Income Tax Appellate Tribunal - Chennai
M.Balasubramaniam, Chennai vs Assessee on 19 February, 2016
आयकर अपील
य अ धकरण, 'ए' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी ए. मोहन अलंकामणी, लेखा सद य केसम%
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
WTA Nos.7, 8 & 9/Mds/2015
नधा&रण वष& / Assessment Years : 2008-09, 2009-10 & 2010-11
Sh. M. Balasubramaniam, The Deputy Commissioner of
Sakthi Nilayam, v. Income Tax,
No.92/51, Nachimuthu Gounder Corporate Circle (1),
Street, Income Tax Office,
Pollachi - 642 001. Coimbatore - 641 018.
PAN : ABEPB 2022 Q
(अपीलाथ*/Appellant) (,-यथ*/Respondent)
अपीलाथ* क. ओर से/Appellant by : Sh. R. Vijayaraghavan, Advocate
,-यथ* क. ओर से/Respondent by : Sh. Pathlavath Peerya, CIT
सन
ु वाई क. तार
ख/Date of Hearing : 06.01.2016
घोषणा क. तार
ख/Date of Pronouncement : 19.02.2016
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
These appeals of the assessee are directed against the respective orders of the Commissioner of Wealth Tax (Appeals)-1, Coimbatore, dated 29.05.2015, pertaining to assessment years 2008-09 to 2010-11.
2 W.T.A. Nos.7,8 & 9/Mds/15
2. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the only issue arises for consideration is with regard to value of the landed property at Okkiam Thorapakkam Village, Saidapet Taluk, Chennai, on the date of valuation. According to the Ld. counsel, the assessee owns 9 acres of non-agricultural land. Out of 9 acres of non-agricultural land in Okkiam Thorapakkam Village, 40% of the land has to be provided for amenities such as road, park, etc. Therefore, the marketable title would be with respect to 5.40 acres of land. The assessee valued the land as on the valuation date at `83/- per sq.ft. Referring to a copy of the letter said to be received from Member Secretary, Chennai Metropolitan Development Authority, the Ld.counsel submitted that the land in question is situated in I.T. Corridor and Coastal Regulation Zone-II. The Ld.counsel further submitted that the land in question is 100 mtr from the Buckingham canal. There was street alignment proposed to the extent of `30.5 mtr road to ECR through this said land. Therefore, the Member Secretary, Chennai Metropolitan Development Authority clarified that till the proposed 100 ft. road is finalized, the construction cannot be made / permitted in the land. Since the construction cannot be made, according to the Ld. counsel, the land in question cannot be treated as urban land for the 3 W.T.A. Nos.7,8 & 9/Mds/15 purpose of Wealth Tax Act. The Assessing Officer simply rejected the claim of the assessee and estimated the value at `1200 per sq.ft. on the basis of guideline value. According to the Ld. counsel, the guideline value is only to guide the Sub-Registrar to fix the market value. Since the road alignment was not finalized and it is not known on which part of the land the proposed road passes through unless the concerned authority, namely, Chennai Metropolitan Development Authority, finalizes the alignment of the proposed 100 ft. road across the land, it cannot be said that the land in question could be used for construction. In fact, the Assessing Officer extracted the observation made by Chennai Metropolitan Development Authority. However, valued the land at `1200 per sq.ft. According to the Ld. counsel, the construction was not permitted in the land in question, therefore, it cannot be treated as urban land under Section 2(ea) of the Wealth Tax Act. Therefore, according to the Ld. counsel, the subject land cannot be included in the net wealth of the assessee.
3. On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the letter dated 17.04.2012 of Chennai Metropolitan Development Authority was not addressed to the assessee but it was addressed to one Shri S. Paul 4 W.T.A. Nos.7,8 & 9/Mds/15 Raj. As per this letter, the land in question was classified as mixed residential area and falls in I.T. Corridor. The assessee has not produced any clear demarcation of proposed road through the subject land in question. The Assessing Officer, after verifying the guideline value on the website of Registration Department, found that the value of the land on the valuation date was `1200 per sq.ft. Accordingly, the land was treated as urban land. Referring to the contention of the assessee that there was proposed 30.5 mtr road in the second Master Plan, the Ld. D.R. submitted that this proposed road was not yet finalized and it was also not demarcated in the land. Therefore, according to the Ld. D.R., mere proposal cannot be a reason for not permitting construction over the land. According to the Ld. D.R., the land in question is classified as residential use and falls in I.T. Corridor. Therefore, the construction is very much permissible. The Ld. D.R. placed his reliance on the judgment of Madras High Court in Commissioner of Wealth-Tax v. A.S. Ananth 92003) 261 ITR 763 and submitted that lower rate than the one quoted in the guideline of the Registration Department cannot be fixed. The Ld. D.R. has also placed his reliance on the judgment of Kerala High Court in Commissioner of Wealth-Tax v. Smt. Sara 5 W.T.A. Nos.7,8 & 9/Mds/15 Varghese (1991) 187 ITR 450 and submitted that valuation has to be made on the basis of material found on record.
