Income Tax Appellate Tribunal - Cochin
Smt. Meera Jacob vs Wto on 17 November, 2006
ORDER
1. The assessee has filed these 11 appeals under the Wealth Tax Act challenging the orders of the Commissioner of Wealth-tax (Appeals)-IV, Kochi for the assessment years 1989-90 to 1999-2000. The facts pertaining to these appeals as well as most of the issues are common, hence these appeals were heard together and now are being disposed of by this common order for the sake of convenience.
2. We will first take up the appeals relating to assessment years 1989-90, 1990-91, 1991-92 and 1992-93 as we will have to decide the issues considering the pre-amended Wealth Tax Act.
WTA Nos. 31,32,33 and 34 (Coch.)/2006-assessment years 1989-90,1990-91, 1991-92 and 1992-93.
3. The briefly stated facts pertaining to these appeals are as under : The assessee was an NRI. She stayed in Singapore from 1962 to 1993 and returned to India and settled in Kottayam. The assessee was owning 66.717 cents of land within the municipal limits of Kottayam and the said land was purchased by the assessee for the total consideration of Rs. 1,00,491 during the period 1-4-1975 to 4-3-1977 by three different registered conveyances. According to the assessee, the said land was low lying muddy, wet and marshy land. The assessee has spent Rs. 9,54,700 for construction the compound wall and part-filling of the land with earth up to 31-3-1981. The assessee started construction of residential building complex in December, 1989 and continued the same till 31-3-1990. It appears that after 31-3-1990, the half constructed structure of the building did not see any further improvement. The assessee had obtained the sanction of the appropriate authority for constructing the residential building complex on the said land on 7-10-1989. After 1-4-1990, no further improvement or development was made on the said property and the assessee sold the said property having partly constructed structure of the building on 27-3-2000 for the sale consideration of Rs. 1,00,07,550. The assessee filed her return of wealth for the assessment year 2000-01 declaring the long-term capital gain on the sale of the said property.
4. In addition to the above property, the assessee owns 64 cents of land in A Kanjikuzhi within the municipal limits of Kottayam Municipality. The assessee claimed that out of the 64 cents of said land, the assessee had occupied 40 cents of land for her residential house and remaining 24 cents was used for agricultural operations. The assessee was also owning 24 cents of land in Vijayapuram village and she claimed that the said land was also used for cultivation of agricultural crops like tapioca plantation and other kitchen crops. Now, as far as the present four appeals are con-cerned, the first issue which arises for our consideration and which is only in assessment year 1989-90 is whether the CWT (Appeals) went wrong in denying exemption to the assessee in respect of the land/property in Muttambalam village having the area of 66.717 cents.
5. We have heard the Id. Chartered Accountant Shri Z.T. Zacharia for the assessee and the Id. departmental Representative Smt. A.S. Bindu for the revenue. The Id. CA reiterated his arguments in respect of this issue which was made before the lower authorities. The sum and substance of the C argument of the Id. CA is that on the valuation date relevant to the assessment year 1989-90, the said land was agricultural land and hence the said land should have been exempted from the definition of "asset".
6. On the other hand, the Id. DR vehemently submitted that as per the contention of the assessee, the said land was never used for the agricultural operations as it was marshy, wet and muddy land. It was further contended that no agricultural operation was carried out on the said land and no proof is also brought on record to show that any agricultural operation was carried. It was further contended that merely because the land is shown as paddy land in the conveyance deed, on that basis, the assessee cannot claim that the said land was used for agricultural pur poses. It was further argued that the assessee started construction after filling the said land with earth in 1989 and hence, there is no substance in the argument of the assessee.
7. We have heard the rival submissions of the parties. We have also carefully considered the facts pertaining to this issue as per material placed before us. The Id. CA was fair enough to submit that actually there was no agricultural operation carried out by the assessee on this land but the nature of that land was agricultural land. In our opinion, merely because a particular land is described as agricultural land in some documents that cannot be treated as agricultural land as claimed by the assessee. Admittedly, no agricultural operation or cultivation is carried on the said land. We, therefore, reject the contention of the assessee in respect of this land and dismiss the relevant ground taken by the assessee in the assessment year 1989-90.
8. The next issue for our consideration which is common in assessment years 1989-90 to 1992-93 is whether the CWT (Appeals) went wrong in denying exemption claimed by the assessee in respect of the 48 cents of land i.e., 24 cents of land in Kanjikuzhi and 24 cents of land in Vijayapuram village (Pulickal property) as agricultural land. We have heard the rival submissions of the parties. As far as this issue is concerned, the assessee's contention in respect of the 24 cents of land in Kanjikuzhi village is that out of 64 cents of land 40 cents was occupied for the residence of the assessee and 24 cents of land was used for agricultural operations. As far as 24 cents of land in Vijayapuram village (Pulickal property) is concerned, it was argued that the said land was used for cultivation of agricultural crops like tapioca crop and other kitchen crops. We have carefully considered the reasoning given by the lower authorities. We find that the assessing officer has relied on the decision of the Hon'ble Supreme Court in the case of CWT v. Officer-in-Charge, court of Wards wherein the Hon'ble Supreme Court has broadly laid down the principles for determining the nature of agricultural land. On the perusal of the record, we find that no evidence has been produced by the assessee to show that in fact, the said two lands were involved in the agricultural operations. The assessee has also not filed anything before us to substantiate her claim. We do not find any reason to interfere with the orders of the lower authorities. We therefore, reject the claim of the assessee and dismiss the relevant grounds taken by the assessee in all the four assessment years.
