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Devineni Avinash, Devineni Lakshmi Legal Rep. of Late Sri Deniveni Rajasekhar Versus Wealth Tax Officer Ward-2 (3) , Vijayawada

2017 (12) TMI 480 - ITAT VISAKHAPATNAM

Treatment of asset as stock in trade - Held that:- The assessee has purchased urban vacant land located at Banjara Hills and entered in to development agreement with Vulcon Project Developers Pvt. Ltd for development of the land but no development took place till the date of valuation date. The assessee declared the asset in the balance sheet as a fixed asset and no supporting evidence was placed by the assessee with regard to the claim of the assessee as stock in trade. The property was not con .....

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f Wealth Tax Act and CWT(A) has rightly directed the AO to hold that the same required to be brought to Wealth Tax purpose. Accordingly, we uphold the order of the CWT(A) and dismiss the appeal of the assessee on this ground. - W.T.A. Nos. 20-22/Viz/2017 - Dated:- 8-12-2017 - Shri D Manmohan, Vice President And Shri D. S. Sunder Singh, Accountant Member Appellant by : Shri C.Subrahmanyam, AR Respondent by : Shri B.C.S.Naik, DR ORDER Per D. S. Sunder Singh, Accountant Member These appeals are fil .....

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th Tax Act, 1957 are contrary to the facts of the case and provisions of law. 1.1. The learned Commissioner of Wealth Tax(A)(in short 'CWT(A)') erred in observing that the vacant land situated in Sheikpet Hyderabad is liable for Wealth Tax when the same is held by the assessee as his stock-in-trade. 1.2. The learned CWT(A) ought to have held that the subject land_ is a business asset/stock-in-trade which the assessee can hold for 10 years from the date of purchase, therefore, the same is .....

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ing the impugned asst. year, matter pending in a City Civil Court in O.S.N0f248 of 2003 with an injunction order to maintain the status-quo till further orders. In as much as the assessee is prevented from carrying out construction of the building, therefore, the subject land is not coming within the definition of asset u/s.2(ea) of the WT.Act. 1.5. The learned CWT(A) is not correct by not following the decision of the Jurisdictional Bench Hon'ble ITAT Visakhapatnam in the case of Sri Devine .....

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gment he would not have made such wrong observation and he would not have taken an adverse decision on the issue. 1.7. The observations of the learned CWT(A) at para-6.3 is contrary to the provisions of law, facts of the case. The reliance placed on the decision of ITAT Amritsar Bench reported in (2006) 97 lTD 482(Asr)to support his adverse view is out of context since the decision supports the case of the assessee. 1.8. For these and other reasons that are to be urged at the time of hearing of .....

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lth on 17.09.2010 declaring net wealth at Rs.Nil for the A.Y.2008-09. The assessment was completed u/s 16(3) r.w.s. 17 of Wealth Tax Act on total net wealth of ₹ 6,47,28,860/-. During the assessment proceedings, the assessing officer (AO) computed the net wealth as under : 1. Property at Enikepadu ₹ 7,50,000 2. Property at Shameerpet ₹ 6,43,860 3. Property at Shaikpet Rs.6,33,35,000 4. Property at Gunadala & ITI bus stop Rs. Nil 5. Movable Properties Rs. Nil Total wealth as .....

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was stock in trade as per the development agreement entered in to with Vulcon Project Developers Pvt. Ltd and argued that property is exempt from wealth tax. However, the AO found from the income tax returns that the assessee had filed the return of income in ITR-2 declaring income from house property and neither done any business nor declared any income from business. Hence, the AO held that the property is not business asset and liable for wealth tax. Accordingly called for the information fro .....

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et wealth. The CWT(A) observed that the property in question was urban vacant land located at Banjara Hills, Hyderabad and the land was purchased on 30.07.2007. Though the MoU was entered with M/s Vulcon Project Developers Private Ltd. on 31.07.2007, till the relevant valuation date i.e on 31.03.2008, the land remained vacant land and no construction or development activity took place. CWT(A) further, observed that the assessee declared the asset in the balance sheet as on 31.03.2008 for income .....

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ny construction activity took place in the relevant period. Therefore, following the decision of the Tribunal in assessee s own case, for the assessment year 2009-10 in WTA No.1/Vizag/2015 dated 10.06.2016 held that the asset is stock in trade, accordingly upheld the action of the AO in treating the asset as taxable asset . 8. During the appeal proceedings, before the CWT(A), the assessee raised alternate proposition stating that the subject property was in litigation and the city court has gran .....

