SHRI GIRIDHARI (HUF),CHENNAI V. ACWT, NCC-3, CHENNAI

WTA 4/CHNY/2025

AI Insights

The case involves multiple appeals by Shri Govindas Purushothamadass HUF and Giridhari HUF against the orders of the Commissioner of Income Tax (Appeals)-18, Chennai, concerning the assessment years 2008-09 and 2009-10. The primary contention was whether the impugned property qualifies as an 'asset' under section 2(ea) of the Wealth Tax Act, 1957, and the appropriate valuation of such an asset. The Tribunal had to determine the correct application of discounts for co-ownership and the impact of the Joint Development Agreement (JDA) and the OSR donation on the property valuation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711196 (ITAT-CHENNAI)
• Appeal Type: Wealth Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2009-2010
• Other Referred Cases: J.K.K. Natarajah vs. WTO (1990) 32 ITD 370 (Mad.)
• Laws Referred To: Wealth Tax Act, 1957
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M. SHANMUGA PRIYA
• Assessee Lawyers: G. BASKAR; P.M. KATHIR
• Keywords: Gift; Reopening of assessment

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHENNAI BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT & MS PADMAVATHY S, AM W.T.A. No. 01/Chny/2025 (Assessment Year: 2008-09) W.T.A. No. 02/Chny/2025 (Assessment Year: 2009-10) Shri Govindas Purushothamadass (HUF), No. 3/2, Nowroji Street, Chetpet, Chennai-600 031 PAN: AABHG4303F Vs. The Wealth Tax Officer, Non Corporate, Ward-3(1), 121, Nungambakkam High Road, Chennai-600034. Appellant) : Respondent) W.T.A. No. 03/Chny/2025 (Assessment Year: 2008-09) W.T.A. No. 04/Chny/2025 (Assessment Year: 2009-10) Giridhari HUF, No. 3/2, Nowroji Street, Chetpet, Chennai-600 031 PAN: AAEHG8245D Vs. The Assistant Commissioner of Wealth Tax, Non Corporate, Circle-3, 121, Nungambakkam High Road, Chennai-600034. Appellant) : Respondent) Appellant /Assessee by : Mr. G. Baskar, Adv. & Mr. P.M. Kathir, Adv. Revenue / Respondent by : Dr. M. Sri Shanmuga Priya, JCIT Date of Hearing : 22.07.2025 Date of Pronouncement : 25.07.2025 Printed from counselvise.com 2 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. O R D E R Per Padmavathy S, AM: These appeals by different assessees are against the separate orders of the Commissioner of Income Tax (Appeals)-18, Chennai [in short 'CIT(A)'] passed under section 23 of Wealth Tax Act, 1957 (the Act) all dated 11.04.2025 for Assessment Years (AY) 2008-09 and 2009-10. The common grounds raised by both the assessees for both the AYs are as under: “1. The order of the CWT(A) is erroneous and bad in law as the same is opposed to the facts of the case and provisions of law. 2. The very reopening of assessment by the AO being illegal and void, the CWT(A) erred in failing to quash the reopening of assessment. 3. The AO having failed to follow the directions of this Hon'ble Tribunal, the CWT(A) erred in failing to annul the order of assessment as illegal. 4. The building having existed on the said land and being commercial in nature during the relevant years, the CWT(A) grossly erred in failing to delete the addition of wealth by the AO as the building is exempt from Wealth Tax. 5. The very addition of wealth of Rs. 14,16,21,900/- by the AO being illegal and unsustainable, the CWT(A) went wrong in failing to delete the same in full. 6. The CWT(A) erred in upholding the computation of value of the asset by the AO, as the same was incorrect without considering the actual value of the same. 7. The CWT(A) erred in upholding the action of the AO in failing to provide co- ownership concession while computing the value of the asset. 8.Any other ground raised at the time of hearing” WTA No. 01/Chny/2025 2. The assessee is a HUF. During the income tax proceedings it was noticed by the Assessing Officer (AO) that the assessee is one of the co-owners the property at Printed from counselvise.com 3 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. 4 & 4A Rutland Gate, Chennai admeasuring 28 grounds 239 sq. ft. (67,439 sq. ft.). Since the assessee did not file any wealth tax return proceedings are initiated by issue of notice under section 17 of the Act. Subsequently wealth tax assessment under section 16(3) r.w.s. 17 of the Act was completed on 30.03.2016 where in the AO computed the value of the impugned property at Rs.4,200 per Sq.ft for wealth tax purposes. The AO assessed the assessee's share in the wealth at Rs. 14,16,21,900/. Aggrieved, the assessee filed appeal before the CIT(A) wherein the AO was directed to reduce the value of the impugned property by 10%. Subsequently, the assessee filed further appeal before the Tribunal contending that the impugned property is not an asset as per the Act. The Tribunal remitted the appeal back to the AO with a direction to verify based on facts whether the particular asset comes under the definition of assets under section 2(ea) of the Act. In the remand proceedings the AO once again made the same addition stating that the assessee has not produced any evidences to substantiate the claim that the impugned property does not fall within the definition of asset. The assessee is in appeal before the Tribunal for the second time against the order of the CIT(A) who confirmed the addition made by the AO in the remanded proceedings. 