Wealth Tax Payable on Urban land even if assessee carrying on agricultural activities on the same

IN THE ITAT CHENNAI BENCH ‘B’

Mohammed Ibrahim

v/s.

Assistant Commissioner of Income-tax 

WT APPEAL NOS. 31 TO 34 (Mds.) OF 2011

[ASSESSMENT YEAR 2008-09]

MAY 25, 2012

ORDER

V. Durga Rao, Judicial Member

These appeals pertain to four different but connected assessees against the common order of the ld. CWT(A)-I Coimbatore dated 28.09.2011 for Assessment Year 2008-09. Facts and circumstances of these appeals being identical, we are disposing off these appeals through this consolidated order for the sake of brevity and convenience.

2. First we shall take up the case of the assessee Shri Mohammed Ibrahim. Facts, in brief, pertaining to this case are that the assessee had filed return of income admitting net wealth of Rs. 1,35,78,103 on 11.9.2008. The assessee subsequently filed revised statement of wealth totaling to Rs. 2,78,82,103/-. The assessee has claimed the agricultural lands are exempt from Wealth-tax Act. The Assistant Commissioner, Wealth Tax determined the net wealth of the assessee at Rs. 8,12,56,437/- after including wealth from agricultural lands valued by him at Rs. 4,92,67,782/-. During the course of assessment proceedings, the Assessing Officer called the assessee and asked him to explain how the lands situated in urban area are exempt from tax. The ld. A.R. of the assessee appeared before the ld. CWT(A) and relied on the decision of the Hon’ble Jurisdictional High Court at Madras in the case of CIT v. E. Udayakumar [2006] 284 ITR 511 and submitted that the assessee is doing agriculture on the lands and such a land which is situated even in the urban areas is exempt from Wealth-tax provisions. After considering the submissions of the assessee, the Assessing Officer observed that the lands in dispute are located within corporation limit not classified as agricultural land by registration authorities, but the assessee is carrying on agricultural activities on these lands. Construction on these lands can be done after obtaining approval of the appropriate authorities. Hence, the properties owned by the assessee attract Wealth-tax provisions, the value of which is fixed by the Government and taxed accordingly. On being aggrieved, the assessee carried the matter in appeal before the ld. CWT(A).

3. Before the ld. CWT(A), the ld. A.R. reiterated the submissions which he has made before the Assessing Officer and submitted that the assessee is carrying on agricultural activities only on the lands which are in dispute. Therefore, no Wealth tax has to be paid and relied on the decision of the Hon’ble Jurisdictional High Court in the case of E. Udayakumar (supra).

4. After considering the submissions of the ld. A.R., the CWT(A) has observed that according to section 2(ea) of the W.T. Act, any land situated within urban area has to be assessed within the meaning of section 2(ea) of the Act provided the land on which construction of which is not permissible under any law. In the case of the assessee, it is found that the Assessing Officer has verified the areas from the website of the Tamil Nadu State Government TNREGINET which fall under urban land and a seen from the website, in the land held by the assessee, construction of the building is permissible with the approval of appropriate authority. The Assessing Officer, after verifying the details has held the lands owned by the assessee as urban lands and charged to wealth tax. The ld. Commissioner of Wealth-tax confirmed the view taken by the Assessing Officer. Aggrieved by this order of the ld. CWT(A), the Revenue has come in appeal before the Tribunal.

5. The main argument of the ld. Counsel for the assessee is that the eventhough the land is situated in urban area, the assessee is only doing agricultural activities on it and once the assessee is doing agriculture on these lands, he need not pay wealth tax and section 2(ea) has no application. Simply because the lands are within the limits of the corporation, he need not pay Wealth-tax. He relied on the decision of the Hon’ble Jurisdictional High Court in the case of E. Udayakumar (supra).

6. On the other hand, the ld. counsel for the department submitted that the lands are admittedly situated in urban area and attracts provisions of section 2(ea) of the Wealth-tax Act and submitted that the decision of the Hon’ble Jurisdictional High Court relied upon by the assessee does not apply to the facts of the present case in hand.

7. We have heard the rival submissions, perused the orders of the authorities below as well as the relevant material available on record. The case of the Assessing Officer is that the lands are situated in urban area and the assessee has to pay wealth tax and held that the assessee is not eligible for exemption from Wealth-tax simply because he is carrying on agricultural activities in the land. The ld. Commissioner of wealth-tax confirmed the order of the Assessing Officer on the ground that the assessee’s lands come within the purview of urban lands. The above fact is not disputed by the assessee. Therefore, the wealth tax provisions apply to the case of the assessee. The question before is as to whether the assessee is eligible for exemption under the Wealth-tax Act or not? It is an admitted fact that the assessee’s lands come within the purview of urban area. However, the assessee is carrying on only agricultural activities on it and not using it for residential purposes or constructed any building on it. The case of the assessee is that, even though the land falls within the purview of urban area, as the assessee is carrying on agricultural activities, the same is exempt from Wealth-tax. The ld. counsel for the assessee relied on the decision of the Hon’ble Jurisdictional High Court in the case of E. Udayakumar (supra) at Para 4 wherein it has been held as under:

“It is the discretion of the assessee to use the land in the way he likes and the Assessing Officer cannot recommend the user of the land which was owned by the assessee to a particular use. The Tribunal also found that the land in question as agricultural land as on the date of valuation it was not put to commercial use and there was no construction at all and dismiss the appeal.”

8. For the sake of convenience, the relevant portion of section 2ea(v)(b) of the Wealth-tax Act is reproduced hereunder:

“(ea) “assets” in relation to Assessment Year commencing on the first day of April 1993, or any subsequent Assessment Year means –

(v) urban land

(b) means a land situated

 (i)  in any areas which is comprised within the jurisdiction 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)  in any area within such distance not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in sub-clause (i) as the Central Government may, having regard to the extent of and scope for urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.

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 a stock-in-trade for a period of [ten] years from the date of its acquisition by him.]”

9. In the present case, the land owned by the assessee comes within the purview of urban area and the assessee is carrying on agricultural activities on the same. There is nothing on record to show that construction of building on the assessee’s land is prohibited. Therefore, when the lands are situated in urban area classified by the Revenue authorities as either residential or industrial or commercial, there is no material on record to come to a conclusion that these lands are prohibited from construction of building and section 2(ea)(v)(b) of the Wealth tax has no application. We find the case law relied upon by the assessee to be on a entirely different footing and cannot be applied to the facts of this case. We, therefore, dismiss the grounds of appeal raised by the assessee. Since the facts and circumstances of all the other three assessee’s are identical, we dismiss all these appeals also.

10. In the result, all the fours appeals raised by the assessees are dismissed.