2007 (3) TMI 334 - HC - Wealth-tax

Exemption- . The assessee is assessed in the status of Hindu undivided family. The property owned by the assessee was given for construction of residential flats by the Assessing Officer in the course of assessment proceedings. The development agreement constituted only permissive possession according to the assessee for the limited purpose of construction of flats. The assessee contended that he continued to be the owner of the land till the sale of flats. The Assessing Officer proceeded to treat the property as urban land and brought it to tax. Tribunal held that the land offered in joint development did not fall under the definition of an asset under section 2(ea) of the Wealth Tax Act 1957 and therefore no wealth tax was levied by the department. Held that- The court cannot extend the exemption without any legal compulsion in terms of the Act Since in our view the wording that the urban land would mean a land on which complete building stands such lands alone would qualify for exemption. That conclusion is inevitable thus accept the appeal of the Revenue. Thus this appeal is accepted. The questions of law are answered in favour of the Revenue.

Summary

Issues:
1. Whether the value of properties held by the assessee at Adugodi and Koramangala is chargeable to wealth-tax?
2. Whether the properties of the assessee can be brought to wealth-tax assessments?

Analysis:
1. The case involved the issue of whether the properties held by the assessee at Adugodi and Koramangala are chargeable to wealth-tax. The assessee owned land given for construction of residential flats. The Assessing Officer treated the property as urban land and brought it to tax. The Tribunal, based on a previous decision, held that the land offered for joint development does not fall under the definition of an asset/urban land. The High Court analyzed the definition of urban land under section 2(ea) of the Wealth-tax Act and held that the building under construction does not qualify as a building that has been constructed. The court emphasized interpreting definitions in a reasonable manner to fulfill the Act's object and ruled in favor of the Revenue, accepting the argument that the land occupied by a fully constructed building qualifies for exemption.

2. The second issue pertained to whether the properties of the assessee could be brought to wealth-tax assessments. The court examined the definition of "building" and relevant case laws. The court referenced a previous judgment where the court ruled that vacant land should not be included in the net wealth of the assessee. Additionally, the court discussed cases from the Orissa High Court and the Supreme Court related to the interpretation of the term "building." Ultimately, the court concluded that only lands with complete buildings standing on them qualify for exemption from wealth-tax. The court accepted the appeal of the Revenue, answering the questions of law in their favor and providing no costs.