2014 (7) TMI 1214 - AT - Wealth-tax

Nature of land - whether land in question had fallen within the definition of asset as per Section 2(ea) of WT Act - Held that - After formulating the correct legal position that the agricultural land if within municipal limits and if established the nature of the land as agricultural land; then should not be held as urban land , we hereby consider it necessary to direct the assessee to establish the nature / the character of the agricultural land. As noted above, the assessee has furnished 7/12 extract of the land. We are of the considered opinion that mere filing of 7/12 extract is not sufficient. The provision prescribes that the land is to be used for agriculture purposes. Due to this reason, the assessee has to establish the agricultural operation whether carried out or not and that agriculture income was shown in the income tax return. Agriculture activity coupled with 7/12 extract can establish the nature of the land. When the proceedings were carried out before the lower authorities the provisions of WT Act were only considered by them and it was opined that the claim of the assessee was not within the ambits of the relevant provisions of WT Act; hence, the merits of the nature of the land were not examined. It was rightly so; because as per old law land of any nature if situated within the municipal limit was to be treated as urban land ; then there was no need of further enquiry about the value of the land at that point of time. We, therefore, now deem it proper to restore this issue back to the file of AO to examine the merits of the claim on the basis of the evidence. Side by side, we hereby direct these appellants to furnish all the relevant evidences so that a correct view can be expressed by the learned AO. Since, the issue has been restored back; therefore, the grounds may be treated as allowed but for statistical purpose only.

Summary

Issues:
1. Validity of reopening of assessment under Wealth Tax Act.
2. Classification of agricultural land as urban land for wealth tax purposes.

Issue 1: Validity of reopening of assessment under Wealth Tax Act
The appeals raised grounds challenging the Assessing Officer's reopening of the assessment under Section 16(3) read with Section 17 of the Wealth Tax Act, 1957. The learned AR informed not to press the challenge to the validity of the reopening for both appellants, leading to the dismissal of Ground No.1. The Revenue Department reopened the cases due to the assessee showing agricultural land as exempt from wealth tax, claiming it was within municipal limits or within 8 kms of municipal limits, thus classified as 'urban land'. The assessee contended that the lands were agricultural and not urban land as per the WT Act. The AO, however, considered the land as 'urban land' within the definition of 'asset' under Section 2(ea) of the Act, leading to the taxation of the land for wealth tax purposes.

Issue 2: Classification of agricultural land as urban land for wealth tax purposes
The First Appellate Authority confirmed the AO's decision that agricultural land within 8 kms of Municipal Limits is not exempt from taxable wealth and that construction was not prohibited on the lands. The appellants argued that even if within 8 kms of Municipal Limits, agricultural land should not be considered 'urban land'. They referred to the amended provisions of the Finance Act, 2013, which excluded agricultural land from the definition of 'urban land'. The Tribunal noted the changes in the definition of 'urban land' by the Finance Act, 2013, and directed the assessee to establish the agricultural nature of the land. Mere filing of 7/12 extract was deemed insufficient, requiring evidence of agricultural activity and income tax returns to establish the land's nature. The issue was restored to the AO for further examination based on the evidence provided by the appellants.

In conclusion, the Tribunal allowed the appeals pro tanto for statistical purposes, directing the appellants to furnish relevant evidence to establish the agricultural nature of the land. The judgment highlighted the importance of considering the legal provisions and evidence to determine the classification of land for wealth tax purposes, especially in light of the amended definitions of 'urban land'.