JAGDAMBA POWER AND ALLOYS LIMITED,FIRST FLOOR V. ASSISTANT COMMISSIONER OF WEALTH TAX (CENTRAL)-2, EIGHTH FLOOR

WTA 1/RPR/2024

AI Insights

The case involves Jagdamba Power and Alloys Limited appealing against the order of the Commissioner of Wealth Tax (Appeals), Raipur, which upheld the A.O's decision to tax the company's freehold land and site & land development under the Wealth Tax Act, 1957. The A.O had initially added these assets to the company's taxable wealth, believing they escaped assessment. The company argued that these assets were used for business purposes, specifically for power generation and storage of raw materials, and thus should be exempt from wealth tax. The Tribunal found that the A.O and the CIT(Appeals) had not adequately verified the company's claims and thus restored the matter to the A.O for further investigation.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35676 (ITAT-RAIPUR)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Others
• Pronouncement Date: 21-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2024
• Laws Referred To: Wealth-tax Act, 1957
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: R.B DOSHI

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER WTA No. 01/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2009-10 Jagdamba Power and Alloys Limited 1st Floor, Hira Arcade, New Bus Stand, Pandri, Raipur-492 001 (C.G.) PAN: AABCH2706E .......अपीलाथȸ / Appellant बनाम / V/s. The Assistant Commissioner of Wealth Tax (Central-2), Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri R.B Doshi, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 09.10.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 21.10.2024 2 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), Raipur-3, dated 26.07.2024, which in turn arises from the order passed by the A.O under Sec.17(1) r.w.s 16(3) of the Wealth-tax Act, 1957 (in short ‘the Act’) dated 31.03.2016 for the assessment year 2009-10. The assessee company has assailed the impugned order on the following grounds of appeal before us: “1. Ld. CIT (A) erred in confirming addition/disallowance of Rs.1,59,90,703/- on account of freehold land and site and land development alleging that the same are taxable under Wealth Tax Act, 1957. The disallowance made by AO and sustained by Ld. CIT(A) is arbitrary baseless and not justified. 2. That, as the order of the learned CIT being arbitrary, unwarranted, devoid of merit and bad in law, the same should be quashed and your Appellant be given such relief(s) as prayed for. 3. That the Appellant craves leave to add, alter and amend the grounds of appeal on or before the date of hearing.” 2. Succinctly stated, the A.O holding a bona fide belief that the taxable wealth of the assessee had escaped assessment, initiated proceedings u/s. 17 of the Act. Notice u/s. 17(1) of the Act, dated 04.07.2014 was issued to the assessee company. In compliance, the assessee company filed its return of wealth for A.Y.2009-10 on 31.03.2016 disclosing a net wealth of Rs.15,63,563/-. 3 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 3. The A.O on a perusal of the “balance sheet” of the assessee company for the year ended 31.03.2008, observed that the assessee company owned movable/immovable assets of Rs.1,91,88,801/-, which as per him were exigible to levy of tax under Wealth-tax Act, 1957, as under: As the assessee company had offered net wealth of Rs.15,63,563/- in its return of wealth, therefore, the A.O called upon it to put forth an explanation as to why the balance amount may not be brought to tax. In reply, the assessee company submitted as under: “With reference to your above captioned subject for the A,Y. 2009- 10 your honour has asked for the freehold land Rs.63.32 Lacs and site & land development of Rs.96.58 Lacs on which why Wealth Tax is not applicable, we would like to state before your honour that the assessee company is not liable to pay wealth tax on free hold land and site and land development as the assessee company is using its freehold land and site development for generation of power by setting up of power plant on the same and also the free hold land is being utilized for the purpose of storage of raw material, for creating other infrastructure i.e. store, time office and other allied activities. Regarding Wealth Tax on heavy motor vehicles Rs.49.09 Lacs and vehicles of R.18.08 Lacs, we would like to state before your honour that the heavy vehicles i.e. Trucks, dumper, dozer etc. are being utilized by the assessee company for raw material handling in Sl. No. Movable and Immovable Assets Value of Assets 1. Freehold Land 6332240 2. Site and Land Development 9658463 3. Vehicles 3198098 Total 1,91,88,801/- 4 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 respect of generation of power, therefore, the assessee company is not liable to pay wealth tax. However, in respect of vehicles the assessee company is having total value of vehicles Rs.18,07,595 which includes two wheelers of Rs.48,673/- and also having loan outstanding of Rs.1,95,359/- from ICICI bank of which the taxable wealth comes to Rs.63,563/- and tax thereon Rs.636/-, Therefore, the assessee company is submitting herewith the Wealth Tax return along with challan of Rs.636/- for your perusal…” 4. Although the explanation of the assessee for not including the value of the motor cars in its net wealth found favor with the A.O, but he rejected its claim that the freehold land and site & land development forming part of its fixed assets of Rs.1,59,90,703/- [Rs.63,32,240/- (+) Rs.96,58,463/-] as disclosed in “Schedule E” of its “balance Sheet” did not fall within the realm of the definition of “assets” u/s. 2(ea) of the Act. Accordingly, the A.O vide his order passed u/s.17(1) r.w.s. 16(3) of the Act, dated 31.03.2016 after adding the freehold land and site & land development of Rs.1,59,90,703/- (supra) to the returned wealth of the assessee, determined the wealth of the assessee company at Rs.1,75,54,266/-. 5. Aggrieved, the assessee company carried the matter in appeal before the CWT(Appeals) but without success. As the assessee company had failed to prosecute the matter before the first appellate authority, therefore, the latter after deliberating on the observations of the A.O found no infirmity in the view taken by him and upheld the addition. For the sake of clarity, the observations of the CWT(Appeals) are culled out as under: 5 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 “I have carefully considered the submission of the assessee. As regards explanation of value of motor car, the same is considered. However, the submission of the assessee is not acceptable in respect of the value of Freehold land and site and land development as shown in the Schedule-E of the fixed assets of Rs.1,59,90,703/- (Rs. 63,32,240/- + 96,58,463/-) as the same are not allowable as exempt from Wealth tax u/s. 2(ea) of the W. T. Act. Therefore, an amount of Rs.1,59,90,703/- is added to the net wealth of the assessee. During the appeal proceedings, the appellant has not filed any written submission, the appellant has shown that he is not interested in pursuing the appeal. The laws aid those who are vigilant, not those who sleep upon their rights. Under these circumstances, in my opinion the appellant is not interest in the appeal. In view of these facts, the appeal of the appellant deserves to be dismissed as it cannot be kept pending adjudication for indefinite period. It is the duty of the appellant to make necessary arrangements for effective representation on the appointed date. Mere filing of an appeal is not enough, rather it requires effective hearing also. Therefore, the appeal is found liable for dismissal. No explanation has been furnished by the appellant at this stage on the findings and conclusion of the Ld. AO. In absence of any explanation & on the basis of facts gathered and discussed by the Ld. AO, considering entire facts in the wealth tax assessment order. I find that Ld. AO is justified in assessing the total wealth tax of the appellant as discussed above. when repeated opportunity in this regard was provided clearly shows that the appellant is not interested in pursuing the appeal. In these circumstances, I have no option but to confirm the addition made by the Ld. AO and dismiss the grounds of appeal of the appellant. Respectfully, following the view taken in the case cited above, the appeal filed by the appellant deserves to be dismissed. Therefore, appeal on these grounds are dismissed. 5. Ground No.3 :- This ground of appeal is general in nature and do not require any specific adjudication. 6. In the result, appeals are dismissed.” 6. The assessee company being aggrieved with the order of the CWT(Appeals) has carried the matter in appeal before us. 6 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 7. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. 8. Controversy involved in the present appeal lies in a narrow compass, i.e. as to whether or not the freehold land and site & land development disclosed in “Schedule E” of the “balance sheet” of the assessee company as of 31.03.2008 would fall within the meaning of “assets” as contemplated in Section 2(ea) of the Act, and thus, be exigible for tax under the Wealth Tax Act, 1957? 9. Ostensibly, it is the claim of the assessee company, viz. (i) that the freehold land and site & land development is being used by it for generation of power by setting up a separate plant on the same; and (ii) that the freehold land is also being utilized for the purpose of storage of raw materials for creating other infrastructure, i.e. store, time office and other allied activities; therefore, the same do not fall within the meaning of “assets” contemplated in Section 2(ea) of the Act. Although, we find that the aforesaid claim of the assessee company had been rejected by the A.O but no reason for not accepting the said claim of the assessee company is discernible from his order. 7 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 10. We have thoughtfully considered the issue in hand in the backdrop of the contentions of the Ld. Authorized Representatives of both the parties. Section 2(ea)(i)(3) of the Act carves out an exception that where “any building or land appurtenant thereto” (hereinafter referred to as \"house\"), is occupied by the assessee for the purpose of business or any profession carried on my him, then same would be excluded from the definition of “assets” as provided in Section 2(ea) of the Act. For the sake of clarity, Section 2(ea)(i) of the Act is culled out as under: “2. In this Act, unless the context otherwise requires,-- xxxxxxxxxxxx [(ea) [\"assets\", in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means— (i)[ any building or land appurtenant thereto (hereinafter referred to as \"house\"), whether used for residential or commercial purposes or for the purpose of maintaining a guest-house or otherwise including a farm-house situated within twenty-five kilometres from local limits of any municipality (whether known as Municipality, Municipal Corporation or by any other name) or a Cantonment Board, but does not include-, (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than five lakh rupees; (2) any house for residential or commercial purposes which forms part of stoke-in-trade; (3) any house which the assessee may occupy for the purposes of any business or profession carried on by him; (4) any residential property that has been let-out for a minimum period of three hundred days in the previous year; (5) any property in the nature of commercial establishments or complexes;]” (Emphasis supplied by us) 8 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 11. Although, we are principally in agreement with the Ld. AR, and are of the view, that in case the freehold land and site & land development was utilized by the assessee company for the purpose of its business, viz. (i) generation of power by setting up a plant on the same; and/or (ii) utilized for the purpose of storage of raw materials and for creating other infrastructure, i.e. store, time office and other allied activities; then the same would squarely be covered by the exception to the definition of the term “assets” as envisaged in Section 2(ea)(i)(3) of the Act. At the same time, we are conscious of the fact that the aforesaid factual position as canvassed by the assessee company, since inception, had neither been verified by the A.O nor by the CIT(Appeals). We, thus, in terms of our aforesaid observations are of the considered view that the matter in all fairness requires to be restored to the file of the A.O with a direction to verify the authenticity of the assessee’s claim that the aforesaid properties, i.e. freehold land and site & land development during the subject year were occupied by the assessee company for the purpose of its business. In case, the assessee’s claim is found to be in order, then the treating of the same as an “asset” by his predecessor vide order passed u/s. 17(1) r.w.s. 16(3) of the Act, dated 31.03.2016 shall stand vacated. Thus, the Ground of appeal No.1 raised by the assessee company is allowed for statistical purposes in terms of our aforesaid observations. 9 Jagdamba Power and Alloys Limited Vs. ACWT (Central)-2, Raipur WTA No. 01/RPR/2024 12. Grounds of appeal Nos. 2 & 3 being general in nature are dismissed as not pressed. 13. In the result, the appeal of the assessee company is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in open court on 21st day of October, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 21st October, 2024. **#SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT, Raipur-1 (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "