Assistant Commissioner Of Wealth Tax Circle - 6(3) (1) , Bengaluru V. Sri M R Seetharam (HUF), Bengaluru

WTA 30/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6007 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR BENGALURU
• Keywords: Capital asset; Retrospective amendment
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER W TA NO. 30/BANG/2018 ASSESSMENT YEAR : 2009 - 10 THE ASSISTANT COMMISSIONER OF WEALTH TAX, CIRCLE 6(3)(1), BANGALORE. VS. SHRI M.R. SEETHARAM (HUF), GOKULA HOUSE, GOKULA, MATHIKERE, BENGALURU 560 054. PAN: AAHHS 7342J APP ELL ANT RESPONDENT APPELLANT BY : SHRI PRADEEP KUMAR, CIT(DR)(ITAT), BENGALURU. RESPONDENT BY : SMT. SUMAN LUNKAR, CA DATE O F HEARING : 04.12 .201 8 DATE OF PRONOUNCEMENT : 31 .12 .201 8 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 15.12.2017 OF THE CIT(APPEALS), BENGALURU-6, BENGAL URU RELATING TO ASSESSMENT YEAR 2009-10. 2. IN THE WEALTH TAX ASSESSMENT OF THE ASSESSEE UND ER THE WEALTH TAX ACT, 1957 (THE ACT) FOR AY 2009-10, THE ASSESSING O FFICER (AO) TREATED THE LAND OWNED BY THE ASSESSEE AT AKKELNAHALLI-MALLENAH ALLI VILLAGE, BANGALORE AS PART OF ASSET OWNED BY THE ASSESSEE FO R THE PURPOSE OF DETERMINING NET WEALTH OF THE ASSESSEE FOR THE PURP OSES OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID LANDS WERE AGRICULTURAL LANDS AND WTA NO.30/BANG/2018 PAGE 2 OF 9 THEREFORE OUTSIDE THE AMBIT OF THE DEFINITION OF AS SETS WITHIN THE MEANING OF THE TERM AS DEFINED IN SEC.2(EA)(V) OF THE ACT. IN THEIR SUBMISSIONS, THE ASSESSEES HAD STATED THE SAID LANDS SITUATED AT AKK ELENAHALLIMALLENAHALLI VILLAGES DOES NOT COME UNDER THE AMBIT OF THE DEFIN ITION OF WEALTH AS PER EXPLANATION 1(B) TO SECTION 2(EA) OF THE ACT WHICH DEFINES URBAN LAND, AS IT IS SITUATED 11 KMS AWAY FROM BBMP LIMITS. THE ASSE SSEES ALSO SUBMITTED THAT CONVERSION OF THE AGRICULTURAL LANDS DOES NOT CHANGE THE CHARACTER OF THE LAND AS AGRICULTURAL LAND SO LONG AS THE LANDS CONTINUE TO BE AGRICULTURAL LAND. THE ASSESSEES ALSO PLACED RELIANCE ON THE DE CISION OF THE ITAT, BANGALORE BENCHES IN ASSESSEES OWN CASE FOR THE EA RLIER ASSESSMENT YEAR 2005-06 IN CONNECTION WITH THE VIEW OF THE AO THAT BIAPPA (WITHIN WHOSE JURISDICTION THE LANDS IN QUESTION WERE SITUA TE) IS A LOCAL AUTHORITY. THE AO, AFTER CONSIDERING THE ASSESSEES SUBMISSION S CONCLUDED THE ORDERS OF ASSESSMENT HOLDING THAT THE LAND IS SITUA TED WITHIN 8 KMS FROM THE BBMP LIMITS IN STRAIGHT LINE METHOD AND FURTHER HELD THAT THE SAID LAND FALLS WITHIN THE JURISDICTION OF THE NEWLY CREATED ADMINISTRATIVE AUTHORITY, I.E. BIAPPA. THE AO ALSO HELD THAT BIAPPA IS AN AUTHOR ITY AKIN TO A MUNICIPALITY OR CANTONMENT BOARD, WHICH HAS ALL THE POWER ASSIGNED TO ANY LOCAL ADMINISTRATIVE AUTHORITY AND THEREFORE SHOULD ALSO BE CONSIDERED TO BE