Income Tax Appellate Tribunal - Pune
Kantilal Ratnachand Bhandari (Huf),, ... vs Wealth-Tax Officer,, on 11 July, 2017
आयकर अऩीऱीय अधधकरण "बी" न्यायऩीठ ऩण
ु े में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
श्री डी. करुणाकरा राव, ऱेखा सदस्य, एवं श्री ववकास अवस्थी, न्याययक सदस्य के समक्ष ।
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
धनकर अऩीऱ सं. / WTA Nos. 44, 45 & 46/PUN/ 2016
यनधाारण वषा / Assessment Years : 2002-03, 2003-04 & 2004-05
Kantilal Ratnachand Bhandari (HUF),
C/o. Mahaveer Textile Stores,
340 - A, Sakhar Peth,
Solapur - 413005
PAN : AACHK1793A
.......अऩीऱाथी / Appellant
बनाम / V/s.
Wealth Tax Officer,
Ward - 2(1), Solapur
......प्रत्यथी / Respondent
Assessee by : Shri S.N. Doshi
Revenue by : Shri S.P. Walimbe
सुनवाई की तारीख / Date of Hearing : 16-05-2017
घोषणा की तारीख / Date of Pronouncement : 11-07-2017
आदे श / ORDER
PER VIKAS AWASTHY, JM :
These three Wealth Tax Appeals filed by the assessee are directed against the order of Commissioner of Wealth Tax (Appeals)-7, Pune dated 05-05-2016 common for the assessment years 2002-03, 2003-04 and 2004-05. Since, identical issues are involved in all the three appeals, these appeals are taken up together for adjudication and are decided by this common order.
2
WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05
2. The brief facts of the case as emanating from record are: The assessee/appellant owned urban land in Gat No. 316 at Majrewadi, District Solapur. The land admeasuring 1,74,198/- sq. mtrs. was found surplus under the provisions of Urban Land Ceiling and Regulation Act and was acquired by the State Government on 21-05-1986. The assessee challenged the action of State Government in acquiring the land before the Hon‟ble Bombay High Court. In the meantime the State Government allotted the surplus land acquired from assessee to Maharashtra Housing and Development Authority (MAHADA) for development. The MAHADA developed part of the land and created third party interest by allotting and allocating part of the land. The Hon‟ble Bombay High Court vide order dated 01-10-1997 held the entire procedure of land acquisition as void ab- initio and directed the State Government to return the land acquired as surplus. The State Government vide Release Order dated 08-10-1997 returned land admeasuring 43214 sq. mtrs. to the assessee/appellant. The remaining land in respect of which the State Government had created third party interest, compensation was paid to the assessee @ Rs.519/- per sq. mtrs. including 30% solatium. Subsequently, the State Government modified the Release Order and reduced the area from 43214 sq. mtrs. to 42661.07 sq. mtrs. The State Government at the time of returning the land to assessee reserved some part of land for specified purpose. The classification of land for specified purpose is a under :
i. Land reserved for Education purpose 9894 sq. mtrs.
ii. Post Office 1204 sq. mtrs.
iii. Residential Purpose (undeveloped area) 4446 sq. mtrs.
iv. Park - Garden 3854 sq. mtrs.
v. District Center 16000 sq. mtrs.
vi. Developed Plots 7263.07 sq. mtrs.
Total 42661.07 sq. mtrs.
3
WTA Nos. 44 to 46/PUN/2016,
A.Ys. 2002-03 to 2004-05
2.1 The Wealth Tax Officer (WTO) issued notice to the assessee u/s. 17 of the Wealth Tax Act, 1957 (hereinafter referred to as "the Act"). In response to notice the assessee filed return of wealth declaring net wealth in the impugned assessment years as under :
Assessment year Net Wealth
2002-03 Rs.16,23,200/-
2003-04 Rs.13,92,400/-
2004-05 Rs.25,60,200/-
2.2 In computation of net wealth the assessee declared developed plot Nos. 2, 3, 5 and 6 total admeasuring 2468.74 sq. mtrs. After claiming exemption u/s. 5(vi) of the Act, the assessee valued the remaining land at Rs.460/- per sq. mtrs. Further, the assessee disclosed undeveloped residential plots admeasuring 2400 sq. mtrs. After claiming deduction @ 35% valued the balance area of 1560 sq. mtrs. at Rs.460/- per sq. mtrs.
In addition to the aforesaid lands the assessee disclosed the agricultural land at Soregaon, District Solapur, situated within 8 kms. from the Municipal limits. The assessee declared the value of said agricultural land as Nil.
