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2016 (4) TMI 654 - ITAT PUNE

2016 (4) TMI 654 - ITAT PUNE - TMI - Treatment of land acquired by the Government of India under the Land Acquisition Act, 1894 - whether falls within the definition of net wealth of the assessee company under the Wealth Tax Act, 1957? - Held that:- The assessee does not hold any ownership rights in the said portion of land and it is absolutely with the Government. Once the ownership of land is vested with the Government and where only possession of the said land has been given to the assessee, .....

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was a Government company and the land was acquired by the Government for the purpose of assessee company, which admittedly, is a public purpose under the provisions of LAC Act, but the land vests with the Government and it has every right to take a decision with regard to the said land in order to liquidate the financial crunch of its company i.e. the assessee before us, which is a Government company. However, the said decision of the Government was withdrawn on a later date and funds were deci .....

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ORDER Per Sushma Chowla, JM This bunch of six appeals filed by the same assessee are against separate orders of CWT(A)-V, Pune, all dated 31.05.2013 relating to assessment years 2004-05 to 2009-10 against respective orders passed under section 16(3) r.w.s. 17 of the Wealth Tax Act, 19 57 (in short the Act ). 2. This bunch of appeals relate to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in WTA No.02/PN/201 .....

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dition to original grounds of appeal has also filed additional grounds of appeal for all the respective years under appeal, which read as under:- 1. In treating the land which was acquired by the Government under Land Acquisition Act, 1894 for the public purpose, as an asset belonging to the assessee and making it liable to wealth tax under Wealth Tax Act, 1957. The action of the AO being contrary to the facts and being bad in law it is prayed that the said land be treated as not taxable under t .....

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sessing Officer and the CWT (A) erred in valuing the said land without considering and I or applying provisions of the law. This being bad in law it is prayed that the assessment be set aside. 5. The issue arising in the present appeal is the treatment of land which was acquired by the Government of India under the Land Acquisition Act, 1894 (in short LAC ) for the construction of residential colony of the assessee company, whether falls within the definition of net wealth of the assessee compan .....

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Wealth Tax , but the assessee had not furnished any Wealth Tax Return for the said assessment year 2004-05. Thereby, the Assessing Officer was of the view that the wealth had escaped assessment. Accordingly, notice under section 17(1) of the Act was issued on 30.03.2011. In response to the said notice, the assessee furnished the return of wealth declaring total wealth of ₹ 4,21,800/-. During the course of wealth tax assessment proceedings, the Assessing Officer noted that the assessee had .....

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ntion of assessee and noted that such Rule only specified the adjustment to be made to the value of assets mentioned under Rule 3 of WT Rules. Hence, the claim of the assessee that unbuilt colony land was not taxable, was not accepted. Another issue noted by the Assessing Officer was that over a period of time, large tracts of unbuilt colony land had become independent in themselves, since they do not cause any detriment to the enjoyment of the building as such. Moreover, the Asset Sale Committe .....

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tted on its own that the market value of 20 acres of land lying at its disposal was about 100 to 150 crores for financial year 2010-11. Thus, taking the average value of land at ₹ 138 crores for 20 acres, the value of land per acre was worked out at ₹ 6.25 crores for financial year 2010-11. Taking 10% step down value per year for inflationary factors, the market value of the land unused of 60 acres was extrapolated backwards for last few years and it was worked out as under:- Financi .....

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x (Appeals) [in short CWT(A) ], the contention of the assessee was that the Special Land Acquisition Officer, Pune vide order dated 27.03.1967 had passed the land acquisition award under section 11 of the LAC Act and the lands were acquired for the expansion of present residential colony of HAL, which was a Government Undertaking. The said land was acquired by LAC Officer free of cost as Grant, which was exclusively for residential colony purpose only and that too only for HAL and no other usage .....

