Wealth tax exclusion for hotel construction land where ongoing business use kept the property outside vacant urban land treatment.

Land on which a hotel project had commenced, with planning permission obtained and substantial construction already underway, was held not to remain vacant urban land for wealth-tax purposes. Applying Section 2(ea) of the Wealth Tax Act, the Madras High Court treated productive business use and ongoing construction as bringing the property within the exclusion from "asset"; incomplete construction alone did not justify treating the land as exigible when the project had not been abandoned. The land was therefore not liable to wealth tax for the assessment years concerned.

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Issues: Whether land on which construction of a hotel had commenced and substantial construction work was in progress, but the building was not yet complete, could still be treated as an urban land exigible to wealth tax, or whether it fell within the exclusion under Section 2(ea) of the Wealth Tax Act.

Analysis: The assessment years in question related to a period when the assessee had already purchased the land, obtained planning permission and commenced construction for a hotel project. The statutory scheme under Section 2(ea) excludes from the definition of 'asset' property that is used for business or otherwise falls outside the concept of vacant urban land. The Court accepted the reasoning that the object of the amendment was to tax unproductive assets, while productive use of land through construction for business could take the property outside the charging provision. The fact that construction was not fully completed did not, by itself, keep the land within the category of vacant urban land when the land had already been put to use for a business project and construction activity was ongoing without abandonment.

Conclusion: The land was not exigible to wealth tax for the assessment years in question and the assessee was entitled to the benefit of the exclusion under Section 2(ea) of the Wealth Tax Act.

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