TMI Blog2004 (5) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... y 9, 2001, passed by the Income-tax Appellate Tribunal, Ahmedabad, in Wealth-tax Appeals Nos. 55 to 58 of 1999 for the assessment years 1991-92 to 1994-95. Since the appeals involve common questions of law and fact, by consent of learned counsel for the parties, the appeals were heard together and are being disposed of by this common judgment. The appeals were admitted for considering the following substantial questions of law: "(i) Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in dismissing the appeal of the appellant without taking into consideration the relevant material on record and without any 'speaking order' on merits? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in interpreting the provisions of the Wealth-tax Act with regard to definition of 'urban land' in section 2(ea), clause (v), and Explanation (b) to section 2(ea) which stipulates that the area of land occupied by a building does not form part of urban land? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the contention of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The arbitrator allotted subplot No. 417/1/1 to Bhadresh K. Shah, sub-plot No. 417/1/2 to the appellant Dr. K.M. Shah and 417/1/4 to Mrugesh K. Shah. As per the relocation done by the arbitrator, each of these three persons got an area of 818 sq. mtrs. Of course, sub-plot No. 417/1/1 allotted to Bhadresh K. Shah had the residential bungalow constructed on it. On the basis of the aforesaid award, the city civil court passed decree dated July 17, 1995, in terms of the award. The appellant, his two sons and his daughters entered into an agreement of sale dated April 1, 1995, for selling the entire property being final plot No. 417/1 to the promoters of proposed Sugam Shops and Co-operative Housing Society, etc. The sale deeds were executed on April 20, 1996, showing a sale consideration of Rs. 6,54,71,500 (rounded off to Rs. 6.55 crores for convenience for the purposes of discussion in these appeals). The consideration was divided between the appellant and his two sons equally, that is, each one of them got nearly Rs. 1.81 crores and the three daughters got an amount of Rs. 37.24 lakhs each. The aforesaid property being final plot No. 417/1 having four sub-plots and having a resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under the Gift-tax Act for the assessment year 1995-96. The controversy involved in the appeals under the Wealth-tax Act was different from the controversy involved under the Gift-tax Act. However, the Commissioner (Appeals) heard all the five appeals together and by order dated March 19, 1999, dismissed the four appeals under the Wealth-tax Act as well as the appeal under the Gift-tax Act. The assessee challenged the orders in the appeals under the Wealth-tax Act in Wealth-tax Appeals Nos. 55 to 58 of 1999 before the Income-tax Appellate Tribunal. After hearing learned counsel for the appellant and the learned Departmental Representative, the Tribunal dismissed the appeals under the Wealth-tax Act by its judgment and order dated January 9, 2001. Thereafter, the appellant filed miscellaneous applications for rectification in all the four appeals. In the meantime, the appellant had already filed the present tax appeals for challenging the judgment and order dated January 9, 2001. The same were, therefore, disposed of on the ground of pendency of rectification applications with liberty to revive in case the rectification applications were dismissed. The rectification applications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litate against occupation of house by the owner for his own use as residence. It is also contended that the Tribunal has not applied the correct tests as laid down in CIT v. Zaibunnisa Begum [1985] 151 ITR 320 (AP) and in CIT v. Smt. M. Kalpagam [1997] 227 ITR 733 (Mad). The Tribunal erred in not taking into consideration the forms filed by the appellant's sons under section 6 of the Urban Land Ceiling Act and also the orders passed by the authorities under the Urban Land Ceiling Act and the orders passed by this court in the proceedings under the Urban Land Ceiling Act wherein it was held that there was no excess land held by the appellant's sons. Several important documents like the tax bills issued by the Ahmedabad Municipal Corporation assessing the property as one property being plot No. 417/1 have not at all been considered by the Tribunal and, therefore, the judgment under appeal is vitiated. The property bearing No. 417/1 was always treated as one property and the appellant's wealth-tax returns were also accepted in all the assessment years right from the beginning and the assessment was also made on the basis that there was only one property being plot No. 417/1. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remove anomalies and practical difficulties but also to introduce some tax concessions and to remove some hardships and to provide certainty in the matter of wealth-tax assessments and to reduce litigation by incorporating rules for valuation of assets in the Wealth-tax Act itself. Strong reliance is, therefore, placed on Circular No. 559, dated May 4, 1990, containing explanatory notes to various provisions of the Direct Tax Laws (Amendment) Act, 1989, particularly paragraph 18.1 thereof. Submissions on behalf of the Revenue On the other hand, Mr. Tanvish U. Bhatt, learned standing counsel for the Revenue, has supported the judgment and order of the Tribunal and has further made the following submissions: The judgment of the Tribunal being one of affirmance, it was not necessary for the Tribunal to give detailed reasons for accepting the findings given by the Commissioner (Appeals) for cogent reasons. It cannot, therefore, be said that the judgment and order of the Tribunal is not a speaking order. The Tribunal has taken into consideration all the relevant material and the Tribunal has given cogent reasons for upholding the order of the Commissioner (Appeals). What is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., sub-plot No. 417/1/1. The said rules would not be applicable to the other two plots. Statutory provisions Before considering the rival submissions, it is necessary to refer to the relevant statutory provisions. While the Wealth-tax Act at the time of its enactment provided for exemption in respect of one residential house belonging to the assessee in a rural area, with passage of time, the restrictions about location of the house in a rural area and about use of the house exclusively for residential purposes came to be removed, but for almost two decades from the assessment years 1964-65 to 1984-85 the exemption in respect of the house belonging to the assessee was restricted to rupees one lakh which was raised to rupees two lakhs for the assessment year 1985-86. For the assessment years 1986-87 to 1992-93, the assessee was entitled to exemption in respect of- "one house or part of a house belonging to the assessee", but the exemption was available within the overall ceiling limit of Rs. 5 lakhs specified in section 5(1A) in respect of several financial assets specified therein. This provision is, therefore, relevant for the appeals relating to the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 assessee for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as a stock-in-trade for a period of five years from the date of its acquisition by him." The other relevant provision is section 7 as introduced with effect from the assessment year 1989-90 onwards which provides for determination of value of assets. Up to the assessment year 1988-89, the value of the house was to be estimated to be a price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date, subject to the provisions contained in the rules in that behalf. However, section 7 as amended with effect from the assessment year 1989-90 and which is applicable to the four assessment years in this group of appeals reads as under: Section 7 (operative for and from the assessment years 1989-90) "7. Value of assets how to be determined. - (1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs to the assessee. Rule 4 provides that "net maintainable rent" is to be computed after deducting from the "gross maintainable rent" the amount of taxes levied by any local authority and a sum equal to 15 per cent, of the gross maintainable rent. Rule 5 provides the method for computing the "gross maintainable rent" being the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority, whichever is higher; where the house property is not let, the amount of annual rent assessed by the local authority. Rules 6 and 7 provide for adjustments to the value arrived at. Rule 8 enumerates the cases where the provisions of rule 3 for valuation of house property shall not apply. The valuation in such cases shall be done by the Assessing Officer in the manner laid down in rule 20. The relevant portion of rule 8 to Schedule III to the Wealth-tax Act, 1957, reads as under: "8. Nothing contained in rule 3 shall apply, - (a) where, having regard to the facts and circumstances of the case, the Assessing Officer, with the previous approval of the Deputy Commissioner, is of opinion that it is not practicable to apply the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It is not a matter of choice or option". Mr. Patel has also relied on the decision of the Calcutta High Court in Kalipada Ghosh v. Tulsidas Dutt, AIR 1960 Cal 467 in support of his contention that "house" or "dwelling house" should be taken to mean not only the structure or building, but also adjacent buildings, garden, court-yard, orchard, and all that it is necessary for the convenient occupation of the house and that it is not necessary for the members of the family or for one or more of them physically to occupy a house so as to make it a dwelling house. It is enough if the house or its appurtenances are used for the use or accommodation of servants, officers or guests of the family. However, the observations of the apex court in Singhania's case [1994] 207 ITR 1 were made in the context of valuation of unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957. The rule provided for only one method for valuing unquoted equity shares of a company. In the instant case, the question is whether rules 3 to 7 in Schedule III are to be applied only to sub-plot No. 1 or also to the two other sub-plots (i.e., sub-plots Nos. 2 and 4). Hence, the above decision has no rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant's case that the building together with the entire land of final plot No. 417/1 was used and enjoyed by the appellant and his family members occupying the building for residential purpose. As regards the area, since the area of sub-plot No. 417/1/2 is 533 sq. mtrs. and so also the area of sub-plot No. 417/1/4 is about 