9. The next important and core issue involved in all these four years is in respect of the valuation of the above referred three properties, we will first take up the issue of valuation in respect of land with partly constructed building complex admeasuring 66.717 cents in Muttambalam village within the municipal limits of Kottayam municipality. The facts pertaining to this issue have already been started hereinabove and hence in order to avoid repetition of facts, we directly go to the issue. The assessee has purchased this property from 1-4-1975 to 4-3-1977 for the total sale consideration of Rs. 1,00,491. It appears that this property was a muddy and marshy land and the assessee had to put lot of earth for making it useful. We have already held that no agricultural operation was carried out by the assessee on the said land nor was it used for agricultural purposes. As per the facts on record, the assessee planned to construct a five-storied building on the said land and the necessary sanction from the Kottayam Municipality and other appropriate authorities was obtained on 7-10-1989. Thereafter, the assessee started construction on the said land and the said construction continued till 31-3-1990 and thereafter, that construction was stand-still till 27-3-2000 when the assessee sold the said property for the total consideration of Rs. 1,00,07,550.
10. In the assessment year 1989-90, the assessee valued the said property at Rs. 10,55,191 i.e., the purchase consideration of Rs. 1,00,491 plus cost of improvement during till 31-3-1981 of Rs. 9,54,700. The assessee declared the value of the said property for the assessment year 1990-91 at Rs. 23,17,191 further adding the cost of construction of the building complex alleged to be made till 31-3-1990 amounting to Rs. 12,62,000 and the assessee declared the said value for further two assessment years i.e., assessment years 1991-92 and 1992-93. In respect of these four assess-A merit years the argument of the assessee before the CWT (Appeals) was that when the land was purchased it was a muddy, wet and marshy land and the assessee had to spend a sum of Rs. 9,54,700 for the part filling of the land as well as construction of compound wall, hence at least in the assessment year 1989-90 there was no much more value attached to the said land. The CWT (Appeals) was not impressed with the argument of the assessee. In the opinion of the CWT (Appeals), the said land was situated on Shastri Road, very much in the heart of the town and the CWT (Appeals) was also not agreeing with the valuation made by the assessing officer for this assessment year. As the assessee has sold out the said property on 27-3-2000 for the gross consideration of Rs. 1,00,07,550, the assessing officer has adopted the following valuation in respect of this 66.717 cents of land in survey No. 19/1 of Muttambalam Village in Kottayam Municipality. The assessing officer has valued the land by adopting the following rates:
(i) Assessment years 1989-90 and 1990-91 @ Rs. 10,000 per cent
(ii) Assessment years 1991-92 and 1992-93 @ Rs. 12,000 per cent
11. The CWT (Appeals) issued notice of enhancement under Section 23(5) of the W.T. Act. Before issuing the notice of enhancement, the CWT (Appeals) has obtained the remand report from the assessing officer in respect of the comparable sale instances for the period 31-3-1989 to 31-3-1999. It appears that the CWT (Appeals) also heard the Authorised Representative of the assessee and he was also furnished with the copy of remand report. The CWT (Appeals) also furnished to the assessee a copy of the letter received by the assessing officer from the Sub-Registrar (Addl.), Kottayam. The assessee raised objection on the enhancement by contending that the land was situated in marshy, low lying and spongy land and, therefore, the price of the land was low. The CWT (Appeals) did not agree with the contention of the assessee as the assessee has started to construct a five-storied building on the said land. Hence, in the opinion of the CWT (Appeals) for providing a strong foundation of the five-storied building, it cannot be said that the area was marshy. The CWT (Appeals) proposed to enhance the valuation of the said land as under:
Sr. No. Valuation Date Asst. Year Rate per cent
1.
31-3-1989 1989-90 Rs. 35,000
2. 31-3-1990 1990-91 Rs. 38,000
3. 31-3-1991 1991-92 Rs. 45,000
4. 31-3-1992 1992-93 Rs. 55,000
12. The CWT (Appeals) called for a remand report of the assessing officer which is reproduced in the order of CWT (Appeals) in paragraph 9 which is as under:
9. The remand report received from the assessing officer is extracted below:
Kindly refer to the above. Enquiries were made with the SRO, Kottayam to obtain comparable instances of sale for the period 31-3-1989 to 31-3-1999. The SRO has furnished only 3 instances of sale which is shown below:
Year Extent of land Sale value Rate/Cent Rs.
