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2015 (12) TMI 1361 - ITAT KOLKATA

2015 (12) TMI 1361 - ITAT KOLKATA - TMI - Denial of exemption claim - whether the exemption provided in section 5(vi) of the Act in respect of plot of land not exceeding 500 sq,mtrs is also applicable to companies or not - Exemption for plot of land not exceeding 500 sq.mtrs has to be limited only to individuals and HUF and the proviso to section 5(vi) had only acted as a restrictive covenant and full effect needs to be given for the same. We also hold that the proviso needs to be read along wit .....

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he assessee is eligible to claim exemption for two years from the date of acquisition in respect of urban land held for industrial purposes. Accordingly, we hold that the assessee is eligible for exemption for urban land from wealth tax for Asst Years 2003-04 & 2004-05. It is well settled that the assets held as on the valuation date (i.e 31st march of each year) is the relevant date for bringing an asset under the ambit of wealth tax. Similarly the exemption provision also needs to be looked in .....

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S. S. Viswanethra Ravi, Judicial Member For the Appellant: Shri S.M Surana, Advocate, ld. AR For the Respondent : Shri Niloy Baran Som, JCIT, ld. Sr. DR ORDER Shri M. Balaganesh, AM These appeals of the assesee arise out of the common order of the Learned CWT(A)-II, Kolkata in Appeal Nos. 115,116 & 117/CC-XIII/CWT(A)/C-II/09-10 dated 19-09-2013 for the Asst Years 2003-04 ; 2004-05 & 2005-06 respectively against the order of assessment framed by the Learned AO u/s 16(3) read with section .....

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efinition of taxable assets u/s 2(ea) of the Act. The assessee has also raised the additional grounds of appeal as below:- For that the ld.CIT(A) should have granted exemption u/s. 5(vi) of the W.T Act since the property being vacant land was held by the assessee which comprised of an area of less than 500 sq.mtrs. 2. For that even otherwise the land was held for Industrial purposes and putting up a hotel and as such was exempt under the provisions of the Wealth Tax Act . As these additional gro .....

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the business of running a hotel selling sweetmeat, snacks, fast food etc. The assessee had purchased a land at Canal Circular Road, Kolkata for ₹ 15,97,148/- and claimed exemption for the same u/s 2(ea)(i)(5) of the Act in the wealth tax returns filed on the plea that the said land is meant for construction of a hotel and the construction process had started and the assessee had spent a sum of ₹ 15,41,613/- as on 31.3.2003 towards construction of a hotel. The fact of assessee having .....

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to tax by the Learned AO as follows:- Asst Year 2003-04 - 15,97,148 Asst Year 2004-05 - 17,06,198 Asst Year 2005-06 - 17,52,998 On first appeal, it was submitted by the assessee that the urban land is held for business purpose at Canal Circular Road, Kolkata for setting up of a hotel and where construction of a building for business purposes is under process. It was submitted that the assessee planned to erect a residential guest house for the purpose of lodging travelers on the land and also pr .....

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assets as per section 2(ea) of the Act. The assessee placed reliance on the following decisions in support of its contentions:- CWT vs Rohini Hotels (Madras) ltd in TC (A) Nos. 557 and 558 of 2005 (Mad) Apollo Tyres case reported in 325 ITR 528 (Ker) The Learned CWTA held that the construction carried out by the assessee is for construction of a guest house and hence it is not meant for industrial purposes and accordingly the claim of the assessee for seeking exemption for land held for industri .....

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ad to be brought to tax for all the three asst years and upheld the additions made by the Learned AO. Aggrieved, the assessee is in appeal before us for the three assessment years. 5. The Learned AR made a preliminary submission that exemption u/s 5(vi) of the Act is applicable in respect of plot of land less than 500 sq. metres and he further argued that this exemption is not confined only to individual and HUF but is also applicable for all the assesses. He argued that though in the main provi .....

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house the travellers and provide them food and snacks. Hence it is only running a hotel in the highway and admittedly hotel is an industry and hence the land is meant for industrial purposes and accordingly exempt for first two years from the date of acquisition i.e for Asst Years 2003-04 and 2004-05. The second alternative argument advanced by the Learned AR is that the urban land is not identifiable as an urban land as on the valuation date as the construction activity had admittedly been sta .....

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ividuals and HUF. He placed reliance on the Explanatory Memorandum to section 5(vi) of the Act - Exemption for house / plot explaining the scope of the said provision. He further argued that the land in which construction is in process is meant to be used as a guest house and exemption is not eligible to the assessee even for first two years. He further placed reliance on the decision of the Jurisdicitonal High Court in the case of CWT vs Sanjay Krishna Hedge reported in (2013) 35 taxmann.com 17 .....

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ble to companies or not. The provisions of section 5(vi) of the Act are reproduced herein below for the sake of convenience:- 5(vi) - one house or part of a house or plot of land belonging to an individual or Hindu Undivided Family: Provided that wealth tax shall not be payable by an assessee in respect of an asset being a plot of land comprising an area of five hundred square metres or less. The relevant Explanatory memorandum is reproduced herein below:- Scope of section 5(vi) - Exemption for .....

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. Benefit is available to individual and Hindu Undivided Families. The alternative of plot was included by the Finance (No. 2) Act, 1998, with effect from 1-4-1999. Para 68.4 Under the existing clause (vi) of section 5, one house or part of a house belonging to an individual or a Hindu Undivided Family is exempt from wealth tax. The act amends this clause so as to extend this exemption also in respect of a plot of land comprising an area of 500 sq.mtrs or less. Para 68.5 These amendments will ta .....

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plot of size of 500 sq.mtrs or less, so that a plot of even a slightly larger size, may not qualify for exemption. The aforesaid Explanatory Memorandum clearly specifies the intention of the legislature that the exemption for plot of land not exceeding 500 sq.mtrs has to be limited only to individuals and HUF and the proviso to section 5(vi) had only acted as a restrictive covenant and full effect needs to be given for the same. We also hold that the proviso needs to be read along with the main .....

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es on the highway) and accordingly the urban land is exempt for first two years i.e Asst years 2003-04 & 2004-05. In the facts of the instant case, the assessee is setting up a travellers accommodation together with the provision of food and snacks to the travellers on the highway and hence would automatically fall under the category of a hotel industry. We also find that the reliance placed by the Learned AR on the definition of terms hotel and hotel receipts tax under section 3 of The Hote .....

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It is well settled that Hotel is an industry and hence the assessee is eligible to claim exemption for two years from the date of acquisition in respect of urban land held for industrial purposes. Accordingly, we hold that the assessee is eligible for exemption for urban land from wealth tax for Asst Years 2003-04 & 2004-05. It is well settled that the assets held as on the valuation date (i.e 31st march of each year) is the relevant date for bringing an asset under the ambit of wealth tax. .....

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at the building is under construction on the said urban land situated on the highway and hence it loses the character of being identified as an urban land and accordingly is outside the ambit of taxable assets u/s 2(ea) of the Act is concerned, we would like to place reliance on the decision of the Jurisdictional High Court in the case of CWT vs Sanjay Krishna Hedge reported in (2013) 35 taxmann.com 173 (Calcutta) which in turn relied on the decision of Hon ble Karnataka High Court in the case o .....

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