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2018 (5) TMI 1495 - AT - Wealth-taxDeletion of addition made by AO - the land being chargeable to Wealth Tax was added in the total wealth of the assessee - Held that - the AO has treated the land shown by the assessee in its balance sheet as taxable wealth, whereas, the assessee claimed that the building was under construction on such land therefore, the same cannot be treated as taxable wealth under the Wealth Tax Act. In the case on hand, the building under construction has been shown on such land as capital work-in-progress and this fact has not been disputed by the lower authorities. Therefore, the land on which building is under construction seized from the chargeability of Wealth Tax under the Wealth Tax Law. When divergent views are expressed by different judicial forums, we prefer to follow the views expressed by the Courts which are in favor of the assessee - Hon ble Supreme Court, in the case of CIT v. Vegetables Products Ltd. 1973 (1) TMI 1 - SUPREME COURT , wherein the Hon ble Supreme Court held that if two reasonable constructions of a taxing provision are possible then that construction which favors the assessee must be adopted. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Whether the land owned by the assessee during the financial year qualifies as an asset under section 2(ea) of the Wealth Tax Act, 1957, and is thus chargeable to Wealth Tax. Issue-wise Detailed Analysis: 1. Taxability of Land under Wealth Tax Act: The Revenue's sole contention in the appeal was that the Commissioner of Wealth Tax (Appeals) [CWT(A)] erred in deleting the addition of ?3.30 crores to the net wealth of the assessee. The Assessing Officer (AO) had treated the land shown in the assessee's balance sheet as taxable wealth, asserting that the land was an asset as per section 2(ea) of the Wealth Tax Act, 1957. 2. Assessee's Argument: The assessee, a Stock Exchange approved by SEBI, argued that the land should not be considered taxable wealth because it was not an open plot. The land had incurred a construction cost of ?4,82,68,218/- for building construction, classified under capital work-in-progress in the balance sheet. The assessee relied on the judgment of the Kerala High Court in the case of Apollo Tyres Ltd. vs. ACIT, which held that land under construction should not be included in taxable wealth. 3. CWT(A)'s Decision: The CWT(A) agreed with the assessee, observing that the land was being used for building construction, which was in progress. The CWT(A) cited various High Court judgments, including those from Kerala, Karnataka, and Punjab & Haryana, which supported the view that land under construction does not qualify as taxable wealth under section 2(ea) of the Wealth Tax Act. Consequently, the CWT(A) deleted the addition made by the AO. 4. Revenue's Further Arguments: The Revenue argued that urban land is chargeable to Wealth Tax if it remains unused for two years from the date of acquisition. They contended that the building under construction on the land could be identified separately for Wealth Tax purposes, relying on the Karnataka High Court judgment in the case of Giridhar G. Yadalam. 5. Tribunal's Analysis: The Tribunal noted that the assessee had shown the building under construction as capital work-in-progress, which was not disputed by the lower authorities. The Tribunal referenced the Kerala High Court judgment in Apollo Tyres Ltd., which stated that urban land used for constructing a commercial building qualifies for exemption from Wealth Tax. The Tribunal emphasized that once land is utilized for construction, it ceases to be identified as vacant land and is not independently valued for Wealth Tax purposes. 6. Conclusion: The Tribunal concluded that the land on which the building was under construction is not liable for Wealth Tax under the Wealth Tax Act. They upheld the CWT(A)'s decision, dismissing the Revenue's appeal. The Tribunal also noted that the arguments raised by the Revenue regarding the clarity of facts were not arising from the lower authorities' orders and thus did not hold. Final Judgment: The appeal of the Revenue was dismissed, and the order of the CWT(A) was upheld, confirming that the land under construction was not chargeable to Wealth Tax.
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