IN THE INCOME TAX APPELLATE TRIBUNAL
JAIPUR BENCH 'B' JAIPUR
BEFORE SHRI R.K. GUPTA AND SHRI SANJAY ARORA
WTA NO. 11/JP/2011
Asstt. Year : 2003-04.
The ACWT, Circle-2, vs. Shri Niranjan Lal Data, Alwar. Bhagwati Sadan, S.D. Marg, Alwar.
Appellant by : Shri Subhash Chandra Respondent by : Shri P.C. Parwal
Date of hearing : 27.02.2012.
Date of pronouncement : 07.3.2012.
Date of Order : 07/03/2012.
PER R.K. GUPTA, J.M.
This is an appeal by department against the order of ld. CWT (A) relating to
assessment year 2003-04.
2. Following grounds have been taken by the department in its appeal :-
(1) That the ld. CWT (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of wealth of Rs. 5,56,86,313/- made on a/c of share in Raniwala Oil Mills.
(2) That the ld. CWT (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of wealth of Rs. 19,00,238/- made on a/c of the share in Krishna Mills, Alwar.
(3) That the ld. CWT (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of wealth of Rs. 5,00,000/- made on a/c of the share in the property situated at Rishikesh. 2
(4) That the ld. CWT (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of wealth of Rs. 2,43,89,750/- made on a/c of the share in property situated at Station road, Alwar.
(5) That the ld. CWT (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of wealth of Rs. 30,49,500/- made on a/c of share in property situated at Kush Marg, Alwar.
(6) That the ld. CWT (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of wealth of Rs. 5,68,00,000/- made on a/c of share in property situated at Nagli Khora, Alwar.
(7) The department reserves its right to add, alter, modify, delete or amend all or any of the grounds of appeal before or at the time of hearing of appeal.
3. At the very outset, the ld. A/R of the assessee stated that all the issues involved in
the appeal of the department are covered by the orders of Tribunal in case of assessee
himself and in case of Smt. Nirmala Devi Data. Copies of the orders of the Tribunal
decided in WTA No. 1 to 5/JP/2011 in case of Smt. Nirmala Devi Data and WTA Nos. 6
to 10/JP/2011 in case of Shri Niranjan Lal Data were filed.
4. The ld. CIT D/R on the other hand stated that though the issues are covered by the
orders of the Tribunal, however, he filed brief written submission and further placed
reliance on the order of the AO.
5. After considering the orders of the AO and ld. CIT (A) and submissions of the
department and the order of the Tribunal in case of assessee himself and in case of wife
of assessee i.e. Smt. Nirmala Devi Data, we find that all the issues involved in the appeal
of the department are covered by the orders of the Tribunal. 3
6. First issue is in respect to deleting the addition of wealth made on account of
share in Raniwala Oil Mills.
6.1. This issue has been decided by the Tribunal in detail and findings of the Tribunal
are given in paras 2.5 to 3.4 at pages 6 to 12 are reproduced as under :-
"2.5 We have heard both the parties. The decision in the case of Distributors (Baroda) (P) Ltd., (supra) is from the Bench of 05 judges while the decision of Delhi Cloth & General Mills Co. Ltd. was pronounced by 03 judges of the Hon'ble Apex Court. It is an admitted position of law that the decision of Coordinate Division Bench is to be followed by the Division Bench and in case the Division Bench feels that the decision of earlier Division Bench has been given without considering certain decisions or it has not considered the relevant provisions of law then the matter is to be referred to the larger Bench. The judicial precedents normally lays down that Coordinate Division Bench should follow the decision of other Coordinate Division Bench. 2.6 Before considering the submissions of the ld. DR, it will be useful to reproduce the findings of the ld. CWT(A) in the case of Shri Shailendra Bhargava which is reproduced at pages 7 to 10 of the ITAT order (WTA No.15 to 19/JP/2010 dated 10-06-2011)
" 5.4. Having heard the detailed arguments of the learned authorized representative and perusing the assessment order and the documents submitted during the course of the appellate proceedings, it is seen that the land was allotted by the then His Highness for industrial purposes. There are the ample evidences to establish that the land was allotted for industrial activity and the industrial unit was running over it. The industrial unit was running with the permission of the then competent authority. The appellant applied for the construction over the said asset to the UIT, and it was refused twice, necessary evidence in 4
support thereof was submitted before me. The Assessing Officer has proceeded to value the land on the basis of para 4 of the lease deed, whereby the lessee shall be entitled to use the property for construction of hotel, cinema, manufacturing industry, shops or for any other purposes and in other manner as they like. This para refer to the possible future use of the property and on the basis of future use, the asset can not be valued for the wealth tax purposes. While arriving at this conclusion I draw strength from the finding given in the CWT v/s DCM Limited 290 ITR 615 (Del.), wherein it has been given the finding that "we have no doubt in our mind that in order to decide taxability of an asset, we have to go by the factual position as on the valuation date. It is not permitted under law to assume a hypothetical situation which never existed." Further, the terms/provisions contained in the lease deed, which have been relied upon by the Assessing Officer while valuing the land as commercial, can