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GIRIDHAR G. YADALAM Versus COMMISSIONER OF WEALTH TAX AND ANR.

2016 (1) TMI 826 - SUPREME COURT OF INDIA

Exigibility of 'Urban Land' to wealth tax - whether the land would be excluded from the 'urban land' only when building is completely constructed thereupon or it would be covered by the aforesaid clause even if the building activity is started and the building is not yet complete? - HC held that the building has to be completely erected on the land in order to get it covered by exclusion clause - Held that:- The view taken by the High Court [2007 (3) TMI 334 - KARNATAKA HIGH COURT ] is the corre .....

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treated to be occupied by a building where it is still under construction. If the contention of assessee is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid.

It would be too far fetch, in such a situation, to say that the land stands occupied by a building that has been constructed thereon. Even assessee was candid in accepting that when the constru .....

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ve interpretation has to be rejected

We do not agree with the submission of assessee that the situation when building is fully constructed has been covered by Section 2(e)(a)(v) read with Explanation 1(b) as it would fall under Section 2(e)(a)(i). We have already reproduced the aforesaid Section and find that it deals with altogether different situations. As pointed out above, Explanation (1) thereof excludes certain categories of 'Urban Land' and we are concerned herewith clause (ii .....

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751, 752, 753, 754, 755, 756, 757, 758, 759, 760, 761, 762, 763, 764, 765, OF 2011 - Dated:- 24-7-2015 - A.K. SIKRI AND ROHINTON FALI NARIMAN, JJ. CIVIL APPEAL NO. 766, 767, 768, 769, 770, 771, 772, 773, 774, 775, 776, 777, 778, 779, 780 OF 2011, SLP (CIVIL) NO. 19011 OF 2012, SLP (CIVIL) NO. 19012 OF 2012 For The Appellant : Mr. Gopal Jain,Sr.Adv., Ms. Chinmayee Chandra,Adv., Ms. Khushboo Bari,Adv., Mrs. Nandini Gore,Adv., Mr. Gopal Jain,Sr.Adv., Ms. Nandini Gore,Adv., Mr. Kartik Bhatnagar,Adv .....

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ereinafter referred to as the 'Act'). This Explanation defines 'Urban Land'. Urban land is exigible to wealth tax under the aforesaid Act. However, the definition of 'urban land' in explanation 1(b) excludes certain category of lands. As per Explanation 1(b) to Section 2(ea)(v), 'urban land' to mean land situate - but does not includes:- (i) land classified as 'agricultural land' in the records of the Government and used for agricultural purposes or land o .....

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of its acquisition. 2. To put it pithily, what calls for interpretation is clause (ii) above, namely, what is the meaning that is to be attributed to the expression the land occupied by any building which has been constructed with the approval of the appropriate authority. 3. In the context of these appeals the question is as to whether the land would be excluded from the 'urban land' only when building is completely constructed thereupon or it would be covered by the aforesaid clause ev .....

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o the orders passed by the Kerala and Madras High Courts which have taken a contrary view. From this narration, it becomes clear that there is one common issue and that was the reason for hearing of these appeals together. 6. Mr. Gopal Jain, learned senior counsel appeared for the assessee in the lead matter i.e. Civil Appeal No.728/2011. For the sake of brevity we would take note of the facts from this appeal: Assessee herein is the HUF which is the co-owner of a land measuring 30,663.04 sq. me .....

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it had retained ownership of the land until flats are fully constructed and possession of the assessee's share was handed over to it. The development agreement constituted only permissive possession according to the assessee for the limited purpose of construction of flats. Assessee contended that assessee continues to be the owner of the land for the Financial Years 1995-96 and subsequent years till the sale of flats. Notice under Section 17 of the Act was issued to the assessee and he fil .....

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the Revenue. The Revenue took up the matter in further appeals before the High Court of Karnataka. The High Court has upset the order of the ITAT holding that the assessee is not entitled to the benefit of clause (ii) of Explanation 1(b) to Section 2(e)(a)(v) of the Act, as the building had not been constructed and was still under construction during the Assessment Year. 7. It is not in dispute that 'urban land' is to be included to calculate 'net wealth' for the purpose of weal .....

