2016 (8) TMI 351 - HC - Wealth-tax

Ownership Essential for Wealth Tax: Leasehold Rights Not Assets

The High Court affirmed the Tribunal's decision that under the Wealth Tax Act, leasehold rights did not constitute assets for wealth tax purposes. The ... Urban land - ITAT held that 'urban land' as defined in clause (b) of Explanation 1 to Sec.2(ea) of the Wealth Tax Act does not include any right or interest that a person may be having in the urban land otherwise than by way of actual ownership - Held that:- This Court is in complete agreement with the findings recorded by the Tribunal which is just and proper and therefore we accordingly answer the question raised in this appeal in favour of the assessee and against the Department . The assessee before us merely had a right in the property, which does not fall within the meaning of the term “assets” as defined in section 2(ea) of the Act. Issues:1. Interpretation of the definition of 'urban land' under the Wealth Tax Act.2. Determination of whether leasehold rights constitute assets for wealth tax purposes.Analysis:1. The first issue in the judgment revolves around the interpretation of the term 'urban land' as defined in the Wealth Tax Act. The Tribunal had to decide whether the term included any right or interest in urban land apart from actual ownership. The Tribunal's decision was based on the revamped scheme of taxation under the Wealth Tax Act, effective from 01.04.1993. The new definition of 'assets' in clause (ea) of sec.2 excluded any right or interest in urban land other than actual ownership. The Tribunal clarified that the concept of deemed ownership in case of leasehold rights was introduced later, effective from assessment year 1997-98, not applicable to the assessment year in question (1996-97). The Tribunal agreed with the Commissioner of Wealth Tax (CWT) that ownership was essential under the new definition of 'assets,' and any other right was beyond the scope of the definition. Consequently, the Tribunal upheld the CWT's order, stating that the assessee's right in the property did not qualify as an asset under the Act.2. The second issue addressed in the judgment pertains to whether leasehold rights constitute assets under the Wealth Tax Act. The Tribunal examined whether any right, including leasehold rights, not based on ownership fell within the definition of 'assets' under section 2 of the Act. The Tribunal's decision was in line with the exclusive and narrower definition of 'assets' introduced in the revamped scheme of taxation. The Tribunal emphasized that under the new definition, any right other than ownership did not qualify as an asset. Referring to legal provisions and judicial pronouncements, the Tribunal concurred with the CWT's view that the assessee's leasehold right did not fall within the definition of 'assets.' The Tribunal upheld the CWT's order, concluding that the assessee's right in the property did not meet the criteria for taxation under the Wealth Tax Act.In conclusion, the High Court, after considering the arguments presented by both parties and reviewing the orders of the CIT (A) and the Tribunal, affirmed the Tribunal's findings. The Court agreed with the Tribunal's interpretation of the law and held that the questions raised in the appeals favored the assessee against the Department. The judgment clarified the scope of the term 'assets' under the Wealth Tax Act and emphasized the significance of ownership in determining the taxability of rights in urban land.