Smt.Vishalakshidevi, Bangalore V. Wealth Tax Officer, Bangalore

CO 101/BANG/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5397 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 1 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-01-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 19-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMER SINGH MEENA
• Keywords: Gift; Competent authority; Set aside
• Section: 10; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER WTA Nos. 22 to 28/Bang/2016 Assessment Years : 1999-2000 to 2005-06 The Deputy Commissioner of Wealth Tax, Central Circle – 1(4), Bangalore. Vs. Late Mrs. Vishalakshi Devi Represented by Legal heirs: 1. Ms. Shruthi Kirti Devi (Daughter) 2. Mr. Rudrapratap Singh (Son) 3. Mr. Gajendra Singh (Husband) Add: “Shreeyum “, Palace Grounds, Ramana Mahashri Road, Bangalore – 560 080. PAN: ABEPV6587A APPELLANT RESPONDENT & C.O. Nos. 99 to 105/Bang/2017 (in WTA Nos. 22 to 28/Bang/2016) Assessment Years : 1999-2000 to 2005-06 Late Mrs. Vishalakshi Devi Represented by Legal heirs: 1. Ms. Shruthi Kirti Devi (Daughter) 2. Mr. Rudrapratap Singh (Son) 3. Mr. Gajendra Singh (Husband) Add: “Shreeyum “, Palace Grounds, Ramana Mahashri Road, Bangalore – 560 080. PAN: ABEPV6587A Vs. The Wealth Tax Officer, Ward – 6 (3)(2), Bangalore. APPELLANT RESPONDENT Assessee by : Shri S. Annamalai, Advocate Revenue by : Shri Sumer Singh Meena, CIT DR (OSD) Date of Hearing : 06-01-2022 Date of Pronouncement : 10-01-2022 ORDER PER BENCH These appeals and cross objections are by the revenue and assessee respectively against the different orders passed by the Ld.CWT for Page 2 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 assessment years 1999-2000 to 2005-06. Common issues are involved in all these appeals, which were heard together and are disposed of by this common order for the sake of convenience and brevity. 2. At the time of hearing, the assessee has not pressed its Cross Objections and hence they are dismissed as not pressed. 3. WTA Nos. 22 to 28/Bang/2016 (AYs 1999-2000 to 2005-06) The facts of the case for AY 1999-2000 are that the assessee an individual was having rental income. She filed her returns of wealth on 19.12.2020 declaring total wealth of Rs.14,55,600/-. The Ld.AO reopened the assessment by issue of notice u/s. 17 of the Wealth-tax Act in response to which the assessee filed the return reiterating the original return. The assessee filed her objections to the reassessment stating that the asset is no more owned by the assessee in the light of Bangalore Palace Acquisition Act, 1996 which is contested by the assessee before the Supreme Court and by virtue of Supreme Court’s order, the assessee is only an occupier of the land and not the owner. Further the 28 acres of land in Bangalore Palace Compound would not fall under the definition of Urban Land since it came under the purview of Karnataka Parks, Playfields and Open Spaces (Preservation and Regulation) Act of 1985. The AO, however, in view of section 2(ea) of the Wealth-tax Act treated the assessee as owner of the asset and made assessment on protective basis. 4. On appeal, the Ld.CIT(Appeals) noted that the CWT(A) vide order dated 28.1.2013 held that the appellant had brought to her notice that the Act acquiring the Bangalore Palace and its appurtenant lands restricted her from putting up any constructions which would not blend with the architecture of the Bangalore Palace. The restrictions under the Karnataka Parks, Play field, Open spaces Regulation Act of 1985 were also applicable on her. Accordingly, permanent constructions in the form of ordinary buildings were ruled out and tile appellant had only put up some temporary structure to make use of the land as its Page 3 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 occupier. From these facts it is clear that although on the date of valuation, the land of 28 Acres stood in the name of the appellant with a dispute pending before the Supreme court, she essentially had no right whatsoever to construct any structure as per her needs on this property. She could not lease it out or mortgage it for availing loans nor could she sell or otherwise transfer the property These are critical restriction which indicates that the bundle of rights associated with ownership does not vest with the appellant. The 28 Acres of land therefore, clearly fall within the exemption clause of section 2(ea)(b) in the years of valuation. Hence no wealth tax on this land is chargeable and the additions made on this count are directed to be deleted. 5. The Ld.CIT(Appeals) in view of the above factual matrix and respectfully following the decision of the Bangalore Tribunal on a similar issue in the case of Smt. Kamakshi Devi in WTA Nos.6 to 8/Bang/2013 dated 31 st July, 2014, allowed the appeal of the assessee. Against this, the revenue is in appeal before us. 6. The grounds raised by the revenue are common for the years under consideration. For sake of convenience, grounds in WTA No. 22/Bang/2016 are reproduced below:- “1. The order of the CIT (Appeals) is opposed to law and the facts and circumstances of the case. 2. On the facts and in the circumstances of the case, the learned CWT(A) erred in not taking cognizance of the judgment of the Hon'ble Supreme Court of India in (2015) 378 ITR 9 (SC) dt. 21.09.2015, wherein the Apex Court has stated that valuation of excess land, which is subject matter of the Urban Land Ceiling Act, would be Rs.2 lakhs and to this amount, the market value of the remaining land will have to be added for the purpose of arriving at the valuation for payment of wealth tax. 3. On the facts and in the circumstances of the case, the learned CWT(A) erred in not appreciating the fact that the land in question was definitely 'urban land', being situated within the jurisdiction of the Bangalore Municipality. Further, the assessee was restricted only from constructing any structure not in consonance with the architecture of the Bangalore Palace. Therefore, the land in Page 4 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 question, certainly does not fall within the ambit of the exemption clause, i.e., Explanation (b) of Section 2(ea) of the Act. 4. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A), in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored. 5. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.” 7. Admittedly, the issue in the grounds raised by the revenue came up for consideration before this Tribunal in WTA Nos. 5 & 6/Bang/2012 in the assessee’s sisters case for AYs 1986-87 & 1987-88. This Tribunal vide order dated 28.8.2019 disposed similar issue as follows:- “6. Aggrieved by order of Ld.CIT (A), in 1st round of assessment proceedings, revenue preferred appeal before this Tribunal, which stood dismissed. Upon reference being drawn by this Tribunal to Hon’ble High Court, Hon’ble Court vide order dated 30/06/05 in TRC No. 13 and 14/2000 decided issue against assessee. Hon’ble Court held that, under Wealth Tax Act 1957, market value of land in excess of sealing fixed under Urban Land Cealing Act, must be determined, based upon offer of hypothetical buyer. Hon’ble Court directed Tribunal to determine market value of both immovable property owned by assessee being Chamundi Vihar land, Mysore and 28 acres land in Bangalore Palace compound. The Tribunal vide order dated 12/09/05 directed Ld.AO to determine market value of two immovable as per directions of Hon’ble High Court. Be that as it may, it is submitted that, on identical set situation Hon’ble High Court in case of CWT vs Srikantdutta Narsimaharajah Wadeyar, Hon’ble High Court similarly held that, value of land must be determined under section 7 of Wealth tax Act 1957, assuming there is a hypothetical open market and there is a hypothetical purchaser with hypothetical bids. Against this order, SLP was filed before Hon’ble Supreme Court. Hon’ble Supreme Court after considering facts and having regards to law applicable under Urban Land Ceiling Act as well as Wealth Tax Act, held as under: “22. We have considered the respective submissions by giving our deep thoughts thereto with reference to the record of the case. It is clear that the valuation of the asset in question has to be in the manner provided under section 7 of the act. Such a valuation has to be on the valuation date which has reference to the last day of the previous year as defined under section 3 of the income tax act if and Page 5 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 assessment was to be made under the act for that year. In other words, it is 31st of March immediately preceding the assessment year. The valuation arrived at as on the date of the asset is a valuation on which the wealth tax is assessable. It is clear from the reading of section 7 of the act that assessing officer has to keep hypothetical situation in mind, namely, if the asset in question is to be sold in the open market, what price it would fetch. Assessing officer has to form an opinion about the estimation of such prise that is likely to be received if the property were to be sold. There is no actual sale and only a hypothetical situation of a sale is to be a contemplated by the assessing officer ...................................... 24. Thus, the tax officer has to form an opinion about the estimated price if the said were to be sold in the assumed market and estimated price would be the one which and assumed are willing purchaser would pay for it. On these reckoning, the asset has to be valued in the ordinary way. 25. The High Court has accepted, and rightly so, that since the property in question came within the mischief of del ceiling act it would have depressing effect insofar as the price which the assumed are willing purchaser would pay for such property. 26. However, the question is as to what price the willing purchaser would offer in such a scenario? 27. In order to provide an answer to this question, we may take note of certain relevant portions of the ceiling act, which are even noticed by the High Court. We will reproduce here section 3, 5, 10 (1) and 10 (3) and narrate the scope of the other relevant provisions of producing the text thereof....... 3. Persons not entitled to hold vacant land in excess of the ceiling limit.— Except as otherwise provided in this Act, on and from the commencement of this Act, no person shall be entitled to hold any vacant land in excess of the ceiling limit in the territories to which this Act applies under sub-section (2) of section 1. 6. Transfer of vacant land.