9911796707
Advanced Search 
TMI Blog2006 (11) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... 1962 to 1993 and returned 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that actually 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 agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration 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 also not agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 extent of the land had been reclaimed at a substantial cost by land owners. The assessee has taken the stand that the land owned by her was very marshy and boggy and has been reclaimed at substantial cost. It is also stated that she has partly constructed a building. It is her averment that her plot is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The CWT (Appeals) did not accept the contentions of the assessee and he ultimately enhanced the valuation as adopted by the Assessing Officer as under : Sr. No. Valuation date Asst. Year Rate per cent 1. 31-3-1992 1992-93 Rs. 55,000 2. 31-3-1991 1991-92 Rs. 45,000 3. 31-3-1990 1990-91 Rs. 38,000 4. 31-3-1989 1989-90 Rs. 35,000 15. In our opinion, a reasonable view has been taken by the CWT (Appeals) and no interference is called for. Admittedly the property was sold for Rs. 1,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 concerned, we find that the Assessing Officer has only considered 10 cents of land and not 24 cents for the purpose of valuation for the assessment years 1989-90 to 1992-93. Moreover, we find that the valuation made by the Assessing Officer is very reasonable. We do not find any reason to interfere with the orders of the Assessing Officer. We, therefore, decide this issue against the assessee and in favour of the revenue and the relevant grounds stand rejected. WTA Nos. 35, 36, 37, 38, 39, 40 and 41 (Coch.)/2006 assessment years 1993-94 to 1999-2000. 20. Now, we are taking up the appeals for the assessment years 1993-94 to 1999-2000 being WTA Nos. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 accepted the assessee's contention in the assessment year 1989-90 that it was an agricultural land but the Assessing Officer added the valuation of the said land in the assessment years 1993-94 to 1999-2000 by holding that as per section 2(ea) of the Wealth-tax Act applicable with effect from assessment year 1993-94 or any subsequent assessment year, every urban land is chargeable to tax and as no distinction has been made between the agricultural and non-agricultural land the entire 24 cents of land irrespective of its nature is to be considered for computing the net wealth of the assessee. As far as the 24 cents of land at Vijayapuram village is concerned, for the same rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 starting of construction and incurring of some expenditure for the construction of building. The building and the land appurtenant thereto losses its character when the construction is completed. The Assessing Officer, therefore, proceeded to add the valuation of the land plus partly constructed building on the said land by including the value of the same in computation of the net wealth of the assessee. 24. The assessee challenged the orders of the Assessing Officer on this issue before the CWT (Appeals). The assessee assailed the orders of the Assessing Officer taking the same plea that the said property is exempt from wealth-tax as the partly constructed property is not urban land. The assessee relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contemplated in the new section 2(ea). Further submission of the ld. CA is that presuming that it is a land, still it cannot be treated as an urban land as it is a productive asset because the assessee started construction of residential complex on the said land. Hence in sum and substance, the ld. CA submitted that the said property cannot be considered for computation of net wealth of the assessee. Per contra, the ld. DR supported the orders of the lower authorities. 26. In this case, it is not disputed that the land was purchased long back during 1974--77 and it was lying idle. It is also not disputed that the assessee started the construction of the residential complex of the five-storied building on the same plot o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready 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 completed, still the utilization of the land has become complete. Therefore, the argument of the revenue that the nature of the land ceases to be vacant land only when the building has been fully constructed and become functional is fallacious. That argument is against the spirit of law. 7. The whole confusion is caused because of the fact that the distinction between utilization of the land and completion of the construction of the building is not differentiated. So, theoretically speaking, even if a single brick is laid on the vacant land as initiation of the construction of the building and the building is constructed thereafter, the land ceases to be a vacant land from the date of laying down of the first brick on the land. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 levied on individuals, Hindu undivided families and all companies only in respect of non-productive assets such as residential houses including farm houses and urban land, jewellery, bullion, motor cars, planes, boats and yachts which are not used for commercial purposes. The Committee has further suggested that such tax should be at the rate of one per cent, with a basic exemption of Rs. 15 lakhs. I propose to accept this recommendation and I hope this change will encourage investments in productive assets and discourage investment in ostentatious non-productive wealth'. 9. After the said Bill was converted into the Act, the CBDT vide Circular No. 636 dated 31-8-1992 explained the provisions of the Finance Act, 1992 and the relevant extract of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 including farm houses and urban land, jewellery, bullion, motor car, plane, boat and yacht which are not used for commercial purposes. Hence, while interpreting the term "productive asset", we have to interpret it in the context of the commercial assets. It means that assets which are used for commercial purposes are productive assets and assets which are not used for commercial purposes are non-productive assets. Though the term "commercial asset" has not been precisely defined, but the term "commercial activity" has been defined in the Law Lexicon Second Edition, Reprint 2000 by R. Ramanatha Iyer "to include any type of business or activity which is carried on for a profit." The term "commercial asset" has been defined as an asset which is a part of the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entitled to considerable weight, it is highly persuasive". 14. In section 2(ea), the assets like motor car, jewellery, bullion or furniture which are held by assessees either for the use of the business or running them on hire or as stock-in-trade are excluded from the ambit of "asset". Even in the case of yachts, boats and aircrafts which are used for commercial purposes are also excluded from the definition of "asset". We will have to take into consideration while interpreting clause (vi) which specifically deals with the treatment to be given in respect of cash in hand the entire definition of "asset" as it was brought on the statute book. There is force in the argument of the ld. AR that no discrimination can be made in respect of the productive and non-productive asset as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 meaning of section 2(ea) of the Act. A similar view has been taken by this Tribunal in the case of Federal Bank Ltd. (supra). We, therefore, set aside the order of the CWT (Appeals) on this issue and direct the Assessing Officer to delete the value of this property from the net wealth of the assessee for all the assessment years i.e. assessment years 1993-94 to 1999-2000. This issue is, therefore, decided in favour of the assessee and against the revenue. 30. The next issue is regarding the valuation of the property in of Muttambalam village. As we have already held that the said property cannot be treated as an asset within the meaning of section 2(ea), this issue does not survive for any adjudication. 31. In the result, the assessee's appeals WTA Nos. 31, 32, 33 and 34 (Coch.)/2006 are dismissed and WTA Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
