2017 (11) TMI 217 - AT - Wealth-tax

Addition treating unapproved/agriculture plots/lands as taxable assets - whether the assessee s having various pieces of land/plots falls under the exclusion clause of section 2(ea)(v) read with explanation (b) so as to not fall within the definition of urban land which is otherwise exigible for wealth tax? - Held that - We are presently not going into the debate of prohibition vs permission for carrying out construction on these assets as sought by both the parties and various decisions cited in support thereof. There are number of pieces of land/plots which are under consideration. However, there is no material on record to support these contentions in respect of any of these pieces of land/plots. In absence of that, we are constrained to set aside the matter to the file of the AO to examine the same a fresh in accordance with law. The assessee is directed to file necessary information/documents specifying the correct position in respect of each of the pieces of land/plots in the land revenue records, and basis that, let the AO verify with the JDA the status of these land assets and the position regarding possibility of construction on these land assets as on the valuation date in terms of either total prohibition or permitted after following prescribed rules and regulations as per the JDA Act and related regulations in force and taking the same into consideration, decide as per law. In the result, the matter is set-aside to the file of AO and the ground of the assessee is allowed for statistical purposes. Disallowing the benefit of debt claimed to be utilised for acquiring the exempted assets - Held that - The requirement of law to determine the net wealth is to reduce the value of all the debts owed by the assessee on the valuation date which have been incurred in relation to the said assets which are exigible to wealth tax. The emphasis is therefore on debt in relation to the said assets . The assessee would therefore be required to substantiate with demonstrable evidence that the debt has been incurred in relation to such assets. The proximity or connection with the asset is sine qua non for the purposes of claiming the deduction of debt. Having said that, there is again no material on record to support the contentions raised by the ld AR which satisfies the above requirement of establishing the necessary nexus between the debt and the assets in question. This issue is also set-aside to the file of the AO to examine the same afresh as per law.

Summary

Issues Involved:
1. Addition of ?1,60,06,563/- to the returned wealth by treating unapproved/agricultural plots/lands as taxable assets.
2. Non-allowance of deduction of debts of ?73,56,129/- claimed to be utilized for acquiring taxable assets included in the net wealth.

Detailed Analysis:

1. Addition of ?1,60,06,563/- to the Returned Wealth:

The assessee filed an appeal against the order of the Ld. CWT(A)-I, Jaipur, which confirmed the addition of ?1,60,06,563/- to the returned wealth by treating unapproved/agricultural plots/lands as taxable assets. The assessee claimed these assets as exempt under section 2(ea)(v) explanation 1(b) of the Wealth Tax Act, arguing that construction was not permissible on these lands as per the rules and regulations of the Jaipur Development Authority (JDA). The AO contended that for land to be exempt, it should either be classified as agricultural and used for agricultural purposes or construction should not be permitted under any statutory law. The AO further stated that non-allotment letters or non-approval by JDA do not classify the land as "construction not permitted."

The CIT(A) upheld the AO's decision, citing that the lands were within the jurisdiction of a municipality and did not fall under the exclusions provided in the Wealth Tax Act. The CIT(A) referenced cases such as *Mars Hotels & Resorts (P.) Ltd. Vs DCWT* and *Sunil Kumar Vs WTO*, which supported the view that mere classification as agricultural land without actual agricultural use or lack of construction permission under statutory law does not exempt the land from wealth tax.

The Tribunal noted that the assessee failed to provide verifiable evidence supporting the claim that the lands were either agricultural or had construction prohibitions. The Tribunal set aside the matter to the AO to examine the status of each piece of land/plot in the land revenue records and verify the construction status with the JDA, directing the AO to decide as per law.

2. Non-allowance of Deduction of Debts of ?73,56,129/-:

The assessee also challenged the non-allowance of deduction of debts amounting to ?73,56,129/- claimed to be utilized for acquiring taxable assets. The AO did not allow the deduction, stating that the assessee failed to provide documentary evidence linking the debts to the acquisition of taxable assets. The CIT(A) upheld this decision, emphasizing the lack of evidence to support the claim.

The Tribunal highlighted that for debts to be deductible under section 2(m) of the Wealth Tax Act, there must be a clear nexus between the debt and the taxable assets. The Tribunal referenced cases such as *Lake Palace Hotels & Motels Pvt. Ltd. Vs ACIT* and *Salasar Overseas Pvt Ltd.*, which supported the requirement of demonstrating a direct connection between the debt and the assets.

Given the lack of evidence provided by the assessee, the Tribunal set aside this issue to the AO as well, directing a fresh examination of the nexus between the debts and the assets in question.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, setting aside both issues to the AO for a fresh examination and decision as per law. The assessee is directed to provide necessary information and documents to support their claims regarding the status of the lands and the nexus of the debts with the taxable assets.