not override the statutory provision of Urban Improvement Act. The terms of the lease deed are subject to the provision of section 73 & 73B of the Urban Improvement Act. Therefore the reliance placed by the Assessing Officer on this para number 4 of the lease deed is misplaced one. With regard to the nature of land, a reference can be made to the provision of section 73 & 73B of the Urban Improvement Act, whereby if the land is located in an urban area, then it is the Urban Improvement Trust, which manages/governs the land and provides for change of classification of land, from residential to commercial, from commercial to any other purpose or from industrial to commercial or from cinema to commercial or from any existing permissible use of land to any other purposes is permitted on the ground and rules as the state govt. may prescribe. The nature and title of the land is an industrial as held by UIT and Collector (Stamps), Alwar. Therefore considering all these factual position and documentary evidences placed before me during the appellate proceedings, I have no hesitation in upholding the land in question to be an industrial land. Now coming on the valuation part of the 5
controversy, since I have uphold the land in question to be an industrial land, therefore the DLC rates as applicable for industrial land should be made applicable. It is seen that the appellant has submitted a Regd. Valuer's report before the Assessing Officer during the course of assessment proceedings for the assessment year 1998-99, whereby the land have been valued by taking the rate of Rupee 216/- per sq. yds. It was also claimed by the appellant that upto assessment year 2002-03, the DLC rates of Rupees 216/- was effective and the next revision of the DLC rates were made effective w.e.f. 24.11.2005, therefore upto assessment year 2002-03, the said industrial rates of Rupee 216.00 is applicable. While valuing the land at commercial rates, the Assessing Officer has not relied upon any documentary evidences, which can shed any light that the land is in the nature of commercial land. This issue also cannot be lost sight of the fact that there are depressing factors in the ownership of land i.e. the UIT has given a categorical finding that the ownership of the land is in dispute and also the land is appearing in the name of the SARKAR in the revenue records. Therefore, these depressing factors ought to have been taken into account while valuing the land as held in Ramaiya Reddy v/s. Deputy CIT (2005) 2 SOT, page 59 (Bangalore). Therefore, considering all these issues and in order to meet the ends of justice, it is directed to value the said industrial land at rate of Rupee 216/- per sq. yds. Now coming on the issue of taxability of the asset within the meaning of Wealth-Tax Act, 1957, the claim of the appellant deserves to succeed not only on one count but on several counts. First and foremost among them, that the UIT, which is the governing body for granting the approval for construction, in the instant case, has refused to grant the approval not only once but twice vide their refusal letter dated 25.07.1995 and 10.05.2005, and by virtue of exclusion clause of explanation 1 (b) attached to section 2(ea), the land in question goes out of the definition of the urban land. A reference in this regard is made to the finding given by Honourable Delhi High Court in the case of 6
CWT v/s DCM Limited 290 ITR 615, wherein it is stated that "the intention of the legislature appears to be that land which falls within the exception afore-referred would have to be excluded from the ambit and scope of the expression "urban land". Once the land or any building thereupon making it a combination of land and building is not an urban land, ;then it could not be an asset as defined under s. 2 (ea) of the Act". Secondly, Sh. Babu Lal, the lessor was earlier assessed to tax vis-à-vis his share in the asset from assessment year 1982-83 to 1990-91, if the position is so, then the Assessing Officer is estopped from shifting the incidence of tax from lessor to lessee. Once the Assessing Officer has taken a particular view under the given circumstances, then there is no justification for change of the said view, unless and until there are some valid reason and in the instant case I do not find any such reason, therefore the incident of tax cannot be shifted from the lessor to lessee. Thirdly, the asset in question is the only asset of the appellant and the appellant is entitled to claim the exemption in respect of the said asset within the meaning of section 5(1)(iv) for the assessment year 1998-99 and u/s 5(1)(vi) of the Wealth Tax Act, 1957 for the remaining assessment years in view of the decision of jurisdiction high court as given in the case of Commissioner of Wealth Tax v/s. Tulsi Dass dated 21 March 2002 reported (2002) 256 ITR Page 73 (Raj) and CBDT circular F.No./317/23/73 dated 24.07.1973. Fourthly, if for the argument sake, it is considered that the said land is a vacant land, even then by virtue of the provision of section 4(8)(b) of the Wealth-Tax Act, 1957, the vacant land cannot be brought to tax in the hands of the lessee in view of the decision of Karnataka High Court in the case of Vysya Bank Limited v/s Dy. Commissioner of Wealth Tax reported at (2008) 299 ITR
Therefore considering all these grounds, it is directed to delete the addition made on account of Urban Land in the total/net wealth of the 7
appellant in all the five years. Thus this ground of appeal is allowed and the appellant will get the necessary relief."