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ssessee company, which included the proposal for selling the unused colony land for raising funds. However, the sale of the land never materialized due to various legal complications and efforts to sell the said colony land was canceled by the Government of India, on a later date. The said sanction was never implemented. Further, the plea of the assessee before the CWT(A) was that the land in question was meant for residential colony and fell squarely under exemption provided under section 2(ea) .....

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nt had decided to consider a second revival package without taking recourse to sell the land, which was on a later date reversed and hence, there was no merit in the admission of the aforesaid additional evidence. The CWT(A) thus, was of the view that the land in question was acquired for the purpose of expansion of colony of the assessee and though the land remained unused urban land. As per the definition of urban land in Explanation (b) to section 2(ea) of the Act, where any unused land held .....

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issue raised before the Tribunal, the additional grounds of appeal have to be first adjudicated. It was proposed by the learned Authorized Representative for the assessee that the said land was not includable as net wealth of the company since the land was acquired by the Government under the LAC Act for residential colony of the company and was not the wealth of the assessee. The learned Authorized Representative for the assessee pointed out that initially 200 acres of land was acquired by the .....

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to sell about 20 acres out of 69 acres, but nothing could be sold by the Government of India. The learned Authorized Representative for the assessee stressed that throughout the assessment proceedings and appellate proceedings, the presumption was that the land belonged to the assessee. Reference was made to clause (f) (iv) of section 3 of the LAC Act to point out that the acquisition was for public purposes or for the purpose of Government company and under section 16 of the Act after acquisiti .....

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le Bombay High Court vide judgment dated 17.11.2000 held that the assessee company was wholly owned by Government of India under section 617 of the Companies Act, for which entire share capital has held by the Government of India. The Hon ble High Court further held that the lands were acquired for the assessee company under the provision of Part - II of Land Acquisition Act and not under Part VII of the LAC Act and secondly, the lands vests absolutely in the Government. Where once the land is v .....

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resumption that the said land belonged to the company. However, in view of the awareness of legal aspects, a new legal plea was being raised before the Tribunal and hence, the additional grounds of appeal were raised. He further submitted that the assessee had no right over the said land, except to use the land for residential colony i.e. a limited right and the entire land belonged to the Government of India. With regard to the meaning of ownership, the learned Authorized Representative for the .....

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r to the assessee company for the construction of residential colony. The learned Authorized Representative for the assessee further placed reliance on the ratio laid down by the Hon ble Supreme Court in V. Chandrasekaran & Anr. Vs. The Ad ministrative Officer & Ors. reported in (2012) 10 S.C.R. 603, wherein the legal connotation of nature of land acquired by the Government of India has been explained elaborately. While summarizing its submissions, the learned Authorized Representative f .....

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and 2, the learned Authorized Representative for the assessee summarized that since the land does not belong to the assessee, so the same was not includable as its wealth. With regard to additional ground of appeal No.3, without prejudice to the above said grounds of appeal, the learned Authorized Representative for the assessee pointed out that the valuation is done based on what seller expects. He stressed that 66 acres of land was valued at seller s expectations and not at market value, which .....

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for construction of residential colony of its employees. When the assessee went in liquidation, permission was given by the Government of India to sell the land in order to recoup the losses and this establishes that the land belongs to the assessee and hence, includable in the hands of assessee for computing its wealth for captioned assessment years. 12. We have heard the rival contentions and perused the record. The assessee before us is a Government company, which is owned by the Government .....

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per Book filed by the assessee. Pursuant to the said acquisition of land by the Government of India, against which the Land Acquisition Collector gave award. Then document of right (Register of Mutation) dated 15.01.1968 was issued and the possession of the said land was given to the assessee company for construction of quarters vide Possession Note dated 10.11.1965 through M.S.M. Chinchwad. Survey Nos., the Area, Cess and the nature of holder from whom the land was acquired is mentioned in the .....

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assessee. The LAC Act prescribes the said Act to amend the law for acquisition of land needed for public purposes and for Government companies and for determining the amount of compensation to be made on account of such acquisition, the Act was enacted. Under section 3(f) of LAC Act, expression public purpose has been defined and the relevant clause for deciding the present issue is clause (4), under which it is provided that the provisions of land for Corporation owned or controlled by the Stat .....

