2015 (2) TMI 172 - AT - Wealth-tax

Deletion of wealth tax - Land an urban land or not - Whether CWT(A), Panaji has erred in treating the company plot of urban land, which is liable for Wealth Tax is outside the purview of definition of assets u/s. 2(ea)(v) of the Wealth Tax Act - Held that - as per the documentary evidence the land at Survey No.15,16,17,18,20, 21 and 22 is located within jurisdiction of village Panchayat Siridao Goa is not urban land as per definition contained in explanation 1(b)(i) of Section 2(ea). - distance has to be measured by the road and the distance cannot be the aerial distance. - From the definition there is an amendment in Section-2(14) w.e.f 1.4.2014 that the distance has to be measured aerially. The amendment clearly states that amended provisions will be applicable for assessment year 2014-15 and subsequent assessment years. Since the present case pertains to A.Y. 2005-06, the pre amended position would not prevail and as stated earlier the judgments have clearly ruled that distance has to be measured by the road and the distance cannot be taken by aerial distance. Net wealth means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on the date under this Act, is in excess of the aggregate value of all the debts owned by the assessee on the date of value which have been incurred in relation to the said assets. The net wealth is chargeable to tax. In the assessee s case the net wealth tax that a land situated in any area which is comprised within jurisdiction of a Municipality or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date and land situated within 8 kms from the local limits of such municipalities or cantonment as the Central Government may specify. In the case of assessee the valuation date is 31st March, 2005 and the last census preceding this date is that in 2001. The land containing Survey Nos.15,16,17,18,20,21 and 22 is situated in Village Panchayat Siridao, Goa. As per certificate the population of the village is 2872 which is less than 10000. The population is confirmed by the certificate obtained from Census Department. Thus, the land situated at Survey Nos.15,16,17,18,20,21 and 22 located within jurisdiction of Survey Nos.15,16,17,18,20,21 and 22 Village Panchayat Siridao-Goa is not urban land. The village Panchayat of Siridao-Goa nearest Municipalities Corporation is the Panaji Municipal Corporation. As per the certificate the Village Panchayat of Siridao-Goa is more than 8 kms. Therefore, we are of the view that the land of Siridao-Goa of the assessee Survey Nos.15,16,17,18,20,21 and 22 is not urban land as per Section 2(ea), therefore, it is not an asset. - appeal of the Department is not decided on merit and Cross Objection is allowed.

Issues Involved:
1. Deletion of Rs. 40,00,000/- addition by the AO on account of wealth assessed by treating land as urban land liable for Wealth Tax.
2. Valuation of land by the AO without referring to the Departmental Valuation Officer.
3. Deduction of unsecured loans taken for purchasing the land.
4. Classification of the land as urban or non-urban for Wealth Tax purposes.

Detailed Analysis:

1. Deletion of Rs. 40,00,000/- Addition by the AO:
The department challenged the CIT(A)'s decision to delete the Rs. 40,00,000/- addition made by the AO, who treated the land as urban land liable for Wealth Tax. The CIT(A) observed that the land was purchased with the commercial intention of setting up an international school and later converted into stock-in-trade for commercial purposes. The CIT(A) concluded that the land was not liable for Wealth Tax, directing the AO to delete the addition.

2. Valuation of Land by the AO:
The assessee filed a cross-objection stating that the AO erred in valuing the land at Rs. 40 Crores without referring to the Departmental Valuation Officer, as mandated by Schedule III Part H referred by Sec 7 of the Wealth Tax Act. The AO also did not provide an opportunity to the assessee to be heard and valued the land higher than the valuation report obtained by the company from a registered valuer.

3. Deduction of Unsecured Loans:
The assessee contended that the AO failed to deduct unsecured loans amounting to Rs. 5.33 Crores, which were taken for purchasing the land and reflected in the audited balance sheet as of 31st March 2005.

4. Classification of Land as Urban or Non-Urban:
The core issue was whether the land in question qualified as urban land under the Wealth Tax Act. The assessee argued that the land situated in Siridao village, with a population of 2872 as per the 2001 census, did not meet the criteria of urban land as defined under Section 2(ea)(v) of the Wealth Tax Act. The land was also located more than 8 kms from the nearest municipal corporation, Panaji Municipal Corporation, as certified by the Village Panchayat and a registered valuer.

The Tribunal admitted the additional ground raised by the assessee, citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. Commissioner of Income Tax, which allows new grounds to be raised if they pertain to questions of law arising from the facts on record.

Tribunal's Decision:
The Tribunal analyzed the definition of urban land under Section 2(ea) and noted that the land in question did not fall within the jurisdiction of a municipality or cantonment board with a population of not less than ten thousand. Additionally, the land was more than 8 kms from the local limits of the specified municipalities. Based on the certificates provided and the legal precedents, the Tribunal concluded that the land did not qualify as urban land and was not liable for Wealth Tax.

Conclusion:
The Tribunal allowed the assessee's additional ground, ruling that the land was not urban land under Section 2(ea) and thus not an asset chargeable to Wealth Tax. Consequently, the department's appeal was not decided on merit, and the assessee's cross-objection was allowed. The order was pronounced in the open court on 4.7.2014.

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