Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income Tax ... vs J.K. Investo Trade (I) Ltd, Mumbai on 9 August, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "F", BENCH MUMBAI BEFORE SHRI PAWAN SINGH,JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER W TA No.02/Mum/2018 (Assessment Year :2004-05) DCIT,Central Circle-8(1) Vs. M/s.JK Investo Trade th Room No.656, 6 Floor (India) Limited Aaykar Bhawan New Hind House 3 M.K.Road NM Marg, Ballard Estate Mumbai-400 020 Mumbai-400 001 PAN/GIR No.AAACJ6284E (Appellant) .. Respondent) & WTA No.05/Mum/2010 (Assessment Year :2005-06) M/s.JK Investo Trade (India) Vs. Wealth Tax Officer-2(2)(1) Limited Mumbai New Hind House 3 NM Marg, Ballard Estate Mumbai-400 001 PAN/GIR No. AAACJ6284E Appellant) .. Respondent) Assessee by Rakesh Mohan & Nirav Poddar Revenue by Sushil Kumar Poddar Date of Hearing 03/07/2019 Date of Pronouncement 09/08/2019 आदेश / O R D E R PER G.MANJUNATHA (A.M):
These appeals filed by the assessee, as well as the revenue are directed against separate, but identical orders of the Commissioner of Wealth Tax (Appeals)-5, Mumbai, dated 29/12/2009 and 29/12/2017 for the Assessment Years 2004-05 and 2005-06. Since, the facts are 2 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
identical and the issues are common, for the sake of convenience, these appeals were heard together and are disposed-off by this consolidated order.WTA No. 02/Mum/2018
2. The revenue has raised the following grounds of appeal:-
i) "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in taking the value of property @ Rs.93,44,364/- as against the value of Rs.23,07,00,998/- without considering the valuation report submitted by the District Valuation Officer and deciding the issue merely on the basis of A.Y. 1993-94 to 1995-96 without appreciating the fact that the Revenue's appeal is pending before the Hon'ble ITAT for the said assessment years".
ii The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
3. The brief facts of the case are that in the year 1957, the assessee, then known as JK Chemicals Ltd., engaged in manufacturing of chemicals products entered into an agreement with Government of Maharashtra, through Collector, Thane for acquiring a piece of land to be used in its manufacturing of chemical product. Thereafter, the assessee has converted said land use into non-agricultural purpose, which was granted in June, 1957 with certain conditions. As per the terms and conditions of conversion order, out of total land area of 1,06,238 square yards, the assesee could use only 10,607 sq.yards (approximately 10%), for the purpose of its industrial activity, in accordance with the approved plan and the remaining land to the extent of 95,630 sq.yards was to be kept open to the sky. Thereafter, 'Sanad' was duly executed on 13/04/1957 and as 3 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
per said Sanad, in pursuance of the agreements signed with the Collector, Thane, the Government has acquired the land, in favour of the assessee, for which it has paid cost of acquisition. The 'Sanad' further stipulate certain conditions, as per which the ownership of land was vested with the assessee, subject to the provision of the 'Bombay Land Revenue Code 1879' and Rules framed there under from time to time.
4. The assessee had filed its Wealth Tax return for AY 2004-05 on 26/01/2004 declaring total wealth of Rs. 93,44,364/-. The assessee has included the impugned land under the definition of assets and accordingly, determined value of the land at Rs. 93,44,364/-, for which necessary valuation report obtained from P.V.Bhole registered architect valuer has been filed along with return of income. The case was selected for scrutiny. During the course of assessment proceedings, the AO referred the valuation of the property to the District Valuation Officer (DVO). The DVO vide his valuation report dated 31/12/2006 determined value of the land at Rs. 23,07,00,998/-, as per which, the value of land has been determined at Rs. 3,189/- per sq.yards. Thereafter, the AO has completed assessment u/s 16(3) of the Wealth Tax Act,1957,and determined total wealth of Rs. 24,92,00,998/-
5. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CWT(A). Before the CWT(A), the assessee has filed elaborate returns submissions on the issue, which has been reproduced at para no. 4.2 on pages 4 to 13 of Ld. CWT (appeal) order. The sum and 4 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
substance of arguments of the assessee before the Ld. CWT(A) are that land in question was a 'Sanad' land, which was used for the purpose, for which such land has been acquired by the Government and also the utilization of the land has been strictly, as per the terms and conditions of acquisitions, as well as conversion and accordingly, the same cannot be considered within the definition of asset as defined u/s 2(ea) of the W.T.Act, 1957. The assessee has also made alternate submissions in the light of definition of urban land, as per which the land in question does not come within the definition of urban land, because, as per explanation to definition of urban land, urban land means, but does not include land on which construction of building is not permissible under any law, for the time being in force in the area, in which such land situate or the land occupied by any building, which has been constructed with the approval of the appropriate authority. Since, the land has been utilized, as per the terms and conditions of 'Sanad' and also the land on which building was constructed with permission of appropriate authority cannot be considered as asset and also land on which construction of the building is not permissible under the law is also cannot be included in the definition of capital asset as defined u/s 2(ea) of the W.T.Act, 1957. In this regard, he relied upon the decision of Hon'ble Bombay High Court in the case of Prabhakar Keshav Kunde Vs CIT [(2010) 194 taxmann.com 306 (Bom)].
