2001 (1) TMI 206 - AT - Wealth-tax

Summary

Issues Involved:
1. Determination of the value of 28 acres of land at Bangalore Palace and Chamundi Vihar, Mysore, for wealth-tax purposes.
2. Inclusion of compensation receivable from the government under the Urban Land Ceiling and Regulation Act, 1976, in the taxable wealth.
3. Applicability of the amended definition of 'Urban Land' under section 2(ea) of the Wealth-tax Act, 1957, effective from 1-4-1993, on the assessment years in question.

Detailed Analysis:

1. Determination of the Value of Land:
The primary issue revolves around the valuation of 28 acres of land at Bangalore Palace and Chamundi Vihar, Mysore, for wealth-tax purposes. The Assessing Officer initially assessed the value at Rs. 6,83,40,900, while the Commissioner of Wealth-tax (Appeals) [CWT(A)] directed the value to be Rs. 2 lakhs, the maximum compensation receivable from the government under the Urban Land Ceiling and Regulation Act, 1976. The ITAT upheld the CWT(A)'s decision, noting that similar cases involving members of the royal family had established Rs. 2 lakhs as the assessable amount.

2. Inclusion of Compensation Receivable in Taxable Wealth:
The revenue contended that the compensation receivable from the government should be included in the taxable wealth. The CWT(A) had included Rs. 2 lakhs in the net wealth of the assessee, relying on a similar case. However, the assessee argued that the right to receive compensation does not constitute 'Taxable Wealth' under the Urban Land Ceiling and Regulation Act. The ITAT agreed with the assessee, stating that the right to receive Rs. 2 lakhs does not fall under the definition of assets as per the Wealth-tax Act, 1957, effective from the assessment year 1993-94 onwards.

3. Applicability of the Amended Definition of 'Urban Land':
The ITAT examined the amended definition of 'Urban Land' under section 2(ea) of the Wealth-tax Act, 1957, effective from 1-4-1993. The definition excludes land on which construction is not permissible under any law in force. The ITAT scrutinized the relevant provisions of the Karnataka Parks, Play-Fields, and Open Spaces (Preservation and Regulation) Act, 1985, and concluded that the 28 acres of land in question falls under this exclusion, as construction is prohibited. Therefore, the land does not come within the purview of taxable wealth for the assessment years under consideration.

Conclusion:
The ITAT dismissed the appeals by the revenue and allowed the cross objections filed by the assessees. It directed the WTO to delete the addition made in respect of the value of the land and the amount receivable as alleged by the Department. The ITAT held that the land in question does not fall under the definition of 'Urban Land' for the assessment years 1993-94 onwards, and the right to receive Rs. 2 lakhs is not assessable as part of the net wealth unless it is part of cash in hand with the assessee.