2016 (2) TMI 290 - AT - Wealth-tax

Reassessment - Inclusion of land in the wealth tax assessment - Appellant contended that land in question was not permitted for construction and a civil suit was also pending before the Sub-court - Held that - , merely because a civil suit is pending on the basis of the amount due to the said Smt V. Kamalam and other creditors, it cannot be said that the assessee has not acquired any title over the said land in question. Therefore, this Tribunal is of the considered opinion that the market value of the land has to be ascertained after taking into consideration the pendency of the civil suit. Since the suit is pending, the value may not be alike freehold land. The pendency of the civil suit would definitely reduce the market price of the land in the open market. Therefore, this Tribunal is of the considered opinion that the land in question is an asset within the meaning of sec. 2(ea) of the Wealth-tax Act and it has to be assessed accordingly under the Wealth-tax Act. - Decided partly in favor of assessee.

Summary

Issues:
Assessment of land as an asset under the Wealth-tax Act based on construction permissions and civil suit implications.

Analysis:
The appeal concerned the assessment of land in Sowripalayam Village, Coimbatore, under the Wealth-tax Act for the assessment year 2008-09. The Assessing Officer reopened the assessment as the wealth of the assessee had escaped assessment. The dispute revolved around whether the land was an asset under sec. 2(ea) of the Act. The Assessing Officer valued the land based on guideline value, while the assessee claimed it was not an asset due to restrictions on construction. The Commissioner of Wealth-tax(Appeals) found that the land could not be treated as an asset due to the prohibition on constructing multistoried buildings without a 9 mtrs access road. The Revenue contended that only multistoried commercial buildings were prohibited, not residential units. The Tribunal noted that the land was initially classified as residential use zone, and the government later approved a change to commercial use. It concluded that construction of a residential unit was permissible, only multistoried commercial buildings were restricted. Thus, the CWT(A) was incorrect in deeming the land not an asset.

The assessee argued that until acquiring an access road, the land could not be considered an asset. The Tribunal observed that the construction of a residential building was allowed under existing regulations, and the land was converted to a commercial zone later. It noted that the construction of a multistoried commercial complex was prohibited, not residential units. The Tribunal disagreed with the CWT(A) and held that the land was indeed an asset under sec. 2(ea) of the Act. The pending civil suits were also considered, with the Tribunal stating that the market value of the land should account for the suits' implications. It directed the Assessing Officer to value the land considering the civil suits. The appeal of the assessee was allowed for statistical purposes.