Visakha Realty (P) Limited, Visakhapatnam V. Assistant Commissioner of Wealth Tax, Central Circle-2, Visakhapatnam

WTA 2/VIZ/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3981 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Keywords: Capital asset; Competent authority; Set aside
• Section: 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / W . T .A.NO. 0 1 - 03 /VIZ/20 1 8 ( / ASSESSMENT YEAR: 20 11 - 12 TO 2013 - 14 RESPECTIVELY ) M/S VISAKHA REALTY(P) LTD. D.NO.9 - 1 - 248 NEAR ASILMETTA JUNCTION RAMA TALKIES VISAKHAPATNAM [PAN : A ACCV7092C ] VS. ASST.COMMISSIONER OF WEALTH TAX CENTRAL CIRCLE - 2 VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / ASSESSEE BY : SHRI G.V.N.HARI , AR / REVENUE BY : S HRI D.K.SONOWAL , CIT DR / DATE OF HEARING : 20 . 0 3 .201 9 / DATE OF PRONOUNCEMENT : 27 .0 3 .2019 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF WEALTH TAX (APPEALS) [CWT(A)] - 12, HYDERABAD VIDE APPEAL NO.10183 - 10185/2016 - 17 DATED 12.03.2018 FOR THE ASSESSMENT YEAR (A.Y.) 2011 - 12 TO 2013 - 14 . 2 W .T.A. NO S . 0 1 - 03 /VIZ/2018 M/S VISAKHA REALTY PRIVATE LIMITED, VISAKHAPATNAM 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE TAXING OF LANDED PROPERTY U/S 16(3) OF THE WEALTH TAX ACT, 1957. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER(AO) FOUND THAT THE ASSESSEE WAS IN POSSESSION OF VACANT URBAN LAND OF 6.70 ACRES AT MADH URAWADA, VISAKHAPATNAM VALUED AT RS.28,95,43,547/ - IN THE FIXED ASSETS OF THE COMPANY FOR THE A.Y. 2011 - 12. THOUGH THE ASSESSEE HAD TAXABLE WEALTH OF RS.28.95 CRORES OF LANDED PROPERTY, THE ASSESSEE DID NOT FILE THE WEALTH TAX RETURN, HENCE, THE AO HAD ISSUED THE NOTICE U/S 17(1) OF WEALTH TAX ACT CALLING FOR THE W.T. RETURN ON 28.01.2016 AFTER RECORDING THE REASONS. INITIALLY THE ASSESSEE DID NOT FILE THE WEALTH TAX RETURN, BUT LATER ON FILED THE NIL RETURN. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S 16 (2) AND IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSEE SUBMITTED THE REPLY STATING THAT THE MAIN OBJECT OF THE COMPANY IS TO DEVELOP THE LAND AND TO DEAL IN REALTY BUSINESS. IN SUPPORT OF THE OBJECTS OF THE COMPANY, THE ASSESSEE SUBMITTED THE MEMORANDUM A ND ARTICLES OF ASSOCIATION. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAD PURCHASED THE PLOT OF LAND AT MADHURAWADA WITH AN INTENTION TO DEVELOP THE PLOT TO ACCOMPLISH THE OBJECTS. THE DEVELOPMENT PROCESS COULD NOT BE COMMENCED DUE TO NOT PROVIDIN G THE FACILITIES AS PROMISED BY VUDA AT THE 3 W .T.A. NO S . 0 1 - 03 /VIZ/2018 M/S VISAKHA REALTY PRIVATE LIMITED, VISAKHAPATNAM TIME OF PURCHASE OF THE PROPERTY. THE ASSESSEE ALSO PRODUCED THE COPIES OF LETTERS WRITTEN TO VICE CHAIRMAN, VUDA FOR PROVIDING NECESSARY INFRASTRUCTURE FOR DEVELOPMENT, AS PROMISED BY IT. THEREFORE, ARGUED BEF ORE THE AO, THAT THE IMPUGNED LAND IS STOCK - IN - TRADE, BUT NOT CAPITAL ASSET AND EXEMPT FROM THE WEALTH TAX. CATEGORIZATION OF THE LAND AS FIXED ASSET IN THE BALANCE SHEET IS AN ERRONEOUS CLASSIFICATION, HENCE REQUESTED THE AO NOT TO ASSESSEE THE VALUE OF LAND TO WEALTH TAX . NOT BEING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE AO TREATED THE LAND AS FIXED ASSET AND HELD THAT THE SAME IS EXIGIBLE TO WEALTH TAX AND ACCORDINGLY BROUGHT THE VALUE OF THE ASSET TO WEALTH TAX. THE AO ASSESSED THE VALUE OF LAND FOR WEALTH TAX AT RS.28,95,43,547/ - FOR ALL THE IMPUGNED ASSESSMENT YEARS FROM THE A.Y 2011 - 12 TO 2013 - 14. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) UPHELD THE ORDER OF THE AO AND DISMISS ED THE APPEAL OF THE ASSESSEE. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT RELEVANT PART OF THE ORDER OF THE CIT(A) IN PARA NO.6.3 WHICH READS AS UNDER : 6.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COMPANY WAS IN POSSESSION OF A VACANT LAND ADMEASURING 6.70 ACRES AT MADHURAWADA, VISAKHAPATNAM, 4 W .T.A. NO S . 0 1 - 03 /VIZ/2018 M/S VISAKHA REALTY PRIVATE LIMITED, VISAKHAPATNAM VALUED AT RS.28,95,43,547/ - , WHICH WAS SHOWN UNDER THE HEAD FIXED ASSETS IN THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER THEREFORE ADDED THE SAID ASSET UNDER SECTION 2(EA) OF THE WEALTH TAX ACT TO THE NET WEALTH OF THE ASSESSEE COMPANY. BEFORE THE ASSESSING OFFICER, THE CONTENTION OF THE ASSESSEE COMPANY AS THAT IT WAS INCORPORATED WITH AN INTENTION TO DO BUSINESS IN REAL ESTATE, AND THAT THE IMPUGNED LAND F ALLS UNDER THE CATEGORY OF STOCK - IN TRADE, BUT WAS MISTAKENLY SHOWN UNDER FIXED ASSETS IN THE BALANCE SHEET AND THAT WEALTH TAX IS THEREFORE NOT LEVIABLE ON THE SAID LAND. IN THE COURSE OF APPELLATE PROCEEDINGS ALSO, THE SAME CONTENTIONS HAVE BEEN REITERATED. THE CONTENTIONS MADE BY THE APPELLANTS AR HAVE BEEN EXAMINED. HOWEVER, FROM THE PERUSAL OF THE FACTS ON RECORD, IT IS SEEN THAT ALTHOUGH THE ASSESSEE COMPANY WAS INCORPORATED ON 15.01.2008 AND ALTHOUGH IT IS THE CONTENTION OF THE APPELLANTS AR THAT THE COMPANY WAS INCORPORATED TO ACQUIRE REAL ESTATE TO CONSTRUCT OFFICES, BUILDINGS ETC., THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO SHOW ANY TRANSACTION TI LL DATE DONE BY IT IN THE REALTY BUSINESS. MOREOVER, AS ALREADY OBSERVED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE ASSESSEE COMPANY HAS ITSELF SHOWN THE SAID LAND UNDER THE HEAD 'FIXED ASSETS' IN ITS AUDITED BALANCE SHEET, AND IF THE LAND HAD ACTUALLY BEEN ACQUIRED AS STOCK IN TRADE, THERE IS NO REASON WHY THE SAID LAND WOULD BE REFLECTED IN THE BALANCE SHEET UNDER THE HEAD 'AXED ASSETS'. FURTHER, THE CONTENTION MADE BY THE AR THAT VUDA DID NOT PROVIDE THE BASIC INFRASTRUCTURE LIKE ROADS ETC., ALSO DOES NOT HELP THE CASE OF THE APPELLANT IN ANY WAY, SINCE THE APPELLANT'S AR HAS HIMSELF STATED THAT THE LAND GOT REGISTERED IN THE NAME OF THE APPELLANT ON 14 - 10 - 2010. THEREFORE, DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE LAND IN QUESTION VERY MUCH BELONGED TO THE APPELLANT. THE LETTER ISSUED BY RD O, VISAKHAPATNAM REGARDING CONVERSION OF THE SAID L AND, WHICH HAS BEEN FURNISHED BY THE APPELLANT'S AR, ONLY GOES TO SHOW THAT THE SAID LAND IS A VACANT URBAN LAND, WHICH IS VERY MUCH LIABLE TO WEALTH TAX. THE FURTHER CONTENTION MADE THAT THE APPELLANT RECTIFIED THE MISTAKE IN THE RETURNS OF INCOME FILED BY IT FROM AY 2014 - 15 ONWARDS ONLY SHOWS THAT THE APPELLANT BECAME WISER IN HINDSIGHT, AND THE ACTION OF REFLECTING THE SAID PROPERTY AS STOCK - IN - TRADE IN THE LATER RETURNS DOES NOT CHANGE THE CHARACTER OF THE PROPERTY. I THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER, AND THE ADDITION MADE IS CONFIRMED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE ASSESSEE HAD PURCHASED 6.70 ACRES OF VACANT LAND FROM VUDA WITH AN INTENTION TO DEVELOP THE PLOTS. REFERRING TO PAGE NO.26 OF THE PAPER BOOK, THE LD.AR INVITED OUR ATTENTION TO THE OBJECTS OF THE COMPANY, WHEREIN, THE OBJECTS OF THE COMPANY WAS TO PURCHASE, SELL AND 5 W .T.A. NO S . 