2.3 During scrutiny assessment, the Assessing Officer made addition in respect of the entire land released by the State Govt. and the agricultural land by treating entire parcels of land as „urban land‟ as defined in Explanation 1(b) of section 2(ea) of the Act.
Aggrieved by the assessment orders for assessment years 2002-03 to 2004-05, the assessee filed appeals for the respective assessment years before the Commissioner of Wealth Tax (Appeals). The First Appellate 4 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 Authority vide impugned order upheld the findings of Assessing Officer in treating the entire land released by the State Govt. and the Agricultural land of the assessee as Asset as defined u/s. 2(ea) of the Act. However, the Commissioner of Wealth Tax (Appeals) granted part relief to the assessee in determination of the value of various parcel of land. Against the findings of Commissioner of Wealth Tax (Appeals) the assessee is in second appeal before the Tribunal.
3. Shri S.N. Doshi appearing on behalf of the assessee submitted at the outset that in all the three appeals except for minor variation in the rate and the area of plots, the grounds of appeal are identical. The ld. AR further submitted that the assessee is not pressing ground Nos. 1 and 6 in the grounds of appeal for all the three assessment years. Thus, the remaining grounds for adjudication before the Tribunal for assessment year 2002-03 are as under :
"2. On the facts and in the circumstances of the case the CWT(A) has erred in not appreciating the fact that the plot admeasuring 30,952 sq. mts is under reservation for education purpose, post office, district center and garden by the Solapur Municipal Corporation cannot be considered as an asset within the meaning of sec 2(ea) of the W.T.Act,1957 as on the valuation date as there was no construction permissible by reason of statutory restriction.
3. On the facts and in the circumstances of the case and without prejudice to above ground No. 2, the CWT(A) has erred in not appreciating the fact that the said reserved plot admeasuring 30,952 being under reservation has no marketable title and hence cannot have any value as on the valuation date.
4. On the facts and in the circumstances of the case the CWT(A) has erred in not appreciating the fact that the appellant owned developed plot admeasuring only 2,468.67 sq. mts and not 3,305.7 mt as on the valuation date namely 31.03.2002 and consequently valuation should have been done only of 2468.67 sq. mts of plot.
5. On the facts and in the circumstances of the case the CWT(A) has erred in valuing the said developed plot of an incorrect area admeasuring 3305.7 sq. mts at the rate of Rs.802 as of 31.03.2002 as against the Rs.519 per sq mt valued by the Wealth Tax 5 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 Officer and thereby resulted into enhancement of wealth disregarding that as per the latest sale instance of the developed plot the valuation should have been done at the rate of Rs.463 per sq. Mt.
7. On the facts and in the circumstances of the case the CWT(A) has erred in valuing the undeveloped plots at the same rate as applied to developed plots i.e. Rs.802 albeit allowing the rebate of 35%.
8. On the facts and in the circumstances of the case the CWT(A) has erred in not appreciating the fact that the appellant owned undeveloped plot admeasuring only 2,400 sq. mts and not 4,4,46 Sq mt as on the valuation date namely 31.03.2002 and consequently valuation should have been done only of2400 sq. mts of plot.
9. On the facts and in the circumstances of the case the CWT(A) has erred in holding the urban agricultural land as an asset u/s 2(ea) of the Act totally overlooking the fact that it is an agricultural land duly cultivated and admittedly no construction was permissible on the said agricultural land as on the date of valuation and further overlooking the retrospective amendment made to sec 2(ea) by Finance Act,2013.
10. On the facts and in the circumstances of the case and without prejudice to ground No.8, the CWT(A) has erred in valuing the agricultural land at the rate of Rs.18,00,000 as of 31.03.2002 by applying CII Index and rejecting the stamp valuation fixed by the Revenue authorities and most importantly without there being any reference to the valuation officer.
The above grounds of appeal may kindly be allowed to be amended, altered and/or modified in the interest of natural justice."
As pointed earlier the grounds of appeal in other assessment years i.e. assessment years 2003-04 and 2004-05 are on similar lines. 3.1 The ld. AR of the assessee has filed written submissions in respect of grounds raised in the appeal. The same are reproduced here-in-below:
"1) Ground No. 1 raised in all these 3 appeals is not pressed.
