Case Law Details
Wipro GE Healthcare Pvt. Ltd. Vs DCIT (ITAT Bangalore)
We notice that there was difference of opinion between the assessee and the AO in respect of extent of land that is assessable to wealth tax. While the case of revenue is that entire vacant land admeasuring 2,54,020.58 sq.ft is assessable to wealth tax, the case of the assessee is that only 58,605.54 sq.ft is assessable to wealth tax. In AY 2007-08, the AO did not assess entire vacant land admeasuring 2,54,020.58 sq.ft in the original assessment order passed u/s 143(3). Hence the AO has passed the impugned rectification order to assess correct entire extent of vacant land. The fact remains that the AO is assessing the value of entire portion of vacant land year after year. Hence, merely because the assessee is contesting the same in AY 2006-07 by filing appeal, in our view, it cannot become a debatable issue. In our view, it is a clear case of mistake apparent from record in not assessing entire area of vacant land as per the stand taken by the revenue. Hence, we are of the view that the AO was justified in passing the impugned rectification order in order to rectify the mistake that occurred in area of vacant land.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
All the three appeals have been filed by the assessee challenging the orders passed by Ld. CIT(A)-10, Bengaluru and they relate to the assessment years 2007-08, 2011-12 & 2012-13. All these three appeals were heard together and are being disposed of by this common order for the sake of convenience.
2. The only dispute urged in all the three appeals relate to valuation of land located at Kadugodi Industrial area, Bengaluru for wealth tax purposes. While the assessee claims that only 58,605.54 sq.ft. only is assessable to wealth tax, the revenue case is that 2,54,020.58 sq.ft is assessable to wealth tax. Thus there is a difference of 1,95,415.04 sq.ft between the two parties.
3. The facts relating to the issue are discussed in brief. The aggregate area of land located at Kadugodi Industrial Area, Bangalore was 3,90,830.08 sq.ft. and the said land was allotted by KIADB (Karnataka Industrial Area Development Board). The valuation of the above said land for wealth tax purposes was arrived as under by the assessee:-
(a) The assessee had constructed building on an area of 59,803.74 sq.ft. and the land appurtenant to the said building is 77,005.75 sq.ft., both aggregating to 1,36,809.50 sq.ft. Since this portion of land is used for business purposes, the assessee submitted that this portion of land aggregating to 1,36,809.50 sq.ft. is not assessable to wealth tax purposes. This claim has been accepted by the revenue.
(b) As per conditions imposed by KIADB, construction is allowed only on 50% of land and accordingly no construction shall be allowed on the remaining 50% of land having extent of 1,95,415.04 sq.ft. Accordingly, the assessee contended that this portion of land is not assessable under Wealth tax Act. This contention is not accepted by the revenue.
(c) The remaining portion of land was 58,605.54 sq.ft. Since it is a vacant land, the assessee offered the value of same only for wealth tax purposes. There is no dispute on this point.
4. The assessee determined the fair market value of 58,605.54 sq.ft of the above said land on the basis of a valuation report obtained from a registered valuer, who had valued the land at Rs.5,50,19,500/- as on 31.3.2011 relevant for AY 2011-12. Similarly, the value as at 31.3.2012 relevant to AY 2012-13 was determined by the registered valuer at Rs.5,50,19,500/-.
5. The A.O. accepted that the building and land appurtenant thereto is not assessable under Wealth tax Act. However, he took the view that the assessee should have valued the entire vacant land of 2,54,020.58 for wealth tax purposes, instead of valuing only 58,605.54 sq.ft, i.e., according to AO, the assessee should have valued the land having extent of 1,95,415.04 sq.ft also for wealth tax purposes. The observations made by AO in AY 2011-12 are extracted below:-
“4.1 In the present case, there is no bar on construction of building in the land. Only requirement is to leave some open spaces. The construction of building is “not permissible under any law” does not mean that the requirements of the KIADB to leave some open spaces amounts to denying permission for construction of buildings in the area. There are certain prohibitions under which construction on urban lands like lands near airport, air base or military cantonment area etc where construction is not permitted will fall under this exception. In the present case, the assessee has already constructed buildings in an area of 59,803.74 sq.ft. and land appurtenant to the buildings is 77,005.75 covered by internal roads and parking space. However, the remaining unused area of 2,54,020.58 sq.ft land should have been considered by the assessee as “urban land” chargeable to wealth tax. However, the assessee has further reduced an area of 1,95,415.04 sq.ft which is not correct. Hence, the arguments of the assessee are not accepted. The reasons for the stand taken has been discussed in detail in the assessment order for AY 2004-05.
4.2 The valuation report relied upon by the assessee has considered the prevailing market rate of the land at Rs.990 per sq.ft. Accordingly, the market value of the total vacant land of 2,54,020.58 sq.ft will be Rs.25,14,80,374/-. In the result, the value of the land at Kadugodi for wealth tax purposes for AY 2011-12 is arrived at Rs.25,14,80,374 and the wealth tax is computed accordingly.”
Identical reasoning is given by AO for other years also.
6. In AY 2012-13 also, the AO did not accept the value determined by the assessee for 58,605.54 sq.ft of land as on 31.3.2012 at Rs.5,50,19,500/-. The AO, on identical reasoning, determined the value of land at Rs.25,14,80,374/- for2,54,020.58 sq.ft.
7. In AY 2007-08, the assessee had valued the land at Rs.5,47,96,180/. The AO completed the assessment u/s 143(3) of the Act determining value at Rs.9,22,09,990/-. Subsequently, he passed a rectification order u/s 35 of the Act determining the value of land at Rs.23,75,10,570/- (2,54,022 sq.ft x Rs.935/- per sq.ft.). The AO deducted the total wealth determined in the order passed u/s 143(3) amounting to Rs.9,22,09,990/- and accordingly assessed the difference amount of total wealth at Rs.14,53,00,580/- in the rectification order.
8. The assessee challenged the assessment orders passed in AY 2011-12 and 2012-13 and also the rectification order passed in Ay 2007-08 by filing appeals before Ld CIT(A), but could not succeed. Hence the assessee has filed these appeals before us.
9. The Ld A.R submitted that the assessee is disputing the action of the AO in assessing the remaining portion of vacant land having extent of 1,95,415.04 sq.ft, since it is not capable of being used for construction purposes as the rules of KIDAB mandates that 50% of the total land should be kept open. He further submitted that this dispute is continuing year after year. The Ld A.R further submitted that the assessee had filed appeals on identical issues before the Tribunal for AY 1998-99, 2000-01 and 2001-02. He submitted that the co-ordinate bench has disposed of the appeals relating to AY 1998-99 and 2000-01 by a common order dated 12th July, 2005 passed in WTA No.50/Bang/2003 and WTA No.38/Bang/2004 respectively. The main contention of the assessee before the Tribunal in those years was that the assessing officer should have provided opportunity to the Departmental Valuation Officer to consider the valuation report furnished by the assessee . The said contention was accepted by the Tribunal and the entire matter was restored to the file of AO for examining the issue afresh. The order passed by the Tribunal in AY 1998-99 and 2000-01 was followed by another coordinate bench in AY 2001-02 in WTA No.21/Bang/05 dated 21-042006. Accordingly, the Ld A.R submitted that all the matters may be restored to the file of AO. The Ld A.R submitted that the Hon’ble Himachal Pradesh High Court has also held in the case of CWT vs. Raghunath Singh Thakur (2008)(304 ITR 0268) has held that the AO is mandatorily required to refer the matter of valuation to the departmental valuation officer. In this regard, the Hon’ble High Court has followed the Circular No.96 dated 25th November 1972 issued by CBDT.
10. For AY 2007-08, the Ld A.R raised a legal contention, in addition to the issue urged on merits. According to Ld A.R, the AO has determined the valuation of land in the order passed u/s 143(3) of the Act. He has passed the impugned rectification order on the basis of assessment order passed for AY 2006-07. However, the assessee has disputed the value determined by the AO in AY 2006-07 by filing appeal before Ld CIT(A). Since the matter is pending in appeal before Ld CIT(A), the matter becomes debatable. In that case, the AO could not have passed the impugned rectification order in AY 2007-08.
