Income Tax Appellate Tribunal - Mumbai
Dcwt-3(2)(2), Mumbai vs M/S. Kanayo K. Motwani, Mumbai on 6 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "H", BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI, JM WTA No.13/Mum/2018 (Assessment Year :2008-09) D.C.W.T 3(2)(2), Vs. M/s. Kanayo K Motwani th R.No.608, 6 Floor 501, 5 t h Floor, Aayakar Bhavan Tulsiani Chamber M.K.Road, Free Press Journal Marg Mumbai - 400 020 Nariman Point, Mumbai -21 PAN/GIR No.AACPM8819R (Appellant) .. (Respondent) Revenue by Shri Udaya Bhaskar Jakka Assessee by Shri Prakash K Jotwani Date of Hearing 31/01/2019 Date of Pronouncement 06/02/2019 आदे श / O R D E R PER M. BALAGANESH (A.M):
This is an appeal filed by the Revenue directed against the order of CWT(A)-8, Mumbai dated 20/08/2018 for A.Y. 2008-09 in the matter of order passed u/s.16(3) r.w.s. 17 of the Wealth Tax Act 1957.
2. The only issue raised by the Revenue in its grounds of appeal is as to whether the property of the assessee at M.H Tower, Belapur, Navi Mumbai could be construed as property under construction as on the valuation date i.e., 31/03/2008 and if so, whether the same could be 2 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani brought within the ambit of definition of assets u/s. 2(ea) of the Wealth Tax Act, 1957 in the facts and circumstances of the case.
3. Brief facts of this issue is that the Ld. AO observed that the assessee had made payment of Rs. 2,01,67,000/- as advance to M/s.
Purab Estates Pvt. Ltd., for purchase of flat at M.H Tower, Belapur, Navi Mumbai. The assessee pleaded that this advance would not be subject matter of taxable asset u/s.2(ea) of the Act as the property was only under construction as on the valuation date as asset is in the form of advance paid to M/s. Purab Estates Pvt. Ltd., as on the valuation date.
4. The Ld. AO observed that assessee claim made hereinabove was not substantiated with any detail. He further observed that on verification of the details that assessee had advanced a sum of Rs.26,01,000/- to M/s. Purab Estates Pvt. Ltd., from the personal account of the assessee.
The purpose of this advance / loan was not known. He observed that even the loans and advances schedule of M/s. K.K. Enterprises which is a proprietary concern of the assessee, does not reflect any advances or loans being provided to M/s. Purab Estates Pvt. Ltd. Hence, he concluded that assessee had not adduced any proof in support of his claim that the property at M.H Tower, Belapur, Navi Mumbai was under construction.
Accordingly, he brought the value of total advance given to the builder company at Rs.2,01,67,000/- as building which is taxable asset u/s. 2(ea) of the Act and levied wealth tax thereon as on the valuation date. The Ld. 3 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani CWT(A) deleted the addition by holding that as on the valuation date i.e., 31/03/2008, the flat at M.H Tower, Belapur, Navi Mumbai was under
construction which is evident from the facts and circumstances of the case and also from the assessment order framed u/s.143(3) of the Act dated 20/01/2016 in the hands of M/s. Purab Estates Pvt. Ltd., By this, the Ld. CWT(A) categorically gave a finding that the flat at M.H Tower, Belapur, Navi Mumbai was under construction as on the valuation date.
Later, the Ld. CWT(A) addressed the consequential issue as to whether the property under construction could be subject matter of taxable asset u/s. 2(ea) of the Act. In this regard, he placed reliance on the decision of Hon'ble Punjab and Haryana High court in the case of CIT vs. Neena Jain reported in 189 Taxman 309 (P&H) wherein the Hon'ble High Court held that property under construction is not liable for wealth tax. Respectfully following the said decision, he deleted the addition made in the assessment to the tune of Rs.2,01,67,000/-.
