A.N. Manidatta (HUF) represented by Kartha Sri. A.N. Manidatta and A.R. Narendranath (HUF) represented by Kartha Sri. A.R. Narendranath V. The Asst. Commissioner of Wealth Tax, Circle - 2(2)(1)

WTA/15/2017

AI Insights

The case involves two appeals by assessees A.N. Manidatta and A.R. Narendranath, challenging the orders of the ITAT which upheld the Wealth Tax assessments for the assessment years 2009-10 to 2013-14. The primary legal issue was whether the lands, although converted for non-agricultural use, should be considered agricultural lands for wealth tax purposes as they were still used for agricultural activities and had not been developed for urban use. The ITAT had previously ruled that the lands were urban and thus taxable, leading to these appeals. The High Court found that the ITAT had not adequately considered the agricultural use of the lands as evidenced by the Valuation Report and the Records of Right, necessitating a re-examination of the facts.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 798740 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-12-2022
• Assessment Year: misc
• Laws Referred To: Wealth Tax Act 1957
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Agricultural Land; Non-Agricultural Use; Urban Land; Valuation report; Wealth Tax
• Section: 17; 16(3); 2(ea); 27-A(1)

Judgement Text

" W.T.A No.15/2017 C/W W.T.A No.1/2018 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF DECEMBER, 2022 PRESENT THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR AND THE HON’BLE MR. JUSTICE ANANT RAMANATH HEGDE W.T.A No.15 OF 2017 C/W W.T.A No.1 OF 2018 IN W.T.A No.15 OF 2017 BETWEEN : A.N. MANIDATTA (HUF) REPRESENTED BY KARTHA SRI. A.N. MANIDATTA S/O SRI A.R. NARENDRANATH AGED ABOUT 36 YEARS 143, ARS PLAZA 8TH CROSS, MALLESWARAM BANGALORE-560 003 ... APPELLANT (BY SHRI. S. PARTHASARATHI, ADVOCATE) AND : THE ASST. COMMISSIONER OF WEALTH TAX, CIRCLE - 2(2)(1) ROOM NO. 128, 1ST FLOOR BMTC BUILDING KORAMANGALA BANGALORE-560 034 ... RESPONDENT (BY SHRI. K.V. ARAVIND, ADVOCATE) W.T.A No.15/2017 C/W W.T.A No.1/2018 2 THIS WTA IS UNDER SECTION 27-A(1) OF WEALTH TAX ACT 1957, ARISING OUT OF ORDER DATED 15.03.2017 PASSED IN WTA NOS.1 TO 5/BANG/2016, FOR THE ASSESSMENT YEARS 2009-10 TO 2013-2014 PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; (B) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT DATED 15.03.2017 BEARING WTA NOS. 1 TO 5/BANG/2016 FOR THE ASSESSMENT YEARS 2009-10 TO 2013-14 AND(C) PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. IN W.T.A No.1 OF 2018 BETWEEN : A.R. NARENDRANATH (HUF) REPRESENTED BY KARTHA SRI. A.R. NARENDRANATH S/O LATE A. RAMAIAH SETTY AGED ABOUT 71 YEARS 143, ARS PLAZA 8TH CROSS, MALLESWARAM BANGALORE-560 003 ... APPELLANT (BY SHRI. S. PARTHASARATHI, ADVOCATE) AND : THE ASST. COMMISSIONER OF WEALTH TAX, CIRCLE - 2(2)(1) ROOM NO. 128, 1ST FLOOR BMTC BUILDING KORAMANGALA BANGALORE-560 034 ... RESPONDENT (BY SHRI. K.V. ARAVIND, ADVOCATE) THIS WTA IS UNDER SECTION 27-A(1) OF WEALTH TAX ACT 1957, ARISING OUT OF ORDER DATED 15.12.2017 PASSED IN WTA NOS.7 TO 11/BANG/2017, FOR THE ASSESSMENT YEARS 2009-10 TO 2013-2014 PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED W.T.A No.15/2017 C/W W.T.A No.1/2018 3 ABOVE; (B) ALLOW THE APPEAL AND SET-ASIDE THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL DATED 5.03.2017 BEARING WTA NOS. 7 TO 11/BANG/2017 FOR THE ASSESSMENT YEARS 2009-10 TO 2013-14 AND (C) PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. THESE WTAs, HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 21.10.2022 COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.S.DINESH KUMAR J, PRONOUNCED THE FOLLOWING:- JUDGMENT These two appeals by the assessees have been admitted to consider the following questions of law: 1. Whether in law, the sanction of conversion of land for non–agricultural purposes would change the nature of land when the land is continued to be held as agricultural land by the appellant as on the valuation date? 2. When the land was cultivated and agricultural crops/plants continued to remain as on the valuation date, the provisions of section 2(ea) of the Act can be applied to include the land for wealth- tax purposes only on the basis of permission granted for conversion with riders by the Government authorities? 