2021 (2) TMI 624 - AT - Wealth-tax

Wealth tax assessment - entitlement to exemption u/s. 5(vi) on the value to the extent of land admeasure 500 Sq mts, irrespective of the number of plot s - assessee and his wife are the co-owners/co-purchasers of two plots and the former s share neither exceeds the threshold limit of 500 sq.mts. or more as per the exemption clause u/s 5(vi) of the Act. - HELD THAT - Assessee and his wife purchased these two plots on 23/02/2011 by way of as many sale deeds; both dated 23/02/2011 through their power of attorney. There is also no material to suggest that both these parties have clubbed their two plots and got the same sanctioned from the town planning or municipality. The precise question that arises for apt adjudication as to whether the said two plots can be assumed to have been clubbed or not so as to be exigible to wealth tax is to be answered in negative i.e. in assessee s favour and against the department. We make it clear that section 5(vi) of the Act nowhere provides for application thereof by applying such a deeming fiction of clubbing so as to arrive at the threshold limit of 500 sq. mtrs.. We refer to Commissioner of Customs (Imports) Vs. M/s Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT in these facts and circumstances to hold that both the lower authorities have erred in law and on facts in assessing this taxpayer s share each in the above two plots; by applying clubbing, as liable for wealth tax assessment. We make it clear that the hon ble constitutional bench has settled the law now that a taxing statute has to be strictly interpreted and benefit of doubt in such an exercise goes to the taxpayer. The assessee succeeds in his sole grievance on this count alone. All other remaining issues on merits are rendered infructuous.

Summary

Issues Involved:
Interpretation of exemption clause u/s 5(vi) of the Wealth Tax Act, 1961 regarding ownership of multiple plots and application of wealth tax provisions.

Analysis:
1. The assessee appealed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2011-12, challenging the addition made to the value of properties owned. The assessee argued that the CIT (A) erred in dismissing the appeal without considering the facts and legal issues involved. The primary contention was regarding the exemption under section 5(vi) of the Wealth Tax Act, claiming entitlement to exemption on the value of land measuring 500 sq mts, irrespective of the number of plots owned.

2. The Assessing Officer found that the assessee owned three properties, out of which two were in question for wealth tax assessment. The land records revealed that the assessee and his wife were co-owners of these two plots, each measuring 282.7 sq.yds. The key issue was whether these two plots should be clubbed together to determine the threshold limit of 500 sq mts for wealth tax liability. The Tribunal held that the deeming fiction of clubbing for arriving at the threshold limit was not applicable under section 5(vi) of the Act.

3. The Tribunal referred to a relevant case law to support its decision, emphasizing that a taxing statute must be strictly interpreted, and any doubt should benefit the taxpayer. Consequently, the Tribunal ruled in favor of the assessee, stating that the lower authorities erred in assessing the taxpayer's share in each plot for wealth tax purposes. The judgment clarified that the assessee's grievance on this specific issue was upheld, making other issues on merits irrelevant.

4. Ultimately, the Tribunal allowed the assessee's appeal based on the interpretation of the exemption clause under section 5(vi) of the Wealth Tax Act, emphasizing that the application of clubbing provisions for determining wealth tax liability on multiple plots was incorrect. The judgment was pronounced on 2nd February 2021, in favor of the assessee.

This detailed analysis highlights the key legal issues, arguments presented, factual findings, relevant case law, and the final decision rendered by the Appellate Tribunal ITAT Hyderabad in the mentioned case.