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2015 (12) TMI 1361 - AT - Wealth-taxDenial of exemption claim - whether the exemption provided in section 5(vi) of the Act in respect of plot of land not exceeding 500 sq,mtrs is also applicable to companies or not - Exemption for plot of land not exceeding 500 sq.mtrs has to be limited only to individuals and HUF and the proviso to section 5(vi) had only acted as a restrictive covenant and full effect needs to be given for the same. We also hold that the proviso needs to be read along with the main section and it cannot act as an alien to the main sub-section. Proviso in section 5(vi) is a qualifying provision to grant exemption for plot of land not exceeding 500 sq.mtrs and limiting it only to individuals and HUF and hence the argument of the Learned AR that exemption is also applicable for companies is not appreciated. - land was purchased by the assessee on 12.3.2003 and the said land is meant for construction of hotel. It is well settled that Hotel is an industry and hence the assessee is eligible to claim exemption for two years from the date of acquisition in respect of urban land held for industrial purposes. Accordingly, we hold that the assessee is eligible for exemption for urban land from wealth tax for Asst Years 2003-04 & 2004-05. It is well settled that the assets held as on the valuation date (i.e 31st march of each year) is the relevant date for bringing an asset under the ambit of wealth tax. Similarly the exemption provision also needs to be looked into as per the prevailing law on the valuation date. Since the land was purchased on 12.3.2003 , it will continue to claim exemption upto 12.3.2005 but not thereafter and accordingly comes under the ambit of taxable wealth as on 31.3.2005 being the valuation date. Hence the assessee is not eligible for exemption from wealth tax under this category for Asst Year 2005-06. - Decided against Assessee.
Issues Involved:
1. Whether the value of urban land held for construction of a hotel by the assessee is taxable under the Wealth Tax Act. 2. Applicability of exemption under Section 5(vi) of the Wealth Tax Act for land less than 500 sq. meters. 3. Eligibility for exemption of urban land held for industrial purposes. Issue-wise Detailed Analysis: 1. Taxability of Urban Land Held for Hotel Construction: The primary issue in these appeals is whether the urban land held by the assessee for constructing a hotel falls under the definition of taxable assets under Section 2(ea) of the Wealth Tax Act. The assessee argued that since the construction process had already started, the land should not be considered as urban land for wealth tax purposes. The Assessing Officer (AO) disagreed and brought the value of the urban land to tax for the assessment years 2003-04, 2004-05, and 2005-06. 2. Exemption Under Section 5(vi) of the Wealth Tax Act: The assessee contended that the land, being less than 500 sq. meters, should be exempt under Section 5(vi) of the Wealth Tax Act. The assessee argued that this exemption is not limited to individuals and Hindu Undivided Families (HUFs) but is applicable to all assessees, including companies. However, the Tribunal referred to the Explanatory Memorandum of Section 5(vi), which clearly specifies that the exemption is limited to individuals and HUFs. The Tribunal held that the proviso to Section 5(vi) acts as a restrictive covenant and does not extend the exemption to companies. 3. Exemption for Urban Land Held for Industrial Purposes: The assessee also argued that the land was meant for constructing a hotel, which qualifies as an industrial purpose, and hence should be exempt from wealth tax for the first two years from the date of acquisition. The Tribunal acknowledged that a hotel is considered an industry and thus the land held for constructing a hotel is eligible for exemption for the first two years. Consequently, the assessee was granted exemption for the assessment years 2003-04 and 2004-05. However, for the assessment year 2005-06, the Tribunal held that since the two-year exemption period had lapsed, the land would be taxable. Conclusion: The Tribunal allowed the appeals for the assessment years 2003-04 and 2004-05, granting exemption on the grounds that the land was held for industrial purposes (hotel construction). However, the appeal for the assessment year 2005-06 was dismissed as the two-year exemption period had expired, making the land taxable under the Wealth Tax Act. The Tribunal also clarified that the exemption under Section 5(vi) is not applicable to companies, thus rejecting the assessee's argument for exemption based on the land being less than 500 sq. meters.
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