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excluded from the definition of urban land. On a plain reading of the said clause it becomes clear that in order to avail the benefit, following conditions have to be satisfied: (a) The land is occupied by any building; (b) Such a building has been constructed; (c) The construction is done with the approval of the appropriate authority; 8. Notwithstanding the aforesaid plain language, an endeavour of Mr. Gopal Jain is to impress upon us to read the said clause to include even that land where the .....

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mptions based on the object and purpose of the amendment to the Wealth Tax Act in 1992. These exceptions have to be construed in line with the legislative intent at the time which Section 2(ea) was inserted, which was to stimulate investment in productive and non-productive assets and only specified assets were subject to wealth tax. On that premise, he emphasised that in each of the aforesaid clauses this objective was kept in the forefront. Qua Exception (I) he stressed that where land is clas .....

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n exception has been made on account of which it will not be considered as an asset and is exempted from wealth tax. 9. Mr. Jain further argued that in this very hue, exception (ii) also needed to be interpreted. His submission was that the word 'constructed' is used in the context of exempting a land occupied by any building which is being constructed with the approval of appropriate authority . With the commencement of construction of a building, land ceases to be identifiable as ' .....

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n 2(ea)(v) read with Explanation 1(b) as it would fall under Section 2(ea)(i) which covers buildings. Section 2(ea)(i) reads as follows: (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 with twenty-five kilometers from local limits of any municipality (whether known as Municipality, Municipal Corporation or by a .....

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ial 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; 11. Mr. Jain also submitted that the stand of the respondent that only completed buildings are to be brought into the ambit of the word 'has been constructed' is not tenable since completed buildings fall under a different clause i.e. clause (ea)(i). According to him, if that is accepted then in such cases, Section 2 .....

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that if exception has been added to remedy the mischief or defect, it should be so construed that remedies the mischief and not in a manner which frustrates the very purpose. Purposive construction has often been employed to avoid a lacuna and to suppress the mischief and advance the remedy. It is again a settled rule that if the language used is capable of bearing more than one construction and if construction is employed that results in absurdity or anomaly, such construction has to be rejecte .....

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o years from the date of its acquisition by the assessee. After two years, such land, if unused is amenable to wealth tax. However, if an assessee starts construction of either a factory or any building for industrial purpose within a period of two years and construction spills over beyond the exempted period, the exemption would still continue irrespective of whether the construction is completed within two years. Similarly, land held as 'stock-in-trade' is exempt from wealth tax for a .....

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that the cardinal principle of interpreting taxing statute was to give literal construction to the language used therein. He further submitted that the provision in question was in the nature of 'exemption provision' where again strict interpretation is to be accorded and onus is upon the assessee to show that he falls within the four corners of the exempted clause. He also submitted that when the language of the statute was unambiguous and clear, question of giving purposive interpreta .....

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d out that on the plain language of the provision in question, the benefit of the said clause would be applicable only in respect of the building 'which has been constructed'. The expression 'has been constructed' obviously cannot include within its sweep a building which is not fully constructed or in the process of construction. The opening words of clause (ii) also become important in this behalf, where it is stated that 'the land occupied by any building'. The land ca .....

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of building is still going on and is not completed, literally speaking, it cannot be said that the building 'has been constructed'. It is for this reason that he wanted us to give the benefit of this provision even in such cases by reading the expression to mean the same as 'is being constructed'. His submission was that the moment construction starts the urban land is put to 'productive use' and that entitles the land from exemption of wealth-tax. This argument of givin .....

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ts. We do not find it to be so in the present case. 17. No doubt, the purpose and objective of introducing Section 2(e)(a) in the Act was to stimulate productive assets. However, the event when such a provision is to be attracted is also mentioned in Explanation 1(b) itself carving out those situations when the land is not to be treated urban land. The Legislature in its wisdom conferred the benefit of exemption in respect of urban vacant land only when the building is fully constructed and not .....

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