TaxTMI 
TaxTMI 
TaxTMI 
2017 (6) TMI 978
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....e notice issued under Section 17 of the Wealth Tax Act on 7.3.1995. The assessee showed the following as assets assessable for wealth tax:- (i) Property at Mount Road .. Rs. 5,47,20,000 (Abbotsbury) (ii) Lands at Nellore .. Rs. 22,27,742 Rs. 5,69,47,742 According to the assessee, the property at Mount Road was being held for productive use and the asset is not assessable to wealth tax. Without prejudice to this contention, the assessee contended that, on the valuation date, the property consisted of buildings and land appurtenant thereto, was to be valued as per Rule 3 of Schedule III to the Wealth Tax Act. The assessee arrived at the value of the asset as on 31.3.1991 at Rs. 5,47,46,181/- taking into account the Gross Maintainable rent at Rs. 56,784/- (as per Rule 5 (ii) based on the receipt issued by the Corporation of Madras. It is the further contention of the assessee that since the property was not let out, the annual value fixed for the property tax purposes at Rs. 56,784/- is to be taken as the annual rent payable. 4. Pursuant to the filing of returns, the Assessing Officer issued a letter dated 26.12.1996 to the assessee with regard to the above asse....
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....der challenge in appeals? (iii) Whether the valuation declared by the appellant in respect of the aforesaid properties ought not to have been accepted? 6. The assessment order was passed by the Deputy Commissioner of Income Tax, Special Range IV, Chennai, by stating that the assessee company filed its return of wealth for the assessment year 1991-92 on 28.8.1995 declaring deficit wealth of Rs. 1,77,53,000/- in response to the notice issued under section 17 of the Wealth Tax Act on 7.3.1995. The assessee showed the assets assessable for wealth-tax as Rs. 5,69,73,923/-. Assessment under section 16(3) r/w section 17 of the Wealth Tax Act, 1957 was completed by the Assessing Officer on 31.3.1991 and the net wealth of the tax as assessable was determined as Rs. 6,75,72,900/- and net tax payable was determined as Rs. 14,85,990/-. 7. Aggrieved against the said assessment, assessee preferred appeal before the Commissioner of Income Tax (Appeals) on the grounds that the Assessing Officer has not properly determined the value of the property at Mount Road, Madras and the Assessing Officer had not appreciated the case of the appellant that holding of the aforesaid property is for producti....
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....ioner is that the valuation of the property at Mount Road was not taken into consideration as per the provisions of law. It is observed by the Commissioner of Income Tax that section 7(1) of the Wealth Tax act lays down the value of any assets, other than the cash, shall be valued in the manner laid down in Schedule III. Further Rule 3 of Schedule III deals with the valuation of any immovable property (including a commercial property) unlike the analogue Rile IBB, which was operative upto 31.3.1989. Under Rule 5 (ii) where the property is not let, the amount of annual rent assessed by the local authority for the purpose of levy of property tax will be the gross maintainable rent. Thus, it is pleaded that the Assessing Officer was not justified in rejecting the application of Rule 3 of Schedule III. Under Rule 8 of Schedule III, an asset could be valued under Rule 20 if it is not practicable to apply the provisions of rule 3 to a case or the difference between the unbuilt are exceeds twenty per cent of the aggregate area of the property is constructed on lease hold land and the lease expires within a period not exceeding 15 years. 9. Rule 8 of Schedule III states: "Nothing conta....
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....3. The aforesaid assets are not assessable as per the Act. These are the grounds on which the appeal has been preferred. 12. The appellate Tribunal has considered the validity of the assessment made after amalgamation and held that as per the scheme of amalgamation, all actions and legal proceedings by or against the transferor company pending on the completion of procedure date shall be continued and be enforced or against the transferee company as the case may be. Therefore, the Tribunal has held even after amalgamation, the transferee company, M/s. Balaji Hotels and Enterprises Ltd., will discharge the wealth-tax liabilities of the transferor company i.e., M/s.Balaji Industries Pvt.Ltd.,. So, the other question involved is valuation of the property at Mount Road, which was also considered. They say the property was not eligible to tax. The land already held by the assessee was kept for industrial purpose or for construction of a hotel for a period of two years from the date of its acquisition by him for that period it will not be subjected to tax. In the present case, the assessee did purchase the Mount Road Property in the year 1986. The property in question was not considered....