11. The Ld D.R submitted that the issue contested in appeals pertaining to AY 2011-12 and 2012-13 may be restored to the file of the AO as decided by the co-ordinate bench in AY 1998-99, 2000-01 and 2001-02. With regard to AY 2007-08, the Ld A.R submitted that the AO was justified in passing the impugned rectification order, since the difference in valuation is on account of difference in the “area of land”. The AO is consistently determining the value of remaining portion of land of 2,54,020.58 sq.ft. year after year. However, the same was omitted to be included in the assessment order passed for AY 2007-08 u/s 143(3) of the Act. The AO has rectified the said mistake in the rectification order passed u/s 35 of the Wealth tax Act. Accordingly, the Ld D.R submitted that the said mistake apparent from record cannot be considered to be a debatable issue. He submitted that the issue on merits contested in AY 200708 may also be restored to the file of AO.
12. We heard rival contentions and perused the record. We shall first address the legal issue contested by the assessee in Asst. Year 2007-08. We notice that there was difference of opinion between the assessee and the AO in respect of extent of land that is assessable to wealth tax. While the case of revenue is that entire vacant land admeasuring 2,54,020.58 sq.ft is assessable to wealth tax, the case of the assessee is that only 58,605.54 sq.ft is assessable to wealth tax. In AY 2007-08, the AO did not assess entire vacant land admeasuring 2,54,020.58 sq.ft in the original assessment order passed u/s 143(3). Hence the AO has passed the impugned rectification order to assess correct entire extent of vacant land. The fact remains that the AO is assessing the value of entire portion of vacant land year after year. Hence, merely because the assessee is contesting the same in AY 2006-07 by filing appeal, in our view, it cannot become a debatable issue. In our view, it is a clear case of mistake apparent from record in not assessing entire area of vacant land as per the stand taken by the revenue. Hence, we are of the view that the AO was justified in passing the impugned rectification order in order to rectify the mistake that occurred in area of vacant land. Accordingly we reject the legal contentions of the assessee urged in AY 2007-08.
13. We notice that the dispute relates to the “area of land”, that is exigible for wealth tax. We notice that the co-ordinate bench has restored the issue to the file of the AO in AY 2001-02, following the decision rendered by another co-ordinate bench in Ay 1998-99 and 2000-01. The order passed by the Tribunal in AY 2001-02 is extracted below:-
“2. The only issue in appeal is regarding valuation of leasehold land.
3. Identical case arose before this Tribunal in WTA No.5/Bang/2003 for the asst. year 1998-99 & WAT No.38/Bang/2004 for the asst. year 2000-01 dated 12th July, 2005 in assessee’s own case, wherein the Tribunal held as under:
“After hearing both the sides, we are satisfied that there is force in the submission made by the assessee. According to the counsel, Schedule III of the Wealth-tax Act, 1957 should have been followed by the Assessing Officer. Apart from that, we find that a reference was made to the Valuation Cell and valuation report itself was challenged by the assessee before the appellate authority. In such a situation, it is mandatory to give opportunity to the Valuation Officer as provided in sec. 23(3A) of the W.T. Act, which has not been done in the present case. In view of the circumstances above, we set aside the impugned orders and restore the matter back to the Assessing Officer for deciding the issue afresh in accordance with law”.
Following the aforesaid order of the Tribunal, we remit the matter back to the assessing officer for deciding the issue afresh in accordance with law.”
14. We also notice that the Circular No.96 dated 25th November, 1972 issued by CBDT has been taken note of by Hon’ble Himachal Pradesh high Court in the case of Raghunath Singh Thakur (supra), by extracting following portion from the Circular:-
“35…… In cases covered by s. 16A(1), it will be incumbent on the WTO to refer the valuation of the asset in question to the Valuation officer and it will not be open to him to decide the question of valuation on his own”.
15. Since the matter has been restored to the file of the AO with the direction to refer the matter to the Departmental valuation officer by the co-ordinate benches in the earlier years, following the same, we restore the matter of determination of extent of property and consequent valuation therefor to the file of AO with similar directions in all the three years. Accordingly, the orders passed by Ld CIT(A) in all the three years are set aside.
16. In the result, the appeal filed by the assessee for AY 2007-08 is treated as partly allowed. The other two appeals are treated as allowed.
Order pronounced in the open court on 23rd Dec, 2021