5. Aggrieved, the Revenue is in appeal before us.
6. We have heard rival contentions. At the outset, we find that assessee had made advance payment of Rs.2,01,67,000/- to M/s. Purab Estates Pvt. Ltd., for purchase of flat at M.H Tower, Belapur, Navi Mumbai. We find that the assessee had contended that M/s. Purab Estates Pvt. Ltd., had undertaken to build a commercial tower i.e., MH Tower. The plots were purchased and construction was stated in the year 4 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani 1999-2000. The agreed terms were such that if the project was not completed as per the guidelines given by CIDCO, the plot had to be surrendered. The CIDCO was approached for surrender of the plot or seeking the extension of time. CIDCO granted neither of two. In the meanwhile, CIDCO was again approached for the extension of approval to construction of building. The said approval was pending. Based on these factual circumstances, the Ld. CWT(A) had come to the conclusion that the subject mentioned property at M.H Tower, Belapur, Navi Mumbai was under construction as on 31/03/2008 i.e., valuation date. We also find from the assessment order of M/s. Purab Estates Pvt. Ltd., for A.Y.2013- 14 framed u/s.143(3) of the Act dated 20/01/2006 by Income Tax Officer
- 3(2)(4), Mumbai that wherein a specific finding had been given by the said Assessing Officer which is reproduced as under for the sake of convenience:-
"The assessee company is engaged in the business of property 'construction and development. However, during the year under consideration, the assessee has not done any business and has claimed expenses of Rs.30,775/- The assessee had undertaken to build a commercial tower of CIDCO in the name and style of 'MH Tower' in CBD Belapur but could not complete the instruction within the stipulated time and has requested for approval of extension of the same which is under consideration. The assessee company has capitalized the project cost."
7. From the above, it is very evident that the property at M.H Tower, Belapur, Navi Mumbai was under construction even as on 20/01/2016 i.e., the date of passing the order for A.Y.2013-14. Admittedly, the Ld. AO had 5 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani brought the subject mentioned assessee under the head "building" as a taxable asset u/s. 2(ea) of the Act. Now, it has been proved beyond doubt that the said asset is only building under construction as on the valuation date. Now the pertinent question which requires to be addressed is as to whether the building "under construction" would be liable for wealth tax as a taxable asset. We find that the issue under dispute has been squarely addressed by the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Neena Jain reported in 330 ITR 157 wherein it has been held as under:-
8. The appeal was admitted to consider the following substantial questions of law:-
"(i) Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT is justified in law in dismissing appeal of the Revenue against the Ld. CIT(A)'s order holding that a house under construction neither being a house nor a plot is not liable to tax under the Wealth Tax Act, 1957?
(ii) Whether, on the facts and in the circumstances of the case, the value of a house under construction including the investment made on construction thereof as on the relevant valuation date is not liable to wealth tax as 'building' or 'urban land' as per clause (i) or clause (v) of section 2(ea) of the Wealth Tax Act, 1957 until the house is complete?"
9. We have heard the learned counsel for the revenue and have perused the record with his help.
10. The main celebrated argument of learned counsel for the revenue that since the incomplete building of the assessee falls within the definition of assets as defined in section 2(ea) of the Act, so, the impugned amount is liable to be added, for the purpose of wealth tax, is neither tenable nor the observations of Gujarat High Court in case Commissioner of Wealth Tax v. Cadmach Machinery Co.(P) Ltd. (2007) 212 CTR Reports 285 and Delhi High Court in case Commissioner of Wealth-Tax v. Prem Nath Motors Pvt. Ltd. (1999) 238 Income Tax Reports 41, are at all applicable to the facts of the present controversy.
6 WTA No.13/Mum/2018M/s. Kanayo K. Motwani
11. In Cadmach Machinery Co. (P) Ltd.'s case (supra), the factory and research building were under the process of construction during the year under consideration. The assessee claimed exemption from wealth tax on the building under construction as per clause (v) of sub-section (3) of section 40 of the Finance Act, 1983. On the peculiar facts and circumstances of that case, while interpreting the provisions of section 40 (3) of the Finance Act, 1983, it was ruled that "under such circumstances, such building could not have fallen in exceptional clause provided in clause (vi). It was further observed that "if the building under construction was not to be regarded as "building", then the land on which the construction is started will have to be included in the assets under clause (v) because the land mentioned therein does not carry any qualification or the "adjective vacant." Even otherwise, land does not lose its value as an asset simply because construction is started thereon and the building does not cease to be a "building" only because it is incomplete in some respect."
12. Sequelly, in Prem Nath Motors Pvt. Ltd.'s case (supra), the Delhi High Court observed as under:-
"To attract the applicability of the abovesaid clause the building or part thereof must be capable of being used by the assessee. The facts as found and the question itself suggest that the investment was in an incomplete and unfinished factory building, the construction whereof wasstill in progress. It is not the case of the Revenue that the building or part thereof as it stood in the relevant assessment year was capable of being subjected to any use by the assessee. Obviously, the building or part thereof is not covered by clause (vi), abovesaid. The answer to the question is obvious. The Tribunal did not err in refusing to make a reference to the High Court. The petition under section 27(3) of the Wealth-tax Act, is without any merit and is therefore dismissed."
13. Possibly, no one can dispute about the aforesaid observations in Cadmach Machinery Co.(P) Ltd.'s case (supra), but the same would not come to the rescue of the revenue in the present case. Moreover, the reproduced observations in Prem Nath Motors Pvt. Ltd.'s case (supra) support the case of the assessee in this relevant connection.
