HIGH COURT OF PUNJAB AND HARYANA Charge of Wealth-tax and assets subject to such charge

Charge of Wealth-tax and assets subject to such charge



The land which falls within the exception of ‘urban land’ would have to be excluded from the ambit and scope of expression ‘urban land’ and, such land would not be covered by the expression ‘assets’ as defined in section 2(ea) of the Wealth-tax Act, 1957; consequently, such land would not be treated as net wealth of an assessee for the purposes of provisions of the Act.



HIGH COURT OF PUNJAB AND HARYANA

Amrit Lal Jindal & Sons (HUF)

v.

ITO

WTA No. 12 of 2009 (O&M)

September 15, 2009

RELEVANT EXTRACTS:

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9. In the backdrop of the aforementioned factual matrix, the assessee-appellant has filed the instant appeals raising the following substantial questions of law for determination of this Court:-

“(i)Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in modifying its earlier order Annexure A-5 by passing orders Annexure A-11 and A- 12,when the matter relating to date of acquisition of property measuring 78 Kanal 1 Marla and the date on which the Right to receive compensation accrued to the assessee, was a debatable issue? (ii)Whether on the facts and circumstances of the case, the acquisition proceedings in the present case were initiated on 15.7.1992 when the Resolution was passed by Improvement Trust and alternatively on 22.7.1994, 29.7.1994 or 5.8.1994,when the Notifications as such were published in the Official Gazette of Punjab Govt.? Therefore, the Ld. ITAT has erred in law to hold that the proceedings of acquisition were initiated in 1997.

(iii)Whether on the facts and circumstances of the case, the right to receive compensation is vested in the owner of the property on the date of passing of the Resolution by Improvement Trust or its vests on the date of notification in the Official Gazette or on the date when the property is actually acquired?

(iv) Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in upholding the order of the lower authorities, whereby the entire chunk of land measuring 106 Kanal 15 Marla was included in the urban land as defined in Section 2(ea)of the Act ibid, when no construction activity was possible on the land under the provisions of local Acts of Punjab as in force during those assessment years and also after the passing of the Resolution by the Improvement Trust before 31.3.1993?

(v)Whether the Ld. ITAT has erred in law in accepting the application for rectification filed by the Department that land measuring 78 Kanal 1 Marla was includible in the net wealth of the assessee, when the Department has not challenged the finding of the 1 st Appellate Authority to the extent that it was only a right to receive compensation as no construction activity was possible on that land during the impugned assessment year.

13. It would first be appropriate to answer question Nos.(ii),(iii) and (iv)first because all the questions are inter-connected. Accordingly, we proceed to answer these questions jointly. One of significant issue which permeate all the questions is the date on which the assessee became disentitled to raise construction on the acquired land by virtue of acquisition of land by Improvement Trust, Sangrur .Would it be the date when the Trust has passed the resolution for framing the scheme or the date when declaration is made under Section 36 of the 1922 Act (which is equivalent to Section 4 of the Land Acquisition Act,1894).The answer to the aforesaid question would depend upon the possibility of the assessee to raise construction by erecting or re-erecting the building. In that regard it would be necessary to read the provisions of the 1922 Act. Chapter IV of the 1922 Act, from Sections 22 to 24 deals with various types of Schemes and the matter which are required to be provided for, mode and manner of framing of the scheme leading to the sanctioning of the same by the Government under Section 42. If any of the schemes as contemplated by Sections 23,24,25,26,27 and 28 is framed then the owner of the land is covered by the Scheme and could be refused permission to raise construction by virtue of the provisions made in Section 31 of the 1922 Act,which reads thus:

“31.Prohibiting of building beyond a street alignment.-

(1) In the locality comprised in a scheme under this Act, no person, shall, except with the written permission of the Trust, erect , reerect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the Trust.

(2)In the locality comprised in a development scheme or an expansion scheme, if any person desires to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly prescribed by the Trust, he shall apply to the Trust for permission to do so, and if the Trust refuses to grant permission to such person according to his application, and does not proceed to acquire such land within one year from the date of such refusal, it shall pay reasonable compensation to such person for any damage or loss sustained by him in consequence of such refusal.”

14 .A perusal of the aforesaid section shows that there is express prohibition of building. According to sub-section (1)of Section 31 of the 1922 Act in the locality comprised in a scheme framed under this Act no person is permitted to erect and re-erect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the trust. According to sub-section (2)of Section 31 of the 1922 Act in the locality comprised in a development scheme or an expansion scheme, if any person keen to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly prescribed by the Trust then he has to obtain specific permission from the Trust. The definitions of ‘street ’,‘alignment ’ and ‘building alignment ’ are available in Section 2(3)&(4)of the 1922 Act. It is matter of common knowledge that when an Improvement Trust frames a scheme as contemplated by various sections to which reference has been made in the preceding paras then intimation in that regard is sent to the other local bodies including the Municipal Committee, Municipal Corporation and Notified Area Committee. Such local bodies are debarred from sanctioning a site plan in respect of the area covered by the scheme . Accordingly it follows that erection, re-erection addition or alteration of any building on the land by the owner is prohibited as no person is entitled to erect or re-erect, add to or alter any building so as to allow the same project beyond a street alignment or building line prescribed by the Trust. It is Improvement Trust alone which could exercise power in respect of area covered by the Scheme. If the owner is permitted to raise construction beyond building line prescribed by the Trust then it would simply interfere with the scheme prepared by the Trust. Therefore it has to be concluded that the provisions come into force when the resolution by the Trust is passed. It is also well known that no site plan is ever sanctioned by the Trust if the land is under a Scheme. The declaration made under Section 36 of the 1922 Act may come much later. What calls for our specific notice in this regard is the peculiar provision which is distinct from the provisions of the Land Acquisition Act,1894. Sections 22 to 24 of the 1922 Act deals with the framing, processing and sanctioning of various schemes such as improvement, land building, development, extension and housing accommodation scheme etc. The provisions made in Sections 22 to 35 of the 1922 Act have nothing to do with the acquisition of the land till the notification is issued under Section 36 of the 1922 Act. After the scheme is framed by the Trust the same is forwarded to the Government for according sanction by following the procedure as per the provisions of Sections 36,38 and 42 of the 1922 Act. It is well settled that no agency of State including the Trust has power to acquire the land. The power of acquisition vests with the Government although the land is acquired for the purposes of scheme framed by the Trust. In that regard reliance may be placed on the judgment of Hon’ble the Supreme Court rendered in the case of Nagpur Improvement Trust v.Vithal Rao,AIR 1973 SC 689 .Therefore it is evident from the peculiar provisions of Sections 22 to 35 of the 1922 Act that the right of the owner to erect or re-erect add to or alter any building is clogged by prohibition.

16 .In view of the aforesaid discussion it is established that the date of resolution for framing the scheme would be the relevant date which in the present case is 15.7.1992.

Re:Question Nos.(i)and (v)

17.The question then is whether the property under the scheme since 15.7.1992 would be exigible to wealth-tax. The answer lies in Sections 2 and 3.Chapter II of the Act is titled as ‘Charge of Wealth-tax and assets subject to such charge ’ .In the present case, we are concerned with assessment years 1993-94,1994-95 and 1995-96.Section 3(2)of the Act is the charging section which provides that subject to other provisions of the Act, wealth-tax has to be charged for every assessment year commencing on and from April 1,1993 in respect of the net wealth on the corresponding valuation date of every individual HUF and company at the rate of one per cent of the amount by which the net wealth exceeds 15 lacs rupees. Section 2(e)of the Act defines the expression ‘assets ’ ,which includes property of every description, movable or immovable but does not include what is specifically excluded in that definition. Section 2(ea)of the Act defines ‘assets’ in relation to the assessment year commencing from April 1,1993 and/or subsequent assessment years. The ‘urban land ’ is included in the definition of ‘assets’ .However, clause (b)of the explanation to Section 2 (ea)of the Act elaborates what is ‘urban land ’ and which landed property is not to be included and covered by that expression. It would be necessary to read the aforesaid provisions, which reads thus:

“2(ea)“assets ” ,in relation to the assessment year commencing on the 1 st day of April,1993,or any subsequent assessment year, means-

(i)to (iv)xxx xxx xxx

(v)urban land;

(vi)xxx xxx xxx

Explanation 1.-For the purposes of this clause,-

(a)xxx xxx xxx

(b)“urban land ” means land situate-

(i)in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name)or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date; or (ii)in any area within such distance, not being more than eight kilometers from the local limits of any municipality or cantonment board referred to in sub-clause (i),as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette, but does not include land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the asses see for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as stock-in-trade for a period of three years from the date of its acquisition by him;” (emphasis added)

18.The aforesaid provision in italics were added by the Finance Act,1993 and was made applicable from April 1,1993.As already noticed, the relevant assessment years in the present case are 1993-94,1994-95 and 1995-96.On a bare reading of the aforesaid provisions it becomes evident that the definition of ‘urban land ’ does not envelop that land on which construction of a building is not permissible under any law for the time being in force in the area where the land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or to any unused land held by an assessee for an industrial purpose for a period of two years from the date of application. The assessee in the present proceedings has claimed the benefit of the provisions to the extent that the land cannot be regarded as ‘urban land ’ because no construction was permissible on the land in question at the relevant time relating to the assessment years 1993-94 and onward .Accordingly, the land which falls within the exception would have to be excluded from the ambit and scope of expression ‘urban land ’ and, therefore, such land would not be covered by the expression ‘assets ’ as defined in Section 2(ea)of the Act .As a result of the aforesaid bare provision that such land would not be treated as net-wealth of an assessee for the purposes of provisions of the Act. In some- what similar circumstances a Division Bench of Delhi High Court in the case of Commissioner of Wealth-tax v. D.C.M. Ltd.,[2007 ]290 ITR 615 (Delhi),has taken the view that once no construction is permissible in law then such land would not be ‘urban land ’ .Therefore, it would not be included in the expression ‘assets’. Accordingly, it has been held that such land would not be exigible to wealth-tax.

19 .The aforesaid discussion makes it clear that once the land could not be covered by definition of expression ‘assets ’ then it would not be exigible under the Act. The question then is whether the Tribunal has validly exercised the power of rectification under Section 35(e)of the Act. The opening words in Section 35(1)of the Act are ‘With a view to rectifying any mistake apparent from the record ’.Similar expression has been used in Section 154 of the Income-tax Act,1961.The aforesaid provision came up for consideration before Hon’ble the Supreme Court in the well known case of T.S.Balaram v. M/s Volkart Brothers,AIR 1971 SC 2204 .In the concluding para 8 of the judgment their Lordships ’ have observed as under:-

“8.From what has been said above,it is clear that the question whether S.17 (i)of the Indian Income-tax Act,1922 was applicable to the case of the first respondent is not free from doubt. Therefore the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act,1961.A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale,(1960)1 S.C.R.890=(AIR 1960 S.C.137)this Court while spelling out the scope of the power of a High Court under Art.226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record-see Sidhramappa v. Commr. of Income-tax, Bombay, (1952)21 ITR 333 =(AIR 1952 Bom 287).The power of the officers mentioned in S.154 of the Income-tax Act,1961 to correct "any mistake apparent from the record "is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an "error apparent on the face of the record". In this case it is not necessary for us to spell out the distinction between the expressions "error apparent on the face of the record" and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent.”

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