Rs.1992
11.53 Are/28.82 cents 1,60,000 5,551 1998 1.3 Are/3.475 cents 4,00,000 1,15,100 1999 1.52 Are/3.8 cents 4,00,000 1,05,250 The SRO has further stated that as per the State Government directive, the current fair market value for land in the area is Rs. 3 lakhs per Are i.e., Rs. 1,20,000 per cent.
From the information gathered from the SRO it appears that there is material difference in the fair market value of land as shown in the records of the SRO and those adopted by the assessing officer for 1998-99 and 1999-2000.
The reason for the difference could be the nature of land held by the assessee. The assessee has stated that the land was very marshy and boggy submerged with dirty and filthy water. It is a fact that the land comprising Nagampadam area of Kottayam in which the assessee's land is situated was very marshy and boggy some years back. A great extent of the land had been reclaimed at a substantial cost by land owners.
The assessee has taken the stand that the land owned by her was very marshy and boggy and has been reclaimed at substantial cost. It is also stated that she has partly constructed a building. It is her averment that her plot is at a disadvantage because of the narrow approach road from the main road as well as the partly constructed building for which the purchases would have to spend considerable sum to complete the construction. She has also furnished instances of sale of purported garden land. The details are as under:
Year Extent of land Sale value Rate/cent Rs.
Rs.
1989-90 5 cents 61,000 12,200 1990-91 5 cents 37,500 7,500 1990-91 5.866 cents 43,000 7,350 1991-92 27.75 cents 1,10,000 3,963 It appears that the details provided by the SRO as well as the assessee do not provide a guideline for determining the fair market value of the land in question as the instances of sale/transactions are very few and the nature of the land may also vary.
I am enclosing the copies of the letters from SRO, Kottayam as well as the A assessee for your kind perusal.
13. The assessee filed her written objections to the notice of enhancement which are reproduced by the CWT (Appeals) in his order in paragraph 10 in summarized manner is as-under:
10. The AR has filed written objections to the notice of enhancement. His contentions are summarized below:
(a) The plot in question is just in front of the building occupied, by the Income-tax Office and the assessing authority is fully aware of the nature of the plot.
(b) It is wrong to hold that no value could be attached to the partly constructed building.
(c) In the sale deed, whereby the appellant conveyed the property, mention is made about the permission granted by the Kerala Government to construct the building complex. It is, therefore, contended that the land was not the attraction of the purchaser, but the partly constructed building complex in the land and the permit for further construction of the purchaser.
(d) The proposal not to attract any value to the partly constructed building is not amenable to reason and facts. It is beyond apprehension also to imagine that a construction costing Rs. 22,16,700 (massive strong and costly foundation with plinth beams and other structures in the low lying marshy, spongy land, columns and pillars and other structures for the first floor for a 5 storied residential complex in 2 blocks) on a plot of land costing Rs. 1,00,491 has no value and the value of property is absolutely attributable to land only.
(e) Valuation of land : The property is right in front of the Income-tax Office and the assessing officer is quite familiar and conversant with the nature of the property. Even the value assigned by the assessing officer is on the higher side.
(f) The sale price of Rs. 1,00,05,550 received by the appellant on 27-3-2000 cannot be taken as a guideline for fixing the market value for the earlier years from 1988-89 to 1998-99.
(g) Before the assessing officer, the appellant had produced copies of sale deeds where the sale price recorded is range from Rs. 1,266 and Rs. 12,200 per cent during the years 1975 to 1992.
(h) The assessing officer has not made available sale deeds of comparable cases cited and therefore, no considered rejoinders could be filed.
14. The CWT (Appeals) did not accept the contentions of the assessee and he ultimately enhanced the valuation as adopted by the assessing officer as under:
Sr. No. Valuation date Asst. Year Rate per cent
1.
31-3-1992 1992-93 Rs. 55,000
2. 31-3-1991 1991-92 Rs. 45,000
3. 31-3-1990 1990-91 Rs. 38,000
4. 31-3-1989 1989-90 Rs. 35,000
15. In our opinion, a reasonable view has been taken by the CWT (Appeals) and no interference is called for. Admittedly the property was sold for Rs. 1,00,05,550 and on that property construction was commenced by the assessee in assessment year 1989-90 itself. Moreover, the assessee has also not filed any valuation report of the registered valuer. We, therefore, confirm the order of the CWT (Appeals).
16. The next issue is regarding the valuation of 48 cents of land which is claimed by the assessee to be agricultural land. As stated hereinabove, the assessee is owning the two properties more particularly, 64 cents of land in Kanjikuzhi out of which 24 cents of land is claimed to be agricultural land and 24 cents in Vijayapuram village which is also claimed to be agricultural land. In this case, it is not disputed that both these lands are situated within the municipal limits of Kottayam Municipality. We have already held that these two lands cannot be treated as agricultural lands.
