2000 (9) TMI 227 - AT - Wealth-tax

Summary

Issues Involved:

1. Classification of land as agricultural or non-agricultural for wealth-tax purposes.
2. Inclusion of the value of the assessee's interest in the firm under section 4(1)(b) of the Wealth-tax Act.
3. Deduction under section 5(1)(iv) of the Wealth-tax Act for a portion of the building let out.

Issue-wise Detailed Analysis:

1. Classification of Land as Agricultural or Non-Agricultural:

The primary issue revolves around whether the 35 bighas of land owned by M/s. Ashoka Dairy Farm (ADF) should be classified as agricultural land and thus exempt from wealth-tax under section 2(e) of the Wealth-tax Act. The Wealth-tax Officer (WTO) considered the land as urban land based on its location within the municipal limits of Banswara town and its potential for non-agricultural use. The Commissioner of Wealth-tax (Appeals) [CWT(A)] disagreed, treating the land as agricultural based on continuous agricultural use, revenue records, and the absence of conversion to non-agricultural use up to the relevant valuation dates. The Tribunal upheld the CWT(A)'s decision, emphasizing that the land was classified as agricultural in revenue records, used for agricultural purposes, and not converted for non-agricultural use by the relevant valuation dates. The Tribunal also noted that the mere intention to convert the land did not change its agricultural character.

2. Inclusion of the Value of the Assessee's Interest in the Firm under Section 4(1)(b):

The Revenue argued that the value of the assessee's interest in the firm, M/s. ADF, should be included in their net wealth under section 4(1)(b) of the Wealth-tax Act, regardless of the nature of the assets owned by the firm. The Tribunal rejected this argument, stating that the interest in the firm primarily related to agricultural land, which is not considered an asset under section 2(e) of the Wealth-tax Act. The Tribunal referenced the Hon'ble Madras High Court's decision in CWT v. Vasantha, which held that property not classified as an asset under section 2(e) should not be included in computing a partner's interest in a firm.

3. Deduction under Section 5(1)(iv) for a Portion of the Building Let Out:

The CWT(A) held that a portion of the building on the land was let out and thus not used as a dwelling house or storage house by cultivators. Consequently, the value of the rented portion was included in the net wealth of the assessees for assessment years 1986-87 to 1989-90. The assessees contended that they were entitled to a deduction under section 5(1)(iv) for this portion. The Tribunal found merit in the assessees' contention but noted that the issue required verification of the nature, ownership, and valuation of the assets. Therefore, the Tribunal remanded this issue back to the WTO for further verification.

Conclusion:

The Tribunal dismissed the Revenue's appeals and treated the assessees' cross-objections as allowed. The Tribunal concluded that the land owned by M/s. ADF was agricultural land and exempt from wealth-tax. The value of the assessee's interest in the firm was not includible in their net wealth under section 4(1)(b). The issue of deduction under section 5(1)(iv) for the portion of the building let out was remanded to the WTO for verification.