3. The assessee along with the co-owner has entered into a Joint Development Agreement (JDA) with one M/s Sabari Foundation Pvt. Ltd., vide agreement dated 21.02.2008. The terms of the agreement is that the owner will get some built up area in the proposed construction and the entire built-up area would revert back to the owner after a period of 60 years. The assessee in the meantime as required under the Building Regulations the assessee executed a Gift-deed along with the other co- owner dated 25-04.2009 in favour of Chennai Metropolitan Development Authority (page 1 to 5 of PB) where by the 1235.65 sq.ft is donated for Open Space Reservation (OSR). The contention of the assessee both in the original proceeding Printed from counselvise.com 4 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. as well as the set-aside proceeding is that the assessee is not liable to Wealth Tax for the reason that the impugned property does not fall within the definition of \"Asset\" under section 2(ea) of the Act. The reason as mentioned by the assessee for the said claim is that when the JDA was entered into with M/s Sabari Foundation Pvt. Ltd. the building was still standing on the land. The assessee in the set-aside proceeding submitted before the AO that the entire building belonging to co-owners was let out to M/s Shaw Wallace Company Ltd., who were using it as commercial establishing, regional office, accounts departments, showroom, transit accommodation etc. and on that count claimed that the asset does not fall within the ambit of Wealth Tax. Since the assessee fail to provide any conclusive evidence to show that the impugned building was in existence during the relevant period and considering the electricity consumption was a mere sum of Rs. 40/-, the AO came to the conclusion that there was no existence of any building in the said land. Accordingly, the AO computed the taxable wealth at Rs. 14,01,21,900/- after giving basic exemption of Rs. 15,00,000/-. 4. Before the CIT(A) in the second round, the assessee contended the guideline value adopted at Rs. 4,200/- per sq. ft. by the AO. The assessee also raised the ground that there should be deduction in the value by 10% for OSR Contribution and also a 10% deduction for co-ownership. The CIT(A) did not accept the submission with regard to the guideline value, however, he directed the AO to allow 10% deduction in the value of the asset. The assessee is in appeal before the Tribunal against the order of the CIT(A). 5. The ld. AR before us reiterated the submission that at the time of entering into the JDA the impugned building was very much in existence and the same has been let out to M/s Shaw Wallace & Co. Ltd. The ld. AR drew our attention to letter Printed from counselvise.com 5 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. dated 31.07.2006 issued by the M/s Shaw Wallace & Co. Ltd. stating that the vacant possession of the property was handed over. Without prejudice, the ld. AR argued that the property is co-owned by more than two people and therefore the value should be reduced by 15% as against 10% as allowed by the CIT(A). In this regard the ld. AR placed reliance on the special bench of the Madras Tribunal in the case of J.K.K. Natarajah vs. WTO (1990) 32 ITD 370 (Mad.) where it has been held that the property is owned by more than two people then the value of the property should be reduced by 15%. The ld. AR made one more plea that the assessee has already executed a Gift-deed in favour of Chennai Metropolitan Development Authority (CMDA) and the assessee should be given reduction OSR which is donated to the CMDA. The ld. AR also pleaded that the internal roads are not marketable and therefore the 10% reduction should be granted towards the same from the value considered for the purposes. 6. The ld. DR on the other hand heavily relied on the order of the AO and the CIT(A). 