17. Now, we are dealing with the issue of valuation of these lands. In respect of property at Vijayapuram village, the assessing officer has noted that in Survey No. 72/1, the assessee has 10 cents of land and she purchased two plots of land which are adjacent to the above 10 cents of property for a total consideration of Rs. 2,80,000 at Rs. 20,000 per cent on 17-11-1992 and 24-11-1992 respectively. The assessing officer treated the entire land as a non-agricultural land. As far as the original 10 cents of land is concerned, the same was valued at Rs. 10,000 per cent for the assessment years 1989-90 to 1992-93, but no valuation is made in respect of 14 cents up to assessment year 1992-93 as admittedly the 14 cents of land was purchased in two plots after the valuation date for the assessment year 1992-93.
18. In respect of the Kanjikuzhi property the assessing officer accepted the assessee's claim that 24 cents out of 60 cents of land was agricultural land and hence no value in respect of the 24 cents was added to the net wealth for the assessment years 1989-90 to 1992-93.
19. In respect of the valuation of 24 cents of land in Kanjikuzhi property and 24 cents of land in Vijayapuram village (Pulickal property), the assessee has taken a specific ground contending that assessing officer as well as the first appellate authority ought to have found that the valuation of the aforesaid 48 cents of land taken by the assessee was reasonable taking into consideration the nature of land and prevailing market conditions and both went wrong in fixing a fanciful market value without any basis. From the perusal of the assessment orders, we find that the assessing officer has not added the value of 24 cents of land at Kanjikuzhi A in the computation of net wealth of the assessee. Moreover, we also find that this was not the issue before the First Appellate Authority also. Hence, the ground taken by the assessee in respect of this particular issue is totally misconceived. As far as the issue regarding valuation of 24 cents of land in Vijayapuram village (Pulickal property) is concerned, we find that the assessing officer has only considered 10 cents of land and not 24 cents for the purpose of valuation for the assessment years 1989-90 to 1992-93. Moreover, we find that the valuation made by the assessing officer is very reasonable. We do not find any reason to interfere with the orders of the assessing officer. We, therefore, decide this issue against the assessee and in favour of the revenue and the relevant grounds stand rejected.
WTA Nos. 35,36,37,38,39, 40 and 41 (Coch.)/2006 assessment years 1993-94 to 1999-2000.
20. Now, we are taking up the appeals for the assessment years 1993-94 to 1999-2000 being WTA Nos. 35, 36, 37, 38, 39, 40 and 41(Coch.)/2006. In these appeals, the assessee has taken the following grounds which are common in all the appeals:
1. The order of the wealth-tax Officer, Ward-1, Kottayam, dated 27-3-2002 No. M-82 in the wealth-tax assessment under Section 16(3) read with Section 17 of the Wealth Tax Act for the assessment year 1993-94 and the order of the Commissioner (Appeals)-IV, Kochi No. WTA 23/(Common order) in WTA 23 to 29/K/CIT-IV/02-03, dated 12-1-2005 D are not maintainable to the extent stated below as they are opposed to law, against facts and weight of evidence.
2. The assessing authority as well as the first appellate authority went wrong in denying the exemption claimed for the 48 cents of land (24 cents in 64.104 cents and 24 cents in the Pulickal property-10 cents + 7 cents + 7 cents) used for regular agricultural operations, in arriving at the taxable wealth of the appellant as it will not fall within the definition of "asset" under Section 2(ea) of the Wealth Tax Act.
3. The assessing authority as well as the first appellate authority ought to have found that the 66.717 cents of land in Muttambalam village fully occupied by a partly constructed building complex was not taxable under the Wealth Tax Act as it falls out of the definition of "asset" under Section 2(ea) of the Wealth Tax Act and their view that it has to be construed as "urban land" exigible wealth-tax, is erroneous, perverse and against law.
4. (a) If the aforesaid 48 cents and the partly constructed building complex in the 66.717 cents in Muttambalam village are exigible to wealth-tax, the assessing authority as well as the first appellate authority ought to have found that the valuation of the said 48 cents and the 66.717 cents of land proposed by the appellant was reasonable taking into consideration the nature of land and prevailing market conditions and they went wrong in fixing a fancible market value without any basis.
(b) The first appellate authority erred in enhancing the market value of 66.717 cents of land without any valid reasons, basis and also by ignoring the price obtained in comparable cases, the documents of which were produced by the appellant before him.
5. On the above grounds and those that may be urged at the time of hearing, it is prayed that the assessment order and the order of the first appellate authority may be set aside and the assessing authority may be directed to complete the assessment according to the return of net wealth by the appellant.
21. The first issue which arises in this case from ground No. 2 is regarding the nature of the land more particularly Vijayapuram village (Pulickal property) and Kanjikuzhi property. We have already dealt with this issue while deciding the assessee's appeal for assessment years 1989-90 to 1992-93. As far as 24 cents of land in Kanjikuzhi is concerned, the assessing officer has accepted the assessee's contention in the assessment year 1989-90 that it was an agricultural land but the assessing officer added the valuation of the said land in the assessment years 1993-94 to 1999-2000 by holding that as per Section 2(ea) of the Wealth Tax Act applicable with effect from assessment year 1993-94 or any subsequent assessment year, every urban land is chargeable to tax and as no distinction has been made between the agricultural and non-agricultural land the entire 24 cents of land irrespective of its nature is to be considered for computing the net wealth of the assessee. As far as the 24 cents of land at Vijayapuram village is concerned, for the same reason, he has considered both the lands for computing the total wealth of the assessee.
22. From the assessment year 1993-94, the Wealth Tax Act has undergone substantial change. The definition of "asset" in Section 2(e) was replaced by Section 2(ea). In view of the newly inserted definition of "asset" ie., Section 2(ea), certain specific assets are brought within the definition of "asset" and urban land is one of them. The definition of "urban land" is given in Clause (b) to Explanation 1 to Section 2(ed) and as per the said Explanation any land situated in any area which is comprised within the jurisdiction of a municipality and which has a population of not less than 10,000 is an urban land. In our opinion, no distinction is made in respect of agricultural and non-agricultural land. Though the Legislature has excluded some of the lands though they are otherwise urban land, but agricultural land is not excluded. In our opinion, the assessing officer has taken a correct view and the same is rightly confirmed by the CWT (Appeals). Therefore, no interference is called for. Ground No. 2 taken by the assessee stands rejected.
23. The next issue is whether the CWT (Appeals) is not justified in confirming the action of the assessing officer considering the value of 66.717 cents of land in Muttambalam village in computing the net wealth as it falls outside the definition of "asset" in view of the newly inserted Section 2(ea) of the W.T. Act with effect from assessment year 1993-94. The assessee purchased the said land which was wetty and marshy. It is not disputed in this case that the said entire land admesasuring 66.717 cents situated within the municipal limits of Kottayam municipality. We A have already narrated the facts in respect of the acquisition of the said property. The assessee obtained the requisite permission for constructing a five-storied building complex on the said plot and started construction in the year 1989. The assessee spent a sum of Rs. 12,62,000 on the construction of the building up to 31-3-1990 and thereafter no further amount was spent on the said construction. Subsequently, the assessee sold the said property on 27-3-2000. In this case, it is not disputed that after 31-3-1990 there was no continuation of construction till the date of sale of the said property. The assessee contended before the assessing officer that the said property has lost the character of open land as it was utilized for the construction of five-storied building complex. Hence, as per the newly inserted definition of "asset" in Section 2(ea), it cannot be treated as an urban land and not an asset also for the purpose of computation of net wealth within the meaning of Section 2(m) of the W.T. Act. In the opinion of the assessing officer, the land occupied by the building or shopping complex does not lose its character of land because of the starting of construction and incurring of some expenditure for the construction of building. The building and the land appurtenant thereto losses its character when the construction is completed. The assessing officer, therefore, proceeded to add the valuation of the land plus partly constructed building on the said land by including the value of the same in computation of the net wealth of the assessee.
24. The assessee challenged the orders of the assessing officer on this issue before the CWT (Appeals). The assessee assailed the orders of the assessing officer taking the same plea that the said property is exempt from wealth-tax as the partly constructed property is not urban land. The assessee relied on the decision of this Tribunal in the case of Federal bank Ltd. (WTA No. 93 (Coch.)/2005, dated 30-11-2005) wherein it is held that once the construction of the building is completed and the building has become functional, the dispute relating to the nature of the land should cease to exist. It was further held that the construction activity may spill over a period of more than one previous year and therefore, during such period when the building was under construction but could not be fully completed it is not possible to hold that the land was vacant. It is further held by this Tribunal that even if a single brick is laid on the vacant land as the initiation of the construction of the building and the building is constructed thereof, the land ceases to be a vacant land from the day of laying down of the first brick on the land. The character of the land has ceased to be vacant land for the purpose of wealth-tax even though literally speaking, the physical character of the land could still be held as a vacant land. The CWT (Appeals) finally concluded that in assessee's own case the building was abandoned after 31-3-1990 and as can be seen from the fact that no construction activity took place after 31-3-1990. The CWT (Appeals) distinguished this Tribunal's decision and held that the assessee's property is still an urban land and liable to be included in the computation of the net wealth of the assessee for all the assessment years more particularly, assessment years 1993-94 to 1999-2000.