6. The Ld. CWT(A), after considering relevant submissions of the assesee and also taken note of various evidences filed by the assessee, 5 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
including copy of 'Sanad' and conversion order of the Collector, Thane, Came to the conclusion that the asset in question is covered by the exclusionary clause of the definition of urban land, which is given in clause (b) of the explanation to section 2 (ea) of the W.T.Act,1957. Therefore, the AO was incorrect in determination of value of the land, over and above, value determined by the assesee in its Wealth Tax Returns. The relevant findings of the Ld.CWT(A) are as under:-
4.3 Decision:-
I have considered the facts of the case and also submissions made by the it. The Appellant is a Company and the Factory of the Appellant is M/s Investo Trade (India) Ltd,, which is situated in chemical zone at Thane. (t acquired the land for factory building from State Government as per agreement dated 13.04.1957. As stated by the assesses the land allotted was Sanad land where government has given the land subject to the provisions of Bombay Land Revenue Code 1879 and put various restrictions on use and development of the said land. The State Government has put restriction as per Order dated 7.06.1957 where it is stated that the Appellant shall build on 10,607 sq.yds 36 sq.ft, and leave remaining 95,630 sq.yds, 64 sq.ft, open to the sky.
The Appellant for the first time, filed Wealth-tax return for the A.Y. 1993-94 declaring the value of the land at Ks.55,45,108/- on the basis of report of the approved valuer. The AO at the time of completion of the assessment has not accepted the value declared by the Appellant and referred the matter to DVO who has valued the property at Rs.2,40,85,5111/-. The Appellant filed the Appeal to the CIT(A) against the assessment order for 1993-94, the CIT(A) has decided the issue in favour of the assessee as per order dt,20-12-1999. Thereafter, the appeal for the AY. 3994-95 and 1995-96 was are decided by the C1T(A) in favour of the assessee- The Dept, has filed appeal against the order of A-Y. 1993-94 to 1995-96 which are still pending before ITAT. The value of the land for the A.Y. 1996-97 to 2003-04 was accepted by the AO as declared by the Appellant, It is again for the A.Y. 2004-05 i.e, in the present Appeal that the AO has referred the value to the DVO who has valued the property at Rs. 23, 07, 00 ,998/- as per his preliminary report dated 26-12-2006. The AO has adopted the said value of Rs.23,07,00,998/- and made addition of Rs.22,13,56,634/- in the Wealth- tax assessment. As the assessee filed, contended that its case was covered under exclusion part of definition of clause (b) of explanation to Section 2(ea) of the Wealth Tax Act, 1957. The AO has been asked to comment on the applicability of Rule 21 of Schedule-III of Wealth Tax 6 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
Act, 1957. The AO has given his remand report as per letter dated 21.12.2017 repeating the facts stated in original assessment order passed by AO, During the course of the hearing, the AR has also pointed Out that even in Assessment Year 2005-06, the AO has not referred the matter to DVO but the property was valued as per Schedule III which was amounting to Rs.8,19,53,463/-. Without prejudice to the above, the AR also stated that had the value been determined as per Schedule III for Assessment Year 2004-05, then the value would have been Rs.7,19,95,300/-. The AR has also pointed out that from Assessment Year 2006-07 onwards, the value as declared by the Appellant was accepted by the AO and there was no addition made.