14. Now, in the instant case, the core question, that arises for determination, is whether the incomplete building of the assessee falls within the ambit of assets as defined in section 2(ea) of the Act or not, which postulates that "assets" in relation to the assessment year commencing on Ist day of April, 1993, or any subsequent assessment year, means 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 7 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani including a farm house situated within twenty-five kilometresfrom 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 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 etc.etc.
15. The contention of the learned counsel for the revenue that "any building would" fall within the definition of assets, is not only devoid of merit but misplaced as well, because the word "any building" cannot possibly be read in isolation and it has harmoniously to be construed with the remaining portion of section 2(ea) of the Act, i.e. whether the building used for residential or commercial purposes or for the purpose of maintaining a guest house, because incomplete building, as in the present case of the assessee, cannot possibly either be used for residential or commercial purposes or for purposes of maintaining a guest house. Therefore, the word "building" has to be interpreted to mean a completely built structure having a roof, dwelling place, walls, doors, windows, electric and sanitary fittings etc. If one or more such components are lacking, then it cannot possibly be saith that the building is a complete structure for the purpose of section 2(ea) of the Act. A residential house is an unit, which is complete for habitation having the minimum bare required facilities. The Legislative intent underlying the amended provisions of section 2(ea) is clear and implicit that the legislature sought to bring within the ambit of this section all those buildings, which are completed and ready for use of residential, commercial or guest house, as the case may be, as incomplete structure cannot be put to any such use.
16. It is not a matter of dispute that the assessee started the construction in the month of February 2002, which was still incomplete at the period of relevant assessment year.
17. The next argument of learned counsel for the revenue that if the incomplete building does not fall within the ambit of assets under section 2(ea) of the Act, then the incomplete building of the assessee is liable to wealth tax under the definition of "urban land", again has no force, because Explanation 1 (b) defines "urban land" to mean the land situated in any area, which is comprised within the jurisdiction of a municipal corporation or committee, any area of committee within such distance, not being more than eight kilometres from the local limits of a municipality or cantonment board etc. but does not include 8 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani the land occupied by any building, which has been constructed with the approval of the appropriate authority. Again, it is not a matter of dispute that the assessee is constructing the building after obtaining sanction from the appropriate authority. Therefore, we are of the considered view that the incomplete building of the assessee neither falls within the definition of a building, as contemplated under section 2(ea) of the Act, nor within the purview of "urban land" as excluded by Explanation 1(b) of the Act.
18. There is another aspect of the matter, which can be viewed from a different angle. The perusal of the scheme of the Act posits that it is not always that any building or land appurtenant thereto are straightway liable to wealth tax. There are many exceptions contained in section 2(ea) (i) of the Act in this respect, such as, house meant exclusively for residential or commercial purposes, which forms part of the stock-in- trade or any house which the assessee may occupy for the purposes of any business or profession carried on by him or any property in the nature of commercial establishments or complexes etc. Sequelly, there is an exclusion clause contained in Explanation 1(b) of the Act, in regard to urban land as well. In that eventuality, the burden of proof was on the revenue and the Adjudicating Authority was required to record a categoric finding that the building of the assessee actually exigible to wealth tax. Meaning thereby, it was incumbent upon the revenue to prove that the incomplete building/urban land of the assessee is such, that squarely falls within the four corners of assets, as defined in section 2(ea) of the Act and liable to wealth tax, which is totally lacking in the present case. Thus seen from any angle, we are of the considered opinion that the value of the investment in constructing the indicated building cannot possibly be added for the purpose of levying wealth tax, during the relevant assessment year, in the obtaining circumstances of the case.
19. In the light of the aforesaid reasons, it is held that the Tribunal was justified and correctly negatived the claim of the revenue and was thus right in holding that the value of house under construction including investment on construction is not liable to wealth tax. Thus, the substantial questions of law are answered accordingly against the revenue.
20. For the reasons recorded above, the aforesaid appeals are hereby dismissed with no order as to costs."
8. Respectfully following the said decision, we hold that the building under construction is not liable for wealth tax and Ld. CWT(A)'s order in 9 WTA No.13/Mum/2018 M/s. Kanayo K. Motwani this regard does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed.
9. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on this 06/02/2019
Sd/- Sd/-
(RAM LAL NEGI) (M. BALAGANESH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 06/02/2019
Karuna Sr.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
DR, ITAT, Mumbai
5.
BY ORDER,
6. Guard file.
सत्यापित प्रतत //True Copy//
(Asstt. Registrar)
ITAT, Mumbai