2014 (11) TMI 1198 - HC - Wealth-tax

Urban land chargeable to wealth tax - Tribunal held that agricultural land within the municipality are subjectable to Wealth Tax being a part of the assets as defined under Section 2(ea) of the Wealth Tax Act - Whether urban land would not include land, on which construction of a building is not permissible under any law for the time being in force in the area ? - HELD THAT - The land of the assessee is agricultural land though situated in the municipal limits of M.C. Shimla. No construction is permissible in the forest land without the permission of the Municipal Corporation Building Bye-laws and Town and Country Planning Act. The intention of the legislature appears to be that the land which falls within this exception would have to be excluded from the ambit and scope of the expression urban land . Thus, the land owned and possessed by the assessee would not fall within ambit of the Section 2(ea)(b) and the learned Authorities were also not right in coming to the conclusion that the construction was possible on the lands covered by the trees. The land on which the trees are standing cannot be treated at par for the purpose of market value with the land on which the construction is possible. The land on which the trees are standing, construction is not possible without seeking permission from the competent authorities and thus the market value of this land would be lower. The substantial questions of law are answered accordingly.

Summary

Issues:
1. Whether agricultural land within the municipality is subjectable to Wealth Tax?
2. Whether land covered by trees where construction is not possible falls under the definition of assets for Wealth Tax?
3. Whether land covered by trees possesses market value similar to land where construction is possible?

Issue 1:
The appellant challenged an order under the Wealth Tax Act, arguing that the impugned land is agricultural and thus not subject to Wealth Tax. The appellant relied on a demarcation report showing the land covered by trees, making construction impossible without permission. The court considered an amendment to the Act, which excludes agricultural land or land where construction is not permissible from the definition of "urban land." Citing a previous case, the court held that land not classified as urban land cannot be considered an asset under the Act. The court concluded that the appellant's land did not fall under the definition of urban land, and hence, was not subject to Wealth Tax.

Issue 2:
The appellant contended that the land covered by trees, where construction was not possible without permission, should not be considered an asset for Wealth Tax purposes. The court agreed, stating that such land does not fall under the definition of urban land as per the Act. The court emphasized that the market value of land where construction is not possible would be lower than land suitable for construction. Therefore, the court held that the land in question, covered by trees, should not be treated the same as land suitable for construction regarding market value.

Issue 3:
The court addressed whether land covered by trees possesses market value similar to land where construction is possible. The appellant argued that such land should not be subject to Wealth Tax as it cannot be used for construction without permission. The court agreed and emphasized that the market value of land where construction is not possible would be lower. The court ruled in favor of the appellant, stating that the land on which trees are standing cannot be treated equally in terms of market value with land where construction is possible. Consequently, the court allowed the appeal, setting aside the previous tribunal's order and dropping the proceedings against the appellant.