The AR has also given a complete chart of the assessments made from Assessment Year 1993-94 to 2015-16 which is reproduced as under:-
WEALTH TAX STATUS A.Y. Value declared Value Remarks assessed 1993-94 45,10,350 2,28,94,000 C1T(A) has accepted value declared by the assessee vide its order dt.20.12.1999. Department is in appeal against above order in ITAT.
1994-95 56,37,920 2,71,96,000 CIT(A.) has accepted value declared by
the asses see vide its
order dt 12,01, 2000. Department is in
appeal against above order in ITAT.
1995-96 84,56,880 3,20,42,000 C1T(A) has accepted value declared by
the asses see vide its order
dt.12.01.2000. Department is in appeal
against above order in ITAT.
1996-97 84,56,830 84,56,880
1997-98 84,56,880 84,56,880
1998-99 84,56,880 84,56,880
1999-00 69,00,000 84,56,880
2000-01 69,00,000 69,00,000
2001-02 69,00,000 69,00,000
2002-03 69,00,000 69,00,000
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2003- 69,00,000 69,00,000
04
2004- 93,44,364 22,92,01,00 Appeal filed before CWT (A) is pending.
05 0
2005- 93,44,364 8,19,53,463 Assessed u/s, 16 (3), As per the A.G.
06 determined value of Rs. 6,19,53,463/-as
per Schedule III the appeal decided by
the CIT (A) is pending before ITAT
2006- 93,44,364 93,44,364
07
2007- Nil. NIL
08
2008- Nil. NIL
09
2009- Nil NIL
10
2010- Nil. N1L
11
2011- Nil NIL
12
2012- NIL NIL
13
2013- NIL NIL
14
2014- NIL NIL Assessed u/s. 16 (1) vide CPC order
15 dated 25.08.2015
2015- NIL NIL Assessed U/S.16 (1) vide CPC order
16 dated 03. 03 .20 16
It could be seen from the above, in the assessment year 1993-94, 1994-95 and 1995-96, the CIT(A) accepted the assessee's valuation; and in the assessment year 2005-06, the CIT(A) decided the issue against the assessee confirming the AO's valuation as per schedule -III of the Wealth Tax Act, However in the earlier assessment year the AO adopted the value as per DVO. Thus, it is observed that there is no consistency in. the value adopted by the AO. In this regard, the AR has pointed out that the learned CIT(A) has decided the issue for Assessment Year 2005-06 against the assessee for which the appeal filed before ITAT is pending.8
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The AR has also pointed out that the ClT(A) has decided the Appeal on 29.12.2009 for Assessment Year 2005-06, while the Bombay High Court has decided the similar issue in the case of Prabhakar Keshav Kunde vs. CIT reported in 194 ITR 306 on 30.08.2010.
The AR has also submitted that the Bombay High Court decision came after the decision of CIT(A) had the above Bombay High Court decision been there before the CIT(A) for the Assessment Year 2005-06, then the decision would have been in favour of the Appellant The AR has further pointed out that while valuing the property, DVO has not considered the fact of Sanad land. Thereafter the value adopted by the AO on the basis of preliminary report of the DVO was completely unjustified.
The AR has stated that the Appellant's case is fully covered by Bombay High Court in the case of Prabhakar Keshav Kunde stated herein above and also decision of CIT(A) for the Assessment Year 1993- 94 to 1995-96 who has considered all the aspects of the valuation of property. Therefore, he has strongly argued that the decision of Bombay High Court should be applied as it is the decision of Jurisdictional Court and all the lower authorities are bound by the decision of Bombay High Court.
I have considered the entire issue carefully and have gone through the written submissions of the Appellant, the preliminary valuation report of the DVO, the order of the Assessing Officer and the remand report submitted by the AO. As per SANAD (the order of approval] issued by the Government of Maharashtra, The said land has been allotted to the assesses with certain conditions. The order of approval/allotment is as under:-
"And whereas the said Land has vested in the company subject to the provisions of the Bombay Land Revenue Code, 1879 (hereinafter called 'the said Cods') and rules framed there under from time to time. Now therefore, it is hereby declared that the said land is vested in the company and is held by the company as its property to be subject nevertheless to the payment by the company of agricultural, non-agricultural or other assessment as the case may be to which the said land may be liable under the provisions of the said Code and rules made there under and the local fund cess as the case may be on the following terms and conditions: -The Company shall :
(i) not use the said land for any other purpose than that for which it is acquired.
(ii) undertake the work of construction of the building or buildings required for the Factory within one year from the date on which the possession of the land is handed to the Company and complete the same within 1*1/2 years from the aforesaid date.
