2006 (2) TMI 501 - AT - Wealth-tax

Summary

Issues:
Revenue's appeal against deletion of addition to net wealth made on acquisition of land and its related development rights by the assessee.

Analysis:
The appeal was filed by the revenue challenging the deletion of the addition to the net wealth of the assessee made on the acquisition of land and its related development rights. The assessee acquired development rights of an adjacent plot of land in the form of Floor Space Index (FSI) for a consideration of Rs. 18.00 lakhs. The Assessing Officer included this amount in the wealth of the assessee, considering it an integral part of the land owned by the assessee. However, the CWT(A) held that the developmental rights cannot be equated with urban land and are not included in the definition of assets under the Wealth-tax Act. Therefore, the CWT(A) deleted the value of developmental rights from the net wealth of the assessee, leading to the revenue's appeal.

The revenue contended that the acquired plot of land with development rights should be included in the wealth of the assessee. The Departmental Representative argued that the acquired land is urban land and should be considered as wealth under the Wealth-tax Act. However, the Authorized Representative for the assessee emphasized that the FSI acquired was a right to develop the property, not ownership of urban land. The assessee was allowed to build on the existing building but not permitted to sell the structure. The AR further argued that if the land is considered urban, it falls outside the purview of the Wealth-tax Act due to being allotted for industrial purposes and remaining unused for two years.

Upon review, the Tribunal found that the assessee acquired development rights for an adjacent area, not ownership of urban land. The FSI was specifically allotted for developing a garden and parking space, with restrictions on building structures or selling the rights to others. The Tribunal cited regulations governing development rights, which separate the development potential from the land itself. As the assessee did not acquire ownership of the new plot but only development rights, the sum paid for these rights was not includable in the wealth of the assessee. Consequently, the Tribunal upheld the decision of the CWT(A) and dismissed the revenue's appeal.