning of section 2(ea) of the Act.3. Verification of Property Status:The Tribunal considered the findings of the Assessing Officer in the assessment order for the subsequent year, which confirmed that the property was no longer in the possession of the assessee and was being used by multiple parties who paid municipal taxes. The Revenue did not dispute these facts, leading the Tribunal to conclude that the value of the buildings on the property should only be considered in the hands of those in possession as per section 4(8). The Tribunal also noted that the Revenue failed to provide evidence to refute the claim that the buildings were constructed with approval, as required by the Act.4. Application of Schedule III:The Tribunal observed that the Assessing Officer had applied Schedule III to consider the rental value of the buildings for property valuation, indicating that the entire property, including the buildings, was assessed. The Tribunal clarified that the property could not be treated as an asset under section 2(ea) of the Act due to the presence of approved buildings and the absence of evidence to the contrary.5. Decision and Outcome:Considering the arguments and legal provisions, the Tribunal allowed the appeals of the assessee and directed the Assessing Officer to exclude the value of the Zeba Bagh property from the net wealth of the assessee for the relevant assessment years. The decision was based on the lack of possession by the assessee, compliance with section 4(8) regarding ownership of buildings, and the property not meeting the criteria of urban land under section 2(ea) due to the presence of approved buildings.