Commissioner of Wealth Tax v. M/s. D.C.M. Ltd.

Whetherreportersoflocalpapermay be allowed to see the judgment? To berefeiTedto the reporteror not? Yes Whetherthe judgmentshouldbe refeired in the Digest? SWATANTERKUMAM, J. A According to the appellant, in this appeal, under Section27A ' of the WealthTax Act (hereinafterrefen-edto as the Act), the questionof law as to tlie scope and meaningof the expression"land and urban land chargeable to wealth tax in relation to assets of the assessee for the Signature Not Verified Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. \J V assessmentyear 1993-94Bnderthe amendedprovisionsof the Act arises for considemtionin the presentappeal.

2, It is well settledprincipleof law that aquestion which has eitherbeen answeredby the judgmentof the Courtor on plainreadingof the provisionsof the relevantsection, ttte interpretationis so clearas not to inviteany legalcontroversy, there the questionof law would not arise as contemplatedundersection27A of the Act. The provisionsofsection 27A of tlte Act at« pari materiato section260A of the Income-taxAct. Thecourtshouldbe satisfiedthat the casein appealinvolvesasubstantial question of law. ADivisionBench of this Court, after applyingthe principleenunciatedby the SupremeCourtin differentcasesheld that m both the abovesaidcitcumstances, the case would not mvolvesubstantial questionoflaw. Referencein this regardcanbe madeto thejudgmentby aDivisionBench of this Courtin Cnmrnissionerof Income-taxVs. S.R, PragriFincesLtd. 270 ITR 560. Thus, now we have to consider whether the controveniy 3. involved in the present case and particularly as formulated by tlie Departmentin the proposedquestionoflaw is answered by judgmentor provisionsofthe Act. Beforediscussingftis on the plainreadingof WTA inms pg.2of 11 V aspect of the case in some elucidation, it v/oiild be necessaiy for us to refer to the facts giving rise to the present appeal. The assesseefiled a return of wealth of Rs.95,36,700/-for the assessmentyeaj- 1993-94. Tlie Assessing Officer issued a notice under section 17 of the Act to the assessee on the gi'ound tliat during the course of assessment for the assessmentyear 1994-95 it .was noticed that assessee has not disclosed urban land worth crores of mpees held by the assessee as stock-in-trade which were liable to wealth tax for the relevant year of 1993-94. To this A- notice, the assesseesubmittedtlie reply statingthat tlie urban land owned by the assesseecould not be includedin tlie net wealtliof the assessee, as such the land and tlie building thereupon was constiiicted without approvalof the relevantautliorities, were convertedinto stock-in-tra.deon

1.9.1992. The AssessingOfficerwhile rejectingthe contentionraised on behalf of the assessee, held that no exemption was available to the assessee in case of conversion of urban land into stock-in-trade till the assessmentyear 1993-94. Accordingto the AssessingOfficer, tlie land was acquu-ed in 1980, possession is taken as on 1.4.1981, tluis the assesseeis not covered.underexceptioninsertedw.e.f. 1.4.1994. Thus, the AssessingOfficeradded the value of the land towards the net wealth of the assessee. Aggrieved, from the order of the Assessing Officer dated 30.3.2001, an appeal was prefen-ed by the assessee before the WVAlf2G03 pg.3ofU V Commissioner, WealthTax (Appeals),who vide his order dated 2.2.2001, held tliat Supreme Court vide his order 1.5.1991 had pennitted the re developmentof the mill area to flattedfactoiycomplexand grouphousing complex and ordered the existing building to be demolished, thus the remainingbuildingcould not be remained to be standing there witli the approvalof the appropriateauthority. While dismissingthe appealof the assessee, by a detailedorder, the First AppellateAutliority, interalia, held as under •v' I "Tlie assessee in its contention fi'om Nos. 1 to 26 relating to this 6'^ ground of appeal has not been able to refute the decision of the AO that urban land held by it as stock in trade is not exempt in A.Y. 1993-94. In order that there is no ambiguity left while not allowing exemption to the assesseecompany, the amendmentby Finance Act 1992 in WT Act was also discussed on page 2 of tlie assessment order. It has been discussed that • clause 2(ea) to Section 2 v,'as inserted to the WT Act w.e.f. 1/4/1993 and the inserted provision provided for exemption of any unused land held by the assessee company for industrialpurposes for a period of 2 years from the date of its acquisition by it. As discussed further in the , assessment order tlie assessee converted its land into stock in tcade in 1/9/1992 which coiTesponds to A.Y. 1993-94. It is obvious that tlie assessee should not have claimed the exemption because in A.Y. 1993-94 no exemption is available. The exemption in such cases is available from A.Y. 1994-95 and not in 1993-94."