MUNICIPALITY FOR THE PURPOSES OF TAX ADMINISTRATION . IN THAT VIEW OF THE MATTER THE AO BROUGHT THE AFORESAID LANDS SITUATED AT AKKELENAHALLI MALLENAHALLI VILLAGES UNDER THE AMBIT OF WEALTH AND ADOPTING THE GUIDELINE VALUE OF THE LANDS, BROUGHT THE SAME TO TAX UNDER T HE ACT. 3. AGGRIEVED BY THE ORDERS OF ASSESSMENTS, THE AFO RESAID ASSESSEES FILED APPEALS BEFORE THE CIT(A)-6, BENGALURU, WHO A LLOWED THE ASSESSEES APPEALS FOLLOWING THE DECISION OF THE CO-ORDINATE B ENCH OF ITAT, BENGALURU IN THE ASSESSEES OWN CASES FOR ASSESSMENT YEAR 200 5-06 IN WTA NO.28 & 29/BANG/2014 DATED 31/03/2015. IT IS NOT IN DISPUT E THAT THE VERY SAME WTA NO.30/BANG/2018 PAGE 3 OF 9 LANDS WERE HELD TO BE NOT ASSETS FOR THE PURPOSE OF THE ACT BY THE BANGALORE BENCH OF ITAT IN THE CASE OF SMT. M.R. PRABHAVATHY IN WTA 16 & 17/BANG/2014 FOR AY 2004-05 ORDER DATED 31.3.2015 . THE CIT(A), FOLLOWING THE AFORESAID DECISION, HELD THAT THE LAN D IN QUESTION CANNOT BE TREATED AS PART OF THE ASSETS OF THE ASSESSEE FOR T HE PURPOSE OF DETERMINATION OF NET WEALTH FOR LEVY OF WEALTH TAX. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL, RAISING THE FOL LOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO L AW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN NOT APPRECIATING THE FACT THAT THE LAND IS SITUATED WITHIN 08 KM FROM BRUHATH BANGALORE MAHANAGARA PAL IKE (BBMP) BY FOLLOWING STRAIGHT LINE METHOD (SLM) FOR MEASUREMENT OF DISTANCE? 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN TREATING BANGALORE INTERNATIONAL AR EA PLANNING AUTHORITY (IAAPA) TO BE NON-MUNICIPAL AUTHORITY? 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED 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 RE VERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 5. THE LD. DR FOR REVENUE SUBMITTED, THAT THE CALCU LATION OF THE DISTANCE OF 8 KMS FROM BBMP LIMITS HAS TO BE THE DI STANCE MEASURED AS THE CROW FLIES, I.E. THAT THE AERIAL DISTANCE HAS T O BE CALCULATED AND NOT THE WTA NO.30/BANG/2018 PAGE 4 OF 9 DISTANCE AS PER ROAD. IN SUPPORT OF THIS PROPOSITI ON, THE LD. DR CITED THE SUBSTITUTED PROVISIONS OF SUB-CLAUSE (B) OF CLAUSE (III) OF SECTION 2(14) OF THE ACT BY FINANCE ACT 2013 W.E.F. 01/04/2014. IT WAS CONTENDED THAT THE AFORESAID SUBSTITUTION OF SECTION 2(14)(III)(B) OF THE INCOME-TAX ACT, 1961 IS CLARIFICATORY IN NATURE AND IF THE SAID LANDS ARE A ERIALLY MEASURED, THEN THE SAME WOULD COME WITHIN THE BBMP LIMITS AND CONSEQUE NTLY FALL WITHIN THE MEANING OF URBAN LAND AS PER EXPLANATION 1(B) TO SECTION 2(EA) OF THE ACT. IT IS SUBMITTED THAT IN VIEW OF THE ABOVE, THE AO W AS CORRECT IN TREATING THE SAID LANDS AS URBAN LAND AND CONSEQUENTLY THE SAI D LANDS ARE LIABLE TO BE INCLUDED IN THE NET WEALTH OF THE ASSESSEES AND BE EXIGIBLE TO WEALTH-TAX. 6. THE