2.7 The first argument of the ld. DR is that nature of land should be ascertained from the purpose for which the present owner is using. In case the land was industrial in the hands of the previous owner then the same cannot be considered as industrial in the case of the subsequent owner unless the subsequent owner carries on any industrial activity on this property . Before, WTO, it has been contended by the assessee that Collector Stamps vide his judgement dated 23-08-1993 determined the market value of the commercial establishment by holding the land as industrial one in the case in which the Sub-Registrar raised the dispute about the stamp duty on the land under consideration when the assessee became owner. The ld CWT(A) has considered the provisions of Section 73 and 73B of the Urban Improvement Trust vide which the authority is with the Urban Improvement Trust to classify the land from residential to commercial or from commercial to any other purposes or from industrial to commercial. The assessee made request to Urban Improvement Trust to convert the land into commercial but this application has not been accepted by the Urban Improvement Trust. The Hon'ble Bombay High Court in the case of CIT Vs. Smt. Debbie Alemao, 331 ITR 59 had an occasion to consider as to whether the land can be considered as agricultural or non-agricultural when the land was shown in the revenue record as an agricultural and no permission for conversion of land was given, No agricultural income shown was considered as non-relevant and the land was considered as agricultural. In the case of Hindustan Industrial Resources Ltd. Vs. ACIT, 221 CTR 710 (Del.), the assessee purchased the land for the purpose of setting up an industry. No agricultural income was shown by the assessee in the return of income. The land was acquired and the award was passed by taking the land in question as agricultural land. The land was not held as industrial land. In the instant case also, the land 8
is industrial land and its conversion has not been approved by the Urban Improvement Trust and therefore, it cannot be said that land is urban land. 3.1 The second issue taken by the ld. DR is that the CWT(A) has taken into account the fact that Urban Improvement Trust, Alwar has refused to grant the permission for construction on this land two times in 1995 and 2005.
3.2 According to the ld. DR, the permission for construction was not given on account of certain other reasons. The Urban Improvement Trust has to supervise the development of the city and the Master Plan is being formulated. In case any change is to be made in the master plan then permission is required. Thus the permission was not given to the assessee in accordance with law and it cannot be said that permission was not given for any other reasons. We have also looked into the arguments given by the ld. DR. We do not feel to deviate from our order of in the case of Shri Shailendra Bharvava, a co-owner (supra).
3.3 The Hon'ble Punjab & Haryana High Court in the case of Jaswant Rai Vs. CWT, 107 ITR 477 had an occasion to consider as to whether the valuation of the property made in the case of a co-sharer is required to be adopted in the case of another co-sharer. The Hon'ble Punjab & Haryana High Court held that so long as that order was not challenged in appeal or revision, it was not open to the department to adopt a different yardstick in the case of the another co-sharer. Once we have taken a decision in the case of co-sharer in respect of valuation of the property and chargeability of tax then the same is finding is to be given. In the instant case, the Hon'ble Madras High Court in the case of CIT Vs. Kumaraarani Smt. Meenakshi Achi, 292 ITR 624 has held that differential treatment cannot be meted out to another co-owner while making the assessment of the same property or while valuing the same property. The Hon'ble Gauhati High Court in the case of Gulabrai Hanumanbox Vs. CWT 198 ITR 131 held that value must be the same in the hands of all co-sharers. The Hon'ble M.P. High Court in the case of CIT Vs. Jagdish Kalani, 295 ITR 9
539 held that there cannot be two inconsistent orders in the case of same sale made by two co-owners. We therefore, follow our findings in the case of Shri Shailendra Bhargava (supra) accordingly confirm that CWT(A) was justified in holding the property of Raniwala Oil Mill, Alwar as not an asset liable to Wealth Tax.
