2013 (8) TMI 221 - HC - Wealth-tax

Nature of the asset - Whether the flat purchased by the assessee in an incomplete condition was not an asset u/s 2(ea) nor was a piece of an urban land u/s 2(ea)(v) - The AO had treated the investment as an urban land u/s 2(ea)(v) - Held that - If the construction was partly completed or the building is under construction, in that case the exception engrafted in the definition of the words urban land does not get attracted - In that event the urban land or undivided interest of the assesse continues to be open for taxation within the category of urban land relying upon CWT v. Girdhar G. Yadalam (2007 (3) TMI 334 - KARNATAKA HIGH COURT) - The intention of the Legislature appears to be to tax the wealth either in the form of urban land or in the form of a house the flat was purchased in an incomplete condition and was yet to be fully completed - there can be no doubt that the construction was yet to be completed Order set aside to the aforesaid extent - The matter shall now go back for reassessment Decided in favor of revenue.

Summary

Issues: Interpretation of the definition of "urban land" under the Wealth Tax Act.

Analysis:
The High Court of Calcutta dealt with the challenge to an order regarding the classification of a flat purchased in an incomplete condition under the Wealth Tax Act. The Assessing Officer treated the investment as "urban land," but the CWT disagreed. The Tribunal also held that the investment could not be classified as "urban land" due to the construction already present on the land. The appellant argued that the flat was under construction and, therefore, should not fall under the definition of "urban land" as per the Act.

The definition of "urban land" was a crucial point of contention. The appellant contended that the exclusion from the definition should only apply to land that has been fully constructed upon with requisite approvals, not to a building under construction. Reference was made to a Karnataka High Court judgment emphasizing that the term "constructed" should be interpreted to mean "fully constructed" and not include buildings under construction. The Court agreed with this interpretation, stating that if the construction is incomplete, the exception in the definition of "urban land" does not apply, and the property remains subject to taxation under the category of urban land.

The Court found the Karnataka High Court's view more preferable, emphasizing that the intention of the Legislature was to tax wealth in the form of urban land or a house. As the flat in question was purchased in an incomplete condition and construction was yet to be completed, it was deemed that the exception in the definition of "urban land" did not apply. Consequently, the Court set aside the previous order and allowed the appeal in favor of the revenue, directing reassessment based on the property's value as urban land in accordance with the law.