— (1)In any State to which this Act applies in the first instance, where any person who had held vacant land in excess of the ceiling limit at any time during the period commencing on the appointed day and ending with the commencement of this Act, has transferred such land or part thereof by way of sale, mortgage, gift, lease or otherwise, the extent of the land so transferred shall also be taken into account in calculating the extent of vacant land held by such person and the excess vacant land in relation to such person shall, for the purposes of this Chapter, be selected out of the vacant land held by him after such transfer and in case the entire excess vacant land cannot be so selected, the balance, or where no vacant land is held by him after the transfer, the entire excess vacant land, shall be selected out of Page 6 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 the vacant land held by the transferee: Provided that where such person has transferred his vacant land to more than one person, the balance, or, as the case may be, the entire excess vacant land aforesaid, shall be selected out of the vacant land held by each of the transferees in the same proportion as the area of the vacant land transferred to him bears to the total area of the land transferred to all the transferees. (2)Where any excess vacant land is selected out of the vacant land transferred under sub-section (1), the transfer of the excess vacant land so selected shall be deemed to be null and void. (3)In any State to which this Act applies in the first instance and in any State which adopts this Act under clause (1) of article 252 of the Constitution, no person holding vacant land in excess of the ceiling limit immediately before the commencement of this Act shall transfer any such land or part thereof by way of sale, mortgage, gift, lease or otherwise until he has furnished a statement under section 6 and a notification regarding the excess vacant land held by him has been published under sub-section (1) of section 10; and any such transfer made in contravention of this provision shall be deemed to be null and void. 10. Acquisition of vacant land in excess of ceiling limit. - (1) As soon as may be after the service of the statement under section 9 on the person concerned, the competent authority shall cause a notification giving the particulars of the vacant land held by such person in excess of the ceiling limit and stating that — (i)such vacant land is to be acquired by the concerned State Government; and (ii)the claims of all person interested in such vacant land may be made by them personally or by their agents giving particulars of the nature of their interests in such land, to be published for the information of the general public in the Official Gazette of the State concerned and in such other manner as may be prescribed. (3) At any time after the publication of the notification under sub-section (1) the competent authority may, by notification published in the Official Gazette of the State concerned, declare that the excess vacant land referred to in the notification published under sub-section (1) shall, with effect from such date as may be specified in the declaration, be deemed to have been acquired by the State Government and upon the publication of such declaration, such land shall be deemed to have vested absolutely in the State Government free from all encumbrances with effect from the date so specified. Page 7 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 28. Section 3 of the ceiling act, as is clear from its reading, is the main provision. It categorically provides that the person shall not be entitled to hold any vacant land in excess of the ceiling limit on the territories to which the act applies, except as otherwise provided under the act itself, from the date of commencement of the act. Act came into force on 17/02/76. The effect of this section was that on and from 17/02/76 the assessee was not entitled to hold the vacant land in question, which was in excess of the ceiling limit. Section 4 of the act provides for the manner in which the ceiling limit of the person is to be ascertained. Section 5 (1) of the ceiling act deals with transfer of the vacant land in excess of the ceiling limit at any time during the period commencing on the appointed day that is 28/01/76 and ending with the commencement of this act that the 17/02/76. Under this subsection, if any person has transferred such land, the extent of the land so transferred shall be taken into account in calculating the extent of vacant land held by such person. Subsection (3) of section 5 of the ceiling act contains a prohibition to transfer any vacant land held by a person in excess of the ceiling limit immediately before the commencement of the act till a statement under section 6 is furnished and notification regarding excess land has been published under section 10 (1) of the act. Any transfer made in contravention to the subsection shall be deemed to be null and void. Section 6 (1) of the ceiling act statutorily obligates that every person holding vacant land in excess of the ceiling limit as on or after the 17th day February 1976 is required to file a statement in the prescribed from, specifying the vacant land within the ceiling limit which he desires to rating. The 1st proviso to section 6 (1) of the ceiling act makes the operation of the act retrospective in fixing 17th of February 1975 as the date to determined whether a person holds vacant land in excess of the ceiling limit. If for any reason the statement is not filed by the person holding vacant land in excess of the ceiling limit, the competent authority May direct him to file such statement within a fixed period. Under section 8 of the ceiling act, on the basis of the statement filed under section 6 of the ceiling act, a draft statement is prepared by the competent authority and the