2) Vide Ground No. 2 and 3 appellant is challenging the inclusion of reserved plot of 30952 Sq Mt as an asset and without prejudice it's valuation.
i) Correct area of plot released:-
The Assessing Area (in Sq. Mt)
2002-03
Officer has 40880
2003-04
considered 38705
2004-05
different total 38059
areas as
under :-
Assessment Year
6
WTA Nos. 44 to 46/PUN/2016,
A.Ys. 2002-03 to 2004-05
a) The CWT (A) directed the Assessing Officer to consider the total area of 38703.70 Sq. Mt. for all these three AYs. The CWT (A) has erred in mentioning this area because he did not consider the rectification order passed on 12th January 2004b as well as sale of plot No.6 of 646 Sq. mt on 01-11-2002. Therefore the total corrected area after rectification works out to :-
Assessment Year Area (in Sq. Mt.)
2002-03 35820.74
2002-03 35174.74
2004-05 38057.77
The year wise details of corrected area are explained at Page No. 27 to 28 of paper book.
b) The valuation of the area of the above corrected area needs to be worked out by taking into consideration separately the areas of reserved plot, developed plot and undeveloped plot.
ii) CWT (A) on page No. 9 para 7.3 ( last fourth line) stated that in addition to the areas considered by him the appellant owns 553 Sq.
Mt. and it should be included.
The fact of the matter is vide Released Order dated 8/10/1997 MHADA released the plot admeasuring 43214 Sq. Mt. Thereafter it carried rectification by order dated 12/1/2004 and reduced the released area to 42661.07Sq. Mt The excess area earlier released to the extent of 553 Sq. Mt had been reduced by the rectification order.
The appellant therefore was not owning the said area at all and it was erroneously shown in the earlier release order. Therefore when the said area of 553 Sq. Mt never belonged to the appellant question of it's inclusion docs not arise.
iii) Reserved Plot:-
Refer Page No 13 to 19 which is an order of Deputy District Collector and Competent Authority of Solapur Urban Land Ceiling Office dated 12.01.2004.As per this order the total area of 30952 Sq Mt. is under reservation for specific purpose as mentioned therein. Reserved Plot - Whether "Asset" u/s 2(ea):-
Submitted that at the outset the reserved plot does not constitute asset within the meaning of sec 2(ea) of W.T. Act. It is because on this plot indisputably there cannot be allowed any construction to the appellant for itself. Therefore any plot! on which construction is not permissible as per law for the time being inforce on the valuation date it does not form the asset for wealth tax purpose.
Page No. 30 to 31. It is a letter from Solapur Municipal Corporation informing that there cannot be allowed any construction either for residential or 7 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 commercial purpose as the said area is reserved for specific purpose. Now referring to the purpose of reservation the said area can be utilized only those specified purposes by Govt. or Corporation. Therefore as far as appellant is concern edit is totally barred from having any construction for itself on the said plot either for residence or commercial purpose. Thus from the view point of the appellant this plot has to be regarded as a plot on which construction is not permissible. Hence it is not an "asset".
Valuation of the Reserved Plot:-
WTO valued this area of reserved plot along with the total area of the plot at the same rate ignoring the nature of the plot as stated above. This valuation by WTO was based on the rate of compensation awarded by the Government and further annual appreciation thereto @ 10% for cost inflation index.
The CWT(A) confirmed the said basis of valuation but directed further to add amount considering Cost Inflation Index. (See Page No. 15 Para 8.3.1 and 8.3.2. of his Order).
Without prejudice to above if this reserved plot is to be considered as an asset it's valuation as on the last date of financial year has to be taken as Nil. It is because there cannot be any buyer expected to buy this plot. Obviously there is no fair market value to this plot. Refer Schedule II part H Rule 20 that provides the guidelines for valuation of urban land. As per these guidelines the value of urban land shall be estimated at the price which it would fetch if sold in the open market on the valuation date. Applying this rule there can be no doubt that on the valuation date this plot will not fetch any price because there cannot be any buyer. These guidelines also support the proposition that value of reserved plot has to be taken as Nil.
The CWT(A) has observed that despite reservation appellant would be entitled to receive the compensation. This area is reserved for specific purpose but yet not acquired by MHADA. The issue of granting the compensation would arise only when MHADA acquires this reserved plot. Till today MHADA has not acquired the reserved plot despite slapping reservation thereon. There is therefore no question of imagining any compensation.
Submitted that valuation has to be determined as of the valuation date and there is no scope for any expectation and anticipation of any value that it may have any time in future. The value of reserve plot is therefore Nil. On the one hand appellant is barred from construction of any residential or commercial building while on the other hand MHADA has not acquired the land there is no question of any compensation. It is inchoate. Merely right to receive compensation that per-se cannot be the ground for making any valuation of the reserved plot as the same is yet not acquired. The guideline Schedule III above squarely applies.
8
WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 In any case both the lower authorities have grossly erred in valuing the reserved plot at the rate at which compensation was paid for the area of plot acquired by Govt. and could not be returned. CWT(A) overlooks the fact that this reserved plot is yet not acquired.
Moreover the said compensation of Rs. 519/- per Sq. Mt which was allowed by the Govt. includes solatium @ 30% as well as interest as provided u/s. 23(1-A) of the Land Acquisition Act. If the component of solatium and interest is excluded the rate of compensation works out to be 345/- per Sq. Mt. The appellant however by no means agree for this value. This is just informed for the purpose of explaining as to how the lower authorities are grossly adopting the value at Rs. 519/- and so on.
3) Vide Ground No.4 & 5 appellant is challenging the valuation of developed plot well as the correctness of area considered for valuation. See Page No. 27 to 28 that shows correct area of developed plot for respective Assessment years.
The WTO valued these developed plots at the rate as applied to the total area of plot and made addition of 10% for appreciation in the subsequent years. Refer Page 4 Assessment Order The CWT(A) enhanced the valuation of developed plot by adopting the rates as under: (Refer Para 8.3.2) Assessment year Rate (per Sq. Mt) ( in Rs.) 2002-03 802/-
2003-04 842/-
2004-05 872/-
a) The area of developed plot considered by lower authority being incorrect on fact, the WTO may please be directed to consider the correct area as explained in the chart.
b) As explained above the lower authorities have erred in adopting the rate of Rs. 519 per Sq. Mt. based on compensation awarded by the Govt. for the reasons as explained above.
c) The appellant has adopted the value at rate of Rs. 460/-per Sq. Mt + 5% increment in subsequent years as against Rs 345/- per Sq. Mt. The rate of Rs 460/-per Sq. Mt has been worked out on the basis of the sale instance of Plot No. 6 belonging to the appellant itself. Refer this calculation at Page No. 32.
d) The CWT(A) has enhanced the valuation in the manner as explained above. Refer para 8.3.5. The CWT(A) relied on one of the sale instances of Plot No. 10 on 08.10.2001 admeasuring 923.40 Sq. Mt. for Rs. 7,40,000/- that gives rate @ Rs. 802/-. Thus he applied Rs 802/- for Assessment Year 2002-03 and for subsequent years with appreciation considering CII Index.
9
WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 The CWT (A)has erred in not taking into consideration the following details -
Particulars Amount Sale Price of Plot No. 10-Date of Sale 08-10-2001 7,40,000/- Less : Development charges paid to MHADA 1,57,980/- Net Consideration 5,82,020/- The rate per Sq. Mt. is Rs.630.30/-
Therefore for AY 2002-03 the rate to be applied for developed plot be taken at Rs. 630/- as against Rs. 460/- as applied by the appellant. However subsequently on01.11.2002 Plot No.6 is sold as per calculation enclosed and the rate works out to be Rs. 460 per Sq Mt. This date of sale 1/11/2002 falls in the A Y 2003-04. Therefore valuation of developed plot for AY's 2003-04 and 2004-05 be taken at Rs. 460 per Sq. Mt + increment of 5% for subsequent years as adopted by the appellant .Kind attention is drawn to Schedule III Part 2 Rule 20 of Wealth Tax Rules.
4) Vide Ground No. 6, Appellant is challenging the enhancement made by the CWT(A) in valuation of developed and undeveloped plots. The CWT(A)as explained above made enhancement in the valuation of developed plot as mentioned above under Ground No.4 and 5. Based on that valuation the CWT(A) also valued the undeveloped plots at the same rate after allowing the deduction of 35%. Thus there is also enhancement in the valuation of undeveloped plots.
Submission is, this enhancement has been made by the CWT(A) without issuing the notice u/s 23(5) of the Wealth Tax Act. Therefore this enhancement at the outset has to be considered as illegal and bad in law.
5) Vide Ground No. 7&8 appellant is challenging the valuation of undeveloped plot.
The CWT(A) has valued the undeveloped plot by applying the rate of developed plot but allowing the deduction of 35% as this is an undeveloped plot. Refer para 8.3.6. In the process he has valued the undeveloped plot at the rate of -
Assessment years Rate ( per Sq. Mt.) [ in Rs.]
