Noorani Properties (P) Ltd Vs The Commissioner of Wealth Tax BMTC Building (Karnataka High Court)
Held that appellant has transferred the land to the developer through JDA and the developer had power to alienate their portion of property. Accordingly, property so transferred is not subject to wealth tax.
Facts-
The Assessing Authority took up appellants’ cases for scrutiny assessment and issued Notices under Section 17 of the Wealth Tax Act, 1957 for the Assessment Years 2004-05 to 2006-07. In response to the Notices, appellants filed ‘NIL’ returns. The Assessing Authority initiated proceedings and passed orders under Section 16(3) read with Section 17 of the Wealth Tax Act. Appellant challenged the Assessing Authority orders before CIT(A) and the same were partly allowed.
Being aggrieved, the appellant approached the ITAT. ITAT dismissed those appeals. Accordingly, the appellant has preferred the present petition mainly on the ground that whether Learned Tribunal was correct in law in holding perversely that the appellant continued to be the owner of urban land despite the fact that the appellant, after transferring the land to the developer through JDA dated 05-12-2000 retained only the right to receive 15.3% of the total built up area which does not fall within the definition of ‘assets’ u/s 2(ea) of the Wealth Tax Act.
Conclusion-
Held that the Developers did have power to alienate their portion of the property; and they had entered into the property. It is a different matter if the project did not progress further. A mere failure of the project does not undo the acts of the parties. Therefore, in our view, the impugned order passed by the ITAT is not sustainable and in the facts and circumstances of this case, it is just and appropriate for the ITAT to have a re-look into the matter in the light of the contents of MDA, NOC issued under Chapter XX-C.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
These appeals by the assessees are directed against common impugned order dated February 12, 2016 passed by the ITAT1 in W.T.As. No.37 to 42/Bang/2014, W.T.As. No.43 to 45/Bang/2014 and W.T.As. No.46 to 51/Bang/2014 and they have been admitted to consider following questions of law:
“1. On the facts and circumstances of the case and in law whether the learned Tribunal was correct in law in holding perversely that the appellant continued to be the owner of urban land under section 2(ea) of the Wealth Tax Act, 1957 despite the fact that the appellate (after transferring the land to the developer through JDA dated 05-12-2000) retained only the right to receive 15.3% of the total built up area, which does not fall within the exhaustive definition of “assets” under section 2(ea) of the Wealth Tax Act, 1957?
2. On the facts and circumstances of the case and in law whether the learned Tribunal ignored the binding decisions of this Hon’ble Court rendered on interpretation of section 2(47)(v) of the Income-tax Act, 1961 squarely applicable to the facts of the case and perversely applied ratio rendered in interpretation of section 2(47)(vi) of the Income-tax Act, 1961?
3. On the facts and circumstances of the case and in law whether the learned Tribunal was correct in holding there was no transfer of the urban land by the appellant despite the fact that the developer was put in possession of the said property under Clause 13.2 of the JDA date 05-12-2000?
4. On the facts and circumstances of the case and in law whether the learned Tribunal was correct in law holding that entries in books of account determine the nature of an asset ignoring the provisions of Clause (b) of Explanation 1 to Clause (ea) of section 2 of the Wealth Tax Act, 1957?. “
2. We have heard Shri. C.P. Ramaswamy, learned Advocate for the assessees and Shri. K.V. Aravind, learned Senior Standing Counsel for the Revenue.
3. Ramaswamy submitted that assessee-Companies are owners of different extent of lands situated in Patandar Agrahara village, K.R.Puram Hobli, Bengaluru. They entered into a Development Agreement dated December 5, 2000 with M/s. Classic Infrastructure and Development Ltd.(‘CIDL’ for short), a subsidiary Company of M/s. ITC Ltd. In pursuance of the agreement, they handed over the physical possession of their respective properties along with original title deeds.
They have cumulatively received a sum of ` 28.88 crores as refundable deposit. CIDL did not develop the property, but on the other hand determined the agreement on August 29, 2007. On the same day a Settlement Agreement was entered into between the appellants, CIDL and M/s. ITC Ltd., and the appellants were compelled to convey the properties in question in favour of ITC Ltd.
4. The Assessing Authority took up appellants’ cases for scrutiny assessment and issued Notices under Section 17 of the Wealth Tax Act, 1957 for the Assessment Years 2004-05 to 2006-07. In response to the Notices, appellants filed ‘NIL’ returns. The Assessing Authority initiated proceedings and passed orders under Section 16(3) read with Section 17 of the Wealth Tax Act dated December 30, 2009 and determined the net wealth in the case of:-