25. We have heard the rival submissions of the parties. We have also carefully considered the facts as per material placed before us by way of record as well as paper book filed by the assessee. In the paper book, the assessee filed a copy of the map of the said property which is placed at page 24. The assessee has also filed six photographs taken from different angles of the said property. The argument of the Id. CA is two-fold. At the first instance, his submissions are that as it is admitted fact that major construction activity started in 1989 occupying the major portion of the said plot hence, it cannot be first of all treated as an open land and it has lost the character of open land, there is no question of making any distinction whether the said property is urban or rural land. The further submissions of the Id. CA is that from the assessment year 1993-94 what is to be included in the definition of asset in view of the newly inserted definition i.e. Section 2(ea) that is the "open land" situated within the municipal limits but the important aspect to be considered is that it should be absolutely open land except bearing the fact that some trees are standing on that. Once the construction is started on the major part of the land, it cannot be treated as an open land and there is no question of treating it as a land which is contemplated in the new Section 2(ea). Further submission of the Id. CA is that presuming that it is a land, still it cannot be treated as an urban land as it is a productive asset because the assessee started construction of residential complex on the said land. Hence in sum and substance, the Id. CA submitted that the said property cannot be considered for computation of net wealth of the assessee. Per contra, the Id. DR supported the orders of the lower authorities.
26. In this case, it is not disputed that the land was purchased long back during 1974-77 and it was lying idle. It is also not disputed that the assessee started the construction of the residential complex of the five-storied building on the same plot of land in the year 1989 and that construction continued till 31-3-1990. It is also not disputed in this case that after 31-3-1990 till the date of sale on 27-3-2000, the assessee has not carried out any further construction activity. Now, we will have to examine the first argument of the Id. CA whether the property has lost the character of land. From the photographs filed by the assessee, we find that RCC columns are constructed on the major portion of the land. No definition of "land" is given in the Wealth Tax Act. As per the New Oxford Dictionary of English (Oxford University Press, 1998, First Edition), the meaning of "land" is given as "the part of the earth's surface that is not covered by water, as opposed to the sea or air". In the ordinary parlance, "land" means "surface of the earth". In the case of Federal bank Ltd. (supra), this Tribunal has considered the issue and held as under:
6. In such circumstances, it is to be held that there was constructive utilization of the vacant land by the assessee to convert the plot into a business asset. The scheme of the wealth-tax, as it stands on the day of A assessment, is to exclude all productive assets from the ambit of net wealth and to levy tax only on non-productive assets. This Legislative intention has been made clear in the concept of "asset" encapsulated in Section 2(ea) of the Wealth Tax Act, 1957. As far as the assessee-bank is concerned, even though as on 31-3-1996 the particular land was lying physically vacant it was in the process of being converted into a building complex meant for the purpose of accommodating the office of the assessee-bank. Once the construction of the building is completed and the building has become functional, the dispute relating to the nature of the land should cease to exist. The most important question is whether during the interregnum period when the building was not completed or construction was only to be started, what would be the position of the land, as far as its nature is concerned, for the purpose of wealth-tax? The construction of huge buildings could not be completed during a particular previous year. The construction activity may spill over a period of more than one previous year. Therefore, during such period when the building was under construction but could not be fully completed, it is not possible to hold that the land was vacant. The land has already been utilised for business purposes even though the building proposed to be constructed did not become fully functional. Therefore, the utilization of the land for commencing the construction and utilization of the proposed building after construction has to be suitably differentiated. The utilization of the vacant land should not be confused with the ultimate enjoyment of the building proposed to be completed. Even though the building has not been completed, still the utilization of the land has become complete. Therefore, the argument of the revenue that the nature of the land ceases to be vacant land only when the building has been fully constructed and become functional is fallacious. That argument is against the spirit of law.
7. The whole confusion is caused because of the fact that the distinction between utilization of the land and completion of the construction of the building is not differentiated. So, theoretically speaking, even if a single brick is laid on the vacant land as initiation of the construction of the building and the building is constructed thereafter, the land ceases to be a vacant land from the date of laying down of the first brick on the land. The character of the land has ceased to be vacant land for the purpose of wealth-tax; even though literally speaking, the physical character of the land could still be held as vacant land.
27. It is not disputed that the assessee has already started construction occupying the major portion of the land and we find that even the RCC pillars are also constructed. In our opinion, the land cannot be treated as an open land. As far as the definition of "asset" in Section 2(ea) of the W.T. Act is concerned, that refers to the open urban land which means the land which is situated within the municipal corporation or cantonment limits. We find substance in the argument of the Id. CA and we are of the opinion that the said land was occupied by the partially constructed building and hence it lost the character of open land and it cannot be treated as a land for the purpose of the definition under Section 2(ea) of the Act. Hence, once it lost the character of open land, it is not necessary to decide whether it is situated in the urban area or rural area. We, therefore, hold that for the assessment years 1993-94 to 1999-2000, the said property cannot be treated as an urban land as it was occupied by the pertailly constructed structure of the building and it is outside the scope of definition of "asset".
28. Another argument of the Id. CA is that the land is a productive asset and hence that cannot be treated as an "asset" within the meaning of Section 2(ea) of the Act for the assessment years 1993-94 to 1999-2000. This Tribunal had an occasion to consider the newly inserted definition under Section 2(ea) of the Act in the case of A.A. Salam v. Asstt. CWT (WT Appeal Nos. 35,36,37,38 and 39 (Coch.)/2000 and 110 (Coch.) of 2005 and others). While interpreting the scope and legislative intent behind the introduction of Section 2(ed), this Tribunal has held as under:
8. While moving the Finance Bill, 1992, which is popularly known as Budget Speech, the Hon'ble Finance Minister explained the reasons and object for introducing changes to the Wealth Tax Act, 1957. The relevant part of his speech is as under:
67. The Wealth Tax Act, 1957, has far too many exemptions making its administration enormously complicated. The valuation of certain assets such as shares also presents problems, since very high market values reflecting speculative activity can lead to a heavy burden on shareholders who are long-term investors. There is also no distinction at present between productive and non-productive assets. The Chelliah Committee has suggested that, in order to encourage the tax payers to invest in productive assets such as shares, securities, bonds, bank deposits etc., and also to promote investments through Mutual Funds, these financial assets should be exempted from wealth-tax. Wealth-tax should be levied on individuals, Hindu undivided families and all companies only in respect of non-productive assets such as residential houses including farm houses and urban land, jewellery, bullion, motor cars, planes, boats and yachtswhich are not used for commercial purposes. The Committee has further suggested that such tax should be at the rate of one per cent, with a basic exemption of Rs. 15 lakhs. I propose to accept this recommendation and I hope this change will encourage investments in productive assets and discourage investment in ostentatious non-productive wealth'.
9. After the said Bill was converted into the Act, the CBDT vide Circular No. 636 dated 31-8-1992 explained the provisions of the Finance Act, 1992 and the relevant extract of the said Circular is reproduced as under:
54. With a view to stimulating investment in productive assets, the Finance Act has abolished wealth-tax on all assets except certain specified assets. The term "asset" will include guest houses and residential houses including farm houses within twenty-five kilometres from the local limits of any 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 but does not include a house which has been allotted by a company to an employee or an officer, or a director who is in the whole time employment, having a gross annual salary of less than two lakh rupees. It will also not include a A house for residential purposes which forms part of stock-in-trade. Further, it will include motor cars other than used in the business of running them on hire or which form part of stock-in-trade; jewellery, bullion, furniture, utensils or any other articles made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals (other than those used as stock-in-trade); yachts and boats and aircrafts (other than those used for commercial purposes), cash in hand in excess of Rs. 50,000 of individuals or HUFs and in case of any other person any amount not recorded in the books of account and urban land'.
10. Now, we will have to exaimine the scope of newly inserted the definition of "asset" vide Section 2(ea) in the Wealth Tax Act. As far as the issue before us is concerned, Clause (vi) to Section 2{ea) is relevant. On the plain reading of the said clause, it may give an impression that in the case of individuals and HUFs, the cash in excess of Rs. 50,000 is treated as an "asset" for the purpose of charging sections of the Wealth Tax Act. We find force in the argument of the Id. AR that after referring to the Hon'ble Finance Minister's speech while moving the Finance Bill, 1992 and subsequent Circular by the CBDT explaining the provisions of the said Act, it is clear that the Government was more concerned for stimulating the investment in the productive assets. Now, the meaning of the term "productive asset" should be ascertained from the speech of the Hon'ble Finance Minister as well as the aforesaid Circular of the CBDT. It appears from the speech of the Hon'ble Finance Minister that the Chelliah Committee appointed by the Government of India had suggested that in order to encourage the tax payers to invest in the productive assets such as shares, securities, bonds, bank deposit, etc. and also to promote investment to the mutual Funds, those assets should be exempted from wealth-tax. While indirectly defining the non-productive assets, more stress was given on residential houses including farm houses and urban land, jewellery, bullion, motor car, plane, boat and yacht which are not used for commercial purposes. Hence, while interpreting the term "productive asset", we have to interpret it in the context of the commercial assets. It means that assets which are used for commercial purposes are productive assets and assets which are not used for commercial purposes are non-productive assets. Though the term "commercial asset" has not been precisely defined, but the term "commercial activity" has been defined in the Law Lexicon Second Edition, Reprint 2000 by R. Ramanatha Iyer "to include any type of business or activity which is carried on for a profit." The term "commercial asset" has been defined as an asset which is a part of the business or activity which is carried on for a profit.
