AI Drafter 
TaxTMI 
TaxTMI 
2004 (5) TMI 41
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....der' on merits? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in interpreting the provisions of the Wealth-tax Act with regard to definition of 'urban land' in section 2(ea), clause (v), and Explanation (b) to section 2(ea) which stipulates that the area of land occupied by a building does not form part of urban land? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the contention of the assessee that by virtue of the provision of section 7(2) of the Wealth-tax Act, 1957, as the property under consideration was exclusively used by the assessee throughout the period of twelve months immediately preceding the valuation date, its value was to be determined at the option of the assessee in the manner laid down in Schedule III to the Act as on April 1, 1971?" Facts: The facts leading to filing of these appeals, briefly stated, and as found by the Tribunal and evident from the map of the property on record, are as under: The appellant, Dr. K.M. Shah, had purchased land bearing revenue survey No. 114, final plot No. 417/1 of proposed Town Planning Scheme No....
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.... subplot No. 417/1/1 to Bhadresh K. Shah, sub-plot No. 417/1/2 to the appellant Dr. K.M. Shah and 417/1/4 to Mrugesh K. Shah. As per the relocation done by the arbitrator, each of these three persons got an area of 818 sq. mtrs. Of course, sub-plot No. 417/1/1 allotted to Bhadresh K. Shah had the residential bungalow constructed on it. On the basis of the aforesaid award, the city civil court passed decree dated July 17, 1995, in terms of the award. The appellant, his two sons and his daughters entered into an agreement of sale dated April 1, 1995, for selling the entire property being final plot No. 417/1 to the promoters of proposed Sugam Shops and Co-operative Housing Society, etc. The sale deeds were executed on April 20, 1996, showing a sale consideration of Rs. 6,54,71,500 (rounded off to Rs. 6.55 crores for convenience for the purposes of discussion in these appeals). The consideration was divided between the appellant and his two sons equally, that is, each one of them got nearly Rs. 1.81 crores and the three daughters got an amount of Rs. 37.24 lakhs each. The aforesaid property being final plot No. 417/1 having four sub-plots and having a residential bungalow on sub....
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....'' 188 lakhs 1994-95 '' 221 lakhs ----------------------------------------------------- The assessee challenged the assessment order in appeal. The learned Commissioner of Wealth-tax (Appeals) upheld the orders of the Assessing Officer. It, however, appears that the Commissioner of Wealth-tax (Appeals) heard the appeals under the Wealth-tax Act for the assessment years 1991-92 to 1994-95 along with the assessee's appeal under the Gift-tax Act for the assessment year 1995-96. The controversy involved in the appeals under the Wealth-tax Act was different from the controversy involved under the Gift-tax Act. However, the Commissioner (Appeals) heard all the five appeals together and by order dated March 19, 1999, dismissed the four appeals under the Wealth-tax Act as well as the appeal under the Gift-tax Act. The assessee challenged the orders in the appeals under the Wealth-tax Act in Wealth-tax Appeals Nos. 55 to 58 of 1999 before the Income-tax Appellate Tribunal. After hearing learned counsel for the appellant and t....
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....417/1/2 and 417/1/4 were not required to be valued separately, but were required to be treated as a part of the same property. Strong reliance is placed on the decision of the Calcutta High Court in Kalipada Ghosh v. Tulsidas Dutt, AIR 1960 Cal 467 in support of the contention that a house includes land appurtenant to the house and also on the decision of this court in CWT v. Shrenik Kasturbhai-Wealth-tax Ref. No. 48 of 1987 and connected matters decided on October 18, 1995, wherein it is held that occupation of quarters by servants engaged by the owner for household chores does not militate against occupation of house by the owner for his own use as residence. It is also contended that the Tribunal has not applied the correct tests as laid down in CIT v. Zaibunnisa Begum [1985] 151 ITR 320 (AP) and in CIT v. Smt. M. Kalpagam [1997] 227 ITR 733 (Mad). The Tribunal erred in not taking into consideration the forms filed by the appellant's sons under section 6 of the Urban Land Ceiling Act and also the orders passed by the authorities under the Urban Land Ceiling Act and the orders passed by this court in the proceedings under the Urban Land Ceiling Act wherein it was held that ....
