2019 (5) TMI 441 - AT - Wealth-tax

Asset within the canopy of section 2(ea) of the W.T. Act - HELD THAT - Assessee had sold the land with dilapidated structure over it lock, stock and barrel to a third party and earned long term capital gain. In our view, this is not a proper ground for disallowing the claim of the assessee. Admittedly, what was sold during the Assessment Year 2006-07 was land with structure. When there is a structure on the land and when it is not in dispute that the structure was put to use in the earlier assessment years for manufacturing activity and when what was sold was commercial establishment it cannot be classified as urban land u/s 2(ea) - the land with structures which was used in earlier years for manufacturing, is not an asset within the canopy of section 2(ea) of the W.T. Act. It is in our view continues to be a commercial asset. Thus, we delete the addition made herein for both the assessment years.

Summary

Issues:
1. Confirmation of assessment of net wealth under section 4(1)(b) of the Wealth Tax Act.
2. Valuation of land and building of the Partnership Firm for Wealth Tax purposes.

Analysis:
1. The first issue pertains to the confirmation of the assessment of the net wealth of the Assessee under section 4(1)(b) of the Wealth Tax Act. The Assessee contended that the land and building owned by the Partnership Firm was not an asset within the meaning of the Act. The firm had temporarily suspended manufacturing operations due to various reasons, and the Assessee argued that the property was a commercial establishment, not an asset under the Act. The Assessee provided evidence, including a No Objection Certificate from the West Bengal Pollution Control Board, electricity bills reflecting industrial rates, and property tax bills with surcharges applicable to commercial properties. The Tribunal found merit in the Assessee's contentions, emphasizing that the property in question was a commercial asset, not urban land as classified under the Act. Therefore, the Tribunal deleted the addition made by the authorities for both assessment years, allowing the Assessee's appeal in part.

2. The second issue revolves around the valuation of the land and building of the Partnership Firm for Wealth Tax purposes. The Assessing Officer had determined the value of the property at a certain amount, which was contested by the Assessee. The Assessee argued that the property was used for manufacturing activities and was a commercial establishment, not falling under the definition of an asset as per the Act. The Tribunal considered the evidence presented by the Assessee, including the history of the property's use for manufacturing, and concluded that the property was indeed a commercial asset. The Tribunal disagreed with the authorities' decision to consider the property as urban land under the Act, especially since the property was sold as a commercial establishment in a subsequent assessment year. Consequently, the Tribunal ruled in favor of the Assessee, deleting the addition made by the authorities for both assessment years and partially allowing the appeal.

In summary, the Appellate Tribunal ITAT Kolkata ruled in favor of the Assessee on both issues, holding that the property in question was a commercial establishment and not an asset under the Wealth Tax Act. The Tribunal emphasized the evidence provided by the Assessee to support their claim and overturned the valuation made by the authorities, ultimately allowing the appeal in part.