451 sq. mtrs., the Commissioner (Appeals) as well as the Tribunal held that each of the above plots could be put to independent user without causing any detriment to the enjoyment of the building as such on sub-plot No. 417/1/1. Of course, on behalf of the appellant it has been contended that looking to the number of persons residing in the building including the appellant and his sons consistent with their social standing (the appellant was at the relevant time an eminent doctor of the city of Ahmedabad), there will be no space left after considering the requirements of the appellant and his family. However, it cannot be overlooked that the appellant and his sons had themselves not only got the land sub-plotted in the year 1967, but had also gifted one of the four plots being sub-plot No. 3 (admeasuring about 505 sq. mtrs.) to the appellant's daughters and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the fact that although no corresponding residential units had come to be built on sub-plots Nos. 2 and 4 and there was no fencing to demarcate the sub-plots and actually one residential unit for the use of the appellant and his family had been built on sub-plot No. 1, on a totality of the facts, sub-plots Nos. 2 and 4 cannot be treated as land appurtenant to the residential house of the appellant. Question No. 1 (Part 1) At this very stage, we may deal with the connected question No. 1 (Part 1), whether the Tribunal had dismissed the appeal without taking into consideration the relevant material on record. While there can be no doubt, as held by the apex court in Omar Salay Mohamed Suit v. GT [1959] 37 ITR 151 and in Udhavdas Kewalram v. CIT [1967] 66 ITR 462 (SC), that it is the duty of the Income-tax Appellate Tribunal to consider all facts and not to improperly reject the evidence and that where a finding is arrived at after improperly rejecting the evidence, its findings even though on questions of fact will be liable to be set aside by a court. However, as observed by the apex court in CIT v. Karam Chand Thapar and Bros. (P) Ltd. [1989] 176 ITR 535, the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Land Ceiling Act that the land had three residential units with land admeasuring 500 sq. mtrs. appurtenant to each of them. The appellant and his family members claimed 500 sq. mtrs. of appurtenant land for the bungalow, another appurtenant land of 500 sq. mtrs. for pagi's room and another 500 sq. mtrs. of the appurtenant land for servant's room in order to show that there was no excess vacant urban land. Having succeeded before the urban land ceiling authorities on that basis, the appellant is bound by the statements made in the Appendix to Form No. 1 under section 6 of the Urban Land Ceiling Act and in the appeal memo. Hence, the order of the Tribunal or the order of the Commissioner (Appeals) are not liable to be disturbed merely because they did not make a specific reference to the material under the Urban Land Ceiling Act which in any case destroys the appellant's case that sub-plots Nos. 2 and 4 are appurtenant to the residential bungalow and that the entire land admeasuring about 2,900 sq. mtrs. is only one unit.The above peculiar features of the case very much militate against the appellant's case that the appellant had always treated the entire unbuilt land in final plo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gi's room over and above the appurtenant land for the residential bungalow. The above two features are sufficient to distinguish the fact situation from the case of Shrenik Kasturbhai.The appellant had produced the tax bills issued by the Ahmedabad Municipal Corporation to indicate that the corporation had treated the entire property as having only one number, i.e., 417/1. However, in view of the fact that there was only one building constructed on sub-plot No. 1 of final plot No. 417/1 and that sub-plots Nos. 2, 3 and 4 had always remained open lands and the corporation has no power to levy tax on open land, nothing turns upon the corporation bills not giving sub-plot number for the building in question. The corporation itself had sanctioned the construction plans in the year 1968 for construction of a residential house admeasuring 345.88 sq. mtrs. on sub-plot No. 1 of final plot No. 417/1. In fact, the bill at page 390 for the year 1992-93 shows the area of construction as 345.88 sq. mtrs., whereas the bill at page 391 for the year 1993-94 and bill at page 392 for the year 1995-96 show the area of construction as 121.34 sq. mtrs. The bill at page 389 for the year 1990-91 does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th-tax Act. Looking to the totality of the facts and circumstances of the case and reasons recorded by the learned Commissioner of Income-tax (Appeals) in her impugned order, we are of the opinion that her order is legally and factually correct and no interference is called for. We, therefore, decline to interfere."In State of Madras v. A.R. Srinivasan, AIR 1966 SC 1827 and Tara Chand Khatri v. Municipal Corporation of Delhi, AIR 1977 SC 567, it has been held that it may be necessary for an appellate authority to give detailed reasons in support of its order if it differs from the lower authority, but when the appellate authority merely gives an order of concurrence, it need not contain such elaborate reasons. An order does not cease to be a speaking order merely because it is brief and not elaborate.In the instant case, the Tribunal has considered the relevant material and has highlighted the important features of the case and has given reasons to show its agreement with the Commissioner (Appeals). Hence, it cannot be said that the order of the Tribunal is not a speaking order.Since in the context of the above findings of fact given by the Commissioner (Appeals), the order of conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, that each of the sub-plots Nos. 2 and 4 was capable of having a building constructed on it. As far as the land occupied by any building is concerned, sub-plots Nos. 2 and 4 did not have any construction except a small pagi room (watchman room) admeasuring 19 sq. mtrs., on sub-plot No. 4 and, therefore, at the most, the land below the said room would have to be excluded while making valuation of the land. Part B of Schedule III to the Act applies to any immovable property being a building or land appurtenant thereto or part thereof. Once the appellant's case that sub-plots Nos. 2 and 4 are land appurtenant to the residential bungalow on sub-plot No. 1 is not accepted and sub-plots Nos. 2 and 4 are found to fall within the definition of "urban land", these lands are liable to be included in the assets for the purpose of computation of net wealth.In view of the above discussion, the Tribunal has not substantially erred in law in interpreting the provisions of the Wealth-tax Act with regard to definition of "urban land" in section 2(ea) and Explanation (b) to section 2(ea) which stipulates that the area of land occupied by a building does not form part of urban land.Having carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant-assessee's contention based on the assessments in the previous years, considering the fact that in all the previous years the assessee had applied the user test and the Department did not find fault with the same and that although on an overall consideration of the relevant tests applied, the Tribunal as well as this court have come to the conclusion that the assessee was not justified in valuing all the sub-plots as part of the house, there is considerable substance in the submission made by Mr. Patel for the assessee that the case does not warrant imposition of penalty under section 18 of the Act. Since only the user test was applied all along for the last 20 years, the assessee was not guilty of concealment of the particulars of any assets nor had the assessee furnished inaccurate particulars of any assets. The entire land bearing final plot No. 417/1 with the building constructed thereon was offered for valuation under the Wealth-tax Act. Hence, we are of the view that no case is made out by the Revenue for imposition of penalty on the appellant for any of the assessment years involved in these appeals.Question No. 4Even while holding that the lands in sub-plots Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we frame question No. 4 for our determination as under:"Whether, on the facts and in the circumstances of the case, the Tribunal substantially erred in law in accepting the valuation of sub-plots Nos. 2 and 4 made in disregard of the statutory building bye-laws of the Ahmedabad Municipal Corporation?"Now, we proceed to deal with the said question. The relevant building bye-laws of the Ahmedabad Municipal Corporation reads as under:"IV. Minimum area of a building unitThe development on a building unit shall be controlled on the basis of its area and the minimum area of a building unit required for various buildings shall be as under:(1) 200 sq. mtrs. (240 sq. yds.) for one domestic unit.(2) 300 sq. mtrs. (360 sq. yds.) for two semi-detached domestic building unit.(3) 333 sq. mtrs. (400 sq. yds.) for three semi-detached buildings of workshop and small factories, dispensary, post-office, bank, maternity homes and infants school.(4) 500 sq. mtrs. (600 sq. yds.) for three semi-detached domestic units and detached or semi-detached buildings, for retail shops, hotel, restaurant, domestic flour factory, community hall and wadi.(5) 665 sq. mtrs. (800 sq. yds.) for four semi-detached domest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wayed by the price that the entire land bearing final plot No. 417/1 fetched in the year 1996 and, therefore, the aforesaid relevant considerations were not taken into account. In view of the above discussion, we are of the view that although the valuation made by the Departmental Valuation Officer was not challenged before the Tribunal as the appellant had concentrated on his case that final plot No. 417/1 was one single unit and that all the lands surrounding the residential bungalow were appurtenant to the said residential bungalow, in view of the statutory building bye-laws and the facts about the location and shape of sub-plots Nos. 2 and 4, we are of the view that the valuation of the said sub-plots Nos. 2 and 4 is required to be made afresh in accordance with law and in the light of the observations made hereinabove.In the result, we allow all the four appeals. The judgment and order of the Tribunal are set aside.I. The matters are remanded to the Tribunal after giving the following findings:(i) In so far as the Tribunal has held that sub-plots Nos. 2 and 4 of the final plot No. 417/1 are not lands appurtenant to the building constructed on sub-plot No. 1 thereof, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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