TMI Blog2006 (11) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to India and settled in Kottayam. The assessee was owning 66.717 cents of land within the municipal limits of Kottayam and the said land was purchased by the assessee for the total consideration of Rs. 1,00,491 during the period 1-4-1975 to 4-3-1977 by three different registered conveyances. According to the assessee, the said land was low lying muddy, wet and marshy land. The assessee has spent Rs. 9,54,700 for construction the compound wall and part-filling of the land with earth up to 31-3-1981. The assessee started construction of residential building complex in December, 1989 and continued the same till 31-3-1990. It appears that after 31-3-1990, the half constructed structure of the building did not see any further improvement. The assessee had obtained the sanction of the appropriate authority for constructing the residential building complex on the said land on 7-10-1989. After 1-4-1990, no further improvement or development was made on the said property and the assessee sold the said property having partly constructed structure of the building on 27-3-2000 for the sale consideration of Rs. 1,00,07,550. The assessee filed her return of wealth for the assessment year 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly there was no agricultural operation carried out by the assessee on this land but the nature of that land was agricultural land. In our opinion, merely because a particular land is described as agricultural land in some documents that cannot be treated as agricultural land as claimed by the assessee. Admittedly, no agricultural operation or cultivation is carried on the said land. We, therefore, reject the contention of the assessee in respect of this land and dismiss the relevant ground taken by the assessee in the assessment year 1989-90. 8. The next issue for our consideration which is common in assessment years 1989-90 to 1992-93 is whether the CWT (Appeals) went wrong in denying exemption claimed by the assessee in respect of the 48 cents of land i.e., 24 cents of land in Kanjikuzhi and 24 cents of land in Vijayapuram village (Pulickal property) as agricultural land. We have heard the rival submissions of the parties. As far as this issue is concerned, the assessee s contention in respect of the 24 cents of land in Kanjikuzhi village is that out of 64 cents of land 40 cents was occupied for the residence of the assessee and 24 cents of land was used for agricultural op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of Rs. 1,00,07,550. 10. In the assessment year 1989-90, the assessee valued the said property at Rs. 10,55,191 i.e., the purchase consideration of Rs. 1,00,491 plus cost of improvement during till 31-3-1981 of Rs. 9,54,700. The assessee declared the value of the said property for the assessment year 1990-91 at Rs. 23,17,191 further adding the cost of construction of the building complex alleged to be made till 31-3-1990 amounting to Rs. 12,62,000 and the assessee declared the said value for further two assessment years i.e., assessment years 1991-92 and 1992-93. In respect of these four assessment years the argument of the assessee before the CWT (Appeals) was that when the land was purchased it was a muddy, wet and marshy land and the assessee had to spend a sum of Rs. 9,54,700 for the part filling of the land as well as construction of compound wall, hence at least in the assessment year 1989-90 there was no much more value attached to the said land. The CWT (Appeals) was not impressed with the argument of the assessee. In the opinion of the CWT (Appeals), the said land was situated on Shastri Road, very much in the heart of the town and the CWT (Appeals) was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for the period 31-3-1989 to 31-3-1999. The SRO has furnished only 3 instances of sale which is shown below : Year Extent of land Sale value Rate/Cent Rs. Rs. 1992 11.53 Are/28.82 cents 1,60,000 5,551 1998 1.3 Are/3.475 cents 4,00,000 1,15,100 1999 1.52 Are/3.8 cents 4,00,000 1,05,250 The SRO has further stated that as per the State Government directive, the current fair market value for land in the area is Rs. 3 lakhs per Are i.e., Rs. 1,20,000 per cent. From the information gathered from the SRO it appears that there is material difference in the fair market value of land as shown in the records of the SRO and those adopted by the Assessing Officer for 1998-99 and 1999-2000. The reason for the difference could be the nature of land held by the assessee. The assessee has stated that the land was very marshy and boggy submerged with dirty and filthy water. It is a fact that the land comprising Nagampadam area of Kottayam in which the assessee s land is situated was very marshy and boggy some years back. A great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apprehension also to imagine that a construction costing Rs. 22,16,700 (massive strong and costly foundation with plinth beams and other structures in the low lying marshy, spongy land, columns and pillars and other structures for the first floor for a 5 storied residential complex in 2 blocks) on a plot of land costing Rs. 1,00,491 has no value and the value of property is absolutely attributable to land only. ( e )Valuation of land : The property is right in front of the Income-tax Office and the Assessing Officer is quite familiar and conversant with the nature of the property. Even the value assigned by the Assessing Officer is on the higher side. ( f )The sale price of Rs. 1,00,05,550 received by the appellant on 27-3-2000 cannot be taken as a guideline for fixing the market value for the earlier years from 1988-89 to 1998-99. ( g )Before the Assessing Officer, the appellant had produced copies of sale deeds where the sale price recorded is range from Rs. 1,266 and Rs. 12,200 per cent during the years 1975 to 1992. ( h )The Assessing Officer has not made available sale deeds of comparable cases cited and therefore, no considered rejoinders could be filed." 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claim that 24 cents out of 60 cents of land was agricultural land and hence no value in respect of the 24 cents was added to the net wealth for the assessment years 1989-90 to 1992-93. 19. In respect of the valuation of 24 cents of land in Kanjikuzhi property and 24 cents of land in Vijayapuram village (Pulickal property), the assessee has taken a specific ground contending that Assessing Officer as well as the first appellate authority ought to have found that the valuation of the aforesaid 48 cents of land taken by the assessee was reasonable taking into consideration the nature of land and prevailing market conditions and both went wrong in fixing a fanciful market value without any basis. From the perusal of the assessment orders, we find that the Assessing Officer has not added the value of 24 cents of land at Kanjikuzhi in the computation of net wealth of the assessee. Moreover, we also find that this was not the issue before the First Appellate Authority also. Hence, the ground taken by the assessee in respect of this particular issue is totally misconceived. As far as the issue regarding valuation of 24 cents of land in Vijayapuram village (Pulickal property) is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the said 48 cents and the 66.717 cents of land proposed by the appellant was reasonable taking into consideration the nature of land and prevailing market conditions and they went wrong in fixing a fancible market value without any basis. ( b ) The first appellate authority erred in enhancing the market value of 66.717 cents of land without any valid reasons, basis and also by ignoring the price obtained in comparable cases, the documents of which were produced by the appellant before him. 5. On the above grounds and those that may be urged at the time of hearing, it is prayed that the assessment order and the order of the first appellate authority may be set aside and the assessing authority may be directed to complete the assessment according to the return of net wealth by the appellant." 21. The first issue which arises in this case from ground No. 2 is regarding the nature of the land more particularly Vijayapuram village (Pulickal property) and Kanjikuzhi property. We have already dealt with this issue while deciding the assessee s appeal for assessment years 1989-90 to 1992-93. As far as 24 cents of land in Kanjikuzhi is concerned, the Assessing Officer has accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yam municipality. We have already narrated the facts in respect of the acquisition of the said property. The assessee obtained the requisite permission for constructing a five-storied building complex on the said plot and started construction in the year 1989. The assessee spent a sum of Rs. 12,62,000 on the construction of the building up to 31-3-1990 and thereafter no further amount was spent on the said construction. Subsequently, the assessee sold the said property on 27-3-2000. In this case, it is not disputed that after 31-3-1990 there was no continuation of construction till the date of sale of the said property. The assessee contended before the Assessing Officer that the said property has lost the character of open land as it was utilized for the construction of five-storied building complex. Hence, as per the newly inserted definition of "asset" in section 2( ea ), it cannot be treated as an urban land and not an asset also for the purpose of computation of net wealth within the meaning of section 2( m ) of the W.T. Act. In the opinion of the Assessing Officer, the land occupied by the building or shopping complex does not lose its character of land because of the startin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book filed by the assessee. In the paper book, the assessee filed a copy of the map of the said property which is placed at page 24. The assessee has also filed six photographs taken from different angles of the said property. The argument of the ld. CA is two-fold. At the first instance, his submissions are that as it is admitted fact that major construction activity started in 1989 occupying the major portion of the said plot hence, it cannot be first of all treated as an open land and it has lost the character of open land, there is no question of making any distinction whether the said property is urban or rural land. The further submissions of the ld. CA is that from the assessment year 1993-94 what is to be included in the definition of asset in view of the newly inserted definition i.e. section 2( ea ) that is the "open land" situated within the municipal limits but the important aspect to be considered is that it should be absolutely open land except bearing the fact that some trees are standing on that. Once the construction is started on the major part of the land, it cannot be treated as an open land and there is no question of treating it as a land which is contempl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the building is completed and the building has become functional, the dispute relating to the nature of the land should cease to exist. The most important question is whether during the interregnum period when the building was not completed or construction was only to be started, what would be the position of the land, as far as its nature is concerned, for the purpose of