2018 (10) TMI 1055 - AT - Wealth-tax

Agricultural lands within municipal limits exempt from wealth tax; non-agricultural lands under construction not liable.

The Tribunal upheld the Commissioner of Wealth-tax (Appeals) [CIT(A)]'s decisions that agricultural lands within municipal limits, classified as ... Net-wealth for the purpose of wealth-tax as provided in section 2(ea)(v) - inclusion of land - amendment made by the Finance Act, 2013 with regard to urban land which is basically an agriculture land, but fall within the ambit of urban municipal limit - Held that:- After the amendment, such land would not be included in the net-wealth for the purpose of wealth-tax as provided in section 2(ea)(v). DR unable to controvert this finding of fact recorded by the CIT(A). As far as urban land viz. Muthiya and land at Vastral are concerned. CIT(A) has recorded a specific finding of fact that construction has commenced. Now this is a finding of fact recorded by the ld.CIT(A) who is at a higher pedestal in the hierarchy. The ld.first Appellate Authority has observed that observation of the AO qua non-commencement of construction is factually incorrect. This finding of the fact could be reversed only if the something is brought to our notice. No material has been brought to our notice, which can show that this finding of fact is contrary to the facts. In the absence of such step, we do not see any reasons to interfere in the orders of the ld.CIT(A), hence, all the appeals of Revenue in the case of Kantibhai T. Savaliya is dismissed. As far as appeals of Shri Harshadbhai K. Savaliya, he was also owner and in possession of two types of land; one claim which is agriculture land within ambit of municipal limit, and another nonagriculture land under construction. CIT(A) has accepted the fact that agriculture land are not required to be included in the net wealth of the assessee on account of amendment made in the Wealth Tax Act by Finance Act, 2013. As far as non-agriculture lands are concerned, constructions have been commenced on them. The ld.CWT(A) has been satisfied with the quality of evidence produced by the assessee in this regard. There is no disparity of facts qua the facts of Shri Kantibhai T. Savaliya, which we have discussed in the earlier part of the order, wherein we have noticed the finding of the ld.CIT(A) in the Asstt.Year 2007-08. Taking into consideration all these aspects, we do not find any merit in these appeals, thus dismissed. Issues Involved:1. Whether the agricultural lands within municipal limits are liable to wealth tax.2. Whether the non-agricultural lands under construction are liable to wealth tax.Detailed Analysis:Issue 1: Agricultural Lands within Municipal LimitsThe primary issue revolves around the classification of certain lands as agricultural and their liability under wealth tax. The assessee claimed that lands situated at various survey numbers were agricultural and hence not assessable for wealth tax. The Assessing Officer (AO) rejected this claim, stating that agricultural activities were not carried out on these lands, and they fell within municipal limits, thus making them liable for wealth tax.On appeal, the Commissioner of Wealth-tax (Appeals) [CIT(A)] reversed the AO's decision, citing the amendment in the Finance Act, 2013, which specifically exempted agricultural lands within municipal limits from wealth tax. The CIT(A) noted that the lands were classified as agricultural in government records and were used for agricultural purposes, thus falling under the exemption provided in section 2(ea)(v) of the Wealth-tax Act. This amendment was retrospective from 01.04.1993, and the CIT(A) emphasized that the lands were in agricultural zones where construction was not permissible under local laws.The CIT(A) supported their decision by referencing several legal judgments, including:- Commissioner of Income-tax vs. E. Udaykumar [2006] 284 ITR 511 (MAD.)- Commissioner of Wealth-tax, Faridabad vs. R.K. Mehra [2009] 184 TAXMAN 285 (PUNJ.& HAR.)- Amin Chand Mehta vs. Commissioner of Wealth-tax, (2015) 58 taxmann.com 316 (Himachal Pradesh)- M.R. Raghuram v. Wealth Tax Officer Income-tax Department, [2013] 38 taxmann.com 54 (Karnataka)The Tribunal upheld the CIT(A)'s findings, noting no contrary evidence was presented by the Revenue to dispute the classification of these lands as agricultural.Issue 2: Non-Agricultural Lands under ConstructionThe second issue pertains to the non-agricultural lands under construction. The AO included these lands in the net wealth of the assessee, arguing that the assessee failed to produce evidence of commencement of construction activities. The CIT(A) disagreed, noting that the assessee had submitted development agreements and commencement letters from the Municipal Corporation, indicating that construction activities had indeed started.The CIT(A) cited several judgments to support the claim that once permission for construction is received, it is deemed that construction activities have begun, thus qualifying the land as a productive asset and excluding it from wealth tax under section 2(ea) of the Wealth-tax Act. The relevant judgments included:- Apollo Tyres Ltd v Assistant Commissioner of Income Tax, Circle- 1(1), [2010], 189 taxman 225 (Kerala)- Mathew L Chakola v Assistant Commissioner of wealth tax, Circle- 2(1) [2006] 9 SOT 617- Smt Meera Jacob v Wealth Tax Officer, Ward 1(3), [2007] 14 SOT 486The Tribunal affirmed the CIT(A)'s decision, emphasizing that the AO's observation regarding non-commencement of construction was factually incorrect and unsupported by evidence.ConclusionThe Tribunal dismissed all appeals by the Revenue, confirming the CIT(A)'s findings that:1. Agricultural lands within municipal limits, classified as agricultural in government records and used for agricultural purposes, are exempt from wealth tax.2. Non-agricultural lands under construction, where construction activities have commenced as evidenced by development agreements and commencement letters, are not liable for wealth tax.The order was pronounced on 18th October 2018 at Ahmedabad, affirming the CIT(A)'s decisions for the assessment years in question.