Mr. R.d. Jolly,With Mr. Ajay Jha, Advocates v. M/S.d.c.m.ltd

A IN THE fflGH COURT OF DELHI W.T.A. No. 7 OF 2m3 TnHpT-nftTitReservedon :January19,2005 Date of Decision: Fehruarv 03.2005 % COMMISSIONEROFWEALTHTAX... PetitionerTlirough Mr. R.D. Jolly,with Mr. Ajay Jha,Advocates. Versus M/S.D.C.M.LTD. ...Respoondent ThroughMr.S.K.Aggaiv/alwith Mr.V.P.Gupta,Advocates. CORAM: HON'BLE MR. JUSTICE .SWATANTRRKUMARHONHT.E MR-JUSTICEMADAN B. LOKUR 1.Whetherreportersoflocalpapermaybe allowed to see the judgment? 2.ToberefeiTedto thereporteror not? Yes 3.Whetherthejudgmentshouldberefeiredin the Digest? SWATANTERKUMAM,J. Accordingto the appellant,in this appeal, underSection27A' ofthe WealthTax Act (hereinafterrefen-edto as the Act),the questionoflaw as to tlie andof the"land and urbanland scope meaning expressionchargeable to wealth tax in relation to assets of the assessee for the V assessmentyear 1993-94Bnderthe amendedprovisionsof the Act arisesfor considemtionin thepresentappeal. 2,It is well settledprincipleof law that aquestion which haseitherbeen answeredby thejudgmentofthe Courtor on plainreadingofthe provisionsof the relevantsection,ttteinterpretationis so clearas notto inviteanylegalcontroversy,there the questionoflaw would not ariseas contemplatedundersection27A of the Act. Theprovisionsofsection27A of tlte Act at« pari materiato section260A of the Income-taxAct.Thecourtshouldbe satisfiedthatthecasein appealinvolvesasubstantialquestionof law. ADivisionBench of this Court, after applyingtheprincipleenunciatedby the SupremeCourtin differentcasesheld thatmboth the abovesaidcitcumstances,the case would not mvolvesubstantialquestionoflaw. Referencein this regardcanbe madeto thejudgmentbyaDivisionBenchof this Courtin Cnmrnissionerof Income-taxVs. S.R,PragriFincesLtd. 270 ITR 560. 3.Thus, now we have to consider whether the controveniyinvolved in the present case and particularly as formulated by tliein theoflaw is answeredorDepartment proposedquestion by judgmenton theplainreadingofprovisionsofthe Act.Beforediscussingftispg.2of 11WTA inms aspect of the case in some elucidation,it v/oiild be necessaiyfor us torefer to the facts giving rise to the presentappeal. The assesseefiled areturn of wealth of Rs.95,36,700/-for the assessmentyeaj- 1993-94. TlieAssessing Officer issued a notice under section 17 of the Act to theassessee on the gi'ound tliat during the course of assessment for theassessment 1994-95 it .was noticed that assesseehas not disclosedyearurban land worth crores of held the assesseeas stock-in-trade mpees bywhich were liable to wealth tax for the relevant year of 1993-94. To thisnotice,the assesseesubmittedtlie reply statingthat tlie urban land ownedby the assesseecould not be includedin tlie net wealtliofthe assessee,assuch the land and tlie building thereupon was constiiicted withoutapprovalof therelevantautliorities,wereconvertedinto stock-in-tra.deon1.9.1992. The AssessingOfficerwhilerejectingthe contentionraised onbehalf of the assessee, held that no exemption was available to theassessee in case of conversion of urban land into stock-in-trade till theassessmentyear 1993-94. Accordingto the AssessingOfficer,tlie landwas acquu-ed in 1980, possession is taken as on 1.4.1981, tluis theassesseeis not covered.underexceptioninsertedw.e.f. 1.4.1994. Thus,the AssessingOfficeradded the value of the land towards the net wealthof the assessee.Aggrieved,from the order of the AssessingOfficerdated 30.3.2001, an appeal was prefen-ed by the assessee before theWVAlf2G03pg.3ofU •v' I Commissioner,WealthTax (Appeals),who vide his orderdated 2.2.2001,held tliat Supreme Court vide his order 1.5.1991 had pennitted the redevelopmentofthe millareato flattedfactoiycomplexand grouphousingcomplex and ordered the existing building to be demolished, thus theremainingbuildingcould not be remained to be standingthere witli theapprovalof the appropriateauthority. While dismissingthe appealof theassessee,by adetailedorder,the First AppellateAutliority,interalia,heldas under •v' I Commissioner,WealthTax (Appeals),who vide his orderdated 2.2.2001,held tliat Supreme Court vide his order 1.5.1991 had pennitted the redevelopmentofthe millareato flattedfactoiycomplexand grouphousingcomplex and ordered the existing building to be demolished, thus theremainingbuildingcould not be remained to be standingthere witli theapprovalof the appropriateauthority. While dismissingthe appealof theassessee,by adetailedorder,the First AppellateAutliority,interalia,heldas under "Tlieassesseein its contentionfi'omNos. 