1998 (12) TMI 634 - AT - Income Tax

Tribunal rules CIDCO land not owned by assessee for wealth tax assessments.

The Tribunal partly allowed the assessee's appeals for statistical purposes. It upheld the validity of proceedings under section 17 of the Wealth-tax Act, ... - Issues Involved:1. Validity of proceedings initiated under section 17 of the Wealth-tax Act, 1957.2. Inclusion of the market value of the land allotted by CIDCO within the ambit of net wealth under section 40(3) of the Finance Act, 1983.3. Consideration of the land as stock-in-trade and its exclusion from the net wealth for assessment under the Wealth-tax Act, 1957.Detailed Analysis:1. Validity of Proceedings Under Section 17:The proceedings under section 17 of the Wealth-tax Act, 1957, were challenged by the assessee on the grounds of non-disclosure of material facts. The Tribunal concluded that the proceedings were validly initiated. The assessee had not specifically disclosed the fact of allotment of the land for the construction of the housing complex by CIDCO in their favor. The mere inclusion of the premium paid for the land in the Balance Sheet under 'leasehold rights' did not amount to full disclosure of material facts. The Tribunal referred to the Explanation to section 17, which clarifies that mere production of account books or other evidence does not necessarily amount to disclosure. Therefore, the Tribunal was satisfied that the proceedings under section 17 were validly initiated.2. Inclusion of Market Value of Land in Net Wealth:The Tribunal examined whether the market value of the land allotted by CIDCO fell within the ambit of assets referred to in section 40(3) of the Finance Act, 1983. The Tribunal noted the intention of the Parliament to levy wealth-tax on unproductive assets of closely held companies. The Tribunal analyzed the agreement between the assessee and CIDCO, highlighting that the assessee was granted a mere license to enter upon the land for construction purposes and not ownership rights. The agreement explicitly stated that the lease would be granted only after the completion of the residential building. As on the relevant valuation dates, the construction was not completed, and no lease agreement had been executed. The Tribunal concluded that the land did not belong to the assessee within the meaning of section 40 of the Finance Act, 1983, read with the Wealth-tax Act, 1957. The Tribunal relied on the Supreme Court decision in Nawab Sir Mir Osman Ali Khan v. CWT, which held that mere possession or joint possession without ownership does not constitute an asset 'belonging to the assessee.' Consequently, the market value of the land was not includible in the wealth-tax assessments for the relevant years.3. Consideration of Land as Stock-in-Trade:Given the Tribunal's conclusion on the second issue, it was deemed unnecessary to address whether the land was stock-in-trade and its exclusion from net wealth. This issue was rendered purely academic.Conclusion:The appeals of the assessee were partly allowed for statistical purposes. The Tribunal held that the proceedings under section 17 were validly initiated, but the land allotted by CIDCO did not belong to the assessee within the meaning of section 40 of the Finance Act, 1983. Consequently, the market value of the land was not includible in the wealth-tax assessments for the assessment years 1984-85 and 1985-86.