Income Tax Appellate Tribunal - Mumbai
Hindustan Dorr-Oliver Ltd, Mumbai vs Department Of Income Tax on 20 August, 2014
आयकर अपीलीय अिधकरण, अिधकरण "आई" खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHES "I" MUMBAI सव[ौी ǒवजयपाल राव,Ûयाियक सदःय एवं राजेÛि,लेखा सदःय के सम¢ Before S.Sh.Vijay Pal Rao,Judicial Member and Rajendra,Accountant Member धनकर अपील सं./WTA No.18/Mum/2012 िनधा[रण वष[ /Assessment Year 2004-05 DCWT RG 8(2), M/s Hindustan Door-Oliver Ltd.
R.No. 216-A, Aayakar Bhavan, Vs Dorr Oliver House, Chakala, Andheri
M.K.Road, Mumbai-400020 (E), Mumbai-400059
PAN: AAACH0964P
(अपीलाथȸ /Appellant) (ू×यथȸ / Respondent)
राजःव कȧ ओर से/ Revenue by : Shri Manoj Mishra
िनधा[ǐरती ओर से / Assessee by : Shri Divyesh I. Shah
सुनवाई कȧ तारȣख/ Date of Hearing : 20/08/2014
घोषणा कȧ तारȣख / Date of Pronouncement : 20/08/2014
Per Rajendra,AM ले खा सदःय राजे Ûि के अनु सार :
Challenging the order dt.19.03.2012 of the CWT(A)-17,Mumbai,Assessing Officer (AO) has raised following grounds of appeal:
1."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the A.O, had rightly treated freehold land of Rs, 17,71,01,000/- as an asset liable for wealth tax under section 2(ea)(v) of the Wealth Tax Act".
2."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the A.O. had rightly taxed book value of Residential flats at Rs. 2,27, 97,000/- as per section 2(ea)(v) of the WT Act as against 17,96,686/- offered by the assessee".
3."The assessee prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the AO be restored."
4."The assessee prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the AO be restored."
2.The assessee-company had filed its return of wealth on 31.10.2004 declaring net wealth of Rs. 25.18 Lakhs.The return was accepted u/s 16(1) of the Wealth-tax Act, 1957(Act).Subsequently, proceedings u/s.17were initiated by issuing a show-cause notice dated 29.06.2009,after recording the reasons for reopening the assessment.In response to the said notice the assessee furnished the return of wealth on 19.08.2009. It was argued before the AO that last appurtenant to the building was used for business, that it was situated in Mumbai and the building was used as its registered office of the company, that the building and land appurtenant was in the nature of commercial establishment, that same was specifically excluded from the definition of the asset, that company was not liable to pay wealth tax of it.
After considering the arguments of the assessee, the AO held that freehold land was an asset of the assessee within the meaning of section 2(ea), 2(ea)(v) of the Act, that the exception thereto were not applicable to the assessee's case, that it did not furnish any evidences to substantiate that 2 WTA No. 18/Mum/2012 M/s Hindustan Dorr-Oliver Ltd.
it was covered by exception mentioned in the said section, that as per the balance-sheet the assessee had shown freehold land at Rs.17.17 Crores, that it had not included freehold land in the computation of net wealth. Treating the freehold land at Rs.. 17.17 Crores as an asset u/s 2(ea)(v) he held that same was chargeable to wealth tax while computing the net wealth.
3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him it was argued that the Freehold land appurtenant to the building was situated in Mumbai and the building was used as Registered Office of the company,that it was building and land appurtenant thereto in the nature of commercial establishment which was specifically excluded from the definition of the assets as per clause 5 of the section 2(ea)(i)of the Act,that that the said freehold land had to be excluded while computing the net wealth,that the AO had erred in treating freehold land at Mumbai and Chennai as an asset in the nature of urban land u/s. 2(ea)(v) of the Act,that it had purchased the land at Chakala,Mumbai in 1964 on that around 1984,that the land and the building had been used as the office premises of the assessee,that it had constructed the office premises on the land about three decades ago,that the subject land and buildings were shown in the financial statements separately in accordance with the accounting and disclosure norms required to be followed under the Indian Companies Act. 1956,that such land was covered under subsection (i) of Section 2(ea) of the Act which deals with "any building or land appurtenant thereto',that the subject freehold lands were not covered under sub-section(v) of Section 2(ea) of the Act which deals with urban land", that AO could not bifurcate the land of the assessee from the building constructed thereon,that the land would lose its value after a building was constructed on it and after that the values of the land and the building had to be taken compositely.The assessee relied upon the decisions of the Kerela High Court delivered in the cases of Guidhar Yadalam (163 Taxman 372) and Apollo Tyres Ltd.(189Taxman 225).After considering the submissions of the assessee and the assessment order,the FAA held that it was clear that the case of the assessee fell within the exclusion provisions of Clause 5 of Section 2(ea)(i) and also under Sub-section (i) of Section 2 (ea) of Act.He directed the AO to treat the same as exempt.
4.Before us,the Departmental Representative supported the order of the AO and the Authorised Representative relied upon the order of the FAA.We have heard the rival submissions and perused the material before us.We find that the building of the assessee was build decades ago and the building is also being operated as its registered office and is being used for the purpose of the business.As it is in the nature of commercial establishments,the land appurtenant to the building 3 WTA No. 18/Mum/2012 M/s Hindustan Dorr-Oliver Ltd.
would not fall under the meaning of "urban land".As per the provisions of the section 2(ea)(i)of the Act land appurtenant to a building is not to included in the net wealth of an assessee. We find that the Hon'ble High Court of Kerala has in the case of Apollo Tyres Ltd.(supra)held as under:
"The contention of the revenue could not be accepted because urban land, that is subject to tax under the definition of 'assets', generally covers only vacant land. In fact, under the exception clause 'the land occupied by any building which has been constructed with the approval of the appropriate authorities exempt from the purview of tax. This provision makes it clear that when urban land is utilized for construction of a building with the approval of the prescribed authority', then the land ceases to be identifiable as an urban land. What the section contemplates is that f an illegal construction is made on an urban land, that is, construction without approval by the appropriate authority, then such land will still be treated as an urban land, no matter building is illegally constructed thereon. However, if a building is constructed with the approval of the prescribed authority,then such land goes out of the meaning of urban land' and what is assessable is obviously the building... Once the land is utilized for construction purposes, it ceases to have its identity as vacant land and it cannot be independently valued and considering the value of the building under construction the value of the land may be insignificant."
In the matter of Guidhar Yadalam(supra)the assessee had started construction of a building on the land owned by it and claimed an exemption under the clause that the land was occupied by any building which has been constructed with the approval of the appropriate authorities. The tribunal had allowed the claim to the assessee and on appeal by the department the Hon'ble High Court held that the word 'constructed' used in the Act should be construed to mean fully constructed' as understood in the common parlance and therefore the land would not be chargeable to wealth tax. Respectfully,following the above,we are of the opinion that the land in question cannot be categorised as urban land,as held by the AO.Therefore, confirming the order of the FAA,we decide ground no.1 against the AO.
5.Next ground is about value of the Residential flats. The AO found that the assessee had shown residential flats and guest houses aggregating to Rs. 17.96 Lakhs in the return,that as per the balance-sheet the residential flats were shown at the book value of Rs. 2.27 Crores.He held that the residential flat was an asset within the meaning of section 2(ea)(1) of the Act, hat the exceptions to section 2 were not applicable these assets,that the assessee had not furnished any evidences to shown that same was covered by the exceptions mentioned in the section of the Act. Finally, he held that the residential flats, at book value of Rs. 2.27 Crores were to be treated as an asset as against Rs. 17.96 Lakhs shown by the assessee in its return of wealth.
6.In the appellate proceedings,before the FAA,it was argued that the assessee has correctly valued the "Residential Flats" based on valuation reports as per provisions of the Act,that the residential flats should be valued as per valuation report.After considering the assessment order and the arguments of the assessee the FAA allowed the appeal filed by it.
4 WTA No. 18/Mum/2012 M/s Hindustan Dorr-Oliver Ltd.
7.Before us,the DR supported the order of the AO.AR stated that value shown in the return of wealth should be adopted and the registered valuer's report should be ignored.We have heard the rival submissions.We find that the assessee has revalued the flats at Rs.2.27 Crores and the AO had adopted the said value while finalising the assessment.At the page no.3 of the paper book the assessee has given details of gross block,depreciation and net block along with the details of original cost, revalued cost and their totals.In our opinion the AO was not justified in adopting the revalued cost.In our opinion the order of the FAA is as per law.So,confirming the same we decide ground no.2 against the AO.
As a result,appeal filed by the AO stands dismissed.
फलतः िनधा[ǐरती अिधकारȣ Ʈारा दाǔखल कȧ गई अपील नामंजूर कȧ जाती है .
Order pronounced in the open court on 20th August, 2014.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 20.08.2014 को कȧ गई ।
Sd/- Sd/-
(ǒवजयपाल राव / VIJAY PAL RAO) (राजेÛि / RAJENDRA)
Ûयाियक सदःय/JUDICIAL MEMBER लेखा सदःय/ACCOUNTANT MEMBER
मुंबई/Mumbai, Ǒदनांक/Date: 20.08.2014
S.K.
आदे श कȧ ूितिलǒप अमेǒषत/
षत Copy of the Order forwarded to :
1. Assessee /अपीलाथȸ 2. Respondent /ू×यथȸ
3. The concerned CIT(A)/संबƨ अपीलीय आयकर आयुƠ,4.The concerned CIT /संबƨ आयकर आयुƠ
5. DR "I" Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध आई खंडपीठ,आ.अ.Ûयाया.मुंबई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai