2020 (11) TMI 73 - HC - Wealth-tax

Wealth tax assessment - Nature of land - urban land - whether the land owned by the respondent assessee would not fall within the definition of the expression urban land under Section 2(ea) of the Wealth Tax Act - HELD THAT - As decided in 2020 (10) TMI 313 - MADRAS HIGH COURT CIT-A has recorded the factual finding that the land, which is unbuiltable under any law for the time being in force, is not an urban land and as such, is not an asset within the meaning of Section 2(e) (a) of the Wealth Tax Act. The CIT-A also referred to a decision in the case of Prabhakar Keshav Kunde 2010 (8) TMI 926 - BOMBAY HIGH COURT .Thus, considering that factually, the CITA on verification found that the land falls within the prohibited zone CRZ III category. - Decided against the revenue.

Summary

Issues:
- Interpretation of the term 'land on which construction of building is not permissible under any law' in the definition of urban land under the Wealth Tax Act, 1957.
- Whether the finding of the Appellate Tribunal regarding construction on land falling under Coastal Regulation Zone (CRZ) is permitted or restricted is perverse.
- Application of Circular No.5/2019 dated 05.02.2019 by the Central Board of Direct Taxes to Wealth Tax appeals.
- Dismissal of appeals by the Tribunal based on low tax effect and revenue audit objection exemption.
- Valuation of property in Neelankarai village and its classification under CRZ III Category.

Analysis:

The High Court of Madras addressed appeals filed by the Revenue under Section 27A of the Wealth Tax Act, challenging a common order by the Income Tax Appellate Tribunal. The primary issues raised included the interpretation of 'urban land' under Section 2(ea) of the Act in relation to land where construction is restricted and the permissibility of construction on land within the Coastal Regulation Zone (CRZ).

In a previous judgment, the Court had rejected Revenue's appeals based on low tax effect for the assessment years 2005-2006 to 2007-2008. The Court applied Circular No.5/2019 dated 05.02.2019 by the Central Board of Direct Taxes to Wealth Tax appeals, setting a threshold limit for Revenue to pursue appeals. Consequently, substantial questions of law were answered against the Revenue.

Regarding the specific case, the issue revolved around the valuation of a property in Neelankarai village falling within the CRZ III Category. The Commissioner of Income Tax [Appeals] agreed with the assessee that the property was unbuildable under current laws, thus not qualifying as urban land under the Wealth Tax Act. The CITA referenced a relevant case law to support this finding.

The Court concluded that no substantial question of law arose in the current case, leading to the dismissal of Revenue's appeals. The Tribunal's rejection of the appeals based on low tax effect and the absence of a revenue audit objection were deemed unnecessary given the Court's decision in favor of the assessee on the merits of the case.

In light of the previous judgment and the factual findings in the current case, the Court dismissed the appeals by the Revenue and answered the substantial questions of law against them. The connected CMPs were also dismissed, with no costs awarded.