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.... for shopping centres, the minimum area of land must be at least 1,000 sq. mtrs. (1,200 sq. yds.). The Departmental Valuation Officer has valued the land under consideration by looking at the fact that the land under consideration as well as the other lands in the area have been sold at rates which are the rates paid by the purchasers for constructing shopping centres. Each of the two sub-plots Nos. 2 and 4 was admeasuring only about 500 sq. mtrs. and, therefore, the valuation was made on the basis of erroneous principles. Amendments to section 5(1)(iv) were made from time to time not merely to remove anomalies and practical difficulties but also to introduce some tax concessions and to remove some hardships and to provide certainty in the matter of wealth-tax assessments and to reduce litigation by incorporating rules for valuation of assets in the Wealth-tax Act itself. Strong reliance is, therefore, placed on Circular No. 559, dated May 4, 1990, containing explanatory notes to various provisions of the Direct Tax Laws (Amendment) Act, 1989, particularly paragraph 18.1 thereof. Submissions on behalf of the Revenue On the other hand, Mr. Tanvish U. Bhatt, learned stand....
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...., of each of the years 1991 to 1994. Valuation of the properties in question is a question of fact. The Departmental Valuation Officer's report was placed on record and the findings contained in the report were not challenged before the Departmental authorities. Hence, it is not open to challenge the valuation in these appeals. Insertion of the rules for valuation of assets in the Wealth-tax Act itself was for the purposes of valuing immovable property being a building or land appurtenant thereto and the same was applied to the valuation of the building and the land on which the bungalow is situate, viz., sub-plot No. 417/1/1. The said rules would not be applicable to the other two plots. Statutory provisions Before considering the rival submissions, it is necessary to refer to the relevant statutory provisions. While the Wealth-tax Act at the time of its enactment provided for exemption in respect of one residential house belonging to the assessee in a rural area, with passage of time, the restrictions about location of the house in a rural area and about use of the house exclusively for residential purposes came to be removed, but for almost two decades from the asses....
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....nafter referred to as "house") whether used for residential or commercial purposes. . . . ; (v) urban land ; Explanation. -For the purpose of this clause (a)- . . . (b) "urban land" means land situate- (i) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation . ..)... and which has a population of not less than ten thousand....; or (ii) .... (regarding area outside the municipal limits), but does not include land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as a stock-in-trade for a period of five years from the date of its acquisition by him." The other relevant provision is section 7 as introduced with effect from the assessment year 1989-90 onwards which provides for determination of value of assets. Up to the assessment y....
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....ets in the Wealth-tax Act itself are also explained in paragraph 18.1 of Circular No. 559, dated May 4,1990, containing explanatory notes to the provisions of the Direct Tax Laws (Amendment) Act, 1989, but they do not throw any light on the specific controversy involved in these appeals. Part B of the Rules (rules 3 to 8) provides for valuation of immovable property. Rule 3 provides that the value of any immovable property, being a building or land appurtenant thereto, or part thereof (acquired and constructed prior to March 31,1974) shall be determined by multiplying the net maintainable rent by the figure 12.5 if the land belongs to the assessee. Rule 4 provides that "net maintainable rent" is to be computed after deducting from the "gross maintainable rent" the amount of taxes levied by any local authority and a sum equal to 15 per cent, of the gross maintainable rent. Rule 5 provides the method for computing the "gross maintainable rent" being the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority, whichever is higher; where the house property is not let, the amount of annual rent assessed by the local autho....
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....p; 65% Specified area is 2,465 x 0.65 = 1,602.25 sq. mtrs. Excess of unbuilt area over specified area is 2,054-1,602.25 = 451.75 sq. mtrs. 451.75 sq. mtrs. as percentage of aggregate area = 451.75x100 ---------- = 18326 Per cent 2465 ---------------------------------------------------- The excess of unbuilt area over specified area is less than 20 per cent, and, therefore, applicabilit....
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....erated by the Madras High Court in CIT v. M. Kalpagam [1997] 227 ITR 733. However, those principles were laid down in the context of the expression "land appurtenant thereto" in section 54 of the Income-tax Act, 1961, granting a concession where capital gains arise from the transfer of buildings or lands appurtenant thereto used by the assessee as his own or his parent's residence, if he constructs a house property or purchases one for the purposes of residence within the time specified in the provision. While those illustrative principles do give a lot of importance to use of the land as appurtenant land, before enumerating those principles and after setting them out, the court sounded the following caveat: "The tax authorities will have to determine the extent of land appurtenant to a building transferred, taking into consideration a variety of circumstances that may be relevant for the purpose. It is not possible to lay down infallible tests to be applied for the determination of the extent of land appurtenant to a building, as the tests vary depending upon the facts and attendant circumstances of each case. For instance: . . . The above tests are illustrative and by no me....