3. If the answer to the above questions is in the affirmative, then, whether the Tribunal was right in not considering the reasonableness of valuation of land as on the valuation date for the purpose of wealth – tax?” W.T.A No.15/2017 C/W W.T.A No.1/2018 4 2. WTA No.15/2019 has been filed by assessee Shri. A.N. Manidatta challenging ITAT's order dated March 15, 2017 in WTA Nos.1 to 5/Bang/2016 for the A.Ys. 2009-10 to 2013-14. 3. WTA No.1/2018 has been filed by assessee Shri. A.R. Narendranath challenging ITAT's order dated December 15, 2017 in WTA Nos.7 to 11/Bang/2017 for the A.Ys. 2009-10 to 2013-14. 4. Shri. A.N. Manidatta is son of Shri. A.R. Narendranath. The subject lands are contiguous lands owned by them. Hence, these two appeals are disposed of by this common order. 5. Brief facts of the case are, assessees own certain land in Sy. No.11/3 in T.Dasarahalli, Bangalore. By order dated October 6, 2008, the said lands were converted for non agricultural use. The Assessing Officer passed separate orders of W.T.A No.15/2017 C/W W.T.A No.1/2018 5 assessment dated December 26, 2014 under Section 16(3) read with Section 17 of the Wealth Tax Act, 1957 (\"The Act\" for short) for the A.Ys. 2009-10 to 2013-14. 6. Appeals filed by the assessees against the orders of Assessing Officer before the CWT(A)1 stood dismissed vide orders dated March 23, 2016 and March 24, 2017. The assessees' appeals before ITAT have also been dismissed. 7. Shri. Parthasarathi, learned Advocate for the assessees mainly contended that: • the lands do not fall within the definition of “urban land” under the Act and accordingly it is not an asset under Section 2(ea) of the Wealth Tax Act; • The lands continued to remain as agricultural lands as on the date of valuation. It is recorded in the Valuation Report that during 1 Commissioner of Wealth Tax (Appeals) W.T.A No.15/2017 C/W W.T.A No.1/2018 6 the inspection, it was found that there were many trees standing in the land; • Though the land was converted, the assessees continued agricultural operation and the conditions specified in the conversion order were not fulfilled. 8. In substance, Shri. Parthasarathi's argument is, though the land was converted for non-agricultural purpose, it was used as an agricultural land only and the Assessing Officer and other authorities have failed to take note of the Valuation Report which mentioned that there were several trees in the lands. 9. Shri. K.V. Aravind, learned Senior Standing Counsel, opposing the appeal submitted that the lands in question were admittedly converted for non-residential purpose by the order of the Deputy Commissioner. Therefore, the Assessing Officer has rightly held that the lands were converted lands and that assessees are liable W.T.A No.15/2017 C/W W.T.A No.1/2018 7 to pay Wealth tax. The CWT(A) and the ITAT, for the reasons recorded in the respective orders have rightly accepted the view taken by the Assessing Officer and dismissed the appeals. Therefore, these appeals do not merit any consideration. 10. We have carefully considered rival contentions and perused the records. 11. The ITAT, in para 9 of the impugned order has held thus: \"09. There is no distinction in respect of agricultural land in the above provision. In the definition of \"urban land\" given in cl.(b) to Expln. 1 to s. 2(ea), there is no exclusion provided for agricultural land. Therefore, agricultural land which is urban land is includible in the definition of \"asset\" in s.2(ea). Subsequently, the definition of urban land in the Wealth Tax Act, 1957 has been amended by Finance Act 2013 w.e.f. assessment year 1993-94 to specifically provide that wealth tax is not leviable on urban land which is, (i) classified as agricultural land in the records of the Government: and (ii) used for agricultural purposes. Thus, both conditions that is the land in question should be agricultural land and it should also be used for agricultural W.T.A No.15/2017 C/W W.T.A No.1/2018 8 purposes have to proved to satisfy the claim of exemption under the Wealth Tax Act.