2015 (6) TMI 147 - AT - Wealth-tax

Wealth Tax assessment - Incomplete construction of commercial complex building - Held that - Assessee has furnished bills and vouchers for the materials purchased such as steel, cement, sand, iron, labour expenses, lorry freight etc. for completing construction of the building. The only reason for bringing to wealth tax of the property is that assessee has applied for construction to the municipal corporation on 4.4.2005 and got approval only on 18.4.2005. In our view, this alone cannot be a ground for bringing the property to wealth tax when in fact the assessee has started constructing the building on the sites earlier, though applied for permission later to municipal authorities - once construction activity commenced in the land ceases its character as a vacant land and it cannot be treated as a nonproductive asset and such land cannot be brought to wealth tax. Thus, we hold that the land situated in survey no.154 and 154/3 is not liable to wealth tax. Therefore, the ground raised by the assessee in both the appeals on this issue is allowed. As regards, Commissioner of Income Tax (Appeals) not being not justified in sustaining the action of the Assessing Officer in bringing to wealth tax assessment a sum of ₹ 2,51,610/- and ₹ 8,16,796/- being value of land and building at Tiruchengode Road and at SIDCO Industrial Estate respectively as both are productive assets and not liable for wealth tax. - issue has not been considered by the Commissioner of Income Tax (Appeals). This ground raised by the assessee before the Commissioner of Income Tax (Appeals) was not disposed off. In the circumstances, we set aside this issue to the file of the Commissioner of Income Tax (Appeals) for disposing off this ground after providing sufficient opportunity to the assessee. Counsel for the assessee has not argued any other issues other than this though grounds were raised. - In favour of assessee.

Summary

Issues:
1. Justification of bringing land and buildings to wealth tax assessment.
2. Treatment of productive assets for wealth tax assessment.

Analysis:
1. The first issue in both appeals pertains to the justification of bringing land and buildings to wealth tax assessment. The Assessing Officer included the land at Salem road, Namakkal in the wealth tax assessment, arguing that construction of a commercial complex building was incomplete as of the relevant assessment years. The Commissioner of Income Tax (Appeals) upheld this decision, stating that no construction activity had commenced during the said years. However, the assessee contended that significant expenditure had been incurred towards construction, as reflected in the income-tax returns filed for those years. The Tribunal observed that the assessee had indeed spent substantial amounts on construction activities, supported by bills and vouchers for materials purchased. Despite the delayed approval from the municipal corporation, the Tribunal held that the land was not vacant and, therefore, not liable for wealth tax. The Tribunal also noted that construction activities had continued in subsequent years, further supporting the assessee's claim that the land was not a nonproductive asset subject to wealth tax.

2. The second issue raised for the assessment year 2005-06 concerned the inclusion of the value of land and building at Tiruchengode Road and SIDCO Industrial Estate in the wealth tax assessment. The Tribunal found that this issue had not been considered by the Commissioner of Income Tax (Appeals) and, therefore, remanded it back for proper disposal. The Tribunal directed the Commissioner to provide the assessee with sufficient opportunity to address this ground. While the assessee did not argue any other issues during the proceedings, the Tribunal partially allowed the appeal for the assessment year 2005-06 for statistical purposes and fully allowed the appeal for the assessment year 2006-07.

In conclusion, the Tribunal ruled in favor of the assessee on the first issue, holding that the land in question was not liable for wealth tax due to ongoing construction activities. The second issue regarding the treatment of productive assets was remanded back to the Commissioner of Income Tax (Appeals) for proper consideration.