9911796707
TMI Blog2004 (5) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1957, against the judgment and order dated January 9, 2001, passed by the Income-tax Appellate Tribunal, Ahmedabad, in Wealth-tax Appeals Nos. 55 to 58 of 1999 for the assessment years 1991-92 to 1994-95. Since the appeals involve common questions of law and fact, by consent of learned counsel for the parties, the appeals were heard together and are being disposed of by this common judgment. The appeals were admitted for considering the following substantial questions of law: "(i) Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in dismissing the appeal of the appellant without taking into consideration the relevant material on record and without any 'speaking order' on merits? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in interpreting the provisions of the Wealth-tax Act with regard to definition of 'urban land' in section 2(ea), clause (v), and Explanation (b) to section 2(ea) which stipulates that the area of land occupied by a building does not form part of urban land? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant Dr. K.M. Shah and 417/1/4 to Mrugesh K. Shah. As per the relocation done by the arbitrator, each of these three persons got an area of 818 sq. mtrs. Of course, sub-plot No. 417/1/1 allotted to Bhadresh K. Shah had the residential bungalow constructed on it. On the basis of the aforesaid award, the city civil court passed decree dated July 17, 1995, in terms of the award. The appellant, his two sons and his daughters entered into an agreement of sale dated April 1, 1995, for selling the entire property being final plot No. 417/1 to the promoters of proposed Sugam Shops and Co-operative Housing Society, etc. The sale deeds were executed on April 20, 1996, showing a sale consideration of Rs. 6,54,71,500 (rounded off to Rs. 6.55 crores for convenience for the purposes of discussion in these appeals). The consideration was divided between the appellant and his two sons equally, that is, each one of them got nearly Rs. 1.81 crores and the three daughters got an amount of Rs. 37.24 lakhs each. The aforesaid property being final plot No. 417/1 having four sub-plots and having a residential bungalow on sub-plot No. 417/1/1 was shown as a property of the appellant, Dr. K.M. Shah, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard all the five appeals together and by order dated March 19, 1999, dismissed the four appeals under the Wealth-tax Act as well as the appeal under the Gift-tax Act. The assessee challenged the orders in the appeals under the Wealth-tax Act in Wealth-tax Appeals Nos. 55 to 58 of 1999 before the Income-tax Appellate Tribunal. After hearing learned counsel for the appellant and the learned Departmental Representative, the Tribunal dismissed the appeals under the Wealth-tax Act by its judgment and order dated January 9, 2001. Thereafter, the appellant filed miscellaneous applications for rectification in all the four appeals. In the meantime, the appellant had already filed the present tax appeals for challenging the judgment and order dated January 9, 2001. The same were, therefore, disposed of on the ground of pendency of rectification applications with liberty to revive in case the rectification applications were dismissed. The rectification applications came to be dismissed by the Tribunal's order dated May 25, 2001. Hence, the appellant was permitted to revive these appeals. We are informed that the separate appeal which the appellant-assessee filed before the Income-tax Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kalpagam [1997] 227 ITR 733 (Mad). The Tribunal erred in not taking into consideration the forms filed by the appellant's sons under section 6 of the Urban Land Ceiling Act and also the orders passed by the authorities under the Urban Land Ceiling Act and the orders passed by this court in the proceedings under the Urban Land Ceiling Act wherein it was held that there was no excess land held by the appellant's sons. Several important documents like the tax bills issued by the Ahmedabad Municipal Corporation assessing the property as one property being plot No. 417/1 have not at all been considered by the Tribunal and, therefore, the judgment under appeal is vitiated. The property bearing No. 417/1 was always treated as one property and the appellant's wealth-tax returns were also accepted in all the assessment years right from the beginning and the assessment was also made on the basis that there was only one property being plot No. 417/1. The appellant had been valuing the said property as residential property as per its market value on April 1, 1971. There was no reason or justification on the part of the Department in not accepting this valuation for the relevant four assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of assets in the Wealth-tax Act itself. Strong reliance is, therefore, placed on Circular No. 559, dated May 4, 1990, containing explanatory notes to various provisions of the Direct Tax Laws (Amendment) Act, 1989, particularly paragraph 18.1 thereof. Submissions on behalf of the Revenue On the other hand, Mr. Tanvish U. Bhatt, learned standing counsel for the Revenue, has supported the judgment and order of the Tribunal and has further made the following submissions: The judgment of the Tribunal being one of affirmance, it was not necessary for the Tribunal to give detailed reasons for accepting the findings given by the Commissioner (Appeals) for cogent reasons. It cannot, therefore, be said that the judgment and order of the Tribunal is not a speaking order. The Tribunal has taken into consideration all the relevant material and the Tribunal has given cogent reasons for upholding the order of the Commissioner (Appeals). What is the weight to be attached to a particular piece of evidence or material on record is a matter of appreciation of evidence and the court while exercising its power under section 27A of the Wealth-tax Act, would only consider substantial questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its enactment provided for exemption in respect of one residential house belonging to the assessee in a rural area, with passage of time, the restrictions about location of the house in a rural area and about use of the house exclusively for residential purposes came to be removed, but for almost two decades from the assessment years 1964-65 to 1984-85 the exemption in respect of the house belonging to the assessee was restricted to rupees one lakh which was raised to rupees two lakhs for the assessment year 1985-86. For the assessment years 1986-87 to 1992-93, the assessee was entitled to exemption in respect of- "one house or part of a house belonging to the assessee", but the exemption was available within the overall ceiling limit of Rs. 5 lakhs specified in section 5(1A) in respect of several financial assets specified therein. This provision is, therefore, relevant for the appeals relating to the assessment years 1991-92 and 1992-93. It appears that there was no exemption for a house for the assessment year 1993-94. For the subsequent assessment years, the relevant provision is clause (vi) of section 5 which, with effect from April 1,1994, grants exemption for and fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the assessee as a stock-in-trade for a period of five years from the date of its acquisition by him." The other relevant provision is section 7 as introduced with effect from the assessment year 1989-90 onwards which provides for determination of value of assets. Up to the assessment year 1988-89, the value of the house was to be estimated to be a price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date, subject to the provisions contained in the rules in that behalf. However, section 7 as amended with effect from the assessment year 1989-90 and which is applicable to the four assessment years in this group of appeals reads as under: Section 7 (operative for and from the assessment years 1989-90) "7. Value of assets how to be determined. - (1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule III. (2) The value of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of twelve months immediately prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the "gross maintainable rent" being the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority, whichever is higher; where the house property is not let, the amount of annual rent assessed by the local authority. Rules 6 and 7 provide for adjustments to the value arrived at. Rule 8 enumerates the cases where the provisions of rule 3 for valuation of house property shall not apply. The valuation in such cases shall be done by the Assessing Officer in the manner laid down in rule 20. The relevant portion of rule 8 to Schedule III to the Wealth-tax Act, 1957, reads as under: "8. Nothing contained in rule 3 shall apply, - (a) where, having regard to the facts and circumstances of the case, the Assessing Officer, with the previous approval of the Deputy Commissioner, is of opinion that it is not practicable to apply the provisions of the said rule to such a case; or (b) where the difference between the unbuilt area and the specified area exceeds twenty per cent, of the aggregate area; or and in any case referred to in clause (a) or clause (b) or clause (c), the value of the property shall be determined in the manner lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r more of them physically to occupy a house so as to make it a dwelling house. It is enough if the house or its appurtenances are used for the use or accommodation of servants, officers or guests of the family. However, the observations of the apex court in Singhania's case [1994] 207 ITR 1 were made in the context of valuation of unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957. The rule provided for only one method for valuing unquoted equity shares of a company. In the instant case, the question is whether rules 3 to 7 in Schedule III are to be applied only to sub-plot No. 1 or also to the two other sub-plots (i.e., sub-plots Nos. 2 and 4). Hence, the above decision has no relevance to the controversy at hand. Similarly, the observations made by the Calcutta High Court in the case of Kalipada Ghosh, AIR 1960 Cal 467, merely provide that house would include appurtenant land which is the clarification made by the amendment by the Finance Act, 1992, by inserting clause (ea) in section 2 of the Wealth-tax Act, with effect from April 1,1993. The decision, however, does not lay down any principle for determining as to how much land is to be considered as land appur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enjoyment of the building as such on sub-plot No. 417/1/1. Of course, on behalf of the appellant it has been contended that looking to the number of persons residing in the building including the appellant and his sons consistent with their