Income Tax Appellate Tribunal - Bangalore
Satel Patel, Bangalore vs Deputy Commissioner Of Wealth Tax, ... on 24 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH ' C '
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
W.T. A. Nos.14 to 18/Bang/2016
(Assessment Year : 2008-09 to 2012-13)
Shri Satel Patel,
No.130, Railway Parallel Roiad,
Kumara Park West,
Bangalore-560 020. .... Appellant.
Vs.
Dy. Commissioner of Wealth Tax,
Central Circle 2(2), Bangalore. ..... Respondent.
Appellant By : Shri R.Ramakrishnan, C A
Respondent By : Shri Sunil Kumar Agarwal, Addl. CIT (D.R)
Date of Hearing : 21.09.2017.
Date of Pronouncement : 24.10.2017.
O R D E R
Per Shri Vijay Pal Rao, J.M. :
These five appeals by the assessee are directed against the composite order dt.14.07.2016 of Commissioner of Income Tax (Appeals)-11, Bangalore for the Assessment Years 2008-09 to 2012-13.
2. The assessee is an individual and filed return of net wealth for the years under consideration. The Assessing Officer noted that the assessee 2 WTA No.14 to 18/Bang/2016 has claimed the property at R.T. Nagar as exempt property as per Section 2(ea)(v) of the Wealth Tax Act. The Assessing Officer accordingly issued a notice under Section 17 of Wealth Tax Act dt.25.03.2015 for reopening of the assessment for these five assessment years on the reason that the assessee has claimed two properties at R.T. Nagar valued at Rs.1,52,60,000 as well as at Adugodi valued at Rs.41,53,181 as exempt properties. However in the opinion of the Assessing Officer no such exemption exists in Wealth Tax Act and accordingly the assessment was reopened for assessing the property as net wealth of the assessee. The assessee contended before the Assessing Officer that the property at R T Nagar cannot be considered as wealth under the provisions of Section 2(ea) of Wealth Tax Act as the construction of said property is not permissible being in litigation. The assessee referred to the litigation pending between the HMT Employees Co-operative House Building Society and Bangalore Development Authority (BDA). It was also submitted that the BDA has already taken over the property in question and also using the same. The Assessing Officer did not accept the contention of the assessee and made the addition in the Net Wealth in respect of the property at R T Nagar as well as property at Adugodi. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and contended that since the BDA has already taken over the property and also constructed one public toilet on the said land and therefore, it is not possible to do construction on the said property. The assessee also brought to the notice of the CIT (Appeals) that the HMT 3 WTA No.14 to 18/Bang/2016 Employees Co-operative House Building Society has challenged the action of the BDA in Court of City Civil Court in Original Suit No.1914/2009. Therefore, the assessee contended that the property cannot be included in the net wealth of the assessee as it is exempted under the provisions of Section 2(ea) of Wealth Tax Act. The CIT (Appeals) was not impressed with the contention of the assessee and upheld the action of the Assessing Officer.
3. The assessee has raised common grounds in these appeals. The grounds raised for the Assessment Year 2008-09 are as under :
4WTA No.14 to 18/Bang/2016
3. Before us, the learned Authorised Representative of the assessee has submitted that the assessee is a senior citizen and was allotted the property at R T Nagar by the HMT Employees Co-operative House Building Society vide Sale Deed dt.7.12.1991 however, since this site was reserved for the purpose of constructing a Kalyan Mandap / Auditorium / Shopping Complex, the BDA has taken over this property which is situated just opposite to the R T Nagar Police Station. The learned Authorised Representative has further submitted that the property has been used for the general public for playing cricket as well as walking.
