2011 (12) TMI 369 - AT - Wealth-tax

Valuation of property - Reference to DVO - In these appeals the assessee has not challenged the value as determined by the DVO in his report for the various assessment years. The dispute is with regard to the area of land that has to be considered as asset within the meaning of section 2(ea) of the Wealth Tax Act 1957 - It is the plea of the assessee that the property which was a vacant land had been given to M/s. Keystone Realtors Pvt. Ltd. and M/s. Ashray Dwellers P. Ltd. under development agreement and the construction activity was going on in the aforesaid property - The assessee claimed that it had retained ownership of the land until flats are fully constructed and possession of the assessee s share was handed over to it - The development agreement constituted only permissive possession according to the assessee for the limited purpose of construction of flats - Held that claim of the assessees to exclude the land over which construction of the building was in progress by the developer cannot be accepted - Decided against the assessee Regarding penalty - assessee had not disclosed in the return of wealth the investment in land at Andheri which was valued at Rs. 60 lacs by the WTO - Hon ble Karnataka High Court has by its order dated 21/3/2007 allowed the appeal of the revenue - Held that No valid reason has been assigned as to why this item of asset was not included in the net wealth by the assessee - Decided against the assessee

Issues Involved:
1. Valuation of property at Dahisar.
2. Definition and inclusion of "urban land" under section 2(ea) of the Wealth Tax Act, 1957.
3. Exclusion of land occupied by buildings under construction from the definition of "urban land".
4. Imposition of penalty for incorrect valuation and non-disclosure of assets.

Detailed Analysis:

1. Valuation of Property at Dahisar:
The primary dispute in these appeals concerns the valuation of the property at Dahisar. The assessee, Mr. Boman Irani, and Mrs. Porochy Irani, each owned one-third of the property, with the remaining one-third owned by Shri Temhton R. Irani. The valuation of the property was referred to the District Valuation Officer (DVO), who provided valuations for various assessment years. The assessees had reduced certain areas while computing the value of the assets, supported by a report from a registered valuer, M/s. N.V. Sabnis and Company.

2. Definition and Inclusion of "Urban Land" under Section 2(ea) of the Wealth Tax Act, 1957:
The definition of "urban land" under section 2(ea) of the Wealth Tax Act includes land situated within the jurisdiction of a municipality with a population of not less than ten thousand or within a specified distance from such a municipality. The definition excludes land on which construction of a building is not permissible, land occupied by any building constructed with the approval of the appropriate authority, unused land held for industrial purposes, and land held as stock-in-trade for a specified period.

3. Exclusion of Land Occupied by Buildings Under Construction:
The assessees argued that the property, which was vacant land, had been given to M/s. Keystone Realtors Pvt. Ltd. and M/s. Ashray Dwellers P. Ltd. under development agreements, and construction activity was ongoing. They sought to exclude areas of land occupied by buildings under construction from the definition of "urban land." The Assessing Officer (AO) and the Commissioner of Wealth Tax (Appeals) [CWT(A)] rejected this argument, stating that the term "has been constructed" refers to completed buildings, not those under construction. This interpretation was supported by the Supreme Court's decision in F.S. Gandhi vs. Commissioner of Wealth-tax, which emphasized the present and future tense of the term "is" in legal provisions.

The Tribunal referred to the Karnataka High Court's decision in CWT vs. Giridhar G. Yadala, which held that land on which a building is being constructed and not yet completed cannot be excluded from the definition of "urban land." The Tribunal upheld the CWT(A)'s decision, stating that the land continued to belong to the assessees as lawful owners and the construction of the building was not completed.

4. Imposition of Penalty for Incorrect Valuation and Non-Disclosure of Assets:
The appeals also involved the imposition of penalties for incorrect valuation of the property at Dahisar and non-disclosure of assets. The Tribunal found that the view canvassed by the assessee regarding the exclusion of land under construction was not untenable, as it was accepted by the Tribunal earlier. Therefore, penalties under section 18(1)(c) of the Act could not be imposed for incorrect valuation of the Dahisar property.

However, in the case of non-disclosure of the property at Andheri by Shri Boman Irani, the Tribunal held that the explanation provided by the assessee was insufficient to exonerate him from penalty. The assessee had not included the value of the Andheri property in the net wealth without valid reason, justifying the imposition of penalty.

Conclusion:
The Tribunal dismissed the appeals concerning the valuation of the Dahisar property and upheld the CWT(A)'s decision. The penalties for incorrect valuation of the Dahisar property were set aside, but the penalties for non-disclosure of the Andheri property were upheld. The final order pronounced in the open court on 16.12.2011 reflected these decisions.

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