(iii) at all times, keep and maintain the said land and the building or buildings erected thereon in good order and condition to the satisfaction of the collector.
(iv) maintain all records of the Company properly and supply to the Government punctually such information as may from time to time be required by Government.
(v) not use the said land or any building that may be erected upon it for any purpose which in the opinion of the Government is objectionable.9
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vi) at its own cost provide, and continue to provide on the said land such markets, roads, parks and other amenities as the Gov, may be general or special observe and carry the govt. may from time to time issue with respect to such markets, roads, parks and other amenities including the directions as regards the maintenance or use thereof or entry therein. 2. The Company shall, from time to time and all times permit the Government, or any officer or officers authorized by the Government in that behalf to inspect the said land and any. works of the Company upon the said land whether in the course of construction or otherwise, and shall furnish to the Government from time to time on demand correct statements of the monies expended by the Company', in the construction of the said work of the Company upon the said land.
3. In case of the said land is not used for the purpose for which it is acquired as hereinbefore recited or is used for any other purpose or in case the Managing Director commits a breach of the conditions hereof, the said Land together with the buildings if any erected thereon shall be liable to resumption by the Government subject however to the condition that the amount spent by the Company for the acquisition of the said land or its value as undeveloped land at the time of resumption whichever is less(but. excluding the cost of or value of any improvements made by the Company to the said land or of any structure standing on the said land] shall be paid as compensation to the Company. Provided that the said land and the buildings erected thereon shall not be so resumed unless due notice of the breach complained of has been given to the Company and the Company has failed .to 'make good the breach or to comply with any direction issued by the Government in this behalf within the time prescribed in the said notice for compliance therewith.
4. If at any time or times the whole or any part of the said land is required- by Government or for purpose of making any new public road or for any purpose connected with the public health safety utility or necessity (as to which matter the Company shall accept as final decision of the Government) the Company on being thereunto required by Government in writing shall transfer the said land as the Government shall specify to be necessary for any of the aforesaid purposes, and in consideration of such transfer, the Government shall pay to the compensation awarded under the said Act and paid by the Company in respect of the land at transfer including the percentage awarded under Section 23(2) of the said Act together with such amount as shall be estimated by the Executive Engineer, Thana Division, Thana whose decision in the matter shall be final as the cost of the un- development of the land so transferred, which shall include the value at the date of transfer of any structure standing thereon, and when part of a building is on the land so transferred and part is on adjoining land, reasonable compensation for the injurious affection of the part of the building on the adjoining land.
5. The Company shall not in anyway alienate the said land or any portion thereof except with the previous permission in writing of Government. Schedule---------
Schedule above referred to -
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District Taluka Village
Thane Thane Panchpankhadi
Survey Hissa Approximate area of the
No. No. land required
Acre Gunthe Annas
86 1 3 3 0
86 2 0 5 0
86 3 0 18 0
86 4 0 13 0
86 5 0 21 0
86 6 0 4 12
115 1 1 11 4
115 2 0 34 8
115 3 0 12 0
115 4 0 15 8
115 5 0 22 12
115 6 0 9 0
115 7 0 29 8
115 8 0 10 S
115 9 0 36 0
116 I 2 17 0
116 2 0 37 0
116 3 1 20 12
116 4 2 19 12
116 5 0 20 4
117 6 0 4 4
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117 1 0 12 12
117 2 0 12 12
117 3 1 18 0
117 4 0 3 0
117 5 0 1 12
117 6 0 13 4
117 7 0 28 8
117 3 0 17 0
117 9 0 1 8
117 10 0 3 4
117 11 0 1 4
Approximate area of the land required 21 acre 38 gunthas. This Sanad is executed on behalf of the Governor of Bombay by the Collector of Thane this twenty seventh day of February one thousand nine hundred fifty nine."
It is also seen that the assessee obtained permission from the Collector to make non-agricultural use of the land. The permission order is as under:-
"To Shri DL Mahata For JK Chemical Ltd., Thane.
Sub: Panchpankhadi, Thane of NA permission in of S.No. 86 Hissa.
No. 1,2,3,4,5&6, S.No.115 Hissa no. 1 to 9, S.No. 117 Hissa no. 1 to 11 Panchpankhadi Village-reg.
Sir, Reference your application dated 8th June 1957 on the subject noted above.