Further the BDA has taken over the entire property and covered with fence apart from constructing a public toilet on one of the corners of the plot. Thus the learned Authorised Representative has submitted that when the assessee has been dispossessed from the property and not in the physical possession then the said property cannot be included in the 5 WTA No.14 to 18/Bang/2016 net wealth of the assessee in terms of Section 2(ea) of Wealth Tax Act. He has referred to the reply / written submission filed by the BDA before the City Civil Court in the suit filed by the other owners of the property and submitted that the BDA has claimed to have taken over the property in question and also constructed a public toilet as well as covered the same with fence. Therefore, this property being an urban land and no construction can be made on the property then it cannot be considered as part of the net wealth of the assessee. He has relied upon the decision of Hon'ble Supreme Court in the case of Commissioner of Wealth Tax Vs. Viswanath Chatterji 103 ITR 536 and submitted that Hon'ble Supreme Court while considering the expression 'belongs' has observed that it is the property of a person or that which is in his possession as of right which is liable to wealth tax. Therefore the Hon'ble Supreme Court has held that liability for wealth tax arises out of the ownership of the asset and not otherwise. Mere possession or joint possession unaccompanied by the right to or ownership of property would therefore not free property within the definition of 'net wealth' for it would not then be an asset belonging to the assessee. The learned Authorised Representative thus submitted that when the property has been taken over by the BDA and it is not possible for the assessee to make the construction over the property in question then it cannot be treated as net wealth of the assessee. He has also relied upon the decision of the Hon'ble Supreme Court in the case of CIT Vs. Podar Cements 226 ITR 625 and submitted that at the most it is bad investment 6 WTA No.14 to 18/Bang/2016 without any value since the property is in dispute and the outcome of the same is not visible in near future.
4. Alternatively the learned Authorised Representative has submitted that the fair market value of the property in view of the deficiencies and defects in the right and title as it was already taken over by the BDA would be NIL for the purpose of net wealth.
5. On the other hand, the learned Departmental Representative has submitted that the property at R T Nagar has been registered in the name of the assessee as per the sale deed and therefore, the assessee has not given up its claim of right and title over the property. It is also not in dispute that the property was allotted by the HMT Employees Co- operative House Building Society vide sale deed dt.7.12.1991. Even otherwise when the assessee and others are contesting their ownership over the properties in the City Civil Court then the assessee has still not given up the claim over the property. Therefore, for the purpose of wealth tax, the assessee remains the owner of the property and it is assessable to tax. He has relied upon the orders of the authorities below.
6. We have considered the rival submissions as well as the relevant material on record. The property at R T Nagar has been allotted to the assessee by the HMT Employees Co-operative House Building Society vide Sale Deed dt.7.12.1991. As per Clause C of the recital of the sale deed, it is clear that the property in question was actually reserved for the purpose of constructing Kalyan Mandal/Auditorium/ Shopping 7 WTA No.14 to 18/Bang/2016 Complex. For ready reference, we reproduce the Clause C of the recitals of the sale deed as under :
"(C) WHEREAS SITE BEARING NO.0 ADMEASURING 75784 SFT. IN THE SAID LAY OUT MOREFULLY DESCRIBED IN THE SKETCH APPENDED HERETO WAS RESERVED FOR THE PURPOSE OF CONSTRUCTING A KALYANA MANTAP AUDITORIUM/SHOPPING COMPLEX"
Thus it is apparent that the property in question was reserved for the purpose of construction of Kalyan Mandal / Auditorium / Shopping Complex and was not for any house construction. Though co-operative society has transferred this land to the assessee however, the transfer is otherwise not permissible as per the plan and let out of the land in question. Further the authorities below have not disputed the fact of BDA has taken over this property and covered by fence. It is also not disputed that BDA has constructed a public toilet on this property. The CIT (Appeals) has noted all these facts in the impugned order but turned down the appeal of the assessee in para 7 as under :
8WTA No.14 to 18/Bang/2016 The assessee has filed the photograph showing the public toilet has already been constructed by the BDA as well as the property is covered by fencing. We further note that in the written submission / reply filed by the BDA in Original Suit No.1914/2009 the BDA has stated that the HMT Employees Co-operative House Building Society has no right or authority to deviate any portion of civic amenities site since the interest of public at large is involved. Thus the BDA has claimed that the property in question is in fact a civic amenities site and reserved for Auditorium and therefore, no private construction can be erected on this property. The BDA has accepted in unequivocal terms that it has completely fenced the entire property in question in order to safeguard the civic amenities site. Therefore once the BDA has already taken over the possession of the property and constructed public toilet on it the assessee is no more in the physical possession of the property. In view of all these facts when the BDA has taken over and covered the property in question by the fence as well as constructed a public toilet then till the assessee is given the possession back there is no question of any 9 WTA No.14 to 18/Bang/2016 construction on the said property. As the assessee is not in the physical possession then the possibility of constructing the same is completely ruled out. The provisions of Section 2(ea) of Wealth Tax Act r.w. Expln. 1(b) specifically excludes the urban land on which construction of building is not permissible. Therefore when the construction of the building is completely ruled out in the case as it was taken over by the BDA due to the reason that the land in question was reserved for civic amenities then the said land cannot be included in the net wealth of the assessee so long as the assessee has no access and right to construct the property. The Hon'ble Supreme Court in the case of CIT Vs. Bishwanath Chatterjee & Ors. 103 ITR 536 while dealing with the definition of 'net wealth' as well as the 'property belonging to' has observed in paras 7 & 8 as under :
"7. The liability to wealth-tax, therefore, arises in respect of the "net wealth" of the assessee, which expression has been defined as follows in section 2(m) :
"(m) 'net wealth' means the- amount by which the aggregate value computed in accordance with the provisions of this Act of all the -assets wherever located, belonging to tie assesses on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than,........."
8. The expression "belong" has been defined as follows in the Oxford English Dictionary:-- " To be the property or rightful possession of." So it is the property of a person, or that which is in his possession as of right, which is liable to wealth-tax. In other words, the liability to wealth-tax arises out of ownership of tie asset, and not otherwise. Mere possession, or joint possession, unaccompanied by the right to, or owner ship of property would therefore not bring the property within the definition of "net wealth" for it would not then he an asset "belonging" to the assessee."
10WTA No.14 to 18/Bang/2016 Accordingly, when there is an apparent defect in the title of the assessee over the land in question and the assessee has already been dispossessed from the property as taken over by the BDA, the property cannot be considered as an urban land as per the provisions of Section 2(ea)(v) r.w. Expl. 1 as the construction on the property is not possible at all. As it is apparent that the land in question was reserved for public amenities and therefore the HMT Employees Co-operative House Building Society was having no right to use the said land other than the public amenities. Hence the co-operative society cannot transfer better title or right in favour of the assessee than it was vested with the co- operative society. Accordingly, the assessee will not get any better right or title in respect of land in question than the transferor i.e. HMT Employees Co-operative House Building Society. Therefore the right to construct the property was neither vested with the HMT Employees Co- operative House Building Society nor vested with the assessee and consequently it will not fall in the definition of urban land as per Section 2(ea)(v) r.w. Expln. 1 of Wealth Tax Act. When the assessee has already lost the property then the question of net wealth does not arise. Accordingly, in the facts and circumstances of the case, we are of the view that the property at R T Nagar cannot be treated as net wealth of the assessee. Accordingly, we delete the addition made by the Assessing Officer in the net wealth in respect of the property at R T Nagar.
11WTA No.14 to 18/Bang/2016
7. As regards the site at Audugodi, we do not find any error or illegality in the orders of the authorities below in adding the same in the net wealth of the assessee.
8. In the result, the appeals of the assessee are partly allowed.
Order pronounced in the open court on 24th Oct., 2017.
Sd/- Sd/-
(INTURI RAMA RAO) (VIJAY PAL RAO)
Accountant Member Judicial Member
Bangalore,
Dt.24.10.2017.
*Reddy gp
Copy to :
1 Appellant 4 CIT(A)
2 Respondent 5 DR. ITAT, Bangalore
3 CIT 6 Guard File
Senior Private Secretary
Income Tax Appellate Tribunal
Bangalore.