2011 (6) TMI 991 - AT - Income Tax

Summary

Issues Involved:
1. Whether the property is an asset chargeable to Wealth Tax within the meaning of section 2(ea) of the Wealth-tax Act, 1957.
2. Validity of the re-opening of the assessment u/s 17(2) of the Wealth-tax Act, 1957.
3. Determination of the nature of the property (industrial land vs. urban land).
4. Valuation of the property for Wealth-tax purposes.
5. Claim of exemption u/s 5(1)(vi) of the Wealth-tax Act, 1957.

Summary:

Issue 1: Chargeability to Wealth Tax
The department contended that the ld. CWT (A) erred in holding that the property is not an asset chargeable to Wealth Tax within the meaning of section 2(ea) of the Wealth-tax Act, 1957. The ld. CIT (A) concluded that the property in question is an industrial establishment and not merely land, thus exempt from Wealth Tax.

Issue 2: Validity of Re-opening of Assessment
The Wealth-tax assessment was completed u/s 17/16(3) of the W.T. Act by ACWT, Circle-2, Alwar. The assessment was re-opened by issuing notice u/s 17(2) on 31.3.2005. The assessee was not provided with the reasons for re-opening despite requests. The ld. CWT (A) held that non-supplying of reasons is a procedural lapse, and the assessment completed by the AO was valid.

Issue 3: Nature of the Property
The assessee argued that the land in question is industrial land and exempt from Wealth Tax. The AO disagreed, treating it as urban land. The ld. CIT (A) found ample evidence that the land was allotted for industrial purposes and had been used as such since 1883. The land was considered industrial by the UIT and Collector (Stamps), Alwar. The ld. CIT (A) upheld the land as industrial, not urban, thus not taxable under the W.T. Act.

Issue 4: Valuation of the Property
The AO valued the property at commercial rates, which the ld. CIT (A) found misplaced. The ld. CIT (A) directed the valuation at industrial rates, considering the DLC rates applicable for industrial land. The valuation was directed to be done at Rs. 216 per sq. yard, as per the registered valuer's report.

Issue 5: Claim of Exemption
The assessee claimed exemption u/s 5(1)(vi) of the W.T. Act. The ld. CIT (A) upheld the claim, stating that the property is the only asset of the appellant and entitled to exemption. The ld. CIT (A) also noted that the land could not be taxed as urban land due to refusal of construction permission by the UIT.

Conclusion:
The Tribunal found no infirmity in the findings of the ld. CIT (A). The department's appeals were dismissed, and the ld. CIT (A)'s decision that the property is an industrial establishment exempt from Wealth Tax was upheld. The order was pronounced in the open court on 10.6.2011.