2019 (8) TMI 1092 - AT - Wealth-tax

Wealth tax assessment - valuation of property - whether land in question was Sanad land and the assessee does not have absolute right over the land? - determination of net wealth on the basis of DVO report - whether land in question does not come under the definition of urban land? - HELD THAT - The facts borne out from records clearly indicates that the land in question was acquired by the Government of Maharashtra through Collector Thane for the purpose of setting up Chemical Factory in the year 1957. The said land was converted into non-agricultural purpose in the year 1957 and as per which the land in question has to be utilized for the purpose of setting up of chemical factory. The conditions further stipulates that out of total area of land of 1, 06, 238 sq. yards land to the extent of only 10, 607 sq yards (approximately 10%) should be used of the purpose of industrial activity and the balance land to the extent of 95, 630 sq yards (approximately 90%) was to be kept open to the sky. The assessee has utilized land for the purpose of construction of factory and other buildings as per the terms and conditions of acquisition accordingly 10% of the land was used for setting up manufacturing facility and 90% of land has been kept open to the sky First arguments in light of Sanad executed between the assessee and Government of Maharashtra and land in question was Sanad land and the assessee does not have absolute right over the land therefore the same cannot be considered as asset for the purpose of Wealth Tax Act 1957 does not hold water because as per the terms and conditions of Sanad it was very clear that the assessee is owner of the land subject to certain conditions therefore merely for the reason of imposition of certain conditions at the time of acquisition of land it cannot be said that the assessee does not have any absolute right over the land and accordingly the first argument of the AR of the assessee fails. Hon ble Punjab Haryana High Court in the case of CWT vs R.K.Mehra 2009 (7) TMI 29 - PUNJAB AND HARYANA HIGH COURT had considered an identical issue and held that a farm land on which construction was not permissible under municipal law would not be includable in definition of urban land chargeable to wealth tax even though assessee has constructed a farm house on said land. Therefore we are of the considered view that the land in question does not come within definition of asset as defined u/s 2(ea) of the Act because 10% of the land has been used for the purpose for which it has been acquired and also constructed building thereon by the approval of appropriate authority and the remaining 90% of land has been kept open to the sky as per the terms and conditions of acquisition as well as conversion order and consequently the remaining 90% of the land is covered in exclusionary clause (b) of the explanation to section 2 (ea) of the W.T.Act 1957 We find that the department has determined net wealth of the assessee on the basis of valuation done by the DVO in respect of property for AY 1993-94 1994-95 and 1995-96 whereas from assessment year 2006-07 on wards to till date the department has not assessed the assessee to wealth tax. From the above it is very clear that the AO has assessed the assesse for some year on the basis of report of DVO whereas for some years the return filed by the assesee has been accepted without any additions to net wealth declared by the assessee even though there is no change in facts. It is a well settled principles of law that although principles of res judicata may not apply to income tax proceedings but Rule of consistency needs to be followed unless there is change in facts and circumstances for taking a different view. This legal position is supported by the decision of Radhasoami Satsang vs CIT 1991 (11) TMI 2 - SUPREME COURT as reiterated the principles of consistency in income tax proceedings. Therefore we are of the considered view that even on this count the AO was incorrect in determination of net wealth on the basis of report of DVO for the impugned assessment years. AO was incorrect in determination of net wealth on the basis of DVO report. CIT(A) after considering relevant facts has rightly deleted additions made by the AO towards valuation of property for the purpose of charging wealth tax. We do not find any error in the findings of ld.CIT(A) and hence we are inclined to uphold the CIT(A) order and dismissed appeal filed by the revenue.

Summary

Issues Involved:
1. Valuation of property for Wealth Tax purposes.
2. Applicability of exclusionary clause under Section 2(ea) of the Wealth Tax Act, 1957.
3. Consistency in the assessment of wealth tax over different assessment years.

Detailed Analysis:

1. Valuation of Property for Wealth Tax Purposes:

The primary issue revolves around the valuation of the property for the assessment years 2004-05 and 2005-06. The Revenue contended that the Commissioner of Wealth Tax (Appeals) [CWT(A)] erred in accepting the property valuation of Rs. 93,44,364/- as declared by the assessee, instead of the Rs. 23,07,00,998/- determined by the District Valuation Officer (DVO). The DVO's valuation was based on a rate of Rs. 3,189/- per sq. yard, leading the Assessing Officer (AO) to determine the total wealth at Rs. 24,92,00,998/-.

2. Applicability of Exclusionary Clause under Section 2(ea) of the Wealth Tax Act, 1957:

The assessee argued that the land in question, acquired under a 'Sanad' from the Government of Maharashtra, was subject to specific conditions limiting its use. Only 10% of the land could be used for industrial activity, while the remaining 90% had to be kept open to the sky, making it non-urban land under Section 2(ea) of the Wealth Tax Act, 1957. The CWT(A) agreed, noting that the land's use restrictions and the fact that construction was not permissible on 90% of the land placed it within the exclusionary clause of urban land. This interpretation was supported by the Bombay High Court's decision in Prabhakar Keshav Kunde vs. CIT, which held that land on which construction is not permissible should be excluded from wealth tax valuation.

3. Consistency in Assessment of Wealth Tax:

The assessee highlighted the inconsistency in the AO's approach, noting that while the AO accepted the declared value for some years, for others, the AO relied on the DVO's valuation. The principle of consistency, as upheld by the Supreme Court in Radhasoami Satsang vs. CIT, was invoked to argue that the AO should not deviate from the previously accepted valuations without a change in facts or circumstances.

Judgments:

For Assessment Year 2004-05 (WTA No. 02/Mum/2018):

The Tribunal upheld the CWT(A)'s decision, agreeing that the land fell under the exclusionary clause of urban land as defined in Section 2(ea) of the Wealth Tax Act, 1957. The Tribunal noted that the conditions imposed on the land's use significantly affected its fair market value. The Tribunal also emphasized the need for consistency in tax assessments, noting that the AO had accepted the declared values in other years without any additions. Consequently, the Tribunal dismissed the Revenue's appeal.

For Assessment Year 2005-06 (WTA No. 05/Mum/2010):

The Tribunal found the facts and issues identical to those of the previous year, with the additional point that the property was rented out during this assessment year. The Tribunal reiterated its earlier findings, emphasizing that the land did not qualify as urban land under Section 2(ea) of the Wealth Tax Act, 1957. The Tribunal directed the AO to delete the additions made to the net wealth declared by the assessee, allowing the assessee's appeal.

Conclusion:

The Tribunal concluded that the land in question did not fall under the definition of urban land as per the Wealth Tax Act, 1957, due to the specific conditions imposed on its use. The Tribunal upheld the CWT(A)'s valuation and dismissed the Revenue's appeal for the assessment year 2004-05, while allowing the assessee's appeal for the assessment year 2005-06. The principle of consistency in tax assessments was also reinforced.