\" 12. The specific contentions of Shri. Parthasarathi are: • that though converted, assessees were using the lands as agricultural lands; • In para 5 of the Valuation Report, it is stated that during the inspection, the Valuation Officer had observed several trees standing on the entire land; and • in the Government records such as the Record of Rights (Pahani), the names of the assessees are found. 13. Shri. Parthasarathi has placed the Record of Rights (Pahani) for the year 2016-17 in respect of Sy. No.14/1. In column No.9, name of Shri. A.R. Narendranath is mentioned as the owner for 1 acre 12 guntas. In respect of Sy. No.11/1 and W.T.A No.15/2017 C/W W.T.A No.1/2018 9 11/3, Shri. Parthasarathi has produced copies of Record of Rights (Pahani) for the year 2016-17. In column No.9, name of Shri. A.R. Narendranath is mentioned as owner in respect of 2 acres 20 guntas. To a query made by this Court with regard to the name of only Shri. Narendranath found in the Record of Rights, Shri. Parthasarathi submitted that the lands have remained in the name of father Shri. A.R. Narendranath. 14. The ITAT, in para 9 of its order extracted hereinabove, clearly mentions that Wealth Tax is not leviable on urban land which is classified as agricultural land in the record of the Government and used for agricultural purposes. 15. The Records of Right placed before us prima facie demonstrate that name of Shri. A.R. Narendranath is found in the Government Record. So far as use of the land for agricultural purposes is concerned, it is recorded in the W.T.A No.15/2017 C/W W.T.A No.1/2018 10 Valuation Report dated November 28, 2014 prepared by Shri. V. Vellaichamy, District Valuation Officer of the Income Tax Department, it is stated thus: \"Nature and Brief Description of the property: This property consists of 5Acre in Survey No.11/3 located at T Dasarahalli village, Yeshwanthapur Hobli, Bangalore. The assessee owns this parcel of land having a total land area of 7acres and 27 guntas in Survey No.11/3 without any demarcation/identification/boundaries. Rest of the land i.e 2 Acre 27.5 guntas is owned by his father. This parcel of land is converted into agricultural to residential use during 06.10.2008. The nearby areas are well developed and all civic amenities are available within the near vicinity. This parcel of land is not having any approach from the road and the access through Survey no.14/1 which is owned by Shri. A.R. Narendranath. During inspection it was found that there were so many trees standing in the entire land. However this parcel of entire land along with Survey no.14/1 which is also owned by Shri. A.N. Narendranth was converted from agricultural land to residential use vide conversion order dated 06.10.2008. There are four workers shed with AC sheet lean to roof, cement flooring etc. These structure are of temporary in nature and no workers were seen occupying the sheds as on date of inspection. There is a residential house lying vacant as on the date of inspection claimed to the constructed about 40 years back.\" (Emphasis Supplied) W.T.A No.15/2017 C/W W.T.A No.1/2018 11 16. Thus, according to the Valuation Officer, there were several trees in the entire land in Sy. No.11/3. It also shows that the access to the said land is through Sy. No.14/1 owned by Shri. A.N. Narendranath. The Report does not clearly indicate whether standing trees were in Sy. No.11/3 or 14/1. Therefore, it requires reconsideration in the hands of the ITAT, which is the last fact finding authority. 17. In view of the above, the following: ORDER (a) Appeals are allowed in part. (b) Orders dated 15.03.2017 (Annexure-A in W.T.A No.15/2017) and 15.12.2017 (Annexure-A in W.T.A No.1/2018) are set-aside. (c) Matters are remitted to the file of ITAT with liberty to the assessees to produce Records of W.T.A No.15/2017 C/W W.T.A No.1/2018 12 Right, Valuation Report and any other material in support of their case. (d) The ITAT shall reconsider the matter and pass appropriate orders in accordance with law. (e) Since the matters have been remanded, we have not answered the questions of law. Sd/- JUDGE Sd/- JUDGE SPS "