2020 (5) TMI 315 - AT - Wealth-tax

Wealth tax assessment - valuation of land - Estimation as per the Wealth Tax Rules - assessee fairly submitted that the land in question is urban land therefore, it is liable for taxation under the Wealth Tax Act - HELD THAT - Since assessee very fairly submitted that the land in question is urban land and liable for taxation, it may not be necessary for this Tribunal to go into the question whether this is an industrial land or not ? However, for the purpose of valuation as on the valuation date, the Wealth Tax Officer has to follow the procedure under the Wealth Tax Act after considering the locality of the land in question is situated, area of the land, potential for future development, infrastructure facilities available around the land etc. and other depressing factor such as the pendency of patta proceedings. This Tribunal is conscious of the fact that the patta is not a document of title. Fact that the patta was granted initially and subsequently cancelled by the Tahsildar, definitely have an impact on the title of the property. Therefore, this is one of the relevant factor to be taken into consideration by the Wealth Tax Officer. For the assessment year 2009- 10, the High Court has already fixed valuation, therefore it may not be necessary for the Wealth Tax Officer to re-examine the same. In other words, the valuation fixed by the High Court for the assessment year 2009-10 for registration of document has to be taken as value as on the valuation done by Wealth Tax Officer. For the assessment year 2013-14, the property was converted into stock-in-trade. This fact also needs to be taken into consideration by the Wealth Tax Officer. For other assessment years, the Wealth Tax Officer has to re-consider in the light of the observation made above. Accordingly, the orders of both the authorities below are set aside for the assessment years 2010-11 to 2013-14.

Summary

Issues: Appeals against orders of Commissioner of Income Tax (Appeals) for assessment years 2009-10 to 2013-14; Dispute over valuation of urban land for Wealth Tax assessment.

Analysis:
1. Valuation Dispute: The appellant's counsel argued that the land in question, initially belonging to the Government of Tamil Nadu, was granted to the assessee-company in 1923. The patta for the land was canceled by the Tahsildar, leading to a pending dispute over the title. Referring to judgments by the Madras High Court, the counsel contended that the valuation for registration fixed by the High Court should be considered for the assessment year 2009-10. However, for other years, valuation should be estimated as per Wealth Tax Rules, considering various factors like land extent, location, development potential, and infrastructure. The appellant acknowledged the urban land's liability for taxation under the Wealth Tax Act and sought a reconsideration of valuation by the Wealth Tax Officer for years other than 2009-10.

2. Opposing View: The Departmental Representative argued that the patta cancellation does not affect the absolute right transferred to the assessee through a registered sale deed. The Wealth Tax Officer's valuation was deemed correct, but the High Court judgments were not presented before the Officer, violating Income Tax Act's Rule 46A. Therefore, the matter should be remitted back to the Officer for consideration of the High Court judgments.

3. Tribunal's Decision: After hearing both parties, the Tribunal decided that the Wealth Tax Officer should reevaluate the property only concerning its valuation. Recognizing the land as urban and taxable, the Tribunal emphasized the need for a detailed valuation process considering factors like location, development potential, and pending patta proceedings. The cancellation of patta by the Tahsildar impacts the property's title, making it a relevant factor for valuation. The High Court's valuation for 2009-10 should stand, but for subsequent years, the Officer must reassess considering all relevant factors. The Tribunal set aside the lower authorities' orders for assessment years 2010-11 to 2013-14, confirming the CIT(A)'s order for 2009-10.

4. Final Outcome: The appeal for the assessment year 2009-10 was dismissed, while other appeals by both the assessee and the Revenue were partly allowed for statistical purposes. The orders were pronounced on February 4, 2020, at Coimbatore.