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TMI Blog2011 (9) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... 996-97. It had obtained permission for construction from Madras Metropolitan Development Authority, who issued the same on 30.3.1995. The assessee is stated to have commenced the construction work during January, 1996. In support of the construction work, the assessee also filed necessary evidence from its contractor. Till the end of March 1998, the construction was going on and in fact, during the assessment year 1998-99, the construction was almost over. It is seen from the order of assessment that since the assessee had already commenced the construction of a hotel, the assessee filed NIL return for the assessment year 1995-96, claiming that the land acquired for its hotel project at Saidapet, Chennai, was not to be treated as a taxable asset under Section 2(ea) of the Wealth Tax Act. The Assessing Officer, however, determined the net wealth of ₹ 16,84,600/- before giving basic exemption of ₹ 15,00,000/-. The Assessing Officer held that considering the fact that the assessee had acquired land during the previous year relating to valuation date 31.3.1993 and till the date of passing of the assessment order, the assessee had not completed its hotel construction, it cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial purpose, the land in question is an 'asset' as prescribed under Section 2(ea) of the Wealth Tax Act, attracting the charge under the provisions of the Wealth Tax Act. 5. Learned Standing counsel for the Revenue placed reliance on the decisions reported in [2010] 325 ITR 223 - CWT v. GIRIDHAR G.YADALAM, [2009] 329 ITR 81 CWT v. HOTEL ORNATE (NILGIRI) P. LTD, [2010] 328 ITR 334 CWT v. SYNTHITE INDUSTRIAL CHEMICALS LIMITED, [2009] 316 ITR 94 ANAND ESTATE PVT. LTD v. DEPUTY CIT and [2008] 305 ITR 299 REMNORD RESEARCH LABORATORIES P. LTD v. WTO and submitted that on the admitted facts herein, the assessee had not completed the construction within the time specified under the Act and going by the definition of Section 2(ea) of the Wealth Tax Act, the chargeablilty to the Wealth Tax Act stood attracted. In the circumstances, he submitted that the Tribunal committed a serious error in ignoring the definition given under Section 2(ea) of the Wealth Tax Act to include urban land as chargeable to the provisions of the Wealth Tax Act. 6. Per contra, learned counsel for the assessee placed reliance on the decision of the Kerala High Court reported in [2010] 325 ITR 528 APOL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pality, 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 five lakh rupees; (2) any house for residential or commercial purposes which forms part of stock in-trade; (3) any house which the assessee may occupy for the purposes of any business or profession carried on by him. (4) ... (5) ... ....... Explanation [1] - (a) .... (b) '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) .... [Emphasis supplied] 9. In the decision reported in [2010] 325 ITR 528 APOLLO TYRES LTD., v. ASST. CIT, the Kerala H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rogressively completed the four storeyed building with basement and started using it within the course of two years from the valuation date. The Kerala High Court held that the land in question did not answer the definition of urban land to bring it within the charging provision. The construction of the productive asset viz., the commercial building by using the urban land, hence, qualified for exclusion from the definition clause. 11. In contrast to this decision is the Karnataka High Court decision reported in [2010] 325 ITR 223 CWT v. GIRIDHAR G.YADALAM. The Karnataka High Court held that the property owned by the assessee HUF was given for construction of residential flats under various agreements. The assessee claimed that it had retained ownership of the land until the flats were fully constructed and possession of the assessee's share in the built up area was handed over to it. In the return filed for the assessment year 1995-96, the assessee contended that it continued to be the owner of the land and in the subsequent years thereon till the sale of the flats took place. The Assessing Officer treated the property as urban land and assessed the assessee under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the purpose of any business or profession carried on by the assessee. Sub clauses (4) and (5) came into force subsequent to the assessment in question. On the view thus taken, the Kerala High court pointed out that the plea raised by the assessee was based on sub clauses (4) and (5); thus having no application with reference to the assessment in question, the claim had to be rejected. 14. The above decision has to be seen in the light of the facts and circumstances of the case as to the applicability of the provisions under sub clauses (4) and (5). Hence, we do not think the decision reported in [2010] 328 ITR 334 CWT v. SYNTHITE INDUSTRIAL CHEMICALS LIMITED would be of any assistance to the Revenue. For the reasons stated hereunder, we agree with the findings of the Kerala High Court reported in [2010] 325 ITR 528 APOLLO TYRES LTD., v. ASST. CIT. 15. As far as the present case is concerned, admittedly the assessee is a hotelier. It had acquired the lands during 1993-94 and in the subsequent year, it had made some additions. Admittedly, the assessee commenced its construction in January, 1996, relevant to the assessment year 1996-97. Till that time, from the date of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.1993. As such, the same have no relevance to the facts of the case. 18. To construe the land as Urban Land to form part of the 'asset' as defined under Section 2(ea) of the Wealth Tax Act, sub clause (b) of Explanation [1] defines 'urban land'. The said provision excludes the land on which construction of a building is not permissible under any law for the time being in force or the land occupied, which has been constructed with the approval of the Appropriate Authority. Apart from that, there are further exclusions from the said definition of urban land with which we are not concerned at present. 19. On the admitted fact that the land had been purchased and the construction activity is already on for a hotel complex to be built, it is difficult for us to fit the assessee's case under the definition of urban land as defined in sub clause (b) of Explanation [1]. Thus, when the definition of urban land defined it as a vacant land and excludes the land occupied by any building which has been constructed, it is difficult to hold that it seeks to exclude only those lands having a constructed building therein. We do not think, the definition of urban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident that the assessee being a hotelier, undertaking construction for use and occupation of the building for the purpose of his business, the asset in question falls only under sub clause (3) of Section 2(ea)(i) of the Wealth Tax Act and nowhere else. 21. As already pointed out, in the decision reported in [2010] 325 ITR 528 APOLLO TYRES LTD., v. ASST. CIT, when the intention for bringing the asset under Section 2(ea) of the Wealth Tax Act is thus indicated, we fail to see any support in the contention of the Revenue that in the absence of actual occupation or the asset being ready for occupation, the exclusion clause would not operate in favour of the assessee. In the light of the object of the amendment and that there being no denial of fact that the assessee had, in fact, started constructing on the land purchased by them, rightly the assessee drew the support from the exclusion clause under Section 2(ea) of the Wealth Tax Act. 22. Going by the object clause introduced by way of amendment under Finance Act, 1992, while respectfully disagreeing with the decision reported in [2010] 325 ITR 223 CWT v. GIRIDHAR G.YADALAM, we have no hesitation in agreeing with the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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