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TMI Blog2016 (1) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;has been constructed' obviously cannot include within its sweep a building which is not fully constructed or in the process of construction. The opening words of clause (ii) also become important in this behalf, where it is stated that 'the land occupied by any building'. The land cannot be treated to be occupied by a building where it is still under construction. If the contention of assessee is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid. It would be too far fetch, in such a situation, to say that the land stands occupied by a building that has been constructed thereon. Even assessee was candid in accepting that when the construction of building is still going on and is not completed, literally speaking, it cannot be said that the building 'has been constructed'. It is for this reason that he wanted us to give the benefit of this provision even in such cases by reading the expression to mean the same as 'is being constructed'. His submission was that the moment construction starts the urban land is put to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated; or (ii) the land occupied by any building which has been constructed with the approval of the appropriate authority; or (iii) any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him; or (iv) any land held by the assessee as 'stock-in-trade' for a period of ten years from the date of its acquisition. 2. To put it pithily, what calls for interpretation is clause (ii) above, namely, what is the meaning that is to be attributed to the expression the land occupied by any building which has been constructed with the approval of the appropriate authority. 3. In the context of these appeals the question is as to whether the land would be excluded from the 'urban land' only when building is completely constructed thereupon or it would be covered by the aforesaid clause even if the building activity is started and the building is not yet complete. 4. Civil Appeal No.728/2011 has arisen from the judgment of Karnataka High Court which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before the High Court of Karnataka. The High Court has upset the order of the ITAT holding that the assessee is not entitled to the benefit of clause (ii) of Explanation 1(b) to Section 2(e)(a)(v) of the Act, as the building had not been constructed and was still under construction during the Assessment Year. 7. It is not in dispute that 'urban land' is to be included to calculate 'net wealth' for the purpose of wealth tax under the Act. However, certain lands are not to be treated as 'urban land' which are mentioned in Explanation 1(b). But Section 2(e)(a) of the Act was inserted by the Finance Act 1992 (Act No.18/1992) w.e.f. 01.04.1993. The purpose was to exempt some of the lands from wealth tax with the objective of stimulating investment in productive assets. It is in the context that the land occupied by any building which has been constructed with the approval of the appropriate authority is excluded from the definition of urban land. On a plain reading of the said clause it becomes clear that in order to avail the benefit, following conditions have to be satisfied: (a) The land is occupied by any building; (b) Such a building has been cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction activity is on-going but spills over. However, the character of land has changed it is being put to use and, therefore, it ceases to be urban land during the period of conversion. 10. According to Mr. Jain, if a building is constructed and construction is complete, the asset will go out of the definition of 'urban land' contained in Section 2(ea)(v) read with Explanation 1(b) as it would fall under Section 2(ea)(i) which covers buildings. Section 2(ea)(i) reads as follows: (i) any building or land appurtenant thereto (hereinafter referred to as 'house'), whether used for residential or commercial purposes or for the purpose of maintaining a guest house or otherwise including a farm house situated with twenty-five kilometers from local limits of any municipality (whether known as Municipality, Municipal Corporation or by any other name) or a Cantonment Board, but does not include-- (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than ten lakh rupees; (2) any house for residential or commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for industrial purpose within a period of two years and construction spills over beyond the exempted period, the exemption would still continue irrespective of whether the construction is completed within two years. Similarly, land held as 'stock-in-trade' is exempt from wealth tax for a period of ten years since, though vacant, it is held for business purposes. 13. Learned senior counsel also extensively read the judgment of the Kerala High Court wherein the interpretation suggested by him has been accepted and the benefit of exemption from wealth tax in respect of such a land where the building is still under construction has been extended. 14. Mr. Rupesh Kumar, learned counsel appearing for the Revenue emphatically countered the aforesaid submissions of Mr. Jain. He submitted that the cardinal principle of interpreting taxing statute was to give literal construction to the language used therein. He further submitted that the provision in question was in the nature of 'exemption provision' where again strict interpretation is to be accorded and onus is upon the assessee to show that he falls within the four corners of the exempted clause. He also submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption provision is to be accorded, which is the case at hand. (iii) The purposive interpretation can be given only when there is some ambiguity in the language of the statutory provision or it leads to absurd results. We do not find it to be so in the present case. 17. No doubt, the purpose and objective of introducing Section 2(e)(a) in the Act was to stimulate productive assets. However, the event when such a provision is to be attracted is also mentioned in Explanation 1(b) itself carving out those situations when the land is not to be treated urban land. The Legislature in its wisdom conferred the benefit of exemption in respect of urban vacant land only when the building is fully constructed and not when the construction activity has merely started. On the contrary, if the argument of the assessee is accepted, that would lead to absurd results in certain cases. For example, what would be the position if the construction of the building starts but the said construction is abandoned mid way? If we accept the argument of the assessee, in such a case, assessee would be given the exemption from payment of wealth tax in the initial years and the same benefit would be denied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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