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....e finding of fact given by the Tribunal and the High Court. As observed in Zaibunnisa Begum's case [1985] 151 ITR 320 (AP), it is for the tax authorities to apply their mind properly to the facts of each case and to devise tests suitable and appropriate to each case. We must, therefore, now turn to the tests applied in the facts of the present case. In the facts of the instant case, the Commissioner (Appeals) gave the following findings and the Tribunal has concurred with the same: The Commissioner (Appeals) has referred to the fact that the final plot No. 417/1 was sub-plotted into four plots in the year 1967 and that out of those subplots which were recognised in the town planning scheme under the Town Planning Act, 1954, the appellant had gifted sub-plot No. 3 to his daughters who became the absolute owners of the said sub-plot in the year 1968 and a residential bungalow was constructed exclusively on sub-plot No. 1 having independent entries from a 80' wide TP road. No part of the said residential bungalow spilled over to other sub-plots. There was independent access for sub-plots Nos. 3 and 4 from a 30' wide TP road, while sub-plot No. 2 was separately accessible from th....
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....g Act relied upon by the appellant himself, indicating how the appellant and his family members treated the lands in question. In the declaration form filed by the appellant and his sons under the Urban Land Ceiling Act, the following particulars were given in the Appendix at page 107 of the paper book: APPENDIX --------------------------------------------------------- Use of Price in Land with Persons having land (Rs.) building interest (whether in the land used for &n....
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....; Shah. --------------------------------------------------------- The above details are given in respect of the land bearing final plot No. 417/1 in TP Scheme No. 3, admeasuring 3,500 sq. yds. The appellant claimed in the appeal memo before the appellate authority under the Urban Land Ceiling Act that the land had three residential units with land admeasuring 500 sq. mtrs. appurtenant to each of them. The appellant and his family members claimed 500 sq. mtrs. of appurtenant land for the bungalow, another appurtenant land of 500 sq. mtrs. for pagi's room and another 500 sq. mtrs. of the appurtenant land for servant's room in order to show that there was no excess vacant urban land. Having succeeded before the urban land ceiling authorities on that basis, the appellant is bound by the statements made in the Appendix to Form No. 1 under section 6 of the Urban Land Ceiling Act and in the appeal memo. Hence, the order of the Tribunal or the order of the Commissioner (Appeals) are not liable to be disturbed merely because they did not make a specific reference to the material under the Urban Land Ceiling Act which in any case destroys the a....
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....vants. This decision would have helped the assessee if final plot No. 417/1 was not sub-plotted into four sub-plots. Apart from this aspect, even in the form and the appeal filed under the Urban Land Ceiling Act, the appellant had shown separate appurtenant land for the servant's room and separate appurtenant land for the pagi's room over and above the appurtenant land for the residential bungalow. The above two features are sufficient to distinguish the fact situation from the case of Shrenik Kasturbhai.The appellant had produced the tax bills issued by the Ahmedabad Municipal Corporation to indicate that the corporation had treated the entire property as having only one number, i.e., 417/1. However, in view of the fact that there was only one building constructed on sub-plot No. 1 of final plot No. 417/1 and that sub-plots Nos. 2, 3 and 4 had always remained open lands and the corporation has no power to levy tax on open land, nothing turns upon the corporation bills not giving sub-plot number for the building in question. The corporation itself had sanctioned the construction plans in the year 1968 for construction of a residential house admeasuring 345.88 sq. mtrs. on sub-plot ....
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....tial house can be built, these are having separate approach roads, duly approved by the Municipal Corporation as plots for separate residential units. Therefore, in our opinion, the learned Commissioner of Income-tax (Appeals) is fully justified in holding that these two subplots are urban land within the meaning of the Wealth-tax Act. Looking to the totality of the facts and circumstances of the case and reasons recorded by the learned Commissioner of Income-tax (Appeals) in her impugned order, we are of the opinion that her order is legally and factually correct and no interference is called for. We, therefore, decline to interfere."In State of Madras v. A.R. Srinivasan, AIR 1966 SC 1827 and Tara Chand Khatri v. Municipal Corporation of Delhi, AIR 1977 SC 567, it has been held that it may be necessary for an appellate authority to give detailed reasons in support of its order if it differs from the lower authority, but when the appellate authority merely gives an order of concurrence, it need not contain such elaborate reasons. An order does not cease to be a speaking order merely because it is brief and not elaborate.In the instant case, the Tribunal has considered the relevant ....
