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M/s. Podar Mills Ltd. C/o. Sharma Shah & Associates Versus Asstt. Comm. of Wealth Tax, Central Circle 34, Mumbai

Enhancement of value of land - Held that:- The land earlier was held by the assessee as non-productive capital asset which was subjected to the wealth tax. However, the assessee had converted 29000 sq. yds. of the land into stock in trade on 31.05.06 and therefore for the relevant assessment year 2007-08, the 29000 sq. yds of the land no longer remain a non-productive capital asset but a business asset in the shape of stock in trade capable of yielding taxable business income and thus exempt fro .....

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showing the asset as stock in trade but in actual keeping the same as non-productive and thereby wrongfully getting the exemption from wealth tax from year to year for a long period of more than 10 years. The time limit thus for claiming exemption from wealth tax in case of any land held as stock in trade has been restricted up to 10 years.

Once the non-productive asset like urban land is converted to a productive asset like a building which qualifies for exemption, then the assessee .....

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Shri Sanjay Garg, Judicial Member And Shri Ramit Kochar, Accountant Member For the Petitioner : Shri Pankaj R. Toprani, A.R. For the Respondent : Shri Amit Kumar Singh, D.R. ORDER Per Sanjay Garg, Judicial Member The above titled three wealth tax appeals have been preferred by the assessee against the common order of the Commissioner of Wealth Tax (Appeals) [hereinafter referred to as the CWT (A)] relevant to assessment years 2005-06, 2006-07 & 2007-08. Since identical issue is involved in a .....

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not function for several days and due to that the appeal could not be filed within the limitation period. The Ld. A.R. has further brought our attention to the fact that in this case, a common order was passed by the WTA relating to A.Y. 2005-06, 2006-07 & 2007-08. The assessee under the wrong impression filed a common appeal agitating the said order. However, he deposited the fees for filing the three appeals. He has also stated that the another mistake was committed by the assessee that he .....

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appeal is of 9 days. There was no deliberate action or intention on the part of the assessee in delaying the filing of appeal. 3. We find that there is a note put by the registry in this respect that inadvertently, the registry has received the single appeal relating to the three assessment years and thereafter the assessee was called upon to rectify the defects. The assessee thereafter rectified the defects and filed separate Form-F for other two assessment years. Considering the above factual .....

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ng the order of the wealth tax officer ignoring the fact and material and enhancing the value of the land without any documentary evidence. The Appellant reserves the right to add, to delete and / or amend any of the foregoing ground of appeal. Apart from the above ground, the assessee has taken the additional grounds of appeal which read as under: 1. The Ld. CIT (A) erred in upholding the addition of ₹ 6,35,00,000/- to the net wealth of the Appellant. 2. The Ld. (CIT) erred in enhancing t .....

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er authorities erred in not adopting the value of land as on 31.03.2005 at ₹ 775 per sq. yds. as per the Report of the Registered Values as on 31.05.2006. The Appellant states that omission of the above grounds from the form of Appeal was not wilful or unreasonable. The Appellant further states that the above grounds are legal grounds and admission of the above grounds do not require investigation in to facts. The Appellant respectfully submits that the above grounds be admitted by the Hon .....

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ee has in fact raised three effective issues relating to the appeals of the assessee. The brief facts of the case are that the assessee was the owner of leasehold industrial land admeasuring 56629 sq. yds. in Jaipur. The land was taken on lease from M/s. Jaipur Spinning & Weaving Mills Ltd. by the assessee vide registered lease deed dated 30.09.1964 for a period of 99 years which was subsequently extended in 1968 for a lease period of 999 years. It is observed from the record that the afores .....

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so that maximum available surplus land be commercially exploited to reduce the debts of the company . Subsequently, further 29000 sq. yds and 1000 sq. yds. of said leasehold land in Jaipur was converted into stock-in-trade vide Board Resolutions dated 18.06.2006 and 30.04.2007 respectively. The assessee had sold 49890 sq. yds of aforesaid land during F.Y. 2007-08 relevant to A.Y. 2008-09 for a consideration of ₹ 20 crores. 7. The Wealth Tax Officer (AO) noted that the aforesaid leasehold l .....

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CWT (A) took into consideration the sale price of the land in question sold in financial year 2007-08 relevant to A.Y. 2008-09 and he applied the formula treating that there might have been 10% appreciation in the value of the land in each year and accordingly reverse calculated the fair value of the land of A.Y. 2005-06, 2006-07 & 2007-08 respectively. Now, the assessee has come in appeal before us. 8. The first contention of the Ld. A.R. of the assessee is that the lower authorities were n .....

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Ld. D.R. has also fairly agreed that the Department has no objection if the matter is referred to the valuation officer for determining the fair market value of the land for the financial years relevant to A.Y. 2005-06, 2006-07 & 2007-08. In view of this, we direct the AO to refer the matter to the Govt. Valuation Officer to arrive at the fair market value of the land separately for the relevant assessment years 2005-06, 2006-07 & 2007-08 respectively. 9. The next contention raised by t .....

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verted into stock in trade. He has contended that the total area to which the wealth tax liability was attracted was 55500 sq. yds. and not 56400 sq. yds. He has invited our attention in this respect to the table given in para 4.33 of the impugned order of the Ld. CWT (A). We find that prima-facie there appears to be a calculation mistake. We accordingly direct the AO to verify this fact and calculate the wealth tax liability of the assessee on the correct area. 11. The next contention raised by .....

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ection 2(2)(ea), but, under the exclusion clause it has been provided that any land held by assessee as stock in trade for a period of 10 years from the date of its acquisition by him, has to be excluded from the definition of urban land for the purpose and scope of Wealth Tax Act. 12. We have considered the above submissions of the Ld. AR of the assessee. We find force in the above submissions of the ld. AR. The land earlier was held by the assessee as non-productive capital asset which was sub .....

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riod of 10 years from the date of its acquisition , the term date of acquisition‟ in such circumstances would mean the date of acquisition of asset as stock in trade which will be the date of conversion of a non-productive capital asset into stock in trade. The time limit of 10 years, in our view, has been provided to curb the practice of misuse of the provision by showing the asset as stock in trade but in actual keeping the same as non-productive and thereby wrongfully getting the exempt .....

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r the provisions of the amended Act, tax is levied only on the non-productive assets such as residential house, urban land, jewellery, bullion, motor cars, etc. Keeping in mind 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 utilizing the urban land. In other words, once the non-productive asset like urban land is converted to a productive asset like a building which qualifi .....

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vy of wealth tax on all assets except those items which were specifically exempted from wealth tax. However, after the amendment only specified assets are subjected to charge towards tax and all other assets are outside the tax net. For the purpose of levy, assets are classified as two categories, one as productive and the other as non-productive. Under the provisions of the amended Act, tax is levied only on the non-productive assets such as residential house, urban land, jewellery, bullion, mo .....

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