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Issues:
1. Inclusion of the value of encroached coffee land in the total wealth of the firm. 2. Whether the encroached land constitutes an includible asset. 3. Exemption under section 2(e)(1)(v) for the encroached land. 4. Determination of the discount for the encroached land. Analysis: 1. The main issue in this case pertains to the inclusion of the value of 75.1 acres of encroached coffee land in the total wealth of the firm. The firm had wrongfully occupied the land belonging to the State Government of Karnataka. The Wealth-tax Officer valued the land in the same manner as the firm's owned land, which was affirmed by the Appellate Asstt. Commissioner. However, the Commissioner of Income-tax (Appeals) took a different view and valued the encroached land at 50% of the rate adopted for the firm's owned land. The assessees challenged this valuation. 2. The argument raised was that assets included in the net wealth should belong to the assessees on the valuation date, and a land occupied by an assessee as a trespasser does not belong to him. However, it was established that even though a wrongful occupant is not the owner of the land, he still has some interest in the property, making it an asset. Possessory right of a wrongful occupant is considered a substantial right capable of being transferred or inherited. 3. The contention for exemption under section 2(e)(1)(v) was based on the argument that the encroached land could be evicted by the Government of Karnataka at any time, making the possession precarious. However, it was clarified that the interest in property must vest in the assessee for a period not exceeding six years to fall under the exempted category. As the firm had been in possession for more than fifteen years, it did not meet the criteria for exemption. 4. The determination of the discount for the encroached land was crucial. The Commissioner (Appeals) had applied a 50% discount on the rate adopted for the firm's owned land. This decision was upheld, and it was directed that the same percentage of discount be applied for the assessment year 1979-80 as well. The nature of possessory interest in the encroached land was considered precarious, leading to the application of the discount. In conclusion, the appeals were allowed in part, affirming the valuation and discounting decision for the encroached coffee land.
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