1 to 26 relatingto this 6'^ ground of appealhas not been able to refute the decision of the AOthat urban land held by it as stock in trade is notexemptin A.Y. 1993-94. In orderthat there is noambiguityleft while not allowing exemption tothe assesseethe amendment Financecompany,byAct 1992 in WT Act was also discussed on page 2of tlie assessment order. It has been discussed that• clause2(ea) to Section2 v,'as inserted to the WTAct w.e.f.1/4/1993 and the inserted provisionprovidedfor exemptionof any unused land held the assessee for industrialbycompanypurposesfor a period of 2 years from the date of itsacquisition by it.As discussed further in the, assessmentorder tlie assessee converted its landinto stock in tcade in 1/9/1992 which coiTespondsto A.Y. 1993-94.It is obvious that tlie assesseeshould not have claimed the exemption because inA.Y. 1993-94 no exemption is available. Theexemption in such cases is availablefrom A.Y.1994-95 and not in 1993-94." 24.0From the above it becomes clear that the ARis admittingthat it is only on the basis of theamendmentbrought about by tlie Finance Act WTA 7/2003 1993 applicable fi'om A.Y. 1994-95 flialexemption is being claimed by tlieInspite of it being cleaily and unambiguousySlonedmat th! amendmentonst^ngftofwhichtlieexemptionis beingclaimedbyappellant would be applicable on y w.eX1/4/1994, tlie AR is trying to claim flieexemption in the year under consiteationwhichagainsttheclearunambiprausprovisionsofWT Acthad tlieamendmentl»enapplicable toA.Y. under consideration,certainly the same would^the- amendment.In view of the speciticmention of the date of '/4/1994 mentioned inthe amendment, the AR's contentionraexemptionshould be allowed in view of (heamendmentbroughtabout by,lie1993 in the A.Y. underconsiaerationis cle^ly•misplaced, the same cannotbe acceptedand isaccordinglyrejected. 75 0In view of the foregoingdiscussiontheAO's action in including in tiie appellants netwealth the value of factor7 Remises andresidentialcolonyis held to bejustiiied. from the abovethe assesseean4.Aggrieved order,preferredappealbefore fte Income-tax AppellateTribunal,Delhi Bench, whichvidea detailedordertheof the assesseevery,accepted appealby holdingas under "We have no doubtin our mind that inordei-to decidetaxabilityof an asset we haw to thetactualas on thevaluationdate^po bypositionf, is no. permittedsituation under which law never to^lhypotheticalare convinced with the factual as fully position WTA 7/2003 . WTA 7/2003 75 0In view of the foregoingdiscussiontheAO's action in including in tiie appellants netwealth the value of factor7 Remises andresidentialcolonyis held to bejustiiied. from the abovethe assesseean4.Aggrieved order,preferredappealbefore fte Income-tax AppellateTribunal,Delhi Bench, whichvidea detailedordertheof the assesseevery,accepted appealby holdingas under "We have no doubtin our mind that inordei-to decidetaxabilityof an asset we haw to thetactualas on thevaluationdate^po bypositionf, is no. permittedsituation under which law never to^lhypotheticalare convinced with the factual as fully position WTA 7/2003 . WTA 7/2003 counselfor the assesseeexplainedby thecompanythat as on tlie valuation date old factory premisesas well as residential colony were existing, exceptfor a small portion which has been demolished.As the conditions the perimposed by MunicipalCorporationof Delhi,completedemolitionhad tobe done beforefor constractioncouldany activitybe commenced. Approval for consti'uctionnadbeen granted much later byflie Municipalof Delhi and that too for oneCorporation onlyphase for the factory complex. Above approvalhad also been withdrawn by way of work stoppagenotice. Thei^fore, even as on date of permissionforconstructiondoesnotexist.Residentialpremiseshad been occupiedby the ex-employeesof the assessee as on the valuationdate.companyLegal disputes have been going on before theCourts.In view of these factualcircumstancespremises in question cannot be said to be land.Tlierefore,weare agreeable to the contentionsofthe learned counsel for the assessee that saidpremisescannot be said to be urban land for theofsection of W.T. Act. On die basispurpose2(ea)of above factual position itself, claim of the deserve to succeed. We find trom thecompanyorders of lower authorities that the factual positionas submitted by the assessee company has notbeen consideredand appreciatedby tliem. TlieAO, in fact did not even consider it necessary togive any weightageto the factualpositionand hejustconcludedthat whateverargumentshavebeenput forth it is urban land taxed under WT Act.Further, he has said that under no ch-cumstancesthe u3-ban land is exempt CWT (A) tliougliconsidered and recorded factual position in hisorder, he disregarded the same by taking intoaccounta a hypotheticalsituationfor each claim,SupremeCourtthougli,hadpermittedredevelopmentof area in principlebut case of theassesseefor etc. wascompany gmnting approvalto be considered by MCD. DDA, etc. withreferenceto relevantregulationsand bye-laws. It pg.6ofll cannotbe said thatof etc. was approval maps onlya routine matter. 10.We accordingly uphold claim of theassessee on the that company. Firstly, groundpremisesunderreferencecaiinotbe said to be landand, tlierefore,were not in the natiire of ''UrbanLand" chargeable to wealth-tax. Fiu'tlier, as pertlie Explanationto sub-section(ea) ofsection2 ofW.T.Act also, the landin questionis notalsofor the reason"chai'geable 5.As is clear from the above two orders, differentreasons havebeengivenby the autlioritiesfor acceptingand/orinjectingtliecase of tlieassessee.Basically, tv/o gi'ounds appeared to have influenced theauthoritiesin coming to then- respectiveconclusions.Fustly, that theassesseehimselfhad treatedthe land and buildingas stock-in-trade andthus did not discloseit in the wealthtax returnfor the yeai-1993-94.Thisby itselfwouldan admissionon tlie part of the assesseethat the saidland is an asset chaigeable to wealth tax in terms of the statutoryprovisions. Secondly,on the interpretationof therelevantprovisions,theFirst AppellateAuthorityhad found that the "stock-in-trade"would notdeprive tlie respondentof the benefitavailableto it under the Act, in sofat- as it was exempted specificallyfrom being an asset of land for theofitsunderthe WealthTax Act.purpose chai-gabilit}-' WTA 7./2003 pg.7 of 11 't-A WTA 7./2003 pg.7 of 11 't-A 6.Section 3 of tlie Act is the chai-ging section whichcontemplatesthat subject to the provisions of.the Act, there shall bechai-gefor every assessmentyear commencingfrom the specifieddate, atax in respect of the net wealth as specified in ScheduleI of the Act.Section2(e) defines the expression"assets"which includesproperty ofevery descriptionmoveableor immovablebut does not includewhat isspecifically included in that definition. Section 2(ea) again defines^assets'in relationto the assessmenton the first ofyearcommencing dayApril, 1993 and/or in subsequentassessmentyeai'; whereinurban land isstated to be inclusivein tiie definitionof the assets. Sub-clause(b) ofexplanationto section2(ea)explainsthe"urbanland"as well as illusti-ateswhatisfor landednot to be includedas exemption peimissible propertynetwealth/assetofthe assessee. The saidprovisionreadsas undei (b) "urbanland" meanslandsiUiate-- (i)in any area which is comprised within theof aknown as aof aknown as ajurisdiction municipality(whether notified area notified areamunicipality',municipal coiporation,committee,'townarea committee,town committeeor by any other name) or acantonmentboai'd andwhichhas apopulationof not less tlian ten thousandaccordingto the last precedingcensus of which therelevant figui-es have been published before thevaluationdate; orcommittee,'townarea committee,town committeeor by any other name) or acantonmentboai'd andwhichhas apopulationof not less tlian ten thousandaccordingto the last precedingcensus of which therelevant figui-es have been published before thevaluationdate; or ai)in any area witliin such distance, not being morethan eight kilometei^from, the local limits of anymunicipality'or cantonmentboardrefeiredto in sub-clause (i), as the Centralgovernmentmay, havingthan eight kilometei^from, the local limits of anymunicipality'or cantonmentboardrefeiredto in sub-clause (i), as the Centralgovernmentmay, having ps.Sofll xi regard to the extent of, and scope for, ubranisationofthatareaandotherrelevantconsiderations,specify in this behalfby notificationin the OfficialGazette, but does not include land land on which