2002-03 521/-
2003-04 547/-
2004-05 566/-
a. At the outset the area of undeveloped plot has been incorrectly considered by the lower authorities. The corrected area of 10 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 undeveloped plot is shown separately in the chart at page No. 27 to 28.
b. Appellant has already explained above in Ground No. 4 & 5 as to how the lower authorities have erred in valuing the developed plot and what actually the valuation should be.
c. The appellant has valued the undeveloped plot the rate of Rs. 460/- per Sq. Mt. as adopted for developed plot less 35% deduction thereof on the ground that this is undeveloped plot. Thus appellant valued the undeveloped plot at Rs. 299.00/- per Sq. Mt. with further increment of 5% of subsequent years. d. Having proved the correctness of value Rs. 460/- per Sq. Mt. for developed plot and after allowing the deduction of 35% the same should be valued at Rs.313.95 per Sq. Mt for AY 2003-04 and Rs. 329.64 per sq. mt for AY 2004-05. However, the valuation of the undeveloped plot for AY 2002-03, referring to actual sales effected during FY 2001-02 be taken at Rs. 630 less 35% i.e 220.50=409.50 e. Thus CWT (A) in valuing the developed and undeveloped plots has also made addition for appreciation on account of Cost Inflation Index. It is submitted that the valuation as explained above is based on actual sale instances with further increment of 5% and therefore there is no justification for considering Cost Inflation Index.
6) Vide Ground No.9 & 10 of AY 2002-03,2003-2004 and Ground No 9 for AY 2004-05 the appellant is challenging the inclusion of agricultural land a asset as well as its valuation. The appellant owns an urban agricultural land at Soregaon admeasuring 5.44 Hectors i.e. Gat No. 107/1 2H 73R + Gat No. 108/1 2H 71 R. This land is purchased by the appellant on 30.12.1999. Appellant claims it as exempt.
The Assessing Officer held that this being urban agricultural land it falls under the definition of asset. The Assessing Officer valued the said land at rate of Rs. 100 per Sq Mt. i.e. at Rs. 54,40,000/- and further increment of 10% for appreciation in subsequent years. Refer Page No 3 of the Assessment Order.
The CWT(A) however has valued the said agricultural land as under(Refer Para 9.3):-
Assessment years Amount ( in Rs.)
2002-03 18,00,000/-
2003-04 19,00,000/-
2004-05 20,00,000/-
11
WTA Nos. 44 to 46/PUN/2016,
A.Ys. 2002-03 to 2004-05
I. Whether "asset" u/s. 2(ea) :-
i) At the outset, it is seen from the Assessment order that
appellant has agreed for inclusion of the agricultural land as asset. The fact of the matter is the appellant initially had the belief that the said land is Rural Agricultural Land. However on pointing out that the land is situated within 8 Kms of the Municipal Corporation appellant agreed that, it is an urban land. The appellant representative has also agreed as stated in the Assessment Order for it's inclusion as asset. Submitted that this concession given by the authorized representative is grossly erroneous and his concession be considered as given inadvertently.
It is also submitted that appellant's concession which is patently contrary to the law should not be taken against the appellant. In other words merely because such patently wrong admission is given that per-se should not negate the fact that the agricultural land on which construction is not permissible, by any standard cannot be considered as an asset u/s. 2( ea).
ii) Despite the fact that it is an urban agricultural land it cannot be regarded as an asset as per see 2(ea) of the Act because there cannot be allowed any construction.
iii) No dispute that land is being used for agricultural purpose.
Supporting evidences have been enclosed in the Form of 7112 extracts showing cropping patterns up to FY 2014-15 (Refer Page No. 43 to 49).
iv) Being agricultural land and actually put under cultivation and obviously not been converted into nonagricultural land ,the said land is not available for any type of construction there on. Therefore it is not an asset.
v) The CWT(A) has referred to the amendment made to see 2(ea) by Finance Act, 2013 w.e.f. from 01.04.1993 and also admitted that it has a retrospective effect. Vide this amendment agricultural land falling within the jurisdiction of municipality will not be considered as an asset. CWT(A) however states that there is no evidence of the agricultural land being used for the agricultural purpose. Submitted that CWT(A) has grossly ignored the extract of 7/12 showing the crops taken. Further these agricultural lands were purchased in December 2000 and appellant did cultivate and earned the agricultural income. The quantum of income was however more or less the same as expenditure incurred. Therefore, the agricultural income has not been disclosed in these years. However, the Agricultural income has been disclosed in the return for Assessment Years 2006-07 to 2008-09. See Page No. 77 to 87.
12
WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 II. Valuation of the agricultural land :-
i) Without prejudice, the valuation adopted by the WTO @ Rs 100/- per Sq. Mt is not substantiated by any evidence much less any sale instance. Neither it is supported by any valuation report of DVO. The Assessing Officer however relied on the rate mentioned in the reckoner available with the sub registrar.
