2018 (12) TMI 418 - HC - Wealth-tax

Inclusion of two plots of land to net wealth as urban land u/s. 2(ea) (v) of the wealth tax Act - Held that - There is a clear distinction between a case where the construction of a building is not permissible under any law for the time in force and where construction though permissible, must be preceded by permission, approval or sanction from the prescribed authority. Counsel for the Assessee had argued that the Wealth Tax is to be computed on the basis of net wealth of an Assessee on the prescribed date on which construction of a building was not permissible on the land in question. In our opinion, this argument begs the question. As held by us, requirement of permission for construction would not make construction on the land impermissible. This being the position, as on which date such requirement is being tested would be of no consequence. In our opinion, therefore, question (a) raised by Assessee, does not give rise to any substantial question of law. For the purposes of enabling the Assessee to appear before the Tribunal only press question No.(b) and (c) in relation to the respective Wealth Tax Appeals, the impugned common judgment of the Tribunal is set aside. Appeals are restored to the Tribunal for fresh consideration

Summary

Issues:
1. Interpretation of the term 'urban land' under the Wealth Tax Act.
2. Inclusion of specific properties in the Assessee's net wealth.
3. Consideration of exclusion clause for lands where construction is not permissible.
4. Tribunal's failure to address all grounds raised by the Assessee.

Issue 1: Interpretation of the term 'urban land' under the Wealth Tax Act:
The judgment dealt with the definition of 'urban land' under the Wealth Tax Act, specifically focusing on whether lands where construction is not permissible should be considered urban land. The exclusion clause in the Act was analyzed to determine if the requirement of permission for construction equates to construction being impermissible under the law. The court clarified that regulatory mechanisms for construction approval do not indicate that construction is prohibited, distinguishing between restrictions and prohibitions. The Assessee's argument that lack of permission equates to impermissibility was rejected, emphasizing the distinction between the two concepts.

Issue 2: Inclusion of specific properties in the Assessee's net wealth:
The case involved two properties, the 'Mahabalipuram plot' and the 'Sri Perumbudur property,' acquired by the Assessee in 2006. The Wealth Tax Department contended that these properties should be part of the Assessee's net wealth. The Tribunal upheld this view, leading to the appeal. The Assessee argued that since no construction could occur without permission, the properties should not be considered urban land. However, the Tribunal's decision was based on the permissibility of construction after obtaining authority sanction.

Issue 3: Consideration of exclusion clause for lands where construction is not permissible:
The judgment discussed the exclusion clause for lands where construction is not permissible under the law. The Assessee contended that the absence of permission equated to impermissibility, but the court disagreed. It emphasized that the exclusion clause does not apply solely based on the requirement for permission before construction. The court clarified that the exclusion clause does not require construction to be impermissible but rather focuses on whether construction can occur without approval from the competent authority.

Issue 4: Tribunal's failure to address all grounds raised by the Assessee:
The Tribunal's judgment was challenged due to its failure to address all grounds raised by the Assessee. The Assessee had raised specific issues regarding the properties in question, but the Tribunal did not consider them in its decision. Consequently, the court set aside the judgment and directed the Tribunal to reconsider the issues related to questions (b) and (c) raised by the Assessee in the appeals, providing an opportunity for further arguments and a fresh decision.

In conclusion, the judgment focused on interpreting the term 'urban land' under the Wealth Tax Act, analyzing the inclusion of specific properties in the Assessee's net wealth, clarifying the exclusion clause for lands where construction is not permissible, and addressing the Tribunal's failure to consider all grounds raised by the Assessee. The court provided detailed explanations and directives for further consideration, ensuring a comprehensive review of the issues involved in the case.