Stock-in-trade exclusion for township project land under wealth tax upheld, with related advances treated as liabilities.

Land held for a government-approved township project and reflected as inventory was excluded from urban land under the Wealth Tax Act because stock-in-trade falls within the statutory exclusion in the definition of urban land. The Tribunal treated the project land as a business asset under development, noted that the development activity had not been abandoned, and rejected the Revenue's reliance on an inapplicable precedent. Advances received against the land were recognised as liabilities to be considered under the net wealth computation provisions, so the additions made by the Revenue were not sustainable and the relief granted in appeal was upheld.

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Issues: Whether the land acquired for the township project was assessable as urban land under the Wealth Tax Act, 1957, or was excluded as stock in trade, and whether the liabilities shown as advances against land were deductible while computing net wealth.

Analysis: The land was acquired for a government-approved special township project and was reflected in the balance sheet as inventory. The definition of urban land under section 2(ea) specifically excludes land held as stock in trade for the prescribed period under Explanation 1(b). The record also showed that the assessee had not abandoned the development project and was carrying it as part of its business assets under development. The precedent relied on by the Revenue concerned a different exclusion from the definition of urban land and was held inapplicable. The Tribunal also accepted that advances received against the land represented liabilities to be considered under section 2(m) while computing net wealth.

Conclusion: The land did not form part of taxable urban land and the Revenue's additions were not sustainable; the relief granted by the Commissioner (Appeals) was upheld and the appeals were dismissed.

Ratio Decidendi: Land held as stock in trade for a township development project is excluded from urban land for wealth-tax purposes, and liabilities directly related to such land are to be considered in computing net wealth.

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