3.4 We have also noticed that the WTO has adopted the value and the difference between the value adopted by the WTO and the value shown by the assessee is beyond the limit prescribed u/s 16A of the Wealth Tax Act. If the difference is beyond the limit mentioned in Section 16A of the Wealth Tax Act then the reference to Valuation Cell is mandatory. Reference is made to the following decisions:-
1. CWT Vs. Raghunath Singh Thakur 304 ITR 268 (HP)
2. Sharbati Devi Jhalani Vs. CWT , 159 ITR 549 (Del.)
3. CWT Vs. L.N. Ahuja, 163 CTR 502 (Del.)
4. Raj Paul Oswal Vs. CWT, 171 ITR 489 (P&H) "
7. Since facts are identical, therefore, we confirm the order of ld. CIT (A) for the
year under consideration also.
8. Second issue is in respect to deleting the addition of wealth made on account of
share in Krishna Mills, Alwar.
8.1. This issue has been discussed by the Tribunal in paras 4.1 to 4.8 at pages 12 to 16.
The operative para of the order of Tribunal is para 4.8, which is reproduced as under :-
" 4.8 We have heard both the parties. It has been contended before the CWT that the assessee is not in possession of the Mill. Certain civil suits are going on in the Hon'ble High Court as well as in the lower Courts with regard to the ownership over the Mill. We have gone through the papers available in the paper book from pages 9 to 27 .There are civil suits. One of the petitioner has filed the affidavit on 15-07-2005 in the District Court, Alwar in which it has been stated that the property is owned by him. Thus the assessee is having a disputed right. It is not an asset in the form of 10
urban land. We therefore, feel that the CWT (A) was justified in holding that such asset is not includible in the Wealth chargeable tax."
9. Since facts are identical, therefore, following the order of Tribunal in case of
assessee himself for earlier years, we confirm the order of ld. CIT (A) for this year also.
10. Third issue is in respect to deleting the addition of wealth made on account of
share in property situated at Rishikesh.
10.1. This issue has been discussed by the Tribunal for earlier years in paras 5.1 to 5.3.
Operative para of the order is 5.3 which is reproduced as under :-
"5.3 We have heard both the parties. The assessee has contended that the land is agricultural land and purchase deed also show that the land is agriculture. It is not the case of the revenue that it is not mentioned as agricultural land in the revenue record. There is no material on record to suggest that land is urban land and not agricultural land. We therefore, feel that the ld CWT(A) was justified in holding that this land is not liable to Wealth Tax."
11. Since facts are similar, therefore, following the earlier years' finding, we confirm
the order of ld. CIT (A) for this year also.
12. Fourth issue is in respect to deleting the addition of wealth made on account of
share in property situated at Station Road, Alwar.
12.1. This issue is covered by the order of Tribunal in case of Smt. Nirmala Devi Data.
The findings of the Tribunal is given in para 2.9 to 2.12 at pages 7 to 11. Findings of the
Tribunal are reproduced as under :-
" 2.9 We have heard both the parties. The AO has determined the value of property by applying the DLC Rate. The DLC Rate can be useful to ascertain the value but it cannot be the sole basis. The size and location of the property is also relevant to ascertain the value of the property. It has been noticed that the AO has adopted the same valuations for the assessment years 1998-99 to 2002-03 by adopting the same DLC Rate. We are not aware about the date from which DLC Rate adopted by the AO was effected. Under Section 7 of the Wealth Tax Act, the AO is required to value the property as on the valuation date. The valuation of immoveable property cannot be the same for all the 05 assessment years. The valuation of the property under reference has been considered by the ld. CWT(A) and the Tribunal for the assessment year 1986-87 to 1988-89. The value of this property was adopted at Rs.2.00 lacs by the AO for the assessment year 1988-89. Before the ld. CIT(A) it was submitted that the property was being used as quarters for the labourers. The ld. CIT(A) for the assessment year 1988-89 held that property should be valued as per Rule 1BB of the Wealth Tax Act. The finding of the ld. CWT(A) was confirmed by the Tribunal vide order dated 22-12-2003. The property has been purchased in the year 1977 and copy of the deed is available in the paper book. It is clearly mentioned that there are three rooms and a Varandah in the property. The part of the land was given on rent by the seller and two rooms were illegally in possession of the tenant to whom land was given on rent. In the sale deed, it is clearly mentioned that the assessee will be able to receive the rent from the tenant and will also able to get the possession vacated from the building which has been illegally occupied by the tenant. Hence it is clear that property was not a vacant plot.
2.10 We have perused the decision of ITAT Hyderabad bench. It is true that the property was referred to valuation cell. It is also mentioned that as per the report of the valuation officer, the vacant land was brought to tax. Hence, Hyderabad Tribunal has not at all held that entire property can be 12
subjected to tax by treating the same as urban land. Only the vacant land was considered as taxable.
2.11 The AO has adopted the valuation by treating the land as commercial. However, it was submitted before us that land was subsequently got converted into commercial land. The conversion of land to commercial was done by the committee as per their meeting dated 28th Dec. 2003. Hence, on the valuation dates relevant to assessment year under consideration before us, the land was not a commercial land and therefore, the valuation of land cannot be done on the basis of the valuation applicable to commercial land.
2.12 The assessee has claimed exemption u/s 5(1)(vi) of the Wealth Tax Act. As per Section 5(1)(vi) of the Wealth Tax Act, a house or part of house belonging to an individual or HUF is not to be included in the net wealth of the assessee. The word 'house' has not been defined in Wealth Tax Act. The term 'house' is a wider term than the dwelling house. The word 'house' has been defined in different Acts. In rent restriction order, the house does not include shop. However, in other Act, the house includes school, factories and other buildings. The ordinary meaning of house as given in the Law Lexicon is as under:-
''The word 'House" clearly means a building in ordinary sense of the word and such building needs not necessarily be always for the habitation of man or beast.''
The sale deed of the property clearly indicates that there was a construction on this property. Upto assessment year 1988-89, the valuation has been done as per Rule 1BB of the Wealth Tax Act which means that the property was considered as a house. We are not having the benefit of going through the map of this property. Rule 6 of Schedule III provides adjustment to value arrived at under Rule 3 for un-built area of plot of land. No adjustment is required to be made in case the un-built area is less than 70% of the aggregate area. If it exceeds the specified area then adjustment is to be made. Considering Rule 6 of Schedule III, we hold 13
that the constructed area plus 70% of the aggregate area will be covered u/s 5 (1)(vi) of the Wealth Tax Act. If un-built area exceeds this specified area i.e. 70% of un-built area then such part of the land will be taxable as urban land. The AO will accordingly ascertain the difference between the un-built area and 70% of the un-built area and will ascertain market value of this land after providing opportunity to the assessee. The valuation is to be done as per provisions of Wealth Tax Act and considering Section 16A of the Wealth Tax Act."
13. Since facts are similar, therefore, in view of the decision in case of co-owner Smt.
Nirmala Devi Data, we confirm the order of ld. CIT (A) for the year under consideration
14. Next issue relates to deleting the addition of wealth on account of share in
property situated at Kush Marg, Alwar.
14.1. This issue has been discussed by the Tribunal in case of assessee himself for
earlier years in paras 7.1 to 7.2. The findings of Tribunal which are given in para 7.2 are
as under :-
" 7.2 We have heard both the parties. The property is in the name of the daughters of the assessee. Such ownership has been accepted in the name of the daughters in the income tax proceedings. Even under Benami Prohibition Act, the property is to be considered to be belonging to the person in whose name it stands otherwise such property cant be acquired by the Govt. The daughters of the assessee are major and therefore, such property cannot be included in the Wealth of the assessee as there is no finding that assessee holds the land in benami name of his daughters." 14
15. Since facts are similar, therefore, we confirm the order of ld. CIT (A) for the year
under consideration also.
16. Last issue is in respect to deleting the addition of wealth on account of share in
property situated at Nagli Khora, Alwar.
16.1. This issue has been discussed by the Tribunal in para 8.1 to 8.5 in case of assessee
himself. Final findings of Tribunal have been given in para 8.5 at page 20 which are as
" 8.5 We have heard both the parties. The assessee applied for construction of hotel over the land which was allotted to him for the purpose of constructing a cinema or hotel or petrol pump. The Urban Improvement Trust vide its order dated 11-09-2008 turned down the assessee's application on the ground that said land is reserved for the purpose of park and open space. Subsequently in 2003, Urban Improvement Trust developed a park and installed the statute of late Shri Rajeev Gandhi. If in the Master Plan the land was reserved for park then no construction could have been possible unless the use of the land as shown in the master plan is changed. Hence, it was the land at which no construction was permissible. Hence, the CWT(A) was justified in holding that such land is not includible in the Wealth Tax Act."
17. Since facts are similar as compared to earlier years, therefore, on the reasoning
given by Tribunal for earlier years, we confirm the order of ld. CIT (A) on this issue also.
18. In the result, appeal of the department is dismissed.
19. The order is pronounced in the open court on 07.3.2012.
Sd/- Sd/- ( SANJAY ARORA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER 15
Copy forwarded to :-
The ACWT, Circle-2, Alwar.
Shri Niranjan Lal Data, Alwar.
The CIT (A)
Guard file (WTA No. 11/JP/2011) By Order,
AR ITAT Jaipur.