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Income Tax Appellate Tribunal - Delhi

Ashok Kataria, New Delhi vs Department Of Income Tax on 12 October, 2015

         IN THE INCOME TAX APPELLATE TRIBUNAL
               DELHI BENCH 'A', NEW DELHI
      Before Sh. N. K. Saini, AM And Sh. Kuldip Singh, JM
             WTA No. 8/Del/2012 : Asstt. Year : 2005-06
             WTA No. 9/Del/2012 : Asstt. Year : 2006-07
Wealth Tax Officer,            Vs Dr. Ashok Kataria,
Ward 37(2)                        392, Mandakini Enclave, Alaknanda,
New Delhi                         New Delhi
(APPELLANT)                       (RESPONDENT)
PAN No. AAACV3918K
           Assessee by : Sh. G. K. Sukhla, Adv.
           Revenue by: Sh. K. K. Jaiswal, DR

Date of Hearing : 07.10.2015        Date of Pronouncement : 12.10.2015

                                 ORDER
PER N.K. SAINI, A.M.

These two appeals by the department are directed against the separate orders each dated 16.04.2012 of the ld. CIT(A)- XXVIII, New Delhi.

2. Common grounds have been raised in these appeals which read as under:

"1. Whether on the facts and in the circumstances of the case, the CWT(A)has erred in allowing the exemption u/s 5(1)(vi) for the plot under construction as the same does not come under the purview of house, or part of a house.

Ashok Kataria

2. The grounds of appeal are without prejudice to each other.

3. The appellant craves to add, amend or modify the ground of appeal at any time."

3. Facts of the case in brief are that the WTO while assessing the Income Tax assessment for the assessment year 2006-07, came to know that the assessee had taxable wealth for the assessment year 2005-06 for which he was supposed to file Wealth Tax Return. The WTO therefore, after recording the reasons to believe that the wealth had escaped assessment issued notice u/s 17(1) of the Wealth Tax Act, 1957 on 25.09.2009 and duly served upon the assessee but no return of wealth was filed in response to the said notice. Again the WTO issued notice u/s 16(4) of the Wealth Tax Act. In response the assessee filed his return of wealth declaring net wealth of Rs. 3,98,804/-. The WTO during the assessment proceedings observed that the assessee had declared wealth consisting of a residential property no. 392, Mandakini Enclave, one DDA Plot No. 6, Mandakini Residential Scheme, New Delhi measuring 260.10 Sq. meters, a motor car, cash in hand and plant and machinery, against which he had claimed debts amounting to Rs. 56,21,464/- and Rs. 9,80,117/-. The WTO pointed out 3 WTA No.8 & 9/Del/2012 Ashok Kataria that the property no. 392, Mandakini Enclave, New Delhi valued at Rs. 3,22,000/- was used by the assessee for self residence and the plot no. 6, Mandakini Residential Scheme had been valued at Rs. 99,69,239/- and the cost of construction on the said plot up to the date of valuation had been declared at Rs. 29,09,654/-. The WTO was of the view that the plot no. 6, Mandakini Residential Scheme valued at Rs. 1,28,78,893/- was not exempt u/s 5(1)(vi) of the Wealth Tax Act as the assessee had already claimed exemption u/s 2(ea)(i)(1) of the Wealth Tax Act in respect of one property. The WTO also added a sum of Rs. 9,80,117/- on the construction of house which was shown by the assessee as secured loan from Corporation Bank. Accordingly, addition of Rs. 1,38,59,010/- was made under the head "immovable assets".

4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessee was entitled to claim exemption for one house/property u/s 5(1)(vi) of the Wealth Tax Act if he had more than one house property. It was further stated that the AO wrongly applied the provisions of Section 2(ea) of the Wealth Tax Act in disallowing the exemption to the assessee. It was further stated that as per the provisions of Section 5(vi) of the 4 WTA No.8 & 9/Del/2012 Ashok Kataria Wealth Tax Act, the assessee was entitled to claim the exemption of one house or a part of house or plot of land and the option of claiming exemption on account of either of two houses was at the option of the assessee. It was contended that the assessee claimed exemption from Wealth Tax on the plot no. 6, Mandakini Residential Scheme, New Delhi measuring 260.10 Sq. meters (less than 500 Sq. meters as provided in the section) which was under

construction and the AO had no option under the Act to pass any order against the option claimed by the assessee. The reliance was placed on the judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT Vs Neena Jain reported at 330 ITR 157.

5. The ld. CIT(A) after considering the submissions of the assessee directed the WTO to allow the exemption as per Section 5(1)(vi) of the Wealth Tax Act by observing as under:

"I have carefully considered the facts of the case. Plot No. 6, Mandakini Residential Scheme, Alaknanda, New Delhi was still under construction during the relevant period. The appellant has submitted copies of primary documents in support of its claim i.e. the assessment order of the M.C.D passed by Deputy Assessor & Collector CNZ dated 26.02.2011 for the said property, wherein it is clearly stated that plot measuring 260.10 sqm. was 5 WTA No.8 & 9/Del/2012 Ashok Kataria allotted by DDA to the taxpayer on 05.12.2002 over which construction has been done during 2010 and electric connection has been applied on 29.06.2010. He states that entire property consisting of basement to third floor is under self residential use. Effective house property tax has been levied with effect from 28.06.2010. A copy of demand notice for new electric connection dated 28.06.2010 has also been filed which clearly states that application is made for a new connection for the said property. Bill for BSES has been paid on 7.7.2010 for the first time also the purchases for sanitary wares etc. are made in July, 2010. These documents prove that during the relevant period the said property was still under construction.

The appellant has cited the judgment of Commissioner of Income Tax Vs Neena Jain (2010) 330 ITR 157 (P&H) according to which the value of the house under construction including investment on construction is not liable to wealth tax. The ratio of the above judgment squarely applies to the facts of the present case. In the facts and circumstances of the case, the Assessing Officer is not justified in not allowing exemption u/s 5(1)(vi) of the Wealth Tax Act. The Assessing Officer has also wrongly applied section 2(ea)(i)(1). In the present case, the facts are entirely different and section 2(ea)(i)(1) cannot be invoked. The exemption as per section 5(1)(vi) not allowed by the Assessing Officer is therefore, allowed. Appeal on these grounds is allowed."

Ashok Kataria

8. Now the department is in appeal. The ld. DR strongly supported the order of the WTO and reiterated the observations made in the wealth tax assessment order dated 31.12.2010. It was further stated that the assessee was having two houses, therefore, the WTO rightly made the addition of one house. It was further stated that the ld. CIT(A) was not justified in deleting the addition made by the AO.

9. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order.

10. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the ld. CIT(A) categorically stated that the assessee was having a plot no. 6 in Mandakini Residential Scheme, Alaknanda, New Delhi, the said plot was measuring 260.10 sqm and was under construction during the year under consideration and that the construction had been done during the year 2010, therefore, the said house which was under construction was not liable to wealth tax. On a similar issue the Hon'ble Punjab & Haryana High Court in the case of CIT Vs Smt. Neena Jain (supra) held as under:

Ashok Kataria "That the contention of the Revenue that "any building"

would fall within the definition of assets, was not only devoid of merit but misplaced as well, because the word "any building" could not possibly be read in isolation and it had harmoniously to be construed with the remaining portion of section 2(ea) of the Act, i.e. whether the building was used for residential or commercial purposes or for the purpose of maintaining a guest house, because an incomplete building could not possibly either be used for residential or commercial purposes or for purposes of maintaining a guest house. Therefore, the word "building"

had to be interpreted to mean a completely built structure having a roof, dwelling place, walls, doors, windows, electric and sanitary fittings etc. If one or more such components were lacking, then it could not possibly be said that the building was a complete structure for the purpose of section 2(ea) of the Act. The assessee was constructing the building after obtaining sanction from the appropriate authority. Therefore, the incomplete building of the assessee neither fell within the definition of a building, as contemplated under section 2(ea) of the Act, nor within the purview of "urban land" as excluded by Explanation 1(b) of the Act. The perusal of the scheme of the Act posits that it was not always that any building or land appurtenant thereto was straightaway liable to wealth tax. There was an exclusion clause contained in Explanation 1(b) of the Act, in regard to urban land as well. In that eventuality, the burden of proof was on the Revenue and the adjudicating authority was required to record a categorical finding that the building of the assessee was actually exigible to wealth-tax which was lacking in the case of the assessee. Thus the Tribunal was justified and correctly negative the claim of the Revenue and was thus right in holding that the value of house under construction including investment on construction was not liable to wealth-tax."

Ashok Kataria

11. In the present case also the assessee was having a plot measuring 260.10 sqm allotted by DDA on 05.12.2002 situated at plot no. 6 Mandakini Residential Scheme, Alaknanda, New Delhi. The said plot was under construction for the years under consideration as construction had been done during the year 2010. Therefore, the assessee was entitled for exemption u/s 5(1)(vi) of the Wealth Tax Act as per the ratio laid down in the aforesaid referred to case of CIT Vs Neena Jain (2011) 330 ITR 157 (supra). We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A).

12. In the result appeals of the department are dismissed. (Order Pronounced in the Court on 12/10/2015).

           Sd/-                                           Sd/-
  (Kuldip Singh)                                (N. K. Saini)
JUDICIAL MEMBER                             ACCOUNTANT MEMBER
Dated: 12/ 10/2015
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
                                            ASSISTANT REGISTRAR