CIT, FARIDABAD vs. R.K.MEHRA, GURGAON

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WTA/10/2009HC Punjab & HaryanaPHHC01098026200915 July 2009Author: MR. JUSTICE M.M. KUMAR,MR JUSTICE JASWANT SINGH5 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the land belonging to the assessee was not covered within the definition of 'urban land' as defined in Section 2(ea) Explanation 1(b) of the Wealth Tax Act, 1957. The Court reasoned that the provision explicitly excludes land on which construction is not permissible under any law for the time being in force. The Tribunal had found, based on various documents including a counter-affidavit from the Government of India, that no construction was permissible in the Sainik Farm area where the assessee's plot was located, and construction was prohibited under municipal bye-laws. The Court also referred to the Delhi High Court's decision in Commissioner of Wealth Tax v. DCM Ltd. (290 ITR 615) which supported this interpretation. Therefore, the farmhouse constructed on the farm land was not regarded as 'urban land'. The departmental authorities were not justified in determining the value of the plot for wealth tax assessment. The appeals were dismissed as they did not raise any substantive question of law.

What were the facts?

The Revenue (Commissioner of Wealth Tax, Faridabad) filed two appeals before the High Court of Punjab and Haryana at Chandigarh, challenging an order dated March 31, 2008, passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'H'. The appeals pertain to the assessment year 1995-96. The core issue revolves around whether the land belonging to the assessee, Lt. Genl. (Retd.) R.K. Mehra, is taxable under the Wealth Tax Act, 1957. The Tribunal had previously held that the land in question was not covered within the definition of 'urban land' and therefore not an asset taxable under the Act, despite the assessee having constructed on it. The Revenue contested this finding.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in holding that the land belonging to the assessee is not covered within the definition of urban land and cannot be treated as an asset taxable under the Wealth Tax Act, even though the assessee had done construction on the said land, as such construction was not prohibited under any law at any point of time, making it an asset under Section 2(ea)(v) of the Wealth Tax Act, 1957? Assessee's Contention: The assessee argued that the land in question was not permissible for construction under any law, and therefore, it was excluded from the definition of 'urban land' as per Explanation (b) to Section 2(ea) of the Wealth Tax Act. The assessee relied on documents, including a counter-affidavit filed by the Government of India, indicating that construction was prohibited in the Sainik Farm area where the plot was located. Revenue's Contention: The Revenue contended that the land, having construction on it, should be treated as an asset taxable under the Wealth Tax Act. They challenged the Tribunal's interpretation of 'urban land' and the exclusion criteria.

Which sections of the Income-tax Act were involved?

2(ea), 27A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. WTA No.10 of 2009 Date of decision .157.2009 Commissioner of Wealth Tax, Faridabad ... Appellant Versus Lt. Genl. (Retd.) R.K.Mehra ... Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JASWANT SINGH Present: Mr.Rajesh Katoch ,Advocate for the appellant Mr. Rohit Sood, Advocate for the respondent

Whether Reporters of local papers may be allowed to see the judgement ?

To be referred to the Reporter or not ?

Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. This order shall dispose of Wealth Tax Appeal Nos. 10 and 11 of 2009 as the issue raised in both the appeals is common. Facts are being taken from Wealth Tax Appeal No. 10 of 2009. The instant appeal filed by the Revenue under Section 27 A of the Wealth Tax Act 1957 (for brevity 'the Act') challenges the order dated 31.3.2008 passed by the Income Tax Appellate Tribunal Delhi Bench 'H' New Delhi in WTA No. 140 D of 2006 for the assessment year 1995-96. It has been averred that the following question of law would arise for determination of this Court: “ Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in holding that the land belonging to the assessee is not covered within the definition of urban land and it cannot be treated to be an asset taxable under the Wealth Tax Act even though the assessee had done construction on the said land, as such, construction was not prohibited on the said land under any law at any point of time, so it was an asset u/s 2(ea) (v) of the Wealth Tax Act, 1957. ?” The Tribunal after noticing the definition of expressions 'assests' and 'urban land' defined in Section 2(ea) of the Act has found that that land in question could not be considered urban land. The definition of expression 'urban land' has been given in explanation (b) of sub section 2 (ea) of the Act. The Tribunal found that if the construction on the land is not permissible by law then such urban land is excluded from the liability of 'tax' and 'assets'. In that regard reliance was placed on a judgement of the Delhi High Court in the case of Commissioner of Wealth Tax v. DCM Ltd. 290 ITR 615 (Delhi). The Delhi High Court has held that on the land in question no construction was permitted and the concerned authorities did not grant approval for raising construction on that land. Therefore as per the provision of explanation 'b' to sub section 2(ea) the land stood excluded from the definition of 'urban land' chargeable to wealth tax. Dealing with the aforesaid aspect the Tribunal has held as under: “ So far as the present case is concerned, the assessee has filed a copy of counter affidavit filed on behalf of Government of India before the Hon'ble High Court regarding illegal and unauthorised construction in the agricultural belt including Sainik Farm. The assessee has also filed various other documents including guide lines for regularisation of unauthorised colonies. On examination of these documents, it is clear that no construction is permissible in the area in which the plot of the assessee is located. In fact in whole of the Sainik Farm area under municipal bye laws construction has been prohibited.

10.

1 On going through the order of the Assessing Officer as well as that of the appellate authority, it is found that they have taken the value of the plot on the basis of alleged agreement to sell. As the land belonging to the assessee is not covered within the definition of urban land, it cannot be treated to be and (as an ?) asset taxable under the Wealth Tax Act. The departmental authorities, therefore, were not justified in determining the value of the plot of the assessee, for making assessment under the Wealth Tax Act. We, therefore, set aside the order of learned CWT (A) and accept the ground taken by the assessee in these two appeals.”

We have heard learned counsel for the parties at a considerable length and find that the construction raised by the assessee- respondent was not in pursuance to the scheme created by any competent authority in law. Infact no construction on the land was permissible. Such land is excluded by the definition of expression 'urban land' as per the provisions of section 2 (ea) Explanation 1(b) of the Act . The relevant portion of the aforesaid provision is reproduced hereunder:

“ 2. Definitions.- In this Act, unless the context otherwise requires,- xx xx xx xx xx 2(ea) “assets”, in relation to the assessment year commencing on the 1st day of April, 1993 or any subsequent assessment year, means- xx xx xx xx xx [Explanation 1]. For the purposes of this clause,- (a) xx xx xx xx (b)) "urban land" means land situate - (i) in any area which is comprised within the juri iction of a municipality (whether known as a 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 according to the last preceding census of which the relevant figures have been published before the valuation date; or (ii) xx xx xx xx but does not include land on which construction of a building is not permissible under any law for 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 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 stock-in-trade for a period of five years from the date of its acquisition by him” (emphasis added) The aforesaid provision was enforced on 1.4.1993. It clarifies that any land on which construction of building is not permitted under any law for the time being in force in the area in which such a land is situated, was not to be included in the expression 'urban land'. It further provides that the land occupied by any building which has been constructed with the approval of the appropriate authority would also not be included in the expression 'urban land'. The matter has been considered by the Delhi High Court in the case of DCM Ltd. (supra). Even on first principle and the plain perusal of the provision, the land belonging to the assessee- respondent stand excluded from the definition of 'urban land'. Therefore the farm house constructed on the farm land would not be regarded as 'urban land' as no construction on such land was permissible. The matter is squarely covered in favour of the respondent- assessee by the definition clause as well as by the judgement of Delhi High Court in DCM Ltd.'s case (supra). There is thus no merit in these appeals. No question of law much less a substantive question of law would arise for the determination of this Court. Accordingly both the appeals fail and the same are dismissed. A copy of this order be placed on the file of connected appeal. (M.M.Kumar) Judge (Jaswant Singh) 15.7.2009 Judge okg

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