Permission to make non-agricultural use of the land measuring 10625S sq, roads out of Hissa No. of S.No. As mentioned above in granted to you subject to the conditions applied befow-12
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1. The conditions of which you shall have to execute of the plot shall be binding on you.
2. The land shall be used for the purpose of a chemical factory only. The user of the land for any purpose other than that for which the permission is hereby granted is prohibited under section 48 of land order and it shall be lawful for the officer granting this permission or any authority superior to him to levy fine and amendment on him may deem, fit for a change in the specified under of the land with our without permission.
3. The amount of NA agreement leviable on the Plot will be informed to you apparently. It is guaranteed upt o 31/7/1939.
4. The area and non-agricultural agreement is liable to alteration according to the actual area approved at by measurement by the land's Department and that any further order fixing such area and NA amendment consequent upon the final measurement shall form part of the Sanad and be binding on you.
5. You shall build on 10607 sq yards 36 sq ft by numbers 1 to 21 in the approved plane dated 11.6.1957(copy enclosed] and shall leave remaining area vis 95630 sq yards 64 sq ft open to the sky. 6- you shall not erupt any additional structure make addition or alteration in the building without obtaining permission of the undersigned.
7. You shall keep a 60 on the road wide and 10 along with the rent of the thereon.
8. You ©hall execute Sanad 10 from within a period of two months from the date of actual commencement of the NA use. If you fail to appeal before the M of Town for executing the Sanad within the stipulated time. The non-agricultural permission shall be canceled.
9. That the NA use of the land must commence within a period of 6 months from the date of the permission.
10. You shall inform the M of Thana in writing through the village officer the date on which the NA use within a period of one month from such commencement failing which you shall be liable to pay in addition to the NA agreement fine as the Collector may direct.
11. If you contravene any of the forgoing condition, the collector may without prejudice to any other penalty to which you may liable under the provisions of the said Code. Continue the said plot in you occupation to payment of such fine and or agreement as he may direct.
I2. Notwithstanding anything contained in sub clause (a) above. It shall be lawful for the collector to direct the removal or alteration or any building or structure created to the provisions of this grant within the time prescribed in that behalf by the undersigned or the authority superior to him and on such removal or alteration not being carried out within the prescribed period he may cause to be carried out and recover the cost of carrying out the same from you as arrear of land revenue.
13. Same as herein provided, the grant should be subject to the provision of the land revenue code.
14. You should pay at once the survey fee to the Mamladar Thane,
15. You should obtain no objection certificate from District Magistrate, Thana before the chemical factory is started."13
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It is also seen from the submissions that as per the Bombay Land Revenue Code 1879 grant of land for Industrial and Commercial purpose has to fulfill the following conditions:-
"The grant of land shall be subject to the conditions under rule 41 and also the following conditions, namely;-
(a) Except with the previous permission of the State Government, the land shall not be submission divided or disposed of in any manner.
(b) The land shall not be disposed of except along with the constructions thereon and the factory, plant and other installation if any, and the land so disposed of shall not, except with the approval of State Government be used for a purpose other than the purpose for which it was initially granted.
(c) On disposal of the land along with the factory, plant, structures and other installations by way of sale, the State Government shall be entitled to half the unearned income and where such land is sold without any constructions aforesaid, the State Government shall be entitled to unearned income not exceeding 90 percent, as the State Government may decide.
(d) If the State Government has reason to believe that any misrepresentation or concealment is made in regard to the sale price, the sale shall be voidable at the discretion of the State Government.
Bombay High Court have decided identical case similar to us, in the case of Prabhakar Keshav Kunde V/s. CIT, Goa (2010), where it was held that "Where properties in question consists of a part of land on which construction is possible and part of land which is not so value of, latter type of land should be excluded while computing Wealth Tax of Assessee."
From the above, ft is very clearly stated in the Sanad that the land has been, vested with the Appellant subject to the provisions of Bombay Land Revenue Code 1879 and various other rules framed thereunder from time to time. There are other terms and conditions mentioned in the Sanad itself. Therefore, ownership of the land is vested with the Appellant subject to various terms and conditions which will have effect on the fair market value of the property. It is also necessary to consider the Appellant's contention of unearned income- In terms of Rule 31 of the Maharashtra Land Revenue (Disposal of Government Lands] Rule, 1971 which deals with grant of land for industrial and commercial purpose, the State Govt. is entitled to unearned income at the rate mentioned in that Act- - In the Appellant's case, the State Govt. is entitled to claim upto 90% of unearned income. The said land is also out of the purview of definition of assets as defined u/s. 2(ea) of the Wealth-tax Act 57 for the reason that the Appellant pursuant to the agreement dated 13/04/1957 acquired the said land as required by the provisions of section 41 of the Land Acquisition Act, 1894. The Appellant therefore applied to the office of the Collector for non- agricultural use of the said unit. Permission was obtained with a condition that the Appellant shall leave an area of 95,630 sq.yds,, 64 sq.ft. open to sky. Therefore, the Appellant was allowed to build on 10,607 sq.yds, 36 sq.ft. The open [and was kept vacant because no construction was permissible in the said condition. Therefore, the Appellant's case is covered by the exclusionary part of the definition of Urban Land which is given in Clause (b) of the explanation to section 2(ea) of the Act which reads as under :-
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Section 2(ea) "assets", in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means -
(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 within 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-
(v) urban land;
Explanation (b) "urban land" means land situate -
but 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 building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the assesses for industrial purposes /or a period of two years from the date of its acquisition by him or any land held by the assessee as stock-in-trade for a period often years from the date of its acquisition by him.
In view of the above discussion and following the Bombay High Court decision in the case of Prabhakar Keshav Kunde and also the Order of my predecessor for Assessment Year 1993-94 to 1995-96, I hold that the Appellant's case is covered by the exclusionary part of the definition of Urban Land which is given in Clause (b) of the explanation to section 2(ea) of the Act. In view of the above discussion and various restrictions placed on the land, the value shown by the Appellant as fair market value is just and proper. The fair market value determined by the valuer cannot be adopted in its place. Accordingly, the original value shown by the appellant is restored and the addition made by the AO is deleted. Therefore, this ground of appeal is allowed.
5. In the result, the appeal of the assesses is allowed,
7. The Ld. DR submitted that Ld. CIT(A) erred in taking the value of property at Rs. 93,44,364/-, as against the value of Rs. 23,07,00,998/- without considering the valuation report submitted by the DVO and deciding the issue merely on the basis of findings recorded for Assessment Year 1993-94 to 1995-96 without appreciating the fact that 15 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
the revenue is in appeal before the ITAT for the said assessment years. The Ld. DR, further submitted that the AO was brought out clear fact in light of valuation report of the DVO that the value determined by the assessee in its wealth tax return is incorrect. Therefore, the Ld. CWT(A) without assigning any reason deleted additions made by the AO towards valuation of property.
8. The Ld. AR for the assessee, on the other hand strongly, supporting order of the Ld. CIT(A) submitted that first up all, the land in question does not comes under the definition of asset as defined u/s 2(ea) of the W.T.Act, 1957, because, the land in question is a 'Sanad', which was acquired for the purpose of setting up of chemical factory and also the utilization of land has been specified in the conversion order, as per which the assessee could use only 10% of the land for its manufacturing activity and remaining 90% land to be kpet open to the sky. The Ld. AR, further referring to the definition of asset as defined u/s 2(ae) of W.T.Act, 1957 submitted that as per exclusionary clause provided in definition of asset, any land on which construction of building is not permissible under any law for the time being in force or the land occupied by any building which has been constructed with the approval of the appropriate authority, the same cannot be considered as urban land. In this regard, he relied upon the decision of Hon'ble Bombay High Court in the case of Prabhakar Keshav Kunde vs CIT and also the decision of Hon'ble Punjab & Haryana High Court in the case of CWT vs R.K.Mehra (2010 228 CTR 205) 16 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
9. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The facts borne out from records clearly indicates that the land in question was acquired by the Government of Maharashtra through Collector, Thane, for the purpose of setting up Chemical Factory in the year 1957. Further, the said land was converted into non-agricultural purpose in the year 1957, and as per, which the land in question has to be utilized for the purpose of setting up of chemical factory. The conditions, further stipulates that out of total area of land of 1,06,238 sq. yards, land to the extent of only 10,607 sq yards (approximately 10%) should be used of the purpose of industrial activity and the balance land to the extent of 95,630 sq yards (approximately 90%) was to be kept open to the sky. The assessee has utilized land for the purpose of construction of factory and other buildings, as per the terms and conditions of acquisition, accordingly 10% of the land was used for setting up manufacturing facility and 90% of land has been kept open to the sky. In this factual back ground, if you examine, the arguments of the AR for the assesee, we find that the first arguments in light of 'Sanad' executed between the assessee and Government of Maharashtra and land in question was Sanad land and the assessee does not have absolute right over the land, therefore the same cannot be considered as asset, for the purpose of Wealth Tax Act, 1957, does not hold water, because as per the terms and conditions of 'Sanad', it was very clear that the assessee is owner of the land subject to certain 17 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
conditions, therefore merely for the reason of imposition of certain conditions, at the time of acquisition of land, it cannot be said that, the assessee does not have any absolute right over the land and accordingly, the first argument of the AR of the assessee fails.
10. Coming to the second arguments of the assessee. The Ld. AR for the assessee referring to the definition of asset, as defined u/s 2(ea) of the W.T.Act, 1957 and the term urban land argued that the land in question does not come under the definition of urban land because, the assessee has constructed factory buildings on 10% of the land with the permission of appropriate authority and remaining 90% of land was kept open to the sky, where any kind of construction of building is not permissible, as per, the Bombay Land Revenue Code, 1879 and Rules framed there under from time to time. We find that the term asset has been defined u/s 2(ea) of the W.T.Act, 1957. As per clause (b) of the explanation to section 2 (ea) of the W.T.Act, the term urban land has been defined, as per which any urban land means and situate, but does not include land on which construction of building is not permissible under any law for the time being in force in the area in which such land situated or the land occupied by any building which has been constructed with the approval of the appropriate authority. As per the said definition of asset, any land on which construction of any building is not permissible under any law for the time being in force and also land occupied by any building, which has been constructed with the approval of the appropriate authority, 18 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
then such land is outside, the purview of the definition of urban land as defined u/s 2(ea) of the Act. In this case, on perusal of facts, we find that the entire land in question has been given to the assessee by the Government for the use of manufacturing of chemicals with the condition that major portion of land , i.e.95,630 sq yards out of 1,06,238 sq yards of total area shall be kept open to the sky and consequently, in this area no construction has been permitted. Therefore, to this extent ie. 95,630 sq yards of land on which, construction of building is not permissible cannot be included in the definition of asset as defined section 2(ea) of the W.T.Act, 1957. Further, the industrial use has been permitted only on land to the extent of 10,607 sq yards and on this land , the assessee has constructed industrial buildings with prior approval of appropriate authority and consequently this portion of land is also not chargeable to the Wealth Tax in accordance with the exclusionary provision provided to section 2(ea) W.T.Act,1957. This legal proposition is supported by the decision of Hon'ble Bombay High Court in the case of Prabhakar Keshav Kunde vs CIT (supra), where the Court held that land on which any construction is not allowed under any law for time being in force is not an asset within the meaning of section 2(ea) and consequently is not included in assessable wealth. Further, where property in question consists of a part of land on which construction is possible and part of land which is not so, value of second type of land should be excluded, while computing wealth of assesee. The Hon'ble Delhi High Court in the case of CWT vs DCM Ltd. 19
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(290 ITR 615) held that once land or any building there upon making it a combination of land and building is not a urban land, then it could not be an asset as defined u/s 2(ea) of W.T.Act, 1957. Further, the Hon'ble Punjab & Haryana High Court in the case of CWT vs R.K.Mehra (supra) had considered an identical issue and held that a farm land, on which construction was not permissible under municipal law, would not be includable in definition of urban land chargeable to wealth tax, even though assessee has constructed a farm house on said land. Therefore, we are of the considered view that the land in question does not come within definition of asset as defined u/s 2(ea) of the Act, because 10% of the land has been used for the purpose, for which it has been acquired and also constructed building thereon by the approval of appropriate authority and the remaining 90% of land has been kept open to the sky, as per the terms and conditions of acquisition, as well as conversion order and consequently, the remaining 90% of the land is covered in exclusionary clause (b) of the explanation to section 2 (ea) of the W.T.Act, 1957
11. Coming to third argument of the Ld. AR for the assessee. The Ld. AR for the assesee has advanced an alternative argument in light of the decision of Hon'ble Apex Court in the case of Radhasoami Satsang vs CIT (1992 60 taxmann.com 248) (SC) to the effect that department has utterly disregarded the rule of principles of consistency, which is evident from the fact that where, the AO has accepted wealth tax returns filed by 20 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
the assessee for some years, whereas in some years, the AO has adopted different value, as per the valuation done by the DVO disregarding the rule of principles of consistency. He, further submitted that even though principles of res judicata may not apply to income tax proceedings, it is very desirable that there should be finality and certainty in all litigations including litigation arising out of income tax, therefore when wealth tax return filed by the assessee have been accepted for some year without any additions to net wealth , no reasons for the AO to make additions for few years on the basis of report of DVO. We find that the department has determined net wealth of the assessee, on the basis of valuation done by the DVO, in respect of property for AY 1993-94, 1994-95 and 1995-96, whereas from assessment year 2006-07 on wards to till date, the department has not assessed the assessee to wealth tax. From the above, it is very clear that the AO has assessed, the assessee for some year on the basis of report of DVO, whereas for some years, the return filed by the assesee has been accepted without any additions to net wealth declared by the assessee, even though there is no change in facts. It is a well settled principles of law that although, principles of res judicata may not apply to income tax proceedings, but Rule of consistency needs to be followed, unless there is change in facts and circumstances for taking a different view. This legal position is supported by the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang vs CIT (Supra), where the Hon'ble Supreme Court has reiterated 21 WTA Nos.08/Mum/2018 & 05/Mum/2010 JK Investo Trade (India) Ltd.
the principles of consistency in income tax proceedings. Therefore, we are of the considered view that even on this count the AO was incorrect in determination of net wealth on the basis of report of DVO for the impugned assessment years.
12. In this view of the matter and respectfully following, the ratio of case laws discussed hereinabove, we are of the considered view that the AO was incorrect in determination of net wealth on the basis of DVO report. The Ld. CIT(A) after considering relevant facts has rightly deleted additions made by the AO towards valuation of property for the purpose of charging wealth tax. We do not find any error in the findings of ld.CIT(A) and hence , we are inclined to uphold the CIT(A) order and dismissed appeal filed by the revenue.
13. In the result, appeal of the revenue is dismissed. WTA.No. 05/Mum/2010
14. The assessee has raised the following grounds of appeal which are reproduced are as under:-
1) The learned CWT (A) has erred both in Law as well as on facts in assessing the value of Sanad land at Rs.8,19,53,463/- under schedule in of the Wealth Tax Act 1957.Without appreciating the fact that the said land is not liable for Wealth Tax.
2) The learned CWT (Appeal) has further erred is not appreciating the fact that the appellant was not allowed construction on the open land, Therefore the appellant's case is covered by the exclusionary part of the definition of 'urban land' Under section 2(ea)(ii)(b). Therefore the said land is outside purview of Wealth Tax.22
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3) Without prejudice to above it is submitted that if at all the Sanad land is assessable to wealth tax, then the value of the said Land should be restricted to the value of Rs.89,30,000 as declared by the appellant and not as per Schedule III as assessed by the W.T.O. The appellant submits that the appellant had let out house property which yielded income & the same is not for letting out land and as such schedule III valuation would not be relevant in valuing land in the present instance.
15. The facts and issues involved in this appeal is exactly identical to the facts and issue, which we had already considered in WTA.No. 2/Mum/2018 for AY 2004-05, but for limited change in facts to the extent of property in question was given on rent for the impugned assessment year. We have already considered, the impugned land and building thereon for the purpose of wealth tax within the meaning of definition of asset as defined u/s 2(ea) of the W.T.Act, 1957 and after considering relevant facts and also clause(b) of explanation to section 2(ea) of the W.T.Act, 1957 held that the land in question is not a urban land consequently, the same cannot be included in the definition of asset as defined u/s 2(ea) of the W.T.Act, 1957. The reasons given by us in the proceedings paragraph in WTA. No. 2/Mum/2018 shall mutatis mutandis apply to this apply also. Therefore, for detailed reasons recorded in proceedings paragraph, we are of the considered view that the AO was erred in determining the value of the land as per schedule-III to the Wealth Tax Act, 1957 and hence, we direct the AO to delete additions made towards value of land to the net wealth declared by the assessee for the impugned assessment year.
16 In the result, appeal of the assessee is allowed. 23
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17. As a result, appeal filed by the assesee is allowed and appeal filed by the revenue is dismissed.
Order pronounced in the open court on this 09/08/2019 Sd/- Sd/-
(PAWAN SINGH) (G. MANJUNATHA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 09/08/2019
Thirumalesh 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.
स यािपत ित //True Copy//
(Asstt. Registrar)
ITAT, Mumbai