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....xcludes land on which construction of a building is not permissible or land occupied by any authorised building, there is nothing on record to show that construction of a building was not permissible on sub-plots Nos. 2 and 4. In fact, the Commissioner (Appeals) has given a finding, and the Tribunal has not disturbed the same, that each of the sub-plots Nos. 2 and 4 was capable of having a building constructed on it. As far as the land occupied by any building is concerned, sub-plots Nos. 2 and 4 did not have any construction except a small pagi room (watchman room) admeasuring 19 sq. mtrs., on sub-plot No. 4 and, therefore, at the most, the land below the said room would have to be excluded while making valuation of the land. Part B of Schedule III to the Act applies to any immovable property being a building or land appurtenant thereto or part thereof. Once the appellant's case that sub-plots Nos. 2 and 4 are land appurtenant to the residential bungalow on sub-plot No. 1 is not accepted and sub-plots Nos. 2 and 4 are found to fall within the definition of "urban land", these lands are liable to be included in the assets for the purpose of computation of net wealth.In view of the ....
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....les was accepted by the Revenue for almost 20 years. However, as per the settled legal position, there is no res judicata in tax matters when different years are involved (vide Dwarkadas Kesardeo Morarka v. CIT [1962] 44 ITR 529 (SC) and Joint Family of Udayan Chinubhai v. CIT [1967] 63 ITR 416 (SC)).Even while rejecting the appellant-assessee's contention based on the assessments in the previous years, considering the fact that in all the previous years the assessee had applied the user test and the Department did not find fault with the same and that although on an overall consideration of the relevant tests applied, the Tribunal as well as this court have come to the conclusion that the assessee was not justified in valuing all the sub-plots as part of the house, there is considerable substance in the submission made by Mr. Patel for the assessee that the case does not warrant imposition of penalty under section 18 of the Act. Since only the user test was applied all along for the last 20 years, the assessee was not guilty of concealment of the particulars of any assets nor had the assessee furnished inaccurate particulars of any assets. The entire land bearing final plot No. 41....
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....ll be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act."Moreover, the limitations on the powers of this court while hearing a reference under section 256 do not apply while hearing an appeal under section 260A of the Act.Hence, we frame question No. 4 for our determination as under:"Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in accepting the valuation of sub-plots Nos. 2 and 4 made in disregard of the statutory building bye-laws of the Ahmedabad Municipal Corporation?"Now, we proceed to deal with the said question. The relevant building bye-laws of the Ahmedabad Municipal Corporation reads as under:"IV. Minimum area of a building unitThe development on a building unit shall be controlled on the basis of its area and the minimum area of a building unit required for various buildings shall be as under:(1) 200 sq. mtrs. (240 sq. yds.) for one domestic unit.(2) 300 sq. mtrs. (360 sq. yds.) for two semi-detached domestic building unit.(3) 333 sq. mtrs. (400 sq. yds.) for three semi-detached buildings of workshop and small factories, ....
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....le of final plot No. 417/1 and looking to the shape of subplots Nos. 2 and 4 neither the purchaser of sub-plot No. 2 nor the purchaser of sub-plot No. 4 would have paid the market price which a plot admeasuring 451 sq. mtrs. or 533 sq. mtrs. in regular shape would have fetched.It appears to us that the Department was quite swayed by the price that the entire land bearing final plot No. 417/1 fetched in the year 1996 and, therefore, the aforesaid relevant considerations were not taken into account. In view of the above discussion, we are of the view that although the valuation made by the Departmental Valuation Officer was not challenged before the Tribunal as the appellant had concentrated on his case that final plot No. 417/1 was one single unit and that all the lands surrounding the residential bungalow were appurtenant to the said residential bungalow, in view of the statutory building bye-laws and the facts about the location and shape of sub-plots Nos. 2 and 4, we are of the view that the valuation of the said sub-plots Nos. 2 and 4 is required to be made afresh in accordance with law and in the light of the observations made hereinabove.In the result, we allow all the four ap....