social standing (the appellant was at the relevant time an eminent doctor of the city of Ahmedabad), there will be no space left after considering the requirements of the appellant and his family. However, it cannot be overlooked that the appellant and his sons had themselves not only got the land sub-plotted in the year 1967, but had also gifted one of the four plots being sub-plot No. 3 (admeasuring about 505 sq. mtrs.) to the appellant's daughters and that sub-plot No. 1 admeasured 1,176 sq. mtrs. on which the bungalow was constructed with floor area of 351 sq. mtrs. (built-up area of about 328 sq. mtrs. and a servants' room also on sub-plot No. 1). In the controversy at hand, the pagi room (watchman's room) admeasuring 19 sq. mtrs. on sub-plot No. 4 admeasuring 451 sq. mtrs. cannot be described as a house exclusively used by the appellant for residential purposes as contemplated by sub-section (2) of section 7 for the purpose of valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art 1), whether the Tribunal had dismissed the appeal without taking into consideration the relevant material on record. While there can be no doubt, as held by the apex court in Omar Salay Mohamed Suit v. GT [1959] 37 ITR 151 and in Udhavdas Kewalram v. CIT [1967] 66 ITR 462 (SC), that it is the duty of the Income-tax Appellate Tribunal to consider all facts and not to improperly reject the evidence and that where a finding is arrived at after improperly rejecting the evidence, its findings even though on questions of fact will be liable to be set aside by a court. However, as observed by the apex court in CIT v. Karam Chand Thapar and Bros. (P) Ltd. [1989] 176 ITR 535, the decision of the Income-tax Appellate Tribunal has not to be scrutinised sentence by sentence merely to find out whether all facts have been set out in detail by the Tribunal or whether some incidental fact which appears on the record has not been noticed by the Tribunal in its judgment. If the court, on a fair reading of the judgment of the Tribunal, finds that it has taken into account all relevant material and has not taken into account any irrelevant material in basing its conclusions, the decision of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about 2,900 sq. mtrs. is only one unit.The above peculiar features of the case very much militate against the appellant's case that the appellant had always treated the entire unbuilt land in final plot No. 417/1 as land appurtenant to his residential bungalow.Learned counsel for the appellant has heavily relied on the decision of this court in CWT v. Shrenik Kasturbhai decided on October 10,1995. On the basis of the said decision, it is submitted that when the servants are residing in the quarters which are on a part of the land in question, they have to be treated as the part of the same residential property. It is submitted that the residence does not mean mere occupation by the assessee, but includes the house appended with all necessary requirements for comfortable living including presence of servants. For proper enjoyment of house by the assessee and members of his family as residence, for the purpose of household requirements and maintenance of house, servants are required to be engaged and they are allowed to remain on the premises for the purpose of convenient use of the property by its occupants.The aforesaid observations were made when the court was called upon to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q. mtrs., whereas the bill at page 391 for the year 1993-94 and bill at page 392 for the year 1995-96 show the area of construction as 121.34 sq. mtrs. The bill at page 389 for the year 1990-91 does not show any such area. But in all the four bills, the annual rating value is shown as Rs. 5,226. Similarly, the bills for the years 1980-81 and 1981-82 indicate the same final plot No. 417/1 with net valuation of Rs. 4,484, but in all these bills the address of the appellant is shown as "Nursing Home Surgical Hospital, Dinbai Tower, Mirzapur Road, Ahmedabad". Similarly, the bills issued for the year 1977-78 for the building on final plot No. 417/1 does not detract from the Revenue's case that sub-plots Nos. 2 and 4 were capable of being treated as independent plots.In view of the above discussion, the material relied upon by the appellant does not carry the appellant's case any further. Question No. 1 (Part II)Now coming to the second part of question No. 1, whether the order of the Tribunal is a speaking order, we have perused the order of the Income-tax Appellate Tribunal. It is true that the reasons given by the Tribunal are quite brief and not as elaborate as the appellant would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner (Appeals). Hence, it cannot be said that the order of the Tribunal is not a speaking order.Since in the context of the above findings of fact given by the Commissioner (Appeals), the order of concurrence or affirmance passed by the Tribunal cannot be said to be either perverse or non-speaking, our finding on the second part of question No. 1, therefore, is that on the facts and circumstances of the case, it cannot be said that the Tribunal dismissed the appeal of the appellant without any speaking order on the merits.In view of the above discussion and the discussion in relation to question No. 1, our finding on the second part of question No. 1 is also in the negative, i.e., in favour of the Revenue and against the assessee.Questions