The WTO did not confront the appellant with this reckoner and allowed to make it's submission.
The CWT(A) however valued the agricultural land relying on the order of the Deputy Collector dated 15-03-2001. It appears CWT(A) has incorrectly mentioned the date of the order as 12/07/2011.
Submitted that CWT(A)'s reliance on the said order is factually incorrect because in fact the said order is passed on an appeal made by the appellant for challenging the said stamp duty valuation of Rs.8,50,000/-.While disposing off the said appeal the Deputy Collector examined and appreciated the contentions made by the appellant and finally held that for the purpose of stamp duty correct fair market value was Rs.4,59,000/- for gat No. 108/1 and Rs.4,62,000/- for Gat No. 107/1 totalling to Rs.9,21,000/--.Refer 50 to 76.
Therefore assuming but without admitting agricultural land is an asset it's valuation be taken at Rs.9,21,000/-."
4. On the other hand Shri S.P. Walimbe representing the Department vehemently supported the findings of Commissioner of Wealth Tax (Appeals) in confirming the additions. The ld. DR contended that although in the Release Order some part of the land has been earmarked for specific purpose, however, there is no restriction on the assessee to sell the said land after construction of specified building or for the purpose of construction of building for specified purpose. In any case if the State Govt. has earmarked the specific plot for construction of Post Office, District Center etc. the assessee would get compensation for the same, therefore, the value of plot earmarked for some specific purpose cannot be Nil.
13
WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05
5. We have heard the submissions made by the representatives of rival sides and have perused written submissions and order of authorities below. We have also examined various documents which are part of paper book and have been referred to in the written submissions by the ld. AR of the assessee. Though the issues involved in all the appeals are identical, for the sake of convenience we are referring to the facts and the grounds raised in the appeal of the assessee for assessment year 2002-03.
6. As far as the facts of the case are concerned regarding acquisition of land and the extent of land subsequently released by the State Govt. there is no dispute. Before release of land the State Govt. has earmarked some part of the land for specific purpose viz. construction of Post Office, construction of District Center, Garden and Park, Education purpose and residential plots. Some part of the land was developed by MAHADA and some part of the land although earmarked for residential purpose was undeveloped. For adjudicating the issue whether the area earmarked for specific purpose falls within the definition of asset as defined u/s. 2(ea) of the Act. It is necessary to first see, the definition of asset as defined under the Act. The definition of „asset‟ and the relevant explanation thereto is reproduced here-in-under :
"[(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 14 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than[ten] lakh rupees;
(2) any house for residential or commercial purposes which forms part of stok-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;]
(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 that where any of the said assets is used by the assessee as stock-in-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 [1] - For the purposes of this clause, -
(b) "urban land" means land situate -
(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 according to the last preceding census of which the relevant figures have been published before the valuation date; or 15 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05
(ii) in any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette, [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]."
The controversy in the present appeal is limited to the part of assets in the form of „urban land‟.
7. The land of assessee acquired under Urban Land Ceiling and Regulation Act was released by the State Government on the directions of Hon‟ble High Court. Before the release of land, MAHADA had developed part of land and had also earmarked plots for specific purposes. The land was released along with reservations. So far as the land earmarked for residential purpose (undeveloped area) and the developed plots is concerned, the assessee has admitted that both these parcels of lands fall within the ambit of „urban land‟. The dispute is with regard to land earmarked for; (i) Education purpose, (ii) Post Office, (iii) Garden and (iv) District Center. To determine whether the plots reserved for the aforesaid purpose fall within the definition of „urban land‟ we would examine the same on the facts and conditions set out in the definition of „urban land‟ to include or exclude the same.
16
WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05
(i) Land Reserved for Education Purpose : In Release Order land admeasuring 9894 sq. mtrs. is reserved for education purpose. There is no restriction on the construction of building on the said reserved land. However, the restriction is only with regard to use of land for education purpose. The assessee is at liberty to sell the area earmarked for education purpose to any institution, organization, trust etc. willing to set up any school, institution, college etc. The restriction as referred to in the definition of „urban land‟ refers to construction of building not permissible under law. In the present case, the assessee is at liberty to construct the building for specific purpose i.e. education or to sell the land for setting up of any educational institution. Thus, in our considered view there is no deterrence for construction of building on the land perse. Thus, we are of considered view that the land reserved for education purpose forms part of urban land.
(ii) Post Office and District Center : In the Release Order, land admeasuring 1204 sq. mtrs. is reserved for Post Office and 16000 sq. mtrs. of land is reserved for construction of District Center. The area reserved for construction of Post Office cannot be used by the assessee for any other purpose except for construction of building of Post Office which obviously would be used by the Government. Operation of Post Offices fall within the domain of Central Government. The Government shall either pay compensation to the assessee for utilizing the land for construction of Post Office or the land may be released at later point of time from such restrictions. Till the time either the assessee receives compensation or condition laid down for construction of Post Office on the piece of land is withdrawn, the assessee cannot use the land or sell the land for any other purpose. Similarly, the area earmarked for District Center is to be utilized 17 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 for construction of Govt. Offices. As in the case of Post Office the area earmarked for District Center cannot be utilized by the assessee for any other purpose, unless the reservation made on the land is withdrawn. Unlike reservation of land for construction of building for educational purpose, the land reserved for construction of Post Office and District Center cannot be used by non-government organization or individual unless restrictions are removed. Therefore, in our considered view the land reserved for Post office and District Center would not fall within the definition of „urban land‟ as defined in Explanation [1] (b) to section 2(ea) of the Act.
(iii) Park and Garden : The land reserved for park and garden is implied restriction imposed against construction of any building or structure on the said land. Unless such restriction is withdrawn, the assessee cannot construct any building or sell the land for any other use. Since, there is a restriction on construction of building on plot of land earmarked for garden, the land cannot be used by the assessee. Therefore, the plot of area admeasuring 3854 sq. mtrs. cannot be considered as „urban land‟ as defined in Explanation [1](b) to section 2(ea) of the Act.
In view of our above observations the area earmarked for Post Office 1204 sq. mtrs., Park and Garden 3854 sq. mtrs., District Center 16000 sq. mtrs. has to be excluded from the total area of land considered as „urban land‟. Accordingly, ground Nos. 2 and 3 raised in the appeal by assessee are partly allowed.
8. In ground No. 4, the assessee has contended that the Commissioner of Wealth Tax (Appeals) has wrongly considered the total area of developed plot as 3305.7 mtrs. for the valuation on 31-03-2002 as against 2468.67 18 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 sq. mtrs. The ld. AR has further referred to the chart at pages 27 and 28 of the paper book to show the area of developed plots in the assessment years under appeal. This ground of appeal requires quantification and verification of area. Accordingly, we deem it appropriate to remit this issue back to the file of Assessing Officer for verification of the area on the basis of documents on record. Accordingly, ground No. 4 raised in the appeal by the assessee is allowed for statistical purpose.
9. In ground No. 5, the assessee has assailed the action of Commissioner of Wealth Tax (Appeals) in adopting rate of Rs.802/- per sq. mtr. for determining the value of developed plot as against Rs.519/- per sq. mtr. valued by the Wealth Tax Officer as on 31-03-2002. A perusal of the impugned order shows that the Commissioner of Wealth Tax (Appeals) while determining the value of developed area has placed reliance on the sale instance of plot in developed area sold during the Financial Year 2001-02. The contention of the assessee is that while adopting market value of plot, the Commissioner of Wealth Tax (Appeals) has not reduced development charges paid by the assessee to MAHADA. We are of the considered view that development charges paid by the assessee to MAHADA have to be reduced from the sale price of the land, if the same have not been recovered by the assessee from the purchasers of the plots. The ld. AR of the assessee in written submissions has determined the value of residential plot in developed area @ Rs.630/- per sq. mtr. after reducing development charges paid to MAHADA from the market value of the plot. We find merit in the submissions of the assessee. However, subject to verification that these development charges are not separately recovered by the assessee from the purchaser of the plots, the same shall be deductible 19 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 while determining the value of developed area. We deem it appropriate to remit this ground bank to Assessing Officer for the limited purpose to verify the fact whether the assessee has paid development charges to MAHADA. If the answer to this question is in affirmative, then to further verify whether the assessee has recovered such development charges from the purchasers of the plots. If answer to second question is in negative, extent of development charges paid to MAHADA may be reduced from the market rate. Accordingly, ground No. 5 raised by the assessee is allowed for statistical purpose in the aforesaid terms.
10. In ground No. 7, the assessee has assailed the findings of Commissioner of Wealth Tax (Appeals) in determining the value of undeveloped plots by applying the base rate of developed plots i.e. Rs.802/- and thereafter allowing rebate of 35%. While deciding the issue relating to determination of value of developed plots, we have observed that the value of developed plots should be determined after reducing the development charges paid by the assessee to MAHADA. The area of developed plots after reducing charges paid to MAHADA comes to Rs.630/- per sq. mtr. After further allowing rebate @ 35% the value of undeveloped plot is arrived at Rs.409.50. Since, we have remitted the ground No. 5 to the Assessing Officer for verification of the fact as to whether the development charges are paid by the assessee or the purchaser of the plots, we deem it appropriate to remit this ground to Assessing Officer, as well to be decided after determining the rate of developed plots. Accordingly, ground No. 7 raised in the appeal by the assessee is allowed for statistical purpose.
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WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05
11. In ground No. 8, the assessee has assailed the findings of Commissioner of Wealth Tax (Appeals) in determining the total area of undeveloped plot at 4446 sq. mtrs. as on 31-03-2002 as against 2400 sq. mtrs. claimed by the assessee. Since, this issue requires verification, we deem it appropriate to remit this issue back to the file of Assessing Officer for adopting the value of area of undeveloped plots from the documents available on record. Accordingly, ground No. 8 raised in the appeal by the assessee is allowed for statistical purpose.
12. In ground No. 9, the assessee has assailed the findings of Commissioner of Wealth Tax (Appeals) in holding the urban agricultural land owned by the assessee as „urban land‟ for determining the net wealth of the assessee. The assessee owns land admeasuring 2.71 hectares in Gat No. 108/1 at Village Soregaon, District-Solapur. The contention of the assessee is that the said agricultural land falls within 8 kms. from the Municipal limits. The land is recorded as agricultural land in the Revenue records and the assessee is performing agricultural operations on the said land. The ld. AR has placed on record 7/12 extracts of the land to show that during the period relevant to the assessment years under appeal, the land was under cultivation and wheat, gram and jowar crops were grown on the said land.
13. A perusal of definition of „urban land‟ would show that the agricultural land does not form part of urban land, if the land is classified as agricultural land in the records of the Govt. i.e. in the Revenue record and the same is used for agricultural purposes. In the present case, an examination of the Revenue records i.e. 7/12 extracts show that the land 21 WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05 comprising in Gat No. 108/1 is an agricultural. The assessee has also placed on record information regarding cultivation of crop under the said land. A further perusal of 7/12 extracts reveal that during the Years 2002-03, 2003-04 and 2004-05 wheat, gram and jowar were cultivated on the land. Even in the subsequent years same crops were cultivated on the land in question. The objection raised by the Revenue is that the assessee has not disclosed agricultural income in the return of income for the assessment years under appeal. The contention of the assessee is that during the period relevant to the assessment years 2002-03, 2003-04 and 2004-05, the income from agriculture was barely enough to set of expenditure. However, in the subsequent assessment years 2006-07 to 2008-09 the assessee in his return of income has disclosed income from agriculture. In support of his submissions, the assessee has placed on record return of income for assessment years 2006-07 to 2008-09 at pages 77 to 87 of the paper book.
We find merit in the submissions of the assessee. Since, the land claimed by the assessee as agricultural land qualify both the conditions i.e. land is classified as agricultural land in the Revenue records and the same has been used for agricultural purpose as is evident from 7/12 extracts, the said land cannot be considered as „urban land‟ as defined in Explanation [1](b) to section 2(ea) of the Act. Accordingly, ground No. 9 raised in the appeal by the assessee is allowed.
Since, we have allowed ground No. 9 raised in the appeal by the assessee, the alternate plea raised by assessee in ground No. 10 of the appeal has become infructuous.
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WTA Nos. 44 to 46/PUN/2016, A.Ys. 2002-03 to 2004-05
14. Since, the issues raised in the appeals of the assessee for assessment years 2003-04 and 2004-05 are identical, the findings given by us in the appeal for assessment year 2002-03 would mutatis mutandis apply in the assessment years 2003-04 and 2004-05.
15. In the result, all the three appeals filed by the assessee are partly allowed in the aforesaid terms.
Order pronounced on Tuesday, the 11th day of July, 2017.
Sd/- Sd/-
(डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩुणे / Pune; ददनाांक / Dated : 11th July, 2017
RK
आदे श की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant.
2. प्रत्यथी / The Respondent.
3. धनकर आयुक्त (अऩीऱ) / The CWT(A)-7, Pune
4. प्रधान धनकर आयुक्त / The Pr. CWT-6, Pune
5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, "बी" बेंच, ऩण ु े / DR, ITAT, "B" Bench, Pune.
6. गाडड फ़ाइऱ / Guard File.
//सत्यावऩत प्रयत // True Copy// आदे शानुसार / BY ORDER, सहायक ऩांजीकार / Assistant Registrar, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune