2016 (4) TMI 731 - AT - Wealth-tax

Tribunal Grants Relief: Delay Condoned, Valuation Referred, Calculation Corrected, Stock-in-Trade Excluded

M/s. Podar Mills Ltd. C/o. Sharma Shah & Associates Versus Asstt. Comm. of Wealth Tax, Central Circle – 34, Mumbai

The Tribunal partly allowed the appeals by condoning the delay in filing, directing valuation to the Government Valuation Officer for fair market value ... Enhancement of value of land - Held that:- The land earlier was held by the assessee as non-productive capital asset which was subjected to the wealth tax. However, the assessee had converted 29000 sq. yds. of the land into stock in trade on 31.05.06 and therefore for the relevant assessment year 2007-08, the 29000 sq. yds of the land no longer remain a non-productive capital asset but a business asset in the shape of stock in trade capable of yielding taxable business income and thus exempt from wealth tax. In the wording in relation provided under the exclusion clause, “ any land held by assessee as stock in trade for a period of 10 years from the date of its acquisition”, the term 'date of acquisition' in such circumstances would mean the date of acquisition of asset as stock in trade which will be the date of conversion of a non-productive capital asset into stock in trade. The time limit of 10 years, in our view, has been provided to curb the practice of misuse of the provision by showing the asset as stock in trade but in actual keeping the same as non-productive and thereby wrongfully getting the exemption from wealth tax from year to year for a long period of more than 10 years. The time limit thus for claiming exemption from wealth tax in case of any land held as stock in trade has been restricted up to 10 years. Once the non-productive asset like urban land is converted to a productive asset like a building which qualifies for exemption, then the assessee can start availing of exemption even during the period of conversion of such non-productive asset to productive asset. See Apollo Tyres Ltd. vs. Assistant Commissioner of Income-tax [2009 (12) TMI 572 - Kerala High Court] The Ld. D.R. has also fairly agreed that so far as the 29000 sq. yds of land which was converted to stock in trade in the financial year 2006-07, the same was not eligible for imposition of wealth tax. Issues Involved:1. Condonation of delay in filing the appeals.2. Estimation of fair market value of land for wealth tax assessment.3. Calculation mistake in the area of land assessed.4. Exclusion of land held as stock-in-trade from wealth tax.Detailed Analysis:Condonation of Delay:The appeals were filed 9 days late. The assessee explained the delay due to a change in management and ongoing litigation, which disrupted the functioning of the directors' office. Additionally, a procedural error occurred where a common appeal was filed for three assessment years using the wrong form. Upon rectification, the delay was noted as 309 days, but the actual delay was only 9 days. The Tribunal found no deliberate intention to delay and condoned the delay, allowing the appeals to proceed.Estimation of Fair Market Value:The Wealth Tax Officer (AO) initially estimated the fair market value of the land on an ad hoc basis. The Commissioner of Wealth Tax (Appeals) [CWT(A)] used a formula based on a 10% annual appreciation rate, derived from the sale price of the land in the financial year 2007-08. The assessee contested this method, arguing that various factors could affect land value and that the AO should have referred the matter to a valuation officer as per instruction No.1905 dated 09.12.1992. The Tribunal agreed and directed the AO to refer the matter to the Government Valuation Officer to determine the fair market value for the relevant assessment years.Calculation Mistake in Land Area:The assessee claimed that the CWT(A) made a calculation error in the area of land assessed, stating it should be 55,500 sq. yds. instead of 56,400 sq. yds. The Tribunal found a prima facie calculation mistake and directed the AO to verify and correct the area for accurate wealth tax liability assessment.Exclusion of Land Held as Stock-in-Trade:For the assessment year 2007-08, the assessee argued that 29,000 sq. yds. of land converted into stock-in-trade should be exempt from wealth tax. The Tribunal referred to section 2(2)(ea) of the Wealth Tax Act, which excludes urban land held as stock-in-trade for up to 10 years from wealth tax. The Tribunal agreed with the assessee, noting that the land converted to stock-in-trade on 31.05.2006 should not be considered a non-productive capital asset for A.Y. 2007-08. The Tribunal directed the CWT(A) to exclude the 29,000 sq. yds. from wealth tax for that year.Conclusion:The Tribunal partly allowed the appeals, condoning the delay, directing the AO to refer the valuation to the Government Valuation Officer, correcting the calculation mistake in land area, and excluding the 29,000 sq. yds. of land held as stock-in-trade from wealth tax for A.Y. 2007-08. The order was pronounced in the open court on 15.04.2016.