2016 (4) TMI 654 - AT - Wealth-tax

Treatment of land acquired by the Government of India under the Land Acquisition Act, 1894 - whether falls within the definition of net wealth of the assessee company under the Wealth Tax Act, 1957? - Held that - The assessee does not hold any ownership rights in the said portion of land and it is absolutely with the Government. Once the ownership of land is vested with the Government and where only possession of the said land has been given to the assessee, we find merit in the plea of the assessee that the said land does not belong to the assessee in order to make it liable to the provisions of Wealth Ta x Act, under which the value of asset belonging to the assessee is to be included in the hands of the assessee as part of its net wealth. Accordingly, we hold so. Merely because a decision was taken by the Government to sell the land in order to meet the liabilities of assessee company does not make the assessee the owner of the land. The assessee was a Government company and the land was acquired by the Government for the purpose of assessee company, which admittedly, is a public purpose under the provisions of LAC Act, but the land vests with the Government and it has every right to take a decision with regard to the said land in order to liquidate the financial crunch of its company i.e. the assessee before us, which is a Government company. However, the said decision of the Government was withdrawn on a later date and funds were decided to be infused into the assessee company. Once the asset does not belong to the assessee, we find no merit in the orders of authorities below in assessing the value of the said assets in the hands of assessee and accordingly, we direct the Assessing Officer to delete the same - Decided in favour of assessee

Issues Involved:
1. Treatment of land acquired by the Government under the Land Acquisition Act, 1894, for the construction of a residential colony of the assessee company, and its inclusion in the net wealth of the assessee under the Wealth Tax Act, 1957.
2. Valuation of the said land for wealth tax purposes.
3. Admission of additional grounds of appeal raised by the assessee.

Detailed Analysis:

Issue 1: Treatment of Land Acquired by the Government
The primary issue was whether the land acquired by the Government of India under the Land Acquisition Act, 1894 (LAC Act) for the construction of a residential colony for the assessee company falls within the definition of net wealth under the Wealth Tax Act, 1957. The assessee argued that the land, acquired for public purposes, vested absolutely in the Government and did not belong to the assessee, and thus should not be included in its net wealth.

The Tribunal noted that the land was acquired by the Government and vested absolutely in it, free from all encumbrances, as per Section 16 of the LAC Act. The Tribunal referenced the Hon'ble Supreme Court's decision in V. Chandrasekaran & Anr. Vs. The Administrative Officer & Ors., which held that once the land is vested in the State, it cannot be divested and the original owner becomes persona non-grata with only a right to compensation.

Additionally, the Hon'ble Bombay High Court in a related writ petition confirmed that the land acquired for the assessee company, a wholly-owned Government company, vested absolutely in the Government. Thus, the Tribunal concluded that the land did not belong to the assessee and should not be included in its net wealth.

Issue 2: Valuation of the Land
The Assessing Officer had valued the land based on market expectations, extrapolating the value of 20 acres of land to 66 acres and adjusting for inflation. The Tribunal found that since the land did not belong to the assessee, the valuation was irrelevant. The land's value should not be included in the assessee's net wealth as it was not an asset belonging to the assessee.

Issue 3: Admission of Additional Grounds of Appeal
The Tribunal admitted the additional grounds of appeal raised by the assessee, which were purely legal in nature. The additional grounds argued that the land, acquired by the Government for public purposes, did not belong to the assessee and should not be included in its net wealth. The Tribunal found merit in this plea, noting that the land vested absolutely with the Government and only possession was given to the assessee for constructing residential quarters.

Conclusion:
The Tribunal allowed the appeals of the assessee, directing the Assessing Officer to delete the value of the land from the net wealth of the assessee. The additional grounds of appeal were admitted and decided in favor of the assessee, rendering the original grounds of appeal infructuous. The decision applied mutatis mutandis to all the appeals for the respective assessment years.

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