same is observed on the applicant/person, who is given an opportunity to file is objections, if any. After considering the objections that may be filed within the time prescribed, the competent authority shall determined the vacant land held by the person concerned in excess of the ceiling limit and serve the draft statement so altered on the person concerned. The altered draft statement is also known as final statement under the act’s. Section 10 of the ceiling act provides for acquisition of vacant land in excess of the ceiling limit. Section 10 (1) of the act and researchers that the competent authority as as soon as possible after the final statement is served on the concerned person, to issue a notification giving the particulars of the vacant land held by such person in Page 8 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 excess of the ceiling limit, and further notified that such vacant land east to be acquired by the concerned state government and invite claims from all persons interested in such land, giving particulars of the nature of their interest in such land. The notification requires to be published in the official A of the State concerned and also in such other manner prescribed in the rules. Under subsection (2), the competent authority is expected to consider any claims that may be filed by the persons interested in the vacant land notified under subsection (1) and determine the nature and extent of such claims and pass such order as he deems fit. Subsection (3) of section 10 of the ceiling act provides for issuance of notification vesting vacant land in the state government free from all encumbrances. Under this subsection the competent authority after the publication of the notification official Gazette concerned, declared that excess land referred to in subsection (1) shall w.e.f. such date as may be specified in the declaration, be deemed to have been acquired by the state government. 1 notification was published, and declaration is made, such land shall be deemed to have wasted absolutely in the state government free from all encumbrances w.e.f. the date specified. “Sub-section (4) of Section 10 of the Ceiling Act provides for maintenance of status quo in respect of excess vacant land proposed to be acquired during the period commencing on the date of publication under sub-section (1) and ending with the date specified in the declaration made under sub-section (3). Sub-section (5) of Section 10 of the Ceiling Act provides that the competent authority shall issue a notice in writing to any person who may be in position to surrender or deliver possession to the State Government or to the person duly authorised in this behalf. The person to whom the notice is issued is given 30 days time to comply with the notice. Under sub-section (6), if a person fails to deliver possession within that period, the competent authority will take necessary steps to take possession itself. Sections 11 and 14 of the Ceiling Act provide for determination of the amount payable to the person concerned for the vacant land acquired and for the mode of payment of the amount to such person. Section 18 of the Ceiling Act lays down the penalty that may be imposed for concealment of particulars in the statement filed under Section 6 of the Act. Section 20 of the Ceiling Act confers on the State Government the power to exempt any person holding vacant land in excess of the ceiling limit from the provisions of the Act. Under Section 33 of the Ceiling Act, any person aggrieved by an Order passed by the competent authority under the Act may file an appeal before a forum created under the Act, except against those Orders made under Section 11 or an Order made under sub-section (1) of Section 30. 29. The combined effect of the aforesaid provisions, in the context of instant appeals, is that the vacant land in excess of ceiling limit was not acquired by the State Government as notification under Section 10(1) of the Ceiling Act had not been Page 9 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 issued. However, the process had started as the assessee had filed statement in the prescribed form as per the provisions of Section 6(1) of the Ceiling Act and the Competent Authority had also prepared a draft statement under Section 8 which was duly served upon the assessee. Fact remains that so long as the Act was operative, by virtue of Section 3 the assessee was not entitled to hold any vacant land in excess of the ceiling limit. Order was also passed to the effect that the maximum compensation payable was Rs.2 lakhs. Let us keep these factors in mind and on that basis apply the provisions of Section 7 of the Wealth Tax Act. 30.The Assessing Officer took into consideration the price which the property would have fetched on the valuation date, i.e. the market price, as if it was not under the rigors of Ceiling Act. Such estimation of the price which the asset would have fetched if sold in the open market on the valuation date(s), would clearly be wrong even on the analogy/rationale given by the High Court as it accepted that restrictions and prohibitions under the Ceiling Act would have depressing effect on the value of the asset. Therefore, the valuation as done by the Assessing Officer could not have been accepted. 