12. Now, we will have to consider the relevance of the speech of the Hon'ble Finance Minister while moving the Bill on the floor of the House as well as the Circular issued by the CBDT for finding out the intention of the Legislature to bring a particular provision on the statute book. The relevance of the Finance Minister's speech for the purpose of finding out the object of the amendment for interpreting the statutory provisions has got the approval of the Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT 101 ITR 234 (SC) and Indian Chamber of Commerce v. CIT101 ITR 796. In the case of Sole Trustee, Loka Shikshana Trust (supra), His Lordship Mr. Justice M.H. Beg, as he then was, made the following observations:
In the case before us, a reference was made merely to the fact that a certain reason was given by the Finance Minister, who proposed an amendment, for making the amendment. What we can take judicial notice of is the fact that such a statement of the reason was given in the course of such a speech. The question whether the object stated was properly expressed by the language of Section 2(15) of the Act is a matter which we have to decide for ourselves as a question of law. Interpretation of a statutory provision is always a question of law on which the reasons stated by the mover of the amendment can only be used as an aid in interpretation if we think, as I do in the instant case, that it helps us considerably in understanding the meaning of the amended law. We find no bar against such a use of the speech.
13. Hence, while interpreting the statutory provisions the speech of the Hon'ble Finance Minister while moving the Bill in the House can be used as external aid. As far as CBDT Circulars are concerned, the Hon'ble Supreme Court in the case of K.P. Varghese v. Income Tax Officer 131 ITR 597 has held that "CBDT Circulars are clearly in the nature of contemporanea expositio furnishing legitimate aid in constructing the statutory provisions. The rule of construction by reference to contemporanea expositio is well established rule for interpreting a statute by reference to the exposition it has received from the contemporary authorities, though it may not give weight where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Groveron Statutory Construction 1940Edition where it is stated on page 219 that "administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is over-turned and such construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive".
14. In Section 2(ea), the assets like motor car, jewellery, bullion or furniture which are held by assessees either for the use of the business or running them on hire or as stock-in-trade are excluded from the ambit of "asset". Even in the case of yachts, boats and aircrafts which are used for commercial purposes are also excluded from the definition of "asset". We will have to take into consideration while interpreting Clause (vi) which specifically deals with the treatment to be given in respect of cash in hand the entire definition of "asset" as it was brought on the statute book. There is force in the argument of the Id. AR that no discrimination can be made in respect of the productive and non-productive asset as per the category of the assessees and hence, the proper construction of Clause (vi) in case of an individual and HUF should be if the cash in hand is not recorded in the books of account in excess of Rs. 50,000 then it will be non-productive asset. But if the cash in hand is recorded in the books of account whether the assessee is individual, HUF or company, then it is not an asset for the A purpose of charging section of Wealth Tax Act. In this case, it is not disputed that cash in hand which is treated as an asset for the purpose of Wealth Tax Act is duly recorded in the books of account of both the assessees. Moreover, as per the provisions of Section 3 which is a charging section of the Wealth Tax Act, three categories of assessees are liable for the wealth-tax i.e. (i) individual, (it) HUF and (tit) Company, and hence, it was not difficult for the Legislature to make a specific reference of "the company" as such instead of using the word "persons". We further find that both the assessees are engaged in the cashew business which they are exporting and they have also availed of the credit facilities from the bank. The Id. AR has filed the details of the withdrawals from the credit facilities and we find that this cash has not come from outside sources, but it is a part and parcel of the commercial transactions of the assessees. Now, a question may be raised as to why only for individual and HUF the basic exemption of Rs. 50,000 is given if it is not the cash in hand recorded in the books of account and why it is not so in case of company, the answer is C very simple. As far as the companies are concerned, there is statutory check under the company law and as per the provisions of the Companies Act and rules made thereunder, a company cannot keep the cash without recording the same in the books of account, but there is no statute controlling the individuals and HUFs like Companies Act specifying that every individual and HUF must record the cash in hand in the books of account. Moreover, every individual and HUF are not expected to engage in the commercial activity like business or trade. Moreover, if two ) interpretations are possible then the interpretation in favour of the assessee should be preferred as held by the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. 88 ITR 192 (SC).
29. Applying the same principles, we are of the opinion that this property becomes the productive asset as the assessee has started construction in the year 1989. The Legislature has not put any time limit for completion of the construction. Admittedly, the assessee has spent substantial sums on the said construction. We are of the opinion that it becomes a productive asset and otherwise also it cannot be treated as an asset within the meaning of Section 2(ed) of the Act. A similar view has been taken by this Tribunal in the case of Federal bank Ltd. (supra). We, therefore, set aside the order of the CWT (Appeals) on this issue and direct the assessing officer to delete the value of this property from the net wealth of the assessee for all the assessment years i.e. assessment years 1993-94 to 1999-2000. This issue is, therefore, decided in favour of the assessee and against the revenue.
30. The next issue is regarding the valuation of the property in of Muttambalam village. As we have already held that the said property cannot be treated as an asset within the meaning of Section 2(ed), this issue does not survive for any adjudication.
31. In the result, the assessee's appeals WTA Nos. 31,32,33 and 34 (Coch.)/2006 are dismissed and WTA Nos. 35,36,37,38,39,40 and 41 (Coch.)/2006 are partly allowed.