2006 (1) TMI 162 - AT - Wealth-tax

Summary

Issues Involved:
1. Whether the assessee rightly claimed the deduction under section 5(1)(vi) of the Wealth-tax Act for the land measuring 1 acre 7 kanals and 12 marlas.
2. Whether the land in question, located outside the boundary wall of the residential house, can be termed as land appurtenant to the residential house.

Issue-wise Detailed Analysis:

1. Deduction under Section 5(1)(vi) of the Wealth-tax Act:
The primary issue revolves around the assessee's claim for exemption under section 5(1)(vi) of the Wealth-tax Act for the land measuring 1 acre 7 kanals and 12 marlas. The assessee filed returns of wealth for the assessment years 1995-96 to 1999-2000, claiming exemption for a residential house along with the land appurtenant thereto. The land in question was part of an ancestral property, divided between the assessee and his brother after their father's death. The land was decreed to the assessee through a court order in February 1994. During assessment, the Assessing Officer (AO) found that the land was located outside the boundary wall of the residential house and thus could not be termed as appurtenant to the house. Consequently, the AO included the value of the land in the wealth-tax assessments for the relevant years.

2. Land Appurtenant to the Residential House:
The assessee appealed against the AO's decision, arguing that the land was part and parcel of the residential house, used solely for residential purposes, and thus eligible for exemption. The Commissioner of Wealth Tax (Appeals) [CWT(A)] accepted the assessee's contentions, holding that the land was appurtenant to the house and entitled to exemption. The CWT(A) relied on the fact that the land was not used for agricultural or any other purposes and was enjoyed exclusively by the assessee for residential purposes. The CWT(A) referenced judicial precedents, including the Hon'ble Madras High Court's judgment in M.K. Kuppuraj (HUF) v. CWT and the ITAT, Jaipur Bench's decision in WTO v. N.N. Atal, which supported the view that open space around a residential house, used for the benefit of the residents, qualifies for exemption under section 5(1)(vi).

Revenue's Appeal:
The Revenue appealed against the CWT(A)'s order, arguing that the land outside the boundary wall could not be considered appurtenant to the residential house. They cited the Hon'ble Andhra Pradesh High Court's judgment in CIT v. Zaibunnisa Begam, which laid down tests for determining whether land is appurtenant to a building. The Revenue contended that the land in question, being outside the boundary wall and used for agricultural purposes, did not meet these tests. They also argued that the land was sold as an independent unit, further indicating that it was not part of the residential house.

Assessee's Defense:
The assessee's representative reiterated that the land was part of the residential premises, used exclusively for residential purposes, and not for agriculture. They emphasized that the land had an orchard and was integral to the residential bungalow. The CWT(A)'s reliance on the Madras High Court's judgment and the ITAT, Jaipur Bench's decision was justified, as there was no prescribed limit on the size of land appurtenant to a residential house under the Wealth-tax Act.

Tribunal's Findings:
The Tribunal noted that the land in question was adjacent to the residential house and not used for agricultural purposes, as no agricultural income was reported. The presence of a boundary wall did not alter the fact that the land was part of the residential premises. The Tribunal agreed with the CWT(A) that the land was used exclusively for residential purposes and thus qualified for exemption under section 5(1)(vi). The Tribunal distinguished the case from the Andhra Pradesh High Court's judgment, noting that the latter dealt with capital gains exemption, not wealth tax. The Tribunal upheld the CWT(A)'s order, confirming the exemption for the land in question.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming that the land measuring 1 acre 7 kanals and 12 marlas was appurtenant to the residential house and eligible for exemption under section 5(1)(vi) of the Wealth-tax Act for the assessment years 1995-96 to 1999-2000.