constiuctionof a buildingis not permissibleunder any law forthe time being in force in tlie area in which suchland is situatedor the land occupiedby any buildingwhich has been constracted with the approval of theappropriateauthorityor any unusedland held by tlieassesseefor industrialpurposes for a period of twoyears from tlie date of its acquisitionby him *[or lartd held the assesseeas stock-in-tradefor aany byperiod of threeyearsfrom the date of its acquisitionby him];" 7.Tlie above provisionswere insertedby the FinanceAct, 1993and made effective from 1.4.1994. We ai-e dealing with the relevantassessmentyearfor 1993-94. On thebarereadingof theaboveprovision,it is deal- that urbanland would not includea land, on whichconstractionofabuildingis not permissibleunder any law for die timebeing in forcein the area where land is situated or the land occupiedby any buildingwhichhas beenconstnictedwith the approvalof the appropriateautliorityor in any unusedland held by the assesseefor an industiialpuiT30sefor aoftwofrom the dateofits It is an admittedcaseperiodyears acquisition.beforeus that the assesseedoes notclaimbenefitof the thirdclauseof thecategoiyspecifiedin the provisions. The assesseewouldobviouslyhave 7.Tlie above provisionswere insertedby the FinanceAct, 1993and made effective from 1.4.1994. We ai-e dealing with the relevantassessmentyearfor 1993-94. On thebarereadingof theaboveprovision,it is deal- that urbanland would not includea land, on whichconstractionofabuildingis not permissibleunder any law for die timebeing in forcein the area where land is situated or the land occupiedby any buildingwhichhas beenconstnictedwith the approvalof the appropriateautliorityor in any unusedland held by the assesseefor an industiialpuiT30sefor aoftwofrom the dateofits It is an admittedcaseperiodyears acquisition.beforeus that the assesseedoes notclaimbenefitof the thirdclauseof thecategoiyspecifiedin the provisions. The assesseewouldobviouslyhave of the land not included as an urban land because noadvantage beingconstractionat the relevanttime was permissibleon tlie land in question.In alternative.Hie buildingwhich has been constructed,ifat all, with theapprovalof the appropriateauthorities.The Maxim, Generaliaveiba-sunt generaliterintelligenda wouldbe afair perceptto inteipietationoftlie provisions as tlie words used being of general nature should beunderstoodgenerallyand despite the fact that they relate to the law ofrevenue, the general consti-uction Hiereof would further the cause of The intentionof theto be thatland whichlegislation. legislativeappearsfalls within the exceptionafore-refenedwould have to be excludedfiomthe ambit andof the"urbanland". Oncethelandor scopeexpression anybuildingthereuponmakingit acombinationoflandand buildingis not anurbanland,thenit couldnot be an assetas definedundersection2(EA) ofthe Act. The rcsuitthereofwouldbe not to ti-eat the same as net-wealthof an assesseefor theof theof the Wealth Tax Act. purposes provisionsThe Firethadon thethat now AppellateAutlioritj' proceeded assumptionorders of SupremeCourt dated L5.1991 qua re-developmenthad beenpermittedof the mill aiea to flatted factory complexand group housingcomplex. Leavewas also grantedto demolishthe existingbuilding. It isnot in dispute before us that till date no pennission/approvalhas beengrantedby the appi'opriateauthorityto the assesseeto raise tlie buildingWA 7/2003pg.lOofll r-'- in-consonance with tlie plans and as such the old structure existing is notin-confirmity with law and had not been raised with the leave of anyautliority.In other words, on the land in question, no constraction waspermitted and tlie authorities concerned have not granted its approval sofat" for raising constraction on that land.In either of these cases, tlie landwould stand excluded from the definition of '\irban land" chargeable towealth tax.In relation to one phase, the permission was granted muchsubsequent to the relevant yeai- of assessment, which as stated on recordbefore us, had also been witlidrawn and work was stopped. In tlie factsand circumstancesaforenoted,we are of theconsideredviewthatnosubstantialquestionof lawarisesforconsideration of the Court in the present appeal, as such the appeal isdismissed leaving the parties to beai' tlieir own costs. NTER KUMARJUDGE^tjADArTB. LGKUR.TUDGE Febniary 03,2005rds