2013 (9) TMI 716 - AT - Wealth-tax

Treatment of Land under wealth tax act Agricultural Or Urban Land - Disallowance of Exemption - Definition of Urban Land u/s 2(ea) - Retrospective Amendment - Whether the CWT (Appeals) erred in dismissing the appeal and confirming the order of the Wealth Tax Officer, treating the agricultural land as urban land liable to wealth tax - Whether the CWT (Appeals) erred in upholding the action of the AO of treating the land used for agricultural purposes and classified as agriculture land in the records of the govt., as Urban Land as defined u/s 2(ea) while disallowing the exemption claimed by the assessee The law on this issue had been amended with retrospective effect from 1st day of April, 1993 and the land which had been classified as agricultural land in the records of the govt. and used for agricultural purposes had been excluded from the definition of urban land - Held that - In view of the amended provisions with retrospective effect from 01.04.1993 in the Wealth Tax Act, whether the said land which had been claimed as exempt by the assessee in the return of wealth had complied with all the amended provisions or not had to be examined - Therefore, in pursuance of amendment through Finance Act, 2013, as mentioned which amendment was clarificatory in nature. It was appropriate to set aside the matter to the file of the W.T.O. to examine the documents lead by the assessee as required in the amended provisions and decide the issue accordingly afresh in view of the said amendment in Explanation-1 to section 2(ea) with retrospective effect 01.04.1993 - The A.O. was directed to provide reasonable opportunity of being heard to the assessee in this regard - Thus, the appeal of the assessee in WTA No.15(Asr)/2013 for the assessment year 2002-03 was allowed for statistical purposes - Decided in favour of Assessee.

Summary

Issues Involved:
1. Classification of agricultural land as urban land liable to wealth tax.
2. Retrospective application of the amendment to Section 2(ea) of the Wealth Tax Act, 1957.
3. Examination of compliance with the amended provisions for exemption claims.

Detailed Analysis:

1. Classification of Agricultural Land as Urban Land Liable to Wealth Tax:
The primary issue in these appeals is whether the agricultural land owned by the appellants, which is within or near the municipal limits, should be classified as urban land and thereby subject to wealth tax. The Wealth Tax Officer (W.T.O.) treated these lands as urban land under Section 2(ea) of the Wealth Tax Act, 1957, and included them in the net wealth of the assessees for taxation. The appellants argued that the land is classified as agricultural land in government records and used for agricultural purposes, thus should be exempt from wealth tax. The CWT(A) upheld the W.T.O.'s decision, stating that the lands fall within the specified limits of urban areas and are therefore taxable.

2. Retrospective Application of the Amendment to Section 2(ea) of the Wealth Tax Act, 1957:
The Tribunal acknowledged an amendment to Section 2(ea) of the Wealth Tax Act, 1957, introduced by the Finance Act, 2013, with retrospective effect from April 1, 1993. This amendment clarifies that urban land does not include land classified as agricultural in government records and used for agricultural purposes, among other exclusions. The Tribunal emphasized the need to examine whether the lands in question comply with the amended provisions for exemption from wealth tax.

3. Examination of Compliance with the Amended Provisions for Exemption Claims:
Given the retrospective amendment, the Tribunal found it necessary to reassess the classification of the lands. The Tribunal set aside the W.T.O.'s orders and remanded the cases back to the W.T.O. for a fresh examination of the documents and evidence provided by the assessees. The W.T.O. was directed to determine whether the lands meet the criteria for exemption under the amended Section 2(ea), including classification as agricultural land in government records and actual use for agricultural purposes. The W.T.O. must provide a reasonable opportunity for the assessees to present their case.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, emphasizing the need for a thorough re-examination of the lands' classification in light of the retrospective amendment to Section 2(ea) of the Wealth Tax Act, 1957. The W.T.O. is to reassess the cases, considering the amended provisions and providing the assessees an opportunity to present relevant evidence. This decision applies uniformly to all 42 appeals, ensuring a consistent approach across all cases.