31.Let us proceed on the same lines as delineated/drawn by the High Court itself, namely, one has to assume that the property in question is saleable in the open market and estimate the price which the assumed willing purchaser would pay for such a property. When the asset is under the clutches of the Ceiling Act and in respect of the said asset/vacant land, the Competent Authority under the Ceiling Act had. already determined the maximum compensation of Rs.2 lakhs, how much price such a property would fetch if sold in the open market? We have to keep in mind what a reasonably assumed buyer would pay for such a property if he were to buy the same. Such a property which is going to be taken over by the Government and is awaiting notification under Section 10 of the Act for this purpose, would not fetch more than Rs.2 lakhs as the assumed buyer knows that the moment this property is taken over by the Government, he will receive the compensation of Rs.2 lakhs only. We are not oblivious of those categories of buyers who may buy -disputed properties" by taking risks with the hope that legal proceedings may ultimately be decided in favour of the assessee and in such a eventuality they are going to get much higher value. However, as stated above, hypothetical presumptions of such sales are to be discarded as we have to keep in mind the conduct of a reasonable person and "ordinary way" of the presumptuous sale. When such a presumed buyer is not going to offer more than Rs.2 lakhs, obvious answer is that the estimated price which such asset would fetch if sold in the open market on the valuation date(s) would not be more than Rs.2 lakhs. Having Page 10 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 said so, one aspect needs to be pointed out, which was missed by the Commissioner (Appeals) and the Tribunal as well while deciding the case in favour of the assessee. The compensation of Rs.2 lakhs is in respect of only the "excess land" which is covered by Sections 3 and 4 of the Ceiling Act. The total vacant land for the purpose of Wealth Tax Act is not only excess land but other part of the land which would have remained with the assessee in any case. Therefore, the valuation of the excess land, which is the subject matter of Ceiling Act, would be Rs.2 lakhs. To that market value of the remaining land will have to be added for the purpose of arriving at the valuation for payment of Wealth Tax. The question formulated is answered in the aforesaid manner. 7. Ld. CIT DR placed reliance upon view taken by Hon’ble Karnataka High Court in assessee’s case. He submitted that there is no appeal filed by assessee against said order for years under consideration and thus attained finality. He submitted that Ld. AO was right in computing value of land as per section 7 of Wealth Tax Act. 8. We have perused submissions advanced by both sides in light of records placed before us. Hon’ble Supreme Court in aforestated paragraph analysed manner in which valuation of property should be determined in respect of land, which would have remained with assessee. On perusal of order passed by authorities below in both the rounds of assessments, it is observed that Ld.AO has not determined the vacant land available with assessee after excess land being taken over by Government. Ld.AO also has not verified notification issued by Government in respect of the same, which could ascertain exact area of land that remained with assessee. Hon’ble Supreme Court categorically observed that land that remained with assessee, has to be valued as per section 7 of Wealth tax Act and in respect of excess land, valuation must be determined on basis of maximum compensation computed by Competent Authority under the Ceiling Act. Ld.CIT, DR objected following the ratio laid out by Hon’ble Supreme Court in case of assessee’s Brothers. We reject such objection raised by ld.CIT, DR as admittedly, facts involved in assessee’s case is similar and identical to that dealt with by Hon’ble Supreme Court in case of assessee’s Brothers. Respectfully following Hon’ble Supreme Court’s observations reproduced hereinabove, we set aside this issue to Ld.AO to call for all relevant documents/details in respect of excess land determined by Competent Authority under Ceiling Act and compensation awarded in respect of the same. In respect of valuation of land covered by notification issued by Competent Authority, value would be taken to be the maximum compensation received by assessee in respect of both properties. From the details so filed, Ld.AO shall determine area actually retained with assessee, which would be valued as per section 7 of Wealth tax Act. Needless to say that assessee shall be given proper opportunity of being heard as per law. Page 11 of 11 WTA Nos. 22 to 28/Bang/2016 & C.O. Nos. 99 to 105/Bang/2017 Accordingly these grounds raised stands allowed for statistical purposes.” 8. Accordingly, in the interest of justice, taking a consistent view on the facts and circumstances of the case, we set aside orders of the lower authorities in all these three years and remit the same to the file of the Ld.AO with similar directions as in AYs 1986-87 & 1987-88 in assessee’s sisters case (supra). 8.1 Similar direction is applicable mutatis mutandis to the assessment years 2000-01 to 2005-06. Accordingly, grounds stands allowed for statistical purposes. In the result, all the appeals of the revenue are partly allowed for statistical purposes and the Cross Objections of the assessee are dismissed. Order pronounced in the open court on 10 th January, 2022. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 10 th January, 2022. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore