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TMI Blog2017 (11) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the position regarding possibility of construction on these land assets as on the valuation date in terms of either total prohibition or permitted after following prescribed rules and regulations as per the JDA Act and related regulations in force and taking the same into consideration, decide as per law. In the result, the matter is set-aside to the file of AO and the ground of the assessee is allowed for statistical purposes. Disallowing the benefit of debt claimed to be utilised for acquiring the exempted assets - Held that:- The requirement of law to determine the net wealth is to reduce the value of all the debts owed by the assessee on the valuation date which have been incurred in relation to the said assets which are exigible to wealth tax. The emphasis is therefore on “debt in relation to the said assets”. The assessee would therefore be required to substantiate with demonstrable evidence that the debt has been incurred in relation to such assets. The proximity or connection with the asset is sine qua non for the purposes of claiming the deduction of debt. Having said that, there is again no material on record to support the contentions raised by the ld AR which sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- For land to become exempt, either it should be classified as agricultural and used for agricultural purposes or construction should not be permitted under any law in force. Law means statutory law and does not include rules and regulations of JDA. For construction not permitted, there should have been some stay order by central govt or state govt or court and merely non allotment letter by JDA or non approval by JDA does not classify it under the category of construction not permitted . If assessee is allowed benefit of this exemption, then most of the city of Jaipur would come under the ambit of construction not permitted and the entire spirit of wealth tax act would be defeated. Similarly in cases of farmhouse at Dhanakya, although they are classified as agricultural lands, but no agricultural activity as such is carried out of them. The act uses the word and when defining exemption clearly stating that both classification as agricultural land and carrying out of agricultural activity is necessary. Hence it is also treated as a taxable asset. Subject to the discussion held above, the entire lands shown above are treated as taxable wealth for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions and it cannot be said that the JDA has prohibited construction activities on such lands. It may be mentioned that in the case of Mars Hotels Resorts (P.) Ltd. Vs DCWT [2012] 21 taxmann.com168 (Mum.), it was held by the Hon ble ITAT that (head note): Section 2(ea), read with section 7, of the Wealth-tax Act, 1957- Assets- Assessment years 1996-97 to 1998-99-Assessee hotel acquired 12 acres of land in 1995-said land was classified as reserved land on which development and construction was barred under State Town Planning Act Later on, by a notification, 50 per cent of land was allowed to be reserved for park and remaining 50 per cent was allowed to be developed into a hotel Assessee claimed that since construction was barred under a law, land in question fell under statutory exception from being treated as an asset and, therefore, not chargeable to Wealth tax Whether since conditions provided in notification were not in nature of prohibition but permission which was subject to fulfilment of certain conditions, such notification did not render land fall under exception as encumberated under clause (b) of Explanation 1 of section 2(ea) Held, yes [in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- to the net wealth of the appellant and thus the same is hereby sustained. Hence, these grounds of appeal are hereby rejected. 4. During the course of hearing, the ld. AR submitted that the plots/lands which are claimed as exempted assets are either agriculture lands or the plots for which JDA allotment letter were not issued or colonies were not approved by JDA. Since as per rules and regulations of the JDA the construction are only permissible on the lands/plots for which the JDA has issued the allotment letter and in absence of that no construction can be carried out on such lands/plots and if any construction is carried out thereon without obtaining the approval from JDA/permission of JDA, the same will be illegal construction and JDA may demolish it. Since as per the explanation 1(b) to the section 2(ea)(iv) of Wealth Tax Act, 1957 provide that urban land does not include land classified as agricultural land in the records of the Government and used for agricultural purposes 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. 4.1 It was further submitted that the Jaipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot raise construction in first two categories of land and the first two category of land are not permissible for construction. The construction of storage, and other utilities and facilities in agricultural land have direct nexus with agricultural activities. In agricultural land the independent construction either residential or commercial cannot be allowed. 4.2 The legislature used the word not permissible and it cannot be understood as prohibited . When the stay is granted on land or the land is under acquisition, then the construction is prohibited. But when the land is unapproved, the construction is not permissible. 4.3 The ld CIT(A) has relied on the decision of Hon ble ITAT Mumbai in the case of Mars Hotels Resorts (P) Ltd vs DCWT. The facts of this case are not applicable to the case of assessee. In this case construction of Hotel building was permissible if the condition of development and maintenance of park is complied with. In this regard, it is worthwhile to reproduce the findings of Hon ble ITAT in para 7.2 and 7.3 as under:- 7.2 vide notification dated 12.11.1992 under the MRPA 1966, the land in question was reserved to the extent of 50% for park and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the material available on record. The limited issue under consideration relates to whether the assessee s having various pieces of land/plots falls under the exclusion clause of section 2(ea)(v) read with explanation (b) so as to not fall within the definition of urban land which is otherwise exigible for wealth tax. The explanation (b) to clause of section 2(ea)(v) defines urban land as under: urban land means land situate- (i) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) 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; or (ii) in any area with such distance, measured aerially, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on vs permission for carrying out construction on these assets as sought by both the parties and various decisions cited in support thereof. There are number of pieces of land/plots which are under consideration. However, there is no material on record to support these contentions in respect of any of these pieces of land/plots. In absence of that, we are constrained to set aside the matter to the file of the AO to examine the same a fresh in accordance with law. The assessee is directed to file necessary information/documents specifying the correct position in respect of each of the pieces of land/plots in the land revenue records, and basis that, let the AO verify with the JDA the status of these land assets and the position regarding possibility of construction on these land assets as on the valuation date in terms of either total prohibition or permitted after following prescribed rules and regulations as per the JDA Act and related regulations in force and taking the same into consideration, decide as per law. In the result, the matter is set-aside to the file of AO and the ground of the assessee is allowed for statistical purposes. 8. In ground no.2, the assessee has chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Vs. Lake Palace Hotels Motels Ltd. Hon ble Rajasthan High Court held that the security deposit received by the assessee against lease is allowable deduction as debt u/s 2(m) of Wealth Tax Act. b) Hon ble ITAT Jodhpur Bench in M/s Salasar Overseas Pvt Ltd. in WTA No. 2 3/JP/2012 (Assessment Years : 2007-08 08-09) has held as under:- We have heard parties with reference to material on record and case laws brought to our notice. The Ld. CWT(A) in appeal has returned a finding of fact that the advances received against plot booking and JDA charges have been utilized for acquisition of gold and car. This finding of fact has neither been assailed by the revenue nor shown to be perverse on facts. The same, therefore, attains finality. We also find and the record reveals that the amount of advances raised by the assessee against plot booking and JDA charges were repayable in cash or kind on the relevant valuation date and is a debt incurred nor were assessed as assessee s income of the years under consideration in framing income tax assessment for respective years in appeal. Having utilized the amount of debt for creation of the assets i.e. motor car and jewellery/bullion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this ground of appeal is hereby rejected. 13. We have heard the rival contentions and perused the material available on record. The requirement of law to determine the net wealth is to reduce the value of all the debts owed by the assessee on the valuation date which have been incurred in relation to the said assets which are exigible to wealth tax. The emphasis is therefore on debt in relation to the said assets . The assessee would therefore be required to substantiate with demonstrable evidence that the debt has been incurred in relation to such assets. In other words, the proximity or connection with the asset is sine qua non for the purposes of claiming the deduction of debt. The decision of Hon ble Rajasthan High Court in case of Lake Palace hotel and Motels, relied upon by the ld AR, also lays down a similar proposition where it was held that the amount (refundable security deposit bearing rate of interest) has a direct nixus with the land in question and was accordingly excluded in terms of section 2(m) of the Act. Having said that, there is again no material on record to support the contentions raised by the ld AR which satisfies the above requirement of establishi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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