2014 (8) TMI 768 - AT - Wealth-tax

Deletion the value of the land for Wealth Tax - Exempt u/s 2(2ea)(ii) - Whether CWT(A) erred in directing the AO to delete the value of the land for Wealth Tax purposes as being exempt ujs. 2(2ea)(ii) of the W. T. Act, without appreciating the findings of the AO in the assessment order - Held that - it is clear that if on a plot of land construction of a building is not permissible under any law then the said plot of land could not form part of urban land or the asset to be taxed under the Act. In the case under consideration the certificate issued by the Municipal Authorities demonstrate that the plot of land was a reserved as recreation ground and on the date of assessment the local authorities had not granted permission to construct any building on it. Even till the passing the order by the FAA, permission was not granted to construct building on the plot of land owned by the assesseehad. Before us, also no evidence was produced that prove that permission was granted to the assessee had for construction in the year under consideration. Therefore, considering the factual matrix of the matter and the above mentioned two judgments, we are of the opinion that the order of the FAA does not suffer from any legal infirmity. Confirming his orders we decide first two grounds against the AO. Receivable compensation cannot be taken for valuing an asset on a particular date- especially when it is not certain that the assessee would get compensation or not at the first place. Taxes cannot be levied on hypothetical situations. - Decided against the revenue.

Summary

Issues:
Challenging Commissioner's orders, Exemption of land for Wealth Tax purposes, Compensation receivable by the assessee.

Exemption of Land for Wealth Tax Purposes:
The Assessing Officer (AO) challenged the Commissioner's orders directing deletion of land value for Wealth Tax purposes under section 2(2ea)(ii) of the Wealth Tax Act. The AO argued that the land was taxable, considering the company's transactions and ownership of urban land. However, the First Appellate Authority (FAA) found that the land was undeveloped, earmarked for public purposes, and did not qualify as a taxable asset. Citing legal precedents, including judgments by the Hon'ble Delhi High Court and the High Court of Punjab and Haryana, the FAA ruled that if construction was not permissible on the land, it could not be considered urban land for Wealth Tax purposes. The Tribunal upheld the FAA's decision, emphasizing that no permission for construction was granted, and the land was reserved for public purposes, thus excluding it from wealth tax assessment.

Compensation Receivable by the Assessee:
Regarding the compensation receivable by the assessee, the Departmental Representative (DR) supported the AO's position, while the Authorized Representative (AR) referred to municipal corporation documents and legal judgments favoring the assessee. The Tribunal considered the Hon'ble High Court of Punjab and Haryana's decision in Perminder Singh's case, ruling that receivable compensation cannot be considered for valuing an asset for taxation, especially in uncertain situations. Following this judgment, the Tribunal decided against the AO on this ground, emphasizing that taxes cannot be levied on hypothetical scenarios.

Consistency in Decision for Multiple Years:
For the assessment years 2005-06 to 2007-08, the Tribunal maintained consistency with the decision for the preceding year, dismissing all grounds against the AO. It was noted that no evidence was presented indicating permission for construction on the land until the end of the relevant assessment years. Consequently, the appeals filed by the AO were dismissed for all the years under consideration.

In conclusion, the Tribunal upheld the FAA's decision to exempt the land from Wealth Tax assessment based on legal provisions and precedents, while also ruling against considering receivable compensation for asset valuation. The consistency in decision-making for multiple years further solidified the dismissal of the AO's appeals.