24.0From the above it becomes clear that the AR is admittingthat it is only on the basis of the amendment brought about by tlie Finance Act WTA 7/2003 pg.4ofll 1993 applicable fi'om A.Y. 1994-95 flial exemption is being claimed by tlie Inspite of it being cleaily and unambiguousy st^ngft Slonedmat th! amendmenton of which tlieexemptionis beingclaimedby appellant would be applicable on y w.eX trying to claim flie 1/4/1994, tlie AR is exemption in the year under consiteation unambipraus against provisionsofWT Acthad tlieamendmentl»en applicable to A.Y. under consideration, certainly the same would ^ In view of the specitic the- amendment. mention of the date of '/4/1994 mentioned in the amendment, the AR's contention ra exemptionshould be allowed in view of (he amendmentbrought about by, lie 1993 in the A.Y. underconsiaerationis cle^ly •misplaced, the same cannotbe acceptedand is accordinglyrejected. 75 0 In view of the foregoingdiscussionthe AO's action in including in tiie appellants net factor7 Remises and wealth the value of residentialcolonyis held to be justiiied.

Aggrieved from the above order, the assesseepreferredan appealbefore fte Income-tax AppellateTribunal, Delhi Bench, which vide avery, detailedorderacceptedthe appealof the assesseeby holding as under "We have no doubt in our mind that in ordei- to decide taxabilityof an asset we haw to po by thetactualpositionas on thevaluationdate^ l is no. permitted under law to f, hypotheticalsituation which never ^ are fully convinced with the factual position as WTA 7/2003 .5 of It P« . In view of these factual circumstances explainedby the counselfor the assesseecompany that as on tlie valuation date old factory premises as well as residential colony were existing, except for a small portion which has been demolished. As per the conditions imposed by the Municipal Corporationof Delhi, completedemolitionhad to be done before any activityfor constractioncould be commenced. Approval for consti'uctionnad been granted much later by flie Municipal Corporation of Delhi and that too only for one phase for the factory complex.

We accordingly uphold claim of the assessee company. Firstly, on the ground that premisesunderreferencecaiinotbe said to be land and, tlierefore, were not in the natiire of ''Urban Land" chargeable to wealth-tax. Fiu'tlier, as per tlie Explanationto sub-section(ea) of section2 of the land in question is not W.T. Act also, " chai'geablealso for the reason

As is clear from the above two orders, different reasons have been given by the autlioritiesfor acceptingand/orinjectingtlie case of tlie assessee. Basically, tv/o gi'ounds appeared to have influenced the authorities in coming to then- respectiveconclusions. Fustly, that the assesseehimselfhad treated the land and buildingas stock-in-trade and thus did not discloseit in the wealth tax returnfor the yeai-1993-94. This by itselfwould an admission on tlie part of the assesseethat the said land is an asset chaigeable to wealth tax in terms of the statutory provisions. Secondly, on the interpretationof the relevantprovisions, the First AppellateAuthorityhad found that the "stock-in-trade"would not deprive tlie respondentof the benefitavailableto it under the Act, in so fat- as it was exempted specificallyfrom being an asset of land for the purposeofits chai-gabilit}-'underthe WealthTax Act. WTA 7./2003 pg.7 of 11 P tlie Act Section 3 of the chai-ging section which 6. contemplates that subject to the provisions of.the Act, there shall be chai-gefor every assessmentyear commencingfrom the specifieddate, a tax in respect of the net wealth as specified in ScheduleI of the Act.

Tlie above provisionswere insertedby the Finance Act, 1993 and made effective from 1.4.1994. We ai-e dealing with the relevant assessmentyearfor 1993-94. On the barereadingof the aboveprovision, it is deal- that urban land would not includea land, on which constraction of abuildingis not permissibleunder any law for die time being in force in the area where land is situated or the land occupiedby any building which has been constnictedwith the approvalof the appropriateautliority or in any unusedland held by the assesseefor an industiialpuiT30sefor a periodof two yearsfrom the date of its acquisition. It is an admittedcase beforeus that the assesseedoes not claimbenefitof the third clause of the categoiyspecifiedin the provisions. The assesseewould obviouslyhave WTA 7/2003 pg.9of 11 advantage of the land being not included as an urban land because no constractionat the relevanttime was permissibleon tlie land in question.