4. We have considered the rival submissions on either side and perused the relevant material available on record. We have carefully gone through the provisions of Section 2(ea) of Wealth-tax Act. Section 2(ea) of Wealth-tax Act reads as follows:-
"(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 kilometres 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--
(1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than 1[ten lakh rupees] ;
Finance Act, 2012 : From April 1, 2013 : In a case where a house is allotted for residential purposes by a company to an employee or officer or director who is in whole time employment such house shall not be included in the definition of assets on which wealth-tax is charged where the gross annual salary of such employee or officer or director is less than Rs. 10 lakhs (as against the earlier Rs. 5 lakhs). This amendment took effect from April 1, 2013 and applies for the assessment year 2013-14 and subsequent assessment years.
(2) any house for residential or commercial purposes which forms part of stock-in-trade;
(3) any house which the assessee may occupy for the purposes of any business or profession carried on by him ;
(4) any residential property that has been let-out for a minimum period of three hundred days in the previous year ;
(5) any property in the nature of commercial establishments or complexes ; 6 W.T.A. Nos.7,8 & 9/Mds/15
(ii) motor cars (other than those used by the assessee in the business of running them on hire or as stock-in-trade) ;
(iii) jewellery, bullion and furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals :
Provided thatwhere any of the said assets is used by the assessee as stockin- trade, such asset shall be deemed as excluded from the assets specified in this sub-clause ;
(iv) yachts, boats and aircrafts (other than those used by the assessee for commercial purposes) ;
(v) urban land ;
(vi) cash in hand, in excess of fifty thousand rupees, of individuals and Hindu undivided families and in the case of other persons any amount not recorded in the books of account.
Explanation For the purposes of this clause,--
(a) "jewellery" includes--
(i) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel ;
(ii) precious or semi-precious stones, whether or not set in any furniture, utensils or other article or worked or sewn into any wearing apparel; Jewellery : The terms "jewel" and "jewellery" refer to articles of value used for adornment, especially those made from gold, silver or precious stones. The terms are, therefore, wide enough to cover not merely precious stones or articles of adornment made with the use of precious stones, but also other articles of value made from gold, silver, platinum or other precious metals. Ordinarily speaking, when a person talks about jewellery, he includes ornaments which are made of gold, silver or any other precious metal also irrespective of whether these articles have precious stones imbedded in them or not. The term "jewellery" is not confined in ordinary parlance to only those ornaments which have precious stones imbedded in them. Explanation 1 in so far as it includes ornaments made of gold, silver, platinum or other precious metal or alloy, is merely clarificatory in nature. Such items were not excluded from the meaning of the term "jewellery" earlier : CWT V. BINAPANI CHAKRAVARTY [1995] 214 ITR 721.
(b) "urban land" means land situate--
7 W.T.A. Nos.7,8 & 9/Mds/15
(i) in any area which is comprised within the jurisdiction of a 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 and which has a population of not less than ten thousand ; or
(ii) in any area within the distance, measured aerially,-- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in sub-clause (i) and which has a population of more than ten thousand but not exceeding one lakh ; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in sub-clause (i) and which has a population of more than one lakh but not exceeding ten lakh ; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in sub-clause (i) and which has a population of more than ten lakh, 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 a 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 assessee for industrial purposes for 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 of ten years from the date of its acquisition by him. Explanation.-- For the purposes of clause (b) of Explanation 1, "population" means the population according to the last preceding census of which the relevant figures have been published before the date of valuation."
Proviso to Explanation 1(b) to Section 2(ea) of the Wealth-tax Act clearly says that the land on which construction of a building is not permissible under any law for the time being in force in the area in which the land is situated, would not form part of urban land. In the case before us, the assessee claims that there was a proposal for construction of 100 ft. (30.5 mtr) road across the land in question. The assessee, in fact, produced a letter which was addressed to 8 W.T.A. Nos.7,8 & 9/Mds/15 one Shri S. Paul Raj, by the Member Secretary, Chennai Metropolitan Development Authority on 17.04.2012. The assessee has also produced a letter dated 21.12.2015 addressed to the assessee himself showing that the land in question was classified as mixed residential road and lies in I.T. Corridor. The land is also classified as Coastal Regional Zone-II. The land is situated within 100 mtr. from Buckingham canal. There is a proposal for formation of road to ECR through the subject land and width of the road is 30.5 mtr (100 ft.). It is not in dispute that the proposed 30.5 mtr road is not finalized and it is still in the proposal stage. The authorities concerned could not identify the area of the land through which 30.5 mtr road passes. Therefore, the exact land on which the proposed road passes through, could not be demarcated. In those circumstances, this Tribunal is of the considered opinion that unless the proposal of 30.5 mtr road is finalized by the concerned authority, the construction of the building on the subject land is not permissible for the present and under the existing law of the land. The local body and CMDA would not approve the building plan till the formation of road is finalized. Unless and until the building plan is approved, the assessee cannot put up any construction at all. Since the construction was not permissible till finalization of the 9 W.T.A. Nos.7,8 & 9/Mds/15 proposed formation of the road and demarcation of land in question, this Tribunal is of the considered opinion that construction of the building in the subject land is not permissible. Once the construction is not permissible, the land in question cannot fall within the definition of "urban land" under Section 2(ea) of the Wealth-tax Act.
