2016 (5) TMI 1246 - AT - Wealth-tax

Agricultural lands within the Urban agglomeration or within the notified area limits - whether would not falll within the Scope & Domain of the terminology Asset as contemplated u/s 2(ea)(v) of the W.T.Act, 1957? - Held that - The legislature has, by virtue of the Finance Act, 2013, introduced the amendment to section 2(ea)(v) with retrospective effect from 01.04.1993. This amendment by way of Explanation 1(b)(ii) section 2(ea)(v), is as follows (relevant extract) but does not include land classified as agricultural land in the records of the government and used for agricultural purposes . The appeals pending before us pertain to assessment years 2004-05 to 2006-07. In view of the above, all the appeals of the assessees are squarely covered by the aforesaid retrospective amendment brought in by the legislature in the Wealth Tax Act. Therefore, agricultural lands are no longer assets (within the amendment of section 2(ea)(v) of the Act), because of the retrospective amendment brought in. As such, they are not exigible to Wealth Tax Act. Action of the AO in including the value of the assessees lands in their net wealth, is reversed. Accordingly, the orders passed by the ld. CWT(A), confirming this action are also reversed.- Decided in favour of assessee.

Summary

Issues:
Appeals against Commissioner of Wealth Tax (Appeals) orders for assessment years 2004-05 to 2006-07 regarding inclusion of agricultural lands as assets for Wealth Tax.

Analysis:
The appeals raised common grounds challenging the orders of the Commissioner of Wealth Tax (Appeals) for the assessment years 2004-05 to 2006-07. The central issue was the inclusion of agricultural lands as assets for Wealth Tax under section 2(ea)(v) of the Wealth Tax Act, 1957. The assessees contended that agricultural lands should not be considered assets for Wealth Tax purposes due to constitutional provisions and legislative history. They argued that agricultural lands, whether within urban agglomerations or notified areas, should not fall under the scope of the term 'asset.' The assessees further highlighted that agricultural lands were specifically excluded from Wealth Tax under Entry 86 of Union List-1, Seventh Schedule, and were not considered non-productive assets as per the Finance Act, 1992. They emphasized that agricultural activities constitute a business and should be exempt from Wealth Tax. Additionally, they pointed out legal provisions prohibiting construction on agricultural lands, further supporting their argument for exclusion from the definition of 'urban land.'

The Tribunal had initially dismissed the appeals following a Supreme Court judgment but later recalled them for fresh adjudication in light of the retrospective amendment introduced by the Finance Act, 2013, to section 2(ea)(v) of the Wealth Tax Act. The amendment clarified that agricultural lands classified as such in government records and used for agricultural purposes would not be considered assets for Wealth Tax. Considering this retrospective amendment, the Tribunal concluded that agricultural lands were no longer assets under the Wealth Tax Act, absolving them from Wealth Tax liability. Therefore, the Tribunal reversed the action of the Assessing Officer in including the value of agricultural lands in the net wealth of the assessees and overturned the orders of the Commissioner of Wealth Tax (Appeals) confirming such inclusion.

In summary, the Tribunal allowed all fifteen appeals filed by different assessees, emphasizing that agricultural lands were no longer considered assets for Wealth Tax purposes due to the retrospective amendment introduced by the Finance Act, 2013. This comprehensive analysis addressed the core issue of the inclusion of agricultural lands as assets for Wealth Tax and highlighted the legislative changes that impacted the taxation treatment of agricultural lands.