2018 (11) TMI 1025 - AT - Wealth-tax

Validity of initiation of reassessment proceedings u/s.17 - AO was correct in treating the said lands as urban land and consequently the said lands are liable to be included in the net wealth of the assessee and be exigible to wealth-tax - urban lands or agricultural lands - Held that - On the issue that since said land is situated in BIAPPA which is an authority the said land is urban land and therefore a capital asset exigible to wealth-tax we find that the said issue is covered in favour of the assessee. BIAPPA does not qualify to be local authority and therefore the said lands are agricultural lands and not urban land or capital assets as canvassed by Revenue. Consequently ground No.3 of Revenue s appeal is dismissed. Reckoning of urbanization as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach roads rather than by straight line or horizontal plane or as per crows flight . Thus it is clear to us that for the period under consideration in the appeals before us i.e. assessment year 2007-08 & 2009-10 the distance has to be calculated by road and not as the crow flies or by straight line. In this factual and legal matrix of the case as discussed above there is no merit in the contention of the revenue. As regards conversion of land from Agricultural use to non agricultural use the Tribunal in Assessees own case dealt with this issue in paragraph 7.3 to 7.3.10 and held that though the subject land was converted into non-agricultural purposes cultivation of the land for agricultural purposes till the date of sale continued unabated and as such the land should be treated as agricultural land. These findings will equally apply for the AYs in these appeals as the character of the land in question remained the same in these AYs also. Respectfully following the decision of the co-ordinate bench of this Tribunal in the assessee s own case for assessment year 2005-06 and of another co-ordinate bench in the case of Shri M.R.Seetharam in we hold that the said lands in question are not urban lands but agricultural lands and hence not exigible to wealth-tax. Consequently Revenue s appeals are dismissed.

Summary

Issues Involved:
1. Validity of wealth tax liability on urban lands.
2. Validity of reopening assessments under Section 17 of the Wealth-tax Act, 1957.
3. Measurement of distance for determining urban land.
4. Classification of land as agricultural or non-agricultural.

Detailed Analysis:

1. Wealth Tax Liability on Urban Lands:
The primary issue was whether the lands owned by the assessees, situated at Akkelenahalli-Mallenahalli village, fall under the definition of 'urban land' as per Explanation 1(b) to Section 2(ea) of the Wealth-tax Act, 1957, thus making them liable for wealth tax. The Assessing Officer (AO) concluded that the lands were within 8 KMs from BBMP limits and under the jurisdiction of BIAPPA, which he considered akin to a Municipality. Consequently, the AO included the value of these lands in the net wealth of the assessees.

2. Reopening of Assessments:
The assessees challenged the validity of the reopening of assessments under Section 17 of the Wealth-tax Act. They argued that the lands did not qualify as 'urban land' and thus were not liable for wealth tax. The Commissioner of Income-tax (Appeals) [CIT(A)] allowed the appeals of the assessees, following the decision of the ITAT in the assessees' own cases for the earlier assessment year 2005-06.

3. Measurement of Distance:
The Revenue contended that the distance of 8 KMs from BBMP limits should be measured aerially (as the crow flies) rather than by road. They cited the substituted provisions of Section 2(14)(iii)(b) of the Income-tax Act, 1961, effective from 01/04/2014, as clarificatory and applicable retrospectively. However, the Tribunal held that these provisions are prospective and applicable only from assessment year 2014-15 onwards. The Tribunal emphasized that the law applicable for the assessment years in question (2007-08 and 2009-10) should be considered, and the distance should be measured by road.

4. Classification of Land:
The Tribunal also addressed whether the conversion of the lands from agricultural to non-agricultural purposes affected their classification. The Tribunal noted that despite the conversion, the lands continued to be used for agricultural purposes until the date of sale. Therefore, the lands should be treated as agricultural lands, not urban lands or capital assets.

Conclusion:
The Tribunal dismissed the Revenue's appeals, holding that the lands in question are agricultural lands and not liable to wealth tax. The Tribunal also dismissed the cross objections of the assessees challenging the reopening of assessments as academic and infructuous, as the main issue was decided in their favor. The Tribunal's decision was based on the precedent set by the co-ordinate bench in the assessees' own cases for the earlier assessment year and the case of Shri M.R. Seetharam.