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Issues involved: Interpretation of the definition of 'urban land' u/s 2(ea) of the Wealth-tax Act, 1957 and the applicability of Karnataka Land Revenue Act, 1964 in determining the tax liability of agricultural lands.
Summary: 1. The petitioner, owner of agricultural land, filed a return for the assessment year 2005-06, claiming exemption from wealth tax based on the exclusion of agricultural lands from the definition of 'urban land' u/s 2(ea) of the Wealth-tax Act, 1957. The respondent Wealth Tax Officer disagreed, citing the possibility of converting the land for urbanization purposes. The assessment order was challenged in a writ petition. 2. The Karnataka Land Revenue Act, 1964, restricts construction on agricultural lands unless permitted u/r Section 95, which allows diversion of land use from agriculture to non-agriculture with Deputy Commissioner's approval. Without such permission, the land retains its agricultural classification and is not liable for wealth tax as 'urban land'. 3. The Court found the respondent's conclusion erroneous as the petitioner's ability to convert the land did not automatically classify it as 'urban land' for wealth tax purposes. The decision was deemed flawed and required intervention. 4. The writ petition was allowed, quashing the assessment order that classified the agricultural land as 'urban land' for wealth tax. The matter was remitted to the respondent for reevaluation excluding the agricultural land from taxation consideration.
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