7. We heard the parties and perused the material on record. With regard to the primary contention of the assessee that the impugned property does not fall within the definition of section 2(ea), we notice that the revenue did not accept the claim of the assessee for the reason that the assessee did not bring any sufficient evidence before the lower authorities including the remand proceedings. Before going into the facts pertaining to the claim of the assessee it is apposite to first look at the definition of Asset as per section 2(ea) of the Act which reads as under – 2. Definitions.—In this Act, unless the context otherwise requires,— (ea) “assets”, in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means— Printed from counselvise.com 6 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. (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 ten lakh rupees (2) any house for residential or commercial purposes which forms part of stock- 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; ****** 8. From the above it is clear that in order to exclude a property within the definition of asset under the Act, the House should have been used for residential purposes subject to certain conditions mentioned therein or the property should be in the nature of a commercial establishment. Therefore, in our considered view the onus is on the assessee to substantiate the claim that the impugned property is either used for residential purposes subject to conditions or is a commercial establishment. The ld. AR before us could not bring any concrete evidence in support of the claim except a letter from M/s Shaw Wallace & Co. Ltd. dated 31.07.2006 that they are vacating the property. In view of this discussion we are unable to agree with the claim of the assessee that the impugned property does not fall within the definition of \"Asset\" under section 2(ea) of the Act. 9. Now coming to the alternate plea of the assessee with respect to increase in the percentage of discount to 15% in case of co-ownership by more than two persons, we notice that the Special Bench of the Madras Tribunal in the case of J.K.K Natarajah (supra) has held that Printed from counselvise.com 7 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. “17. That would leave for consideration the reasonableness or otherwise of the deduction to be allowed on account of joint ownership. The Commissioner (A) had allowed a reduction of 10% if the co-owners were only two and 15% if the co-owners were more than two. On behalf of the assessees, it had been contended that a uniform deduction of 15% should be allowed irrespective of the number of joint owners or co-owners of any property. On the other hand, the Departmental Representative had argued that under no circumstances the deduction to be allowed should exceed 10%. In this connection, we agree with the contention of Shri Ramamani that the decision in KN. Nagabhushana Setty (HUF) case (supra) only laid down the principle that a deduction should be allowed in case of co-owners and it was not as if the maximum that should be allowed was laid down in that case. Actually, the deduction to be allowed on account of joint ownership would depend upon the facts and circumstances of each case, the nature of the asset and several other factors. Therefore, we hold that the direction of Commissioner (A) that a deduction of 15% should be allowed in case the number of co-owners was more than two was quite fair and reasonable and does not call for any interference. As regards the contention on behalf of the assessees that a uniform deduction of 15% should be allowed irrespective of the number of co-owners, we consider that the same cannot be accepted. After all, if the number of co-owners is only two, the would be purchaser had to deal with only two persons for purchasing the entire property, whereas if the number of co-owners is more than two, he has to deal with several persons. The difficulties involved in the former case are obviously less than the difficulties involved in the latter case. Therefore, we hold that Commissioner (A) was eminently fair and reasonable in allowing a deduction of 10% on account of joint ownership in case the number of co-owners was two and 15% in case the number of co-owners was more than two.” (emphasis supplied) 10. In assessee's case we notice that the JDA with Sabari Foundations Pvt. Ltd. has been entered by four persons being co-owners of the impugned property. Therefore, we see merit in the claim of the assessee that the percentage discount to be considered is at 15% as has been lay down in the above decision of the Special Bench. Accordingly, we direct the AO to consider 15% as discount while re- computing the value of the property. Printed from counselvise.com 8 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. 