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ugh the decision of the Tribunal was in favour of the assessee, CWT(A) held that unless there is a complete restriction or prohibition of the bye-law, the land cannot be excluded from the purview of section 2(ea) of Wealth Tax Act. Further, the CWT(A) observed that there is no prohibition of construction of building in the area due to operation of any law, except the injunction orders due to disputes hence, the interim orders issued by the city civil court cannot be equated with the law imposing .....

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stock in trade for 10 years from the date of purchase, the Ld.AR further submitted that the development agreement which goes to prove that the assessee has purchased the land for the purpose of business exploitation and till such time the asset is held as stock in trade the same should be treated as business asset and cannot be brushed aside in a casual manner. Accordingly, Ld. AR argued that the asset is stock in trade and required to be excluded from the wealth tax purpose. On the other hand t .....

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regard to the claim of the assessee as stock in trade. The property was not converted as a business asset in the relevant period. On identical facts in the case of Devineni Avinash for the A.Y.2009-10, the coordinate Bench of ITAT Vizag in WTA No.1/Vizag/2015 dated 10.06.2016 held that the asset is an investment but not stock in trade. For ready reference, we extract the relevant paragraphs of the ITAT s order which reads as under : 6. We have heard both the parties, perused the materials availa .....

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investor which was proved by his conduct that he had disclosed the said asset to the department as investment. It is the contention of the assessee that the land held by him is stock in trade which is kept outside the purview of the definition of asset u/s 2(ea) of the Act. The assessee further contended that he had purchased the land for the purpose of commercial exploitation which was evidenced by the fact that he had entered into a JDA on the next day of the purchase of land, therefore, it ca .....

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onsidered as stock in trade. 7. The only issue that came up for our consideration is whether the land held by the assessee is an urban land coming within the definition of asset as per section 2(ea) of the Act or is a stock in trade, which is kept outside the definition of asset. It is the contention of the assessee that the land held by him is a stock in trade, therefore, it cannot be considered as an asset. We do not find any merit in the contention of the assessee for the reason that the asse .....

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any evidences. On the other hand, the income tax return filed for the assessment year 2009-10 in ITR form-2 which is meant for individual and HUFs not having income from business or profession, abundantly proves that the assessee is not involved in any business. By his conduct, the assessee proved that he is not into the business either in the past or in the future. If the JDA is entered for development of the property, it is for the builder who comes under the activity of business but not the .....

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ssee s appeal on this issue in ground no. 1.1. to 1.3 are dismissed. 12. Ground Nos. 1.4 to 1.7 are related to the litigation on the property before the Hon ble Civil Court in OS No.248 of 2003 with an injunction order to maintain status quo till further orders. The Ld.AR was of the view that due to injunction order issued by the Hon ble City Civil Court the assessee is prevented from carrying out construction of building or the development, therefore, the subject land is not coming within the d .....

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e and clarity, we extract relevant paragraph of the order Hon ble Jurisdictional High Court cited supra. 6. The first question of Jaw that arises for consideration is as to whether the property at Shaikpet, Hyderabad, despite being an urban land, can be held to be not an asset within the meaning of Section 2(ea) of the Act. 7. Section 2(ea) of the Act defines the expression 'assets" in relation to the assessment year commencing on the 1 day of April, 1993 or any subsequent assessment ye .....

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Cantonment Board, but does not include - (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than (ten lakh rupees); (2) any house for residential or commercial purposes which forms part of stock-in trade; (3) any house which the assessee may occupy for the purposes of any business or profession carried on by him; (4) any residential property that .....

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re any of the said assets is used by the assessee as stock-n-trade, such asset shall be deemed as excluded from the assets specified in this sub-Clauses (iv) yachts, boats and aircraft (other than those used by the assessee for commercial Purposes); (v) urban land; (vi) cash in hand, in excess of fifty thousand rupees, of and Hindu - undivided families and in the case of other persons any amount not recorded in the books of account Explanation-1, For the purposes of this clause, - (a) "Jewe .....

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omprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee , town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or (ii) in any area within the distance, measured aerially - (i) not being more than two kilometers, from the, local limits of any municipality or cantonment hoard referred to in sub-clause (I) and which has a population of more .....

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or the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the assesses for industrial purposes tar a period of two years from the data of Its acqusIt1on by him or any land held by the assessee as stock- in-trade for a period of ten years from the date of Its acquisition by him. Explanation, - For the purposes of clause (b) of Explanation 1, populat .....

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ts' under Section 2(ea). Explanation-1 to Section 2(ea) defines "Urban Land" to mean a land situate in any area comprised within the jurisdiction of a municipality, corporation etc. But certain lands are excluded from the definition of the expression "urban land". Under Explanation-1(b) of Section 2(ea) the land on which construction or a building is not permissible under any law for the time being in force in the area in which such land is situated, is excluded from the .....

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