2005 (7) TMI 281 - AT - Wealth-tax

Inclusion of Agricultural Land as Urban Land Upheld

The Tribunal upheld the inclusion of agricultural land within municipal limits as 'urban land' under section 2(ea) of the Wealth-tax Act, 1957. It ... Agricultural Land Issues Involved:1. Whether agricultural land situated within municipal limits is included within the definition of 'asset' under section 2(ea) of the Wealth-tax Act, 1957.2. Whether agricultural land used for business purposes is exempt under section 2(ea)(i)(3) of the Wealth-tax Act, 1957.3. Whether land on which construction is restricted under local laws should be excluded from the definition of 'urban land' under section 2(ea) of the Wealth-tax Act, 1957.4. Validity of initiation of reassessment proceedings.Issue-wise Detailed Analysis:1. Inclusion of Agricultural Land within the Definition of 'Asset':The primary issue was whether agricultural land situated within municipal limits could be considered an 'asset' under section 2(ea) of the Wealth-tax Act, 1957. The assessee argued that agricultural land should be excluded from the definition of 'asset' as it is not included in the Union List and is regulated by residuary powers. The assessee also contended that the Union Government had no power to levy wealth tax on agricultural land in the State of Jammu & Kashmir (J&K) due to Article 370.The Tribunal, however, upheld the Assessing Officer's view that agricultural land within 8 KM of municipal limits falls under 'urban land' as per Explanation 1 to clause (v) of section 2(ea). The Tribunal noted that the definition of 'urban land' is restrictive and does not exclude agricultural land within municipal limits. The Tribunal relied on the judgment of the Punjab & Haryana High Court, which held that agricultural land within municipal limits is considered 'urban land' and is chargeable to wealth tax.2. Exemption for Agricultural Land Used for Business Purposes:The assessee claimed that agricultural land used for business purposes should be exempt under section 2(ea)(i)(3) of the Wealth-tax Act, 1957. The Tribunal noted that this section excludes any house occupied for business purposes but does not extend to open plots of land. The Tribunal found that the assessee's land, used for agricultural operations, did not qualify for exemption as it was not a house occupied for business purposes. The Tribunal emphasized that the definition of 'assets' includes land appurtenant to buildings but does not provide an exemption for open agricultural land.3. Exclusion of Land with Construction Restrictions:The assessee argued that the land should be excluded from the definition of 'urban land' as construction was restricted under local laws. The Tribunal examined the provisions of the Punjab Regional & Town Planning and Development Act, 1995, and found that the restrictions were not absolute prohibitions. The Tribunal noted that construction was permissible with the approval of competent authorities and that the land could be used for residential purposes as per subsequent notifications.The Tribunal held that the exception in section 2(ea) applies only to land where construction is absolutely prohibited under any law, such as security zones or forest areas. Since the assessee's land did not fall under such categories and was subject to conditional permissions, it did not qualify for exclusion from the definition of 'urban land'.4. Validity of Reassessment Proceedings:The last issue concerned the initiation of reassessment proceedings. The Tribunal noted that this ground was not argued before the authorities below or during the current proceedings. The assessee also did not cover this ground in the written submissions. Consequently, the Tribunal dismissed this ground as not pressed.Conclusion:The Tribunal dismissed all the appeals filed by the assessee, upholding the inclusion of agricultural land within municipal limits as 'urban land' under section 2(ea) of the Wealth-tax Act, 1957. The Tribunal also rejected the claims for exemptions based on business use and construction restrictions, confirming the orders of the CWT(A). The reassessment proceedings were deemed valid as the ground was not pursued by the assessee.