11. The second plea of the ld. AR is that the OSR gifted to CMDA should be excluded for the purpose of valuation. In this regard it is relevant to consider the below extract from the Gift-deed executed by the co-owners of the impugned property in favour of CMDA. “Now this indenture witnesseth that the DONORS do hereby give, grant, convey and assign in the interest of public unto the DONEE who hereby accepts the same all that piece and parcel of land for Open Space Reservation area comprised in part of R.S.No.39/3, Nungambakkam Village, Egmore- Nungambakkam Taluk, Chennai District, forming part of the Door No.8/17. Shafee Mohammed Road (earlier Door Nos. 4 and 4A, Rutland Gate), Chennai, measuring 1235.65 Sq.Mts., which is for the use of the public, more fully marked in RED colour in sketch enclosed within Registration Sub-District of Thousand Lights and Registration District of Central Chennai and more particularly described in the Schedule hereunder written, and the DONORS. do hereby covenant with the DONEE that the DONOF.S now do have good right to grant, convey and assign the land of Open Space Reservation area hereby granted conveyed and assigned up to the \"DONEE' with the manner aforesaid and that the \"DONEE\" shall and may at all times hereafter peacefully and quietly possess and enjoy the said lands of Open Space Reservation area free from all encumbrances whatsoever without our lawful eviction, interruption, claims, whatsoever, from or by the \"DONORS\" or any person claiming under or interest for them and further that the \"DONORS\" and all persons having lawfully or equitable claiming any rights on Open Space Reservation area or interest with the said premises or any part thereof from under or interest for the \"DONORS\" or from or under any of their ancestors shall and will from time to time and at all times hereafter at the request of and the cost of the \"DONORS\" do execute and register or cause to be done executed and registered all such acts deeds and things whatsoever for further and more perfectly assuring the said Open Space Reservation area every part thereof unto the \"DONEE\" in the manner aforesaid or as shall or may be reasonably required.” 12. From the perusal of the above, we notice that the co-owners have donated a part and parcel of land for OSR measuring 1235.65 sq. mtrs. to CMDA which is for public use. Accordingly, we direct the AO to exclude the said portion of the impugned property while re-computing the value for the purpose of wealth tax. Printed from counselvise.com 9 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. 13. The 3rd plea of the ld. AR is that the internal roads as mentioned in the JDA should be excluded for the purpose of valuation. However, during the course of hearing the ld. AR could not bring anything on record with regard to the basis for such claim and ld. AR could neither quote any judicial precedents. The claim of the ld. AR that the internal roads are not marketable which is not substantiated by any evidence cannot be the sole basis for excluding the inner roads from the valuation of the property. For the purpose of wealth tax, the asset within the meaning of the Act for which assessee is the owner should be considered unless there are any specific exclusions mentioned under the Act. In our view the internal roads are integral part of the impugned property and the assessee is a co-owner of the said part of the impugned property. Therefore we hold that the internal roads cannot be excluded for the purpose of valuation. In view of this discussion, we are unable to agree with the claim of the ld. AR and accordingly reject the claim that the internal roads are to be excluded for the purpose of valuation. WTA Nos. 02 /Chny/2025 14. From the perusal of records, we notice that the AO has made the addition for the AY 2009-10 rejecting the claim of the assessee that the impugned property does not fall within the definition of Asset. The ld. AR during the course of hearing made identical submissions for AY 2009-10 also. Since we have already decided the impugned issues for AY 2008-09 as herein above, we are of the view that our decision is mutatis mutandis applicable for AY 2009-10 also. WTA Nos. 03 & 04/Chny/2025 15. We notice that the facts in this assessee's case are identical and the assessee is one of the co-owners of the impugned property. Therefore, our decision in WTA Printed from counselvise.com 10 WTA Nos. 01 to 04/Chny/2025 Shri Govindas Purushothamadass HUF and Anr. No. 1 & 2/Chny/2025 for AY 2008-09 and 2009-10 are mutatis mutandis applicable to the present assessee also. 16. In result, the appeals for both the assessee are partly allowed. Order pronounced in the open court on 25-07-2025. Sd/- Sd/- (GEORGE GEORGE K) (PADMAVATHY S) Vice President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Chennai 4. CIT, Chennai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Chennai Printed from counselvise.com "