LD.AR FOR THE ASSESSEE PLACED ON RECORD THE DECISION OF THE CO- ORDINATE BENCH IN THE CASES OF ALL THESE ASSESSEES BEFORE US IN WTA NOS.86 TO 92/BANG/2014 & CO NOS.16 TO 29/BANG/2014 AT 31/3/2015 FOR ASSESSMENT YEAR 2005-06 AND SUBMITTED THAT BOTH THE ISSUES RAISED BY THE REVENUE IN THESE APPEALS HAVE BEEN CONSIDERED BY TH E TRIBUNAL, WHICH HAS HELD THAT THE SAID LANDS ARE AGRICULTURAL LANDS AND DO NOT PARTAKE THE CHARACTER OF CAPITAL ASSET AS PER THE EXPLANATION 1 (B) TO SECTION 2(EA) OF THE ACT. THAT BEING SO, THESE LANDS ARE NOT URBAN LAN DS EXIGIBLE TO WEALTH-TAX. IT WAS SUBMITTED THAT IN VIEW OF THE TRIBUNALS ORD ER (SUPRA), THESE ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGA INST REVENUE. 7. IN RESPECT OF THE RELIANCE PLACED BY THE LD. DR ON THE SUBSTITUTED PROVISIONS OF SUB-CLAUSE (B) OF CLAUSE (III) OF SEC TION 2(14) OF THE INCOME-TAX ACT, 1961, VIDE FINANCE ACT, 2013 W.E.F. 01/04/2014 AND CLARIFICATORY IN NATURE, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT REVENUE CONTENTIONS ARE NOT ACCEPTABLE AS THESE SUBSTITUTED PROVISIONS (SUP RA) ARE APPLICABLE FROM ASSESSMENT YEAR 2014-15 ONWARDS AND CANNOT BE APPLI ED RETROSPECTIVELY. THE LAW APPLICABLE FOR ASSESSMENT YEAR 2007-08 ALON E HAS TO BE CONSIDERED AND APPLIED. ACCORDING TO THE LD. AR, T HE PROVISIONS OF SUB- WTA NO.30/BANG/2018 PAGE 5 OF 9 CLAUSE (B) OF CLAUSE (III) OF SECTION 2(14) OF THE INCOME-TAX ACT,1961, HAS BEEN SUBSTITUTED AND NOT AMENDED AND THEREFORE, AS HELD BY VARIOUS COURTS, SUBSTITUTED PROVISIONS ARE TO BE GIVEN EFFE CT TO PROSPECTIVELY ONLY AND CANNOT BE CONSIDERED TO BE CLARIFICATORY IN NAT URE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. 9. ON THE ISSUE THAT SINCE SAID LAND IS SITUATED IN BIAPPA WHICH IS AN AUTHORITY, THE SAID LAND IS URBAN LAND AND THEREF ORE, A CAPITAL ASSET EXIGIBLE TO WEALTH-TAX, WE FIND THAT THE SAID ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE BY DECISION OF THE CO-ORDINATE BENCH OF TH IS TRIBUNAL IN THE AFORESAID TWO ASSESSEES CASES, ALONG WITH OTHER C O-OWNERS IN COMMON ORDER IN WTA NO.86 TO 97/BANG/2014 AND C.O.NOS.16 T O 29/BANG/2014 DATED 31/03/2015, WHEREIN THE CO-ORDINATE BENCH REL IED ON THE ORDER OF ANOTHER CO-ORDINATE BENCH IN THE CASE OF ONE OF THE CO-OWNERS SHRI M.R. SEETHARAM IN ITA NO.1654/BANG/2012 IN WHICH THE TRIBUNAL HEL D AT PARAS 8 TO 9.1 THEREOF THAT BIAPPA DOES NOT QUALIFY TO BE L OCAL AUTHORITY AND THEREFORE, THE SAID LANDS ARE AGRICULTURAL LANDS AN D NOT URBAN LAND OR CAPITAL ASSETS AS CANVASSED BY REVENUE. CONSEQUENTLY, GROU ND NO.3 OF REVENUES APPEAL IS DISMISSED. 10. AS REGARDS THE MEASUREMENT OF DISTANCE, THE CAS E OF THE REVENUE IS THAT DISTANCE HAS TO BE CONSIDERED AS THE CROW FLIE S I.E., THE DISTANCE HAS TO BE CALCULATED AERIALLY AND NOT BY ROAD. IN THIS CO NTEXT, THE LD. DR RELIED ON THE PROVISIONS OF CLAUSE (B) OF CLAUSE (III) OF SEC TION 2(14) OF THE INCOME-TAX ACT, 1961 AS SUBSTITUTED BY FINANCE ACT, 2013 W.E.F . 01/04/2014; WHICH HE SUBMITTED WERE TO BE GIVEN RETROSPECTIVE OPERATION AS THEY ARE ONLY CLARIFICATORY IN NATURE. WE HAVE GIVEN CAREFUL CON SIDERATION TO THE WTA NO.30/BANG/2018 PAGE 6 OF 9 SUBMISSIONS PUT FORTH BY THE LD. DR AND ARE OF THE CONSIDERED VIEW THAT IT IS NOT TENABLE FOR THE FOLLOWING REASONS FIRSTLY, THE ASSESSMENT YEAR IN THE TWO APPEALS BEFORE US IS ASSESSMENT YEAR 2007-08 AN D THE LAW IN OPERATION AT THAT POINT IN TIME IS TO BE CONSIDERED , UNLESS RETROSPECTIVE OPERATION IS SPECIFICALLY PROVIDED IN THE STATUTE. IN THE CASES ON HAND, FOR ASSESSMENT YEAR 2007-08 & AY 2009-10 THE SAID PROVI SIONS OF SUB-CLAUSE (B) OF CLAUSE (III) OF SECTION 2(14) OF THE INCOME- TAX ACT, 1961 HAVE BEEN SUBSTITUTED BY THE FINANCE ACT, 2013 W.E.F. 01/04/2 014 AND THEREFORE, ARE APPLICABLE ONLY FOR AND FROM ASSESSMENT YEAR 2014-1 5 ONWARDS; AND THEREFORE OPERATE PROSPECTIVELY AND CANNOT BE GIVEN RETROSPECTIVE OPERATION. THE HONBLE APEX COURT IN THE CASE OF VATIKA TOWNSHIP PVT. LTD. (367 ITR 466) HAS HELD THAT WHEN THE LEGISLATURE HA S GIVEN THE APPLICABILITY OF A SECTION FROM A PARTICULAR DATE, THEN IT IS IMPERMISSIBLE FOR THE AUTHORITY TO CONSIDER THE SAME RETROSPECTIVELY, FOR EARLIER YEARS. 11. SUBSTITUTION HAS THE EFFECT OF DELETING THE OLD RULE AND MAKING THE NEW RULE OPERATIVE. IN COMMON PARLANCE, THE WORD SUBSTITUTE WOULD ORDINARILY MEAN TO PUT ONE IN PLACE OF ANOTHER PER SON OR THING OR TO REPLACE OR TO EXCHANGE. SUBSTITUTION OF A PROVI SION RESULTS IN THE REPEAL THEREOF AND ITS REPLACEMENT BY THE NEW PROVISIONS. THE PROCESS OF SUBSTITUTION CONSISTS OF TWO STEPS; THE FIRST BEING THAT THE EXISTING PROVISION/RULE WOULD CEASE TO EXIST AND THE NEW PRO VISION/RULE IS BROUGHT INTO EXISTENCE IN ITS PLACE. IT IS WELL SETTLED RUL E OF CONSTRUCTION THAT EVERY STATUTE IS PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE EFFECT. IF THE AMENDMEN T ACT EXPRESSLY STATES THAT THAT THE SUBSTITUTED PROVISION SHALL COME INT O FORCE FROM THE DATE THE AMENDMENT COMES INTO FORCE, THEN THE SAID PROVISION IS PROSPECTIVE IN NATURE AND IT WOULD NOT BE OPEN TO ANY COURT TO GIV E RETROSPECTIVE OPERATION TO SUCH PROVISION. ULTIMATELY, THE INTENTION OF LE GISLATURE IS THE SOLE GUIDE WTA NO.30/BANG/2018 PAGE 7 OF 9 FOR DECIDING WHETHER PROVISIONS ARE PROSPECTIVE OR RETROSPECTIVE. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE CONSID ERED OPINION THAT THE CONTENTION RAISED BY THE LD. DR FOR REVENUE, THAT T HE PROVISION SUB-CLAUSE (B) OF CLAUSE (III) OF SECTION 2(14) OF THE INCOME- TAX ACT, 1961 WHICH IS SUBSTITUTED BY THE FINANCE ACT 2013 W.E.F. 01/04/20 14 IS CLARIFICATORY IN NATURE AND NEEDS TO BE GIVEN RETROSPECTIVE OPERATIO N IN CONSIDERING THE DISTANCE TO BE CALCULATED AERIALLY; CANNOT BE ACCEP TED. 12. WE ALSO NOTE ON A PERUSAL OF THE ORDER OF ASSES SMENT THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED A LETTER FROM THE ANNESHWARA GRAM PANCHAYAT OFFICE CONFIRMING THAT TH E LAND DOES NOT COME WITHIN THE LIMITS OF ANY CORPORATION OR MUNICI PALITY AND CONFIRMATION FROM THE OFFICE OF THE TAHSILDAR, DEVARAHALLI MEASU RING THE DISTANCE FROM BBMP LIMITS. PER CONTRA, REVENUES CASE IS THAT TH E SAID LANDS ARE SITUATED WITHIN BIAPPA WHICH HAS AN AUTHORITY AS PER THE DEF INITION OF ASSET WHICH PROPOSITION HAS BEEN NEGATIVE BY A CO-ORDINATE BENC H OF THIS TRIBUNAL IN THE CASE OF M.R. SEETHARAM IN ITA NO.1654/BANG/2012(SUP RA). IN THE CASE OF CIT VS. SATINDER PAL SINGH (229 CTR 82) IT WAS HELD THAT THE RECKONING OF URBANIZATION AS A FACTOR FOR PRESCRIBING THE DISTAN CE IS OF SIGNIFICANCE WHICH WOULD YIELD TO THE PRINCIPLE OF MEASURING DISTANCE IN TERMS OF APPROACH ROADS RATHER THAN BY STRAIGHT LINE OR HORIZONTAL PL ANE OR AS PER CROWS FLIGHT. THUS, IT IS CLEAR TO US THAT FOR THE PERIOD UNDER C ONSIDERATION, IN THE APPEALS BEFORE US I.E. ASSESSMENT YEAR 2007-08 & 2009-10 TH E DISTANCE HAS TO BE CALCULATED BY ROAD AND NOT AS THE CROW FLIES OR BY STRAIGHT LINE. IN THIS FACTUAL AND LEGAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, THERE IS NO MERIT IN THE CONTENTION OF THE REVENUE. 13. AS REGARDS CONVERSION OF LAND FROM AGRICULTUR AL USE TO NON- AGRICULTURAL USE, THE TRIBUNAL IN ASSESSEES OWN CA SE (WTA NO.16 TO 29/BANG/2014 & CO 86 TO 97/BANG/2014) DATED 31.3.20 15 DEALT WITH THIS WTA NO.30/BANG/2018 PAGE 8 OF 9 ISSUE IN PARAGRAPH 7.3 TO 7.3.10 AND HELD THAT THOU GH THE SUBJECT LAND WAS CONVERTED INTO NON-AGRICULTURAL PURPOSES, CULTIVATI ON OF THE LAND FOR AGRICULTURAL PURPOSES TILL THE DATE OF SALE CONTINU ED UNABATED AND AS SUCH, THE LAND SHOULD BE TREATED AS AGRICULTURAL LAND. TH ESE FINDINGS WILL EQUALLY APPLY FOR THE AYS IN THESE APPEALS AS THE CHARACTER OF THE LAND IN QUESTION REMAINED THE SAME IN THESE AYS ALSO. 14. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 IN WTA NOS.16 TO 29/BANG/2014 & CO NOS.86 TO 97/BANG/2014 AT 31/3/2015 AND OF ANOTHER CO-ORDINATE BENCH IN THE CASE OF SHRI M.R. SEETHARAM IN ITA NO.1654/BANG/2012, WE HOLD THAT THE SAID LANDS IN Q UESTION ARE NOT URBAN LANDS BUT AGRICULTURAL LANDS AND HENCE NOT EXIGI BLE TO WEALTH-TAX. CONSEQUENTLY, REVENUES APPEALS ARE DISMISSED. 15. IN THE RESULT, APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF DECEMBER, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 31 ST DECEMBER , 2018. / D ESAI S MURTHY / WTA NO.30/BANG/2018 PAGE 9 OF 9 COPY TO: 1. APP ELL A NT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.