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or for a company, then a notification to that effect shall be published in official Gazette and in two daily newspapers, and the Collector shall cause publish notice of the substance of such notification to be given at convenient places in the said locality. Thereupon, under clause (2) of section 4 it shall be lawful for any officer, either generally or specially authorized by such Government in this behalf, to enter upon and survey and take levels of land and to do or every acts necessary to a .....

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to certify its orders, and declarations may be made from time to time in respect of different parcels of any land covered by the same notification under section 4. After declaration, the Collector is to take order for acquisition of land as per section 7 of LAC Act. Thereafter, procedure has to be followed as per different provisions of the Act for acquisition of land and once the said land has been earmarked for acquisition. Then under section 11 of the LAC Act, the Collector shall proceed to e .....

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compensation among all the persons known or believed to be interest in the land. The said award has to be made by the Collector after receiving the approval of appropriate Government or by any such officer as authorized by the Government. Thereafter, under section 16 of the LAC Act, when the Collector has a made an award under section 11, then, he may take possession of the land, which shall thereupon vests absolutely in the Government, free from all encumbrances. Reading the above said provisio .....

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tor is to take the possession of the land, which thereupon vests in the Government absolutely free from all encumbrances. 14. The Hon ble Supreme Court while deciding the issue under the Land Acquisition Act for acquisition of certain piece of land in V. Chandrasekaran & Anr. Vs. The Administrative Officer & Ors. (supra) after taking note of various judicial precedents on the issue held as under:- 16. It is a settled legal proposition, that once the land is vested in the State, free from .....

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2005 SC 491). 17. The said land, once acquired, cannot be restored to the tenure holders/personsinterest, even if it is not used for the purpose for which it was so acquired, or for any other purpose either. The proceedings cannot be withdrawn/abandoned under the provisions of Section 48 of the Act, or under Section 21 of the General Clauses Act, once the possession of the land has been taken and the land vests in the State, free from all encumbrances. (Vide: State of Madhya Pradesh v. V.P. Sha .....

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of the land has been taken by the Government, then where the land stands vested in the State, free from all encumbrances provided under section 16 and 17(2) of the Act, no benefit can be taken by the interested person where he had not filed an objection to the notice issued under section 5A, then the land vested in the State absolutely. 16. The Hon ble Supreme Court vide para 20 and 21 referred to the decision of Hon ble Supreme Court in other cases and observed as under:- 20. Similarly, in Sta .....

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ter utilized for the public purpose envisaged in the Directive Principles of the Constitution. (See also: C. Padma & Ors. V. Deputy Secretary to the Government of Tamil Nadu & Ors., (1997) 2 SCC 627; Bhagat Singh v. State of U.P. & Ors., AIR 1999 SC 436; Niladri Narayan Chandradhurja v. State of West Bengal, AIR 2002 SC 2532; Northern India Glass Industries v. Jaswant Singh & Ors., (2003) 1 SCC 335; and Leelawanti & Ors. V. State of Haryana & Ors., (2012) 1 SCC 66). 21. I .....

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(1996) 6 SCC 405; State of Kerala & Ors. V. M. Bhaskaran Pillai & Anr., AIR 1997 SC 2703; Printers (Mysore) Ltd. v. M.A. Rasheed & Ors., (2004) 4 SCC 460; Bangalore Development Authority v. R. Hanumaiah, (2005) 12 SCC 508; and Delhi Airtech Services (P) Ltd. & Anr. V. State of U.P. & Anr. (2011) 9 SCC 3 54). 17. The conclusion of the Hon ble Supreme Court in para 22, which reads as under:- 22. In view of the above, the law can be crystallized to mean, that once the land is a .....

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ht of restitution on any ground, whatsoever, unless there is some statutory amendment to this effect. 18. In view of the ratio laid down by the Hon ble Supreme Court, where the land is acquired by the Government, then the same vests in the State, free from all encumbrances, as per the provisions of section 16 of LAC Act. Further, the said land is to be used for the purpose for which it was acquired or for any other purpose and the persons whose land is so acquired, he becomes persona non-grata o .....

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vernment of India. The assessee company was incorporated in the year 1954 and which had set-up of Pharmaceutical unit to manufacture Pensulin at Pimpri, Pune. Initially, an area of 200 acres of land was acquired for the setting up of the factory for the manufacture of such drugs. In 1962, a decision was taken to further acquire land of 69 acres for the residential colony of the employees of the assessee. Consequently, notification was issued on 03.09.1964 under section 4 of LAC Act, which was fo .....

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and about 66 acres of land could not be developed. A Writ Petition was filed before the Hon ble Bombay High Court by the successors of original owners of land and they challenged the sale of land on the ground that since the lands of petitioners were acquired under Chapter VII of the LAC Act, provisions of section 44A are attracted, the lands could not be sold by the appropriate Government without the permission of the State Government. Further, it was contended that the restoration of the said .....

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completely misconceived. In the instant case the 1st respondent is a wholly owned Government company under section 617 of the Companies Act for which entire share capital has been held by the Government of India. Provision of the said section are not applicable to the government companies inasmuch as under section 3(e) of the Land Acquisition Act which defines the word Company the Government companies are excluded from the purview thereof. The lands were acquired for the 1st respondent being a w .....

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stated that the provisions of section 44A are not attracted to the facts of the present case. 20. The Hon ble High Court thus, gave a mandate with regard to the ownership of land, which was acquired by the Government for the purpose of construction of residential colony of the employees of assessee company, vested absolutely in the Government and since the said lands were acquired for the assessee company, which was wholly owned Government company of the Central Government, there was no merit i .....

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lan. The SLP filed against the said judgment of the Hon ble High Court has been dismissed by the Hon ble Supreme Court vide its order dated 30.08.2001 in SLP (Civil) No.11976/2001. The copy of the judgment of Hon ble High Court and the order of dismissal of SLP by Hon ble Supreme Court are filed on record by the assessee along with additional grounds of appeal raised by it. 21. The first issue to be addressed by us in this regard is the admission of additional grounds of appeal raised by the ass .....

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by the Government under the LAC Act, vests absolutely in the Government. The additional grounds of appeal raised by the assessee are purely legal grounds and in view thereof, we admit the said additional grounds of appeal. Further, the issue has been crystallized by the Hon ble Bombay High Court in the above mentioned Writ Petition, against which SLP has been dismissed by the Hon ble Supreme Court, wherein assessee was party along with Union of India. Accordingly, we proceed to decide the issue .....

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absolutely with the Government. The assessee has filed on record the copy of Rights (Register of Mutation) dated 15.01.1968, which was issued on 22.02.2002 by the Government / Revenue authority by which the possession of the land was handed over for occupation by the assessee company for residential quarters. The assessee has furnished copy of the said document in Marathi along with English transaction. The perusal of the said document placed in additional Paper Book at pages 1 and 2 reflects th .....

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a Cess and the nature of holder from whom the land was acquired is mentioned therein and the remarks by the accepting Officer is passed on the perusal of Possession Note . The perusal of the above said document of Right reflects that pursuant to the order of Special Land Acquisition Officer, Pune, the possession of the acquired land was given to the assessee for construction of quarters. The case of the assessee before us is that where only possession was given to it and the ownership remained w .....

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red under the LAC Act for public purpose by making it available for Corporation owned or controlled by the State, then the said land after its acquisition and the announcement of award under section 11 of the LAC Act, the possession of which has to be taken by the Collector, shall thereupon vests absolutely in the Government free from all encumbrances. The assessee does not hold any ownership rights in the said portion of land and it is absolutely with the Government. Once the ownership of land .....

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