Nos. 2 and 3Learned counsel for the appellant has made an attempt to urge that since thebuilding was constructed on land bearing final plot No. 417/1, it cannot be said that the land appurtenant thereto was urban land so as to fall under the definition of "assets" as contained in section 2(ea)(v) and Explanation (b). It is also submitted that in any view of the matter such definition was not provided for the period prior to April 1, 1993, and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to definition of "urban land" in section 2(ea) and Explanation (b) to section 2(ea) which stipulates that the area of land occupied by a building does not form part of urban land.Having carefully considered the principles laid down in various decisions cited by learned counsel for the parties and applying the same to the facts involved in these appeals and the findings given by the Commissioner (Appeals) and the Tribunal, although if the test of user of the land were to be applied, the appellant had some case, in view of the manner in which the appellant himself had sub-plotted the land into four sub-plots, put up a construction on only sub-plot No. 1, gifted sub-plot No. 3 to the appellant's daughters and stated in no uncertain terms before the authority under the Urban Land Ceiling Act that the property of the appellant and his two sons consists of three residential plots in final plot No. 417/1 and the finding given by the Commissioner (Appeals) that each sub-plot has an access from one or the other of the town planning roads and that each plot is capable of having construction put up on it, we are of the view that it cannot be said that the Tribunal has erred in law in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no case is made out by the Revenue for imposition of penalty on the appellant for any of the assessment years involved in these appeals.Question No. 4Even while holding that the lands in sub-plots Nos. 2 and 4 are required to be valued independently for the purposes of the Wealth-tax Act, we do find considerable substance in the submissions made by Mr. Patel for the appellant about substantial errors of law committed by the Department in valuing subplots Nos. 2 and 4 for the relevant years. On going through the material on record and the relevant building bye-laws which are statutory, we are of the view that there is considerable force in the submission made by Mr. Patel that sub-plots Nos. 2 and 4 admeasuring only 533 sq. mtrs. and 451 sq. mtrs., respectively, by themselves would not have been purchased for construction of a commercial complex or a shopping centre because under the building bye-laws of the municipal corporation, such commercial complex/shopping centre can be constructed only on a land within an area of at least 1,000 sq. mtrs.It is true, as contended by learned counsel for the Revenue, that the report of the Departmental Valuation Officer was not challenged befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omestic units and detached or semi-detached buildings, for retail shops, hotel, restaurant, domestic flour factory, community hall and wadi.(5) 665 sq. mtrs. (800 sq. yds.) for four semi-detached domestic units and for detached or semi-detached ownership tenement flats.(6) 1,000 sq. mtrs. (1,200 sq. yds.) for detached or semi-detached buildings for shopping centres, petrol pumps with or without service stations and motor repairing garages, primary schools and kindergarten.Explanation: 'Primary school' shall mean schools up to Std. VII.(7) 1,500 sq. mtrs. (1,800 sq. yds.) for detached or semi-detached buildings for hostels, tenement buildings, lecture-halls and high-rise buildings.(8) 2,000 sq. mtrs. (2,400 sq. yds.) for detached or semi-detachedbuildings for colleges and high schools."Sub-plot No. 2 admeasuring 533 sq. mtrs. is on the southern side of the subplot No. 1 having residential bungalow and sub-plot No. 4 admeasuring 451 sq. mtrs. is on the northern side of the said bungalow. Hence, sub-plots Nos. 2 and 4 could not have been jointly sold without sub-plot No. 1. Since sub-plotNo. 1 has been rightly assessed separately under sub-section (2) of section 7A on the basis of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing findings:(i) In so far as the Tribunal has held that sub-plots Nos. 2 and 4 of the final plot No. 417/1 are not lands appurtenant to the building constructed on sub-plot No. 1 thereof, the order of the Tribunal under challenge in these appeals cannot be said to be an order which is not a speaking order nor can it be said that the Tribunal erred in dismissing the appeal without taking into consideration the relevant material on record.(ii) It cannot be said that the Tribunal erred in law in interpreting the provisions of the Wealth-tax Act with regard to the definition of "urban land" in section 2(ea) and Explanation (b) to section 2(ea) which stipulates that the area of land occupied by a building does not form part of urban land.(iii) In the facts and circumstances of the case, the Tribunal did not err in law in rejecting the contention of the assessee that the value of sub-plots Nos. 2 and 4 was required to be determined at the option of the assessee in the manner laid down in Schedule III to the Act as on April 1, 1971.(iv) The valuation of sub-plots Nos. 2 and 4 on the relevant dates made by the Department is not in accordance with law and fresh valuation is required to ..... 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