2018 (2) TMI 1878 - AT - Wealth-tax

Urban land chargeable to wealth tax - Impugned lands are agricultural lands - whether assessee s case squarely falls within the definition of agricultural land? - whether lands in question are exempted for wealth tax u/s 2(ea)? - HELD THAT - In this case, neither the Tahsildar nor the AO himself has inspected the land. The land records clearly show that as per the Government records, the lands are agricultural lands. The sale deeds also substantiate that the lands in question were agricultural lands. There is no other evidence brought on record to controvert that the impugned lands were not agricultural lands. Therefore, unable to uphold the contention of the lower authorities that the lands are non agricultural lands and accordingly hold that the lands are agricultural lands and entitled for exemption u/s 2(ea) of WT Act. Section 2(ea)(b) was amended retrospectively w.e.f. 01.04.1993 as per Finance Act, 2013 as per which the lands on which construction of building is not permissible are excluded from the definition of urban land. In the instant case, the AO has not brought on record any evidence to show that the lands are converted. Once the lands are not converted as non agricultural lands, construction of building is not permissible. In the case of Commissioner of Wealth Tax Vs. D.C.M.Ltd. 2005 (2) TMI 97 - DELHI HIGH COURT held that the urban land on which construction of building is not permissible and no permission till date had been granted by the appropriate authority, the lands are excluded from the definition of urban land chargeable to wealth tax. Commissioner of Wealth Tax Vs.E.Udayakumar 2005 (10) TMI 64 - MADRAS HIGH COURT held that agricultural lands situated within the limits of city corporation on which no construction is put up is not chargeable to wealth tax. The assessee s case squarely falls within the definition of agricultural land as well as the amended provisions of Wealth Tax Act, where construction is not permissible. Accordingly we hold that the lands in question are exempted for wealth tax u/s 2(ea), hence not chargeable to wealth tax. We are unable to sustain the orders of the lower authorities and allow the appeal of the assessee.

Summary

Issues:
Assessment of value of land for wealth tax purposes, Exemption u/s 2(ea) of Wealth Tax Act, Classification of land as agricultural or urban, Reliance on reports and records, Interpretation of relevant legal provisions.

Analysis:
1. The appeals were filed against the order of the Commissioner of Wealth Tax (Appeals) regarding the assessment of the value of land for wealth tax purposes for the assessment years 2008-09 to 2012-13. The issue revolved around the classification of two parcels of land as agricultural or urban for the purpose of wealth tax assessment.

2. The Assessing Officer (AO) contended that the lands in question were urban vacant lands and not agricultural, based on the report from the Tahsildar. The AO relied on the absence of disclosed income from the properties and conducted inquiries with revenue authorities. The AO concluded that the lands were not agricultural and hence taxable under wealth tax.

3. The appellant argued that the lands were agricultural, supported by revenue records showing agricultural activities and crops grown. The appellant also highlighted the retrospective amendment in the Finance Act, 2013, exempting lands where construction of a building is not permissible. The appellant presented evidence such as adangal copies and tenancy agreements to support the agricultural classification.

4. The Tribunal observed discrepancies in the reports relied upon by the lower authorities. The Tribunal noted that neither the Tahsildar nor the AO personally inspected the land, and the report lacked factual findings. Contrary to the lower authorities' conclusions, the Tribunal found substantial evidence supporting the agricultural classification, including government records, sale deeds, and independent survey reports.

5. Citing relevant legal provisions and judicial precedents, the Tribunal emphasized that if construction of a building is not permissible on the land, it falls outside the definition of urban land chargeable to wealth tax. The Tribunal referred to judgments from Delhi, Punjab & Haryana, and Madras High Courts supporting the exclusion of agricultural lands where construction is not allowed from wealth tax liability.

6. Ultimately, the Tribunal allowed the appeals, holding that the lands in question were agricultural and exempt from wealth tax under section 2(ea) of the Wealth Tax Act. The Tribunal rejected the lower authorities' findings and emphasized the importance of factual evidence and legal provisions in determining the tax liability of the lands.

7. The judgment highlighted the significance of accurate classification of land for wealth tax purposes, the importance of supporting evidence, and the retrospective amendments impacting tax liabilities. The decision provided a detailed analysis of the factual and legal aspects involved in determining the tax treatment of the disputed lands.