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2016 (2) TMI 151 - ITAT KOLKATA

2016 (2) TMI 151 - ITAT KOLKATA - TMI - Whether the land held for business purposes would be liable for wealth tax - assessee had held the unused urban land for its hotel industry purposes and started construction activities thereon commencing from Asst Year 1999-2000 onwards after carrying out the activities of land filling, leveling , earth filling, soil testing etc for the purpose of construction of hotel building.

Held that:- The approval for construction of hotel building was obt .....

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alth tax - Decided in favor of assessee. - WTA Nos. 22 & 23/Kol/2013 - Dated:- 23-9-2015 - Shri Mahavir Singh, JM And Shri M. Balaganesh, AM For the Appellant : Shri D. Banerjee, JCIT For the Respondent : Shri S. Choudhury, Advocate ORDER Per Shri M. Balaganesh, AM 1. These appeals of the revenue arises out of the order of the Learned C.W.T.(A) in Appeal No. 188/CIT(A)-I/3(1)/2007-08 dated 29.01.2013 passed against the orders of assessment for the Asst Years 2001-02 & 2002-03 framed by the L .....

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for wealth tax. 4. The brief facts of this issue is that the assessee purchased land for the purpose of setting up a four star hotel complex. The land was put in use for the purpose by land filling, leveling , earth filling, soil testing etc for the purpose of construction of hotel building. The assessee had also incurred a sum of ₹ 1,10,341/- towards construction of hotel building which was duly disclosed in the balance sheet of the assessee. The assessee got the land from Sri Ram Niranj .....

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nt to an agreement dated 29.8.1998 and start construction of star hotel thereon and to have and to hold the said hotel for a period of 30 years on a consideration agreed in the form of royalty payable to the owner of land @ 10% of gross revneue of the hotel plus a fixed amount not less than ₹ 1,00,000/- per annum. The owner and its nominee had also subscribed to the equity capital of the developer to the tune of ₹ 1,00,08,100/-. The assessee started the development activities commenc .....

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d by the Learned CWT (A) who held that the subject mentioned land utilized for development of hotel could be exempt u/s 2(ea) of the Wealth Tax Act, 1957 as it is in the nature of commercial complex and is also a business asset and also stated that the constructed hotel started functioning from Asst Year 2005-06 onwards. Aggrieved, the revenue is in appeal before us on the following ground:- 1. That the Ld. CIT(A) erred in law as well as in facts by treating the land of the assessee company as b .....

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arned CIT(A). 6. We have heard the rival submissions and perused the materials available on record. We find that when the land is given for construction, then it loses the character of land and on that count itself, it is outside the ambit of wealth tax. The construction activity had started from Asst Year 1999-2000 onwards and hence it falls under the ambit of incomplete building. It is well settled that Incomplete building does not fall within the ambit of assets as defined u/s 2(ea) of the Ac .....

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y be read in isolation and it had harmoniously to be construed with the remaining portion of section 2(ea) of the Act, i.e. whether the building was used for residential or commercial purposes or for the purpose of maintaining a guest house, because an incomplete building could not possibly either be used for residential or commercial purposes or for purposes of maintaining a guest house. Therefore, the word building had to be interpreted to mean a completely built structure having a roof, dwell .....

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e purview of urban land as excluded by Explanation 1(b) of the Act. The perusal of the scheme of the Act posits that it was not always that any building or land appurtenant thereto was straightaway liable to wealth tax. There was an exclusion clause contained in Explanation 1(b) of the Act, in regard to urban land as well. In that eventuality, the burden of proof was on the Revenue and the adjudicating authority was required to record a categorical finding that the building of the assessee was a .....

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d ; there is no merit in contention that value of urban land could be assessed to wealth tax until completion of construction of building and until commencement of use of such building for commercial or industrial purpose. Reference in this regard may be made to the decision of Kerala High Court in the case of Apollo Tyres Ltd vs ACIT reported in (2010) 189 Taxman 225 (Ker.). The Wealth-tax Act, 1957, was drastically amended with effect from April 1, 1995. After the amendment only specified asse .....

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and is not utilized for industrial purpose within two years, the value of such urban land will be subject to wealth-tax from the year following. Urban land that is subject to tax under the definition of asset generally covers only vacant land. In fact, under the exception clause the land occupied by any building which has been constructed with the approval of the appropriate authority is exempt from the purview of tax. This provision makes it clear that when urban land is utilized for constructi .....

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the land for industrial purpose. However, this does not mean that part construction and abandoning further construction will entitle the assessee for exemption because part construction without completion of construction of the building cannot be said to be use of the land for commercial or industrial purpose. In view of the exemption available to productive assets, there is no scope for levy of tax during the period of construction of the productive asset, namely, commercial building by utilizi .....

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lot in November 1997, completed the construction of a four storeyed building with basement and started occupying it from March 29, 2000. In the course of assessment for the assessment year 1988-89 the Wealth-tax Officer assessed the value of the land treating it as urban land. This was upheld by the Tribunal. On appeal to the High Court : Held, allowing the appeal, that there was no dispute that the land was allotted for commercial purposes which covered industrial use as well. The assessee prog .....

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