5. We have carefully gone through the judgment of Kerala High Court in Mrs. Sara Varghese (supra) relied on by the Ld. D.R. In the case before the Kerala High Court, the land was covered with rubber plantations. Part of the land was covered with mango and coconut trees and there was a building in the other part of the land which was used as residence and office by the assessee. The assessee valued the land at `96,000/-. However, the Tribunal fixed the value at `250 per cent. On a reference to Kerala High Court, the High Court found that the rubber estate in question is near Edappilly, adjacent to metropolitan town Ernakulam. The value of good yielding rubber estate in Thodupuzha may provide a guidance for valuation of similar property. Therefore, considering valuation of rubber estate in Thodupuzha cannot be considered as irrelevant. After considering the rapid urbanization of Ernakulam, the Tribunal 10 W.T.A. Nos.7,8 & 9/Mds/15 fixed the value of land at `250 per cent, which was confirmed by the Kerala High Court. The Kerala High Court had no occasion to consider the proposal for formation of any road across the land and pending demarcation, and the impossibility of construction of building on the land was not subject matter before the Kerala High Court. Therefore, this Tribunal is of the considered opinion that this judgment of Kerala High Court may not be any assistance to the Revenue.
6. We have also carefully gone through the judgment of Madras High Court in A.S. Ananth (supra). The issue arises for consideration before the Madras High Court is with regard to valuation of "quoted shares" as on the valuation date. The assessee held shares in Solidaire India Limited, the quoted value is at `73 per share. The Assessing Officer rejected the claim of the assessee that it should be valued at the book value of `15.75 per share on the basis of undertaking said to be given by the assessee to Industrial Credit and Investment Corporation of India Limited. However, the Tribunal took the average book value as per quotation of the stock exchange and directed the Assessing Officer to value the share at `45 per share. The Madras High Court found that no 11 W.T.A. Nos.7,8 & 9/Mds/15 deduction can be granted by the Tribunal by taking the average book value and value quoted at the stock exchange. In the case before us, it is not the question of "quoted shares". The issue before this Tribunal is estimation of value of land as on valuation date. When there was a proposal for formation of road which is pending before the concerned authority and the roads are not clearly demarcated, this Tribunal is of the considered opinion that the judgment of Madras High Court also may not be of any assistance to the Revenue.
7. In the case before us, the assessee valued the land at `83 per sq.ft. taking into consideration of the reduction in value of the land. Therefore, this Tribunal is of the considered opinion that estimation of value on the basis of guideline value is not justified. It is well settled principle of law that guideline value is only to guide the Sub-Registrar to find out the market value of the land for the purpose of collecting stamp duty. The guideline value would not in all cases reflect the market value. The guideline value is not a mathematical or constant figure. The guideline value would fluctuate depending upon various factors such as the location, area, infrastructures available nearer to the land and future potential for 12 W.T.A. Nos.7,8 & 9/Mds/15 development of the land, etc. Therefore, for valuing the market value as on valuation date, all the factors referred above have to be taken into consideration, including the guideline value fixed by the Registration Department of the State Government. It is to be remembered that proposal of the road through the subject land and pending finalization and demarcation of exact location, the authorities concerned may not permit any construction over the land. Therefore, this disadvantageous position faced by the assessee cannot be ignored while valuing the land. Since the assessee himself valued the land at `83 per sq.ft., this Tribunal is of the considered opinion that estimation on the basis of guideline value is not justified. Accordingly, the orders of the lower authorities are set aside and the entire addition made by the Assessing Officer is deleted.
8. In the result, the appeal of the assessee is allowed.
Order pronounced on 19th February, 2016 at Chennai.
sd/- sd/-
(ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन)
(A. Mohan Alankamony) (N.R.S. Ganesan)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
13 W.T.A. Nos.7,8 & 9/Mds/15
चे नई/Chennai,
th
4दनांक/Dated, the 19 February, 2016.
Kri.
आदे श क. , त5ल6प अ7े6षत/Copy to:
1. अपीलाथ*/Appellant
2. ,-यथ*/Respondent
3. CWT(A)-1, Coimbatore
4. Principal CWT-1, Coimbatore
5. 6वभागीय , त न ध/DR
6. गाड& फाईल/GF.