KISHORE B SETALVAD vs. COMMISSIONER OF WEALTH TAX

WTR/29/1987HC GujaratGJHC24012205198704 October 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA13 pages
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What did the High Court hold?

The High Court held that a member's interest in an open plot of land belonging to a cooperative housing society and allotted or let out to the member is exempt from wealth tax liability. The Tribunal erred in holding otherwise. The Court reasoned that Section 5(1)(xxviii) grants exemption for shares in cooperative housing societies, and all rights flowing from these shares should be exempt, except for interests specifically brought into the tax net by Section 4(7). The Court found no statutory provision allowing a member to hold interest in property without holding shares. Furthermore, the Court found substance in the assessee's argument that any concession made before the Tribunal regarding deposits was based on a mistake of law. Deposits with cooperative societies, not falling under specific clauses, are exempt under Section 5(1)(xxix). The Court answered the first question in the negative, in favour of the assessee. The second question regarding miscellaneous applications became academic and was not answered.

What were the facts?

The assessee, an individual, is challenging the Wealth Tax authorities' valuation of his 1/4th interest in three open plots of land held through cooperative housing societies for the assessment year 1979-80. The total value of the plots was assessed at Rs. 1,60,500, making the assessee's share Rs. 40,125. The assessee contended that due to restrictions in the society's byelaws, only his share of deposits (Rs. 5,000) should be considered taxable. The IAC (Assessments) and the Commissioner (Appeals) upheld the valuation of Rs. 40,125. The Income Tax Appellate Tribunal (ITAT) dismissed the assessee's appeal, holding that the plots were leased for 998 years and fell under Section 4(1)(b) of the Wealth Tax Act, 1957, not Section 4(7). The ITAT also rejected the assessee's subsequent miscellaneous applications.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and on proper interpretation of the provisions of section 4(1)(b), 4(2) and 4(7) of the W.T. Act, 1957, the Tribunal was justified in upholding the action of the W.T. authorities in determining the value of the assessee's 1/4th interest in the open plots in question in two cooperative housing societies at Rs.40,125? (Question of law and mixed fact and law, concerning Sections 4(1)(b), 4(2), and 4(7) of the Wealth Tax Act, 1957). Assessee's arguments: - The legislature intended to include only buildings or parts thereof, not open plots, in the net wealth. - Rights flowing from shares in cooperative societies, including leasehold interest in plots, are exempt under Section 5(1)(xxviii) read with Section 4(1)(b). - Deposits with cooperative housing societies are exempt under Section 5(1)(xxix) and (xxx). Revenue's arguments: - The Tribunal was justified in holding that the plots were includible in the net wealth. - The expression "building or part thereof" should include open plots of land. - Exemption under Section 5(1)(xxviii) applies only to shares, not leasehold interest in land.

Which sections of the Income-tax Act were involved?

Section 4(1)(b),Section 4(2),Section 4(7),Section 5(1)(xxix),Section 5(1)(xxx)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 29 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

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