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....section 17 was not challenged at the relevant time. Therefore, the proceedings initiated is valid and in accordance with law as contended by the learned standing counsel for the revenue. He has further drwan our contention that the factum of amalgamation was not disclosed in the return filed and only intimated on 5.1.1999 about the amalgamation and the assessment related to the period prior to the date of amalgamation. The present case relates to the period prior to the date of amalgamation. Returns were also filed prior to the amalgamation and the notices were issued before the date of amalgamation when the assessee existed during the assessment. Amalgamation was done with effect from 1.4.1995 before the date of completion of assessment. As per the scheme, all actions and legal proceedings pending on the completion of procedures date shall be continued to enforce transfer as held by the Commissioner of Income Tax. The existing liability has to be discharged by M/s.Balaji Industries Ltd., as continued. Therefore, the contention of the appellant would not be valid and cannot be accepted. The said proviso for continuation of the liabilities forms part and parcel of the scheme of the ....
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....acquisition. 15. None of these conditions are fulfilled in the case of the land held by the appellant. The appellate authority has also gave its finding confirming the order of the Commissioner of Income tax. Insofar as the valuation of the property, Rule 3 of Schedule III of the Wealth Tax Act governs the valuation of the immovable property with effect from 1.4.1989. Rule 3 of Schedule III states as follows:- "3. Subject to the provisions of Rules 4, 5, 6, 7 and 8, for the purposes of Sub-section (1) of Section 7, the value of any immovable property, being a building or land, appurtenant thereto, or part thereof, shall be the amount arrived at by multiplying the net maintainable rent by the figure 12.5. Provided that in relation to any such property which is constructed on leasehold land, this rule shall have effect as if for the figure 12.5, (a) where the unexpired period of the lease of such land is fifty years or more, the figure 10.0 had been substituted ; and (b) where the unexpired period of the lease of such land is less than fifty years, the figure 8.0 had been substituted. Provided further that where such property is acquired or construction of which is c....
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....ucted with the approval of the appropriate authority is excluded from the definition of urban land. On a plain reading of the said clause it becomes clear that in order to avail the benefit, following conditions have to be satisfied: (a) The land is occupied by any building; (b) Such a building has been constructed; (c) The construction is done with the approval of the appropriate authority; 8. Notwithstanding the aforesaid plain language, an endeavour of Mr. Gopal Jain is to impress upon us to read the said clause to include even that land where the construction of building activity has been started. He, thus, wants that the words "has been constructed" is to be read as is being constructed. His attempt to persuade us is predicated on the following premise. Mr. Jain argued that the clause added purposes interpretation i.e. The objective for which this clause was added, namely, to stimulate investment in productive assets, has to be kept in mind. In this behalf, he argued that Explanation 1(b) has carved out exceptions/exemptions based on the object and purpose of the amendment to the Wealth Tax Act in 1992. These exceptions have to be construed in line with the legislat....
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....sidential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than ten lakh rupees; (2) any house for residential or commercial purposes which forms part of stock-in-trade; (3) any house which the assessee may occupy for the purposes of any business or profession carried on by him; (4) any residential property that has been let-out for a minimum period of three hundred days in the previous year; (5) any property in the nature of commercial establishments or complexes; 11. Mr. Jain also submitted that the stand of the respondent that only completed buildings are to be brought into the ambit of the word "has been constructed" is not tenable since completed buildings fall under a different clause i.e. clause (ea)(i). According to him, if that is accepted then in such cases, Section 2 (ea)(v) read with Explanation 1(b) would not be required at all since a completed building is covered independently in Section 2(ea)(i). He, thus, submitted that seen in this context, the expression "has been constructed" must be read as " is being constructed" in order to give effect to the ....
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....on" where again strict interpretation is to be accorded and onus is upon the assessee to show that he falls within the four corners of the exempted clause. He also submitted that when the language of the statute was unambiguous and clear, question of giving purposive interpretation does not arise in the matters pertaining to taxing statutes. 15. After giving our due consideration to the submissions of the learned counsel for both the parties and after going through the judgments of different High Courts, we are of the opinion that the view taken by the High Court of Karnataka in its judgment dated 21.03.2007 is the correct view in law and the contrary view taken by the Kerala and Madras High Courts is erroneous and is liable to be set aside. 16. We have already pointed out that on the plain language of the provision in question, the benefit of the said clause would be applicable only in respect of the building " which has been constructed" . The expression "has been constructed" obviously cannot include within its sweep a building which is not fully constructed or in the process of construction. The opening words of clause (ii) also become important in this behalf, where it is....
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....ase, assessee would be given the exemption from payment of wealth tax in the initial years and the same benefit would be denied in the year when it is found that construction was abandoned and, therefore, not complete. It would result in granting of benefit in the previous year(s), though that was not admissible. Such a situation cannot be countenanced. Presumably, because of this reason, the Legislature wanted to treat only that land to be excluded from the definition of "urban land" at the stage when the building has been fully constructed on the said land. 18. We do not agree with the submission of Mr. Jain that the situation when building is fully constructed has been covered by Section 2(e)(a)(v) read with Explanation 1(b) as it would fall under Section 2(e)(a)(i). We have already reproduced the aforesaid Section and find that it deals with altogether different situations. As pointed out above, Explanation (1) thereof excludes certain categories of "urban land" and we are concerned herewith clause (ii) of this Explanation. By 1992 amendment, Section 2(e)(a) was added which contains the definition of " asset" . Clause (v) thereof includes urban land. Thus, urban land is to b....
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....ty is not disputed. What is argued before us is that since the building is being constructed, the same is exempt for the purpose of wealth tax in terms of the meaning to be given to urban land. A careful reading of the said definition would show that what is excluded is the land occupied by any building which has been constructed (underlining is ours). Admittedly, in the case on hand, the building is not fully constructed. It is in the process of construction. Building in the process of construction cannot be understood as a building which has been constructed as sought to be argued before us. Courts have to interpret any definition in a reasonable manner for the purpose of fulfilling the object of the Act. Courts cannot interpret a term in such an unreasonable manner making thereby unworkable of the Act as sought to be argued before us. Constructed has its own meaning. Constructed would mean 'fully constructed' as understood in the common parlance. The tribunal unfortunately, without noticing the intention of the legislature and the specific wordings in the section has chosen to blindly follow its earlier order. If the order of the tribunal is accepted then neither the own....
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....eafter, assessment proceedings were initiated by the assessee. Assessing officer ruled that the assessee has become the owner of the property for the purpose of taxation. Appeals were filed before the appellate authority. Appeals were allowed and the findings were reversed. The revenue took up the matter before the tribunal. The tribunal ruled in favour of the revenue. On a further appeal by the assessee to this Court, this Court noticed the terminology 'assets' and also the meaning of the word 'urban land' in its order. The Division Bench also noticed Section 4(8) of the Act and also the judgment of the Apex Court in 103 ITR 536 and ultimately ruled that the assessing authority was not justified in including vacant land in the net wealth of the assessee for the purpose of computation of wealth as on the valuation date for the purpose of Wealth Tax Act. The said judgment to a certain extent would support the revenue. 12. We must also refer to the judgment of the Orissa High Court and the judgment of the Supreme Court as referred to by Sri Parthasarathi, learned Counsel. 130 ITR 393, is a case in which the court was considering the word 'house' for the pur....
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....and 2.11 of its judgment that Rule 8 was rightly applied in this case and it has given cogent reasons for its opinion as mentioned in the said paragraphs. There was wide variation between the market value of the property and valuation done by the assessee on the basis of the municipal authorities where the rateable value determined by the municipal authorities was Rs. 6,573 and valuation so arrived was Rs. 1,55, 130. In fact the assessee himself agreed to sell his property through his agreement dated May 11, 1995, for a sum of Rs. 10.26 crores. The assessee had also made improvements. 8. In our opinion, it would be shocking to say that a flat in a locality like Worli in Bombay was worth only Rs. 1,55, 130. Everyone knows that prices of flats in Bombay are very high and the petitioner himself had agreed to sell it on September 15, 1995, at Rs. 10.26 crores. It would be rediculous to say that the price of the flat is only Rs. 1,55, 130. Moreover, we cannot interfere with the findings of fact of the Tribunal. 21. In Commissioner of Income Tax v. S.V.Electricals Pvt.Ltd., reported in [2005] 274 ITR 334 (MP), a Division Bench of the Madhya Pradesh High Court has held as follows:- ....