wealth-tax? The construction of huge buildings could not be completed during a particular previous year. The construction activity may spill over a period of more than one previous year. Therefore, during such period when the building was under construction but could not be fully completed, it is not possible to hold that the land was vacant. The land has already been utilised for business purposes even though the building proposed to be constructed did not become fully functional. Therefore, the utilization of the land for commencing the construction and utilization of the proposed building after construction has to be suitably differentiated. The utilization of the vacant land should not be confused with the ultimate enjoyment of the building proposed to be completed. Even though the building has not been comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .A. Salam v. Asstt. CWT [WT Appeal Nos. 35, 36, 37, 38 and 39 (Coch.)/2000 and 110 (Coch.) of 2005 and others]. While interpreting the scope and legislative intent behind the introduction of section 2( ea ), this Tribunal has held as under : "8. While moving the Finance Bill, 1992, which is popularly known as Budget Speech, the Hon ble Finance Minister explained the reasons and object for introducing changes to the Wealth-tax Act, 1957. The relevant part of his speech is as under : 67. The Wealth-tax Act, 1957, has far too many exemptions making its administration enormously complicated. The valuation of certain assets such as shares also presents problems, since very high market values reflecting speculative activity can lead to a heavy burden on shareholders who are long-term investors. There is also no distinction at present between productive and non-productive assets. The Chelliah Committee has suggested that, in order to encourage the tax payers to invest in productive assets such as shares, securities, bonds, bank deposits etc., and also to promote investments through Mutual Funds, these financial assets should be exempted from wealth-tax. Wealth-tax should be levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant. On the plain reading of the said clause, it may give an impression that in the case of individuals and HUFs, the cash in excess of Rs. 50,000 is treated as an "asset" for the purpose of charging sections of the Wealth-tax Act. We find force in the argument of the ld. AR that after referring to the Hon ble Finance Minister s speech while moving the Finance Bill, 1992 and subsequent Circular by the CBDT explaining the provisions of the said Act, it is clear that the Government was more concerned for stimulating the investment in the productive assets. Now, the meaning of the term "productive asset" should be ascertained from the speech of the Hon ble Finance Minister as well as the aforesaid Circular of the CBDT. It appears from the speech of the Hon ble Finance Minister that the Chelliah Committee appointed by the Government of India had suggested that in order to encourage the tax payers to invest in the productive assets such as shares, securities, bonds, bank deposit, etc. and also to promote investment to the mutual funds, those assets should be exempted from wealth-tax. While indirectly defining the non-productive assets, more stress was given on residential houses inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e speech. 13. Hence, while interpreting the statutory provisions the speech of the Hon ble Finance Minister while moving the Bill in the House can be used as external aid. As far as CBDT Circulars are concerned, the Hon ble Supreme Court in the case of K.P. Varghese v. ITO 131 ITR 597 has held that "CBDT Circulars are clearly in the nature of contemporanea expositio furnishing legitimate aid in constructing the statutory provisions. The rule of construction by reference to contemporanea expositio is well established rule for interpreting a statute by reference to the exposition it has received from the contemporary authorities, though it may not give weight where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Grover on Statutory Construction 1940 Edition where it is stated on page 219 that "administrative construc-tion ( i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is over-turned and such construction, commonly referred to as practical construction, although non-controlling, is nevertheless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As far as the companies are concerned, there is statutory check under the company law and as per the provisions of the Companies Act and rules made thereunder, a company cannot keep the cash without recording the same in the books of account, but there is no statute controlling the individuals and HUFs like Companies Act specifying that every individual and HUF must record the cash in hand in the books of account. Moreover, every individual and HUF are not expected to engage in the commercial activity like business or trade. Moreover, if two interpretations are possible then the interpretation in favour of the assessee should be preferred as held by the Hon ble Supreme Court in the case of CIT v. Vegetable Products Ltd. 88 ITR 192 (SC)." 29. Applying the same principles, we are of the opinion that this property becomes the productive asset as the assessee has started construction in the year 1989. The Legislature has not put any time limit for completion of the construction. Admittedly, the assessee has spent substantial sums on the said construction. We are of the opinion that it becomes a productive asset and otherwise also it cannot be treated as an asset within the mean ..... X X X X Extracts X X X X X X X X Extracts X X X X
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