0 1 - 03 /VIZ/2018 M/S VISAKHA REALTY PRIVATE LIMITED, VISAKHAPATNAM DEVELOP THE LANDS IN REALTY BUSINESS. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT TAKE UP THE DEVELOPMENT ACT IVITY DUE TO NON - CREATION OF INFRASTRUCTURE FACILITIES AS PROMISED BY THE VUDA AUTHORITIES. THE LD.AR ALSO SUBMITTED COPIES OF LETTERS WRITTEN TO VUDA AUTHORITIES REQUESTING TO PROVIDE THE FACILITIES PROMISED SO AS TO ENABLE THEM TO DEVELOP THE LAND. THE REVENUE DIVISIONAL OFFICER VIDE LETTER DATED 29.11.2014 PERMITTED THE ASSESSEE TO CONVERT THE LAND FROM AGRICULTURAL LAND TO NON - AGRICULTURAL LAND. IN THE RETURN OF INCOME FILED FOR THE A.Y.2015 - 16, THE ASSESSEE HAD DECLARED THE ASSET IN INVENTORIES BUT N OT UNDER FIXED ASSETS. FROM THE SUBMISSIONS MADE BY THE ASSESSEE AND EVIDENCES PLACED BEFORE US, IT IS OBSERVED THAT THE SAID LAND WAS PURCHASED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, BUT THE DEVELOPMENT COULD NOT TAKE PLACE DUE LACK OF INFRASTRUCTU RE FACILITIES TO BE PROVIDED BY THE VUDA AS PROMISED BY THEM. THE AO HAD ISSUED THE NOTICE U/S 17(1) FOR ESCAPEMENT OF WEALTH ON 28.01.2016 AND THE ASSESSEE HAD FILED THE RETURN FOR THE A.Y.2015 - 16 ON 23.09.2015 MUCH PRIOR TO THE DATE OF ISSUE OF NOTICE U/S 17 OF WEALTH TAX ACT. ALL THE ABOVE FACTS INDICATE THAT THE LAND IN QUESTION WAS STOCK - IN - TRADE PURCHASED FOR BUSINESS PURPOSE. BECAUSE OF NON - PROVISION OF THE INFRASTRUCTURE FACILITIES, THE ASSESSEE COULD NOT 6 W .T.A. NO S . 0 1 - 03 /VIZ/2018 M/S VISAKHA REALTY PRIVATE LIMITED, VISAKHAPATNAM DEVELOP THE LAND AND THE LAND IN QUESTION WAS STOCK - IN - TRADE, NOT EXIGIBLE TO WEALTH TAX. EVEN OTHERWISE ON AGRICULTURAL LAND, NO CONSTRUCTION IS PERM ISSIBLE UNLESS THE CONVERSION OF LAND IS APPROVED BY THE COMPETENT AUTHORITY. IN THE INSTANT CASE PERMISSION FOR CONVERSION WAS GIVEN ON 29.11.2014. AS PER W.T.ACT URBAN LAND DOES NOT INCLUDE THE LAND CLASSIFIED AS AGRICULTURAL LAND IN THE RECORDS OF THE GOVERNMENT AND USED FOR AGRICULTURAL PURPOSES OR LAND ON WHICH CONSTRUCTION OF A BUILDING IS NOT PERMISSIBLE UNDER ANY LAW FOR THE TIME BEING IN FOR CE IN THE AREA IN WHICH SUCH LAND IS SITUATED. THEREFORE, NO CONSTRUCTION IS PERMISSIBLE ON THE IMPUGNED LAND BEFORE 29.11.2014, THUS EXCLUDED FROM THE DEFINITION OF URBAN LAND. HENCE, WE HOLD THAT THE IMPUGNED LAND IS NOT A CAPITAL ASSET AND EXEMPT UNDER WEALTH TAX ACT. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE ADDITION MADE BY THE AO. ACCORDINGLY, THE APPEALS OF THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. 7 W .T.A. NO S . 0 1 - 03 /VIZ/2018 M/S VISAKHA REALTY PRIVATE LIMITED, VISAKHAPATNAM ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2019. SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 27 .03.2019 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - M/S VISAKHA REALTY(P) LTD. , D.NO.9 - 1 - 248 , NEAR ASILMETTA JUNCTION , RAMA TALKIES , VISAKHAPATNAM 2. / THE REVENUE ASST.COMMISSIONER OF WEALTH TAX, CENTRAL CIRCLE - 2 VISAKHAPATNAM 3. THE PR. COMMISSIONER OF INCOME TAX (CENTRAL) , VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 12 , HYDERABAD 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM