2019 (8) TMI 1093 - AT - Wealth-tax

Wealth tax escapement - Notice issue u/s 17 of Wealth Tax Act - whether the impugned land is not liable for wealth-tax assessment - urban land as per Explanation 1 to section 2(ea) of the Wealth-tax Act, 1957 - HELD THAT - Wealth is leviable only on unproductive asset and not on commercial asset. This is clear from the provisions of Wealth-tax Act, 1957. The Parliament has in its wisdom foreseen that for commencement of an industrial project, it would take minimum two years for securing permission and approval and hence, such land which is held as per the objects of the company for industrial purposes has to be exempted from the levy of wealth-tax for a period of two years from the date of its acquisition. The word used in the statute is land held for industrial purpose during the initial two years period. There is no requirement that such land should be actually used for industrial purpose during the said period of initial two years. When a company with certain stated objects in its memorandum acquires land to implement the object, undoubtedly, the value of such land has to be excluded from the taxable wealth during the initial two years period. On facts on record, it is clear that the land was held by the assessee for industrial purpose for setting up information technology park which includes conveniences and facilities of a specialized nature for information technology industry. The CWT(A), therefore, was correct in excluding value of the impugned land from the taxable wealth. The finding of the Wealth Tax Officer that the assessee has no intention to undertake setting up of technopark is not based on any tangible material. As mentioned earlier, the main object of the assessee-company for which it was incorporated was to establish technopark and facilities which provided for IT industries. The assessee had made attempt to undertake land filling / leveling. The efforts were stopped as per the stay order dated 23.09.2006 from the District Collector. There have been various correspondences between the assessee and the authorities concerned for lifting the stay granted for land filling / leveling. The observation of the WTO that the assessee had no intention to construct any techopark is without any basis. Even otherwise, when the stated object of the assessee-company in the memorandum of association is to establish techno park, for the initial two years from the date of acquisition of land, the impugned land cannot be brought to tax under the Wealth-tax Act, 1957, irrespective of the fact that the land was not actually used for the industrial purpose during the said period. In the instant case, for assessment years 2007-2008 and 2008-2009, the period of two years has not expired from the date of acquisition of land. Therefore, we are of the view that the same cannot be brought within the definition of urban land as per Explanation 1 to section 2(ea) of the Wealth-tax Act, 1957. - Decided against revenue

Issues Involved:
1. Validity of Notice under Section 17 of the Wealth Tax Act.
2. Applicability of Exemption under Section 2(ea)(iii) of the Wealth Tax Act.
3. Definition and applicability of "Industrial Undertaking" under Section 2(ea)(iii).
4. Relevance of the CIT vs. Computerised Accounting and Management Services Pvt. Ltd. decision.
5. Usage of land for Industrial Undertaking during the relevant assessment years.
6. Jurisdiction of the appeal filed before the CWT(A).

Detailed Analysis:

1. Validity of Notice under Section 17 of the Wealth Tax Act:
The Revenue contended that the notice issued under Section 17 of the Wealth Tax Act was valid as it was issued to tax the escaped wealth. The Assessing Officer (AO) issued the notice on the ground that the wealth chargeable to tax had escaped assessment. The CWT(A) did not find merit in the Revenue's contention and ruled in favor of the assessee.

2. Applicability of Exemption under Section 2(ea)(iii) of the Wealth Tax Act:
The assessee argued that the land held was for industrial purposes and thus exempt under Section 2(ea)(iii) of the Wealth Tax Act. The AO rejected this claim, asserting that the land was urban and did not qualify for the exemption. The CWT(A) found that the assessee was incorporated to set up Technoparks, which qualifies as an industrial activity, and thus the land was exempt from wealth tax for the first two years from acquisition.

3. Definition and Applicability of "Industrial Undertaking" under Section 2(ea)(iii):
The AO argued that the term "industrial undertaking" did not encompass the activities proposed by the assessee, which were merely to construct multipurpose building complexes. The CWT(A) disagreed, stating that the land acquired for setting up Technoparks qualifies as being held for industrial purposes under the Wealth Tax Act. The Tribunal upheld this view, emphasizing that the land was acquired for industrial purposes and thus exempt for the initial two years.

4. Relevance of the CIT vs. Computerised Accounting and Management Services Pvt. Ltd. Decision:
The AO contended that the CIT vs. Computerised Accounting and Management Services Pvt. Ltd. decision was not applicable as it pertained to Section 32A(b)(iii) of the Income Tax Act, not the Wealth Tax Act. The CWT(A) and the Tribunal found that the principles from this case were relevant, supporting the view that the assessee's activities qualified as industrial purposes.

5. Usage of Land for Industrial Undertaking During the Relevant Assessment Years:
The AO noted that there was no evidence of the assessee using the land for industrial purposes during the assessment years. The CWT(A) and the Tribunal found that the statute provides an exemption for land held for industrial purposes for the first two years, regardless of actual use. The Tribunal noted that the assessee had made attempts to develop the land, which were halted due to a stay order, thus supporting the claim that the land was held for industrial purposes.

6. Jurisdiction of the Appeal Filed Before the CWT(A):
The Revenue argued that the appeal should have been filed before the CWT, not the CIT(A), and thus the order was without jurisdiction. The CWT(A) and the Tribunal did not find merit in this argument and proceeded with the case based on the substantive issues.

Conclusion:
The Tribunal upheld the CWT(A)'s decision, affirming that the land held by the assessee was for industrial purposes and thus exempt from wealth tax for the initial two years. The appeals filed by the Revenue were dismissed.

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