Delhi High Court

Lalita Dalmia vs Dy. Cit on 6 October, 2004

Equivalent citations: (2004) 85 TTJ Del 690

ORDER

P.N. Parashar, J.M

This appeal has been filed by the assessed against the order of learned CIT (A) dated 1-2-2000 for assessment year 1996-96.

2. The revenue has taken as many as six grounds in this appeal to challenge the findings of learned CIT (A) for adopting and determining the value of share of the assessed at Rs. 13,75,820. Since the grounds are elaborate and argumentative in nature, we do not consider it proper to reproduce the same in the body of this order.

3. Shri M.L. Dujari, FCA, appeared on behalf of the assessed whereas Shri Salil Gupta, senior Departmental Representative, represented the revenue.

4. The facts concerning this matter are that the assessed held 1/8th share in property No. W-7, Greater Kailash-II, New Delhi. While filing the WT return for the assessment year under consideration, the assessed had declared the value of her share at Rs. 11,70,009. The assessing officer took the value of her share at Rs. 23,29,300 on the basis of estimation of the value made by the District Valuation Officer.

5. In appeal, the learned CIT (A) made reference to the order of his predecessor for assessment years 1993-94 and 1994-95 and placed reliance on the same. He determined the value of the share of the assessed at Rs. 13,75,820 by observing as under :

"I have considered the facts and circumstances of the case and also perused the orders of CIT (A)-XXI, New Delhi for assessment year 1993-94 and CIT (A)-xviii, New Delhi for assessment year 1994-95, in which the value of 1/8th share of the appellant is taken at Rs. 13,75,820. Further it is seen that after detailed discussion the CIT (A)-XXI in his order for assessment year 1993-94 held that the whole of the appellants share in the property should be treated as urban land and brought to tax accordingly. Since the facts of the case are similar to those in earlier years, I am in agreement with the findings given in this regard by learned CIT (A) for assessment years 1993-94 and 1994-95. Therefore, it is held that the value of appellants share in the said property be taken at Rs. 13,75,820. The appellant gets a relief of (Rs. 23,29,300-Rs. 13,75,820) = Rs. 9,53,480."

6. At the outset the learned counsel for the assessed submitted that the learned CIT (A) has followed order of CIT (A) for assessment year 1993-94 in the case of assessed and other co-sharers and the same has been reversed by the Tribunal for that assessment year. According to him, the order of the Tribunal dated 27-3-2002 for assessment year 1993-94 has further been followed for assessment year 1994-95. Thus, according to him, the issue stands covered in favor of the assessed by the order of the Tribunal, referred to above. He has also filed copies of the two decisions which are available on the paper book.

7. The learned senior Departmental Representative, on the other hand, submitted that the issue has not been properly considered by the Tribunal in assessment years 1993-94 and 1994-95. In this regard, his specific submission was as under :

"The orders of the Tribunal for assessment years 1993-94 and 1994-95 being relied upon by the assessed have resulted from an incorrect appreciation of the provisions of Urban Land (Ceiling and Regulation) Act, 1976 read with Expln. 1(b) to section 2(ea) of the Wealth Tax Act. The provisions of Wealth Tax Act exempt an "Urban land" as an asset on which construction of building is not permissible under any law for the time being in force in the area in which such land is situated. The provisions of ULCRA do not prohibit construction of buildings on urban land. It only provides for determination of "excess vacant land" and its acquisition by notification. There are provisions for exemption from acquisition proceedings if the "excess vacant land" is used for purposes such as construction under group housing schemes. Thus, the ULCRA and the proceedings conducted in the case of the assessed and other co-owners do not prohibit construction on building on the plots at G.K. II. In the case of the assessed and the other co-owners, the "excess vacant land" was determined under section 9 of the ULCRA. Since, the subsequent proceeding of ULCRA for acquisition of the "excess vacant land" had not commenced by issue of notification under section 10(3), the urban land in question continued to divest with the assessed and its co-owners. Further, proceedings had been initiated to exempt the "excess vacant land" from acquisition under section 20(1)(b) of the ULCRA by permitting construction under group housing scheme. Even on the valuation date, there existed no proceedings for acquisition of the "excess vacant land" or any law prohibiting any construction thereon. On the contrary, the scheme of the ULCRA itself encourages construction of buildings on the "excess vacant urban land", This is further demonstrated by the subsequent approval granted by the Government for construction on the plots. The benefit of exemption under Expln. 1(b) to section 2(ea) of the Wealth Tax Act is available only if construction of building is prohibited by law and not where completion of construction is delayed as in the case of the assessed."

8. Learned senior Departmental Representative also placed reliance on the ratio of decision of Honble Calcutta High Court in the case of Gouri Prasad Goenka & Family (HUF) v. CWT (1993) 203 ITR 700 (Cal).

9. We have carefully considered the entire material. The matter was thoroughly considered by "F" Bench of the Tribunal, Delhi, in assesseds own case for assessment year 1993-94 vide order dated 27-3-2002 rendered in WTA Nos. 692 and 664/Del/1996. The Tribunal after considering the facts and relevant material reversed the order of the learned CIT (A) and dismissed the appeal of the department and allowed appeal of the assessed partly. According to the Tribunal the case of the assessed clearly fell within the ambit of Expln. (1) to section 2(ea) of the Wealth Tax Act, according to which the land in question cannot be considered as "urban land" and hence is to be excluded from the net wealth of the assessed.

10. The order of the Tribunal dated 27-3-2002 has been followed by the "C" Bench of the Tribunal Delhi Bench, vide order dated 23-6-2003 rendered in assesseds own case for assessment year 1994-95 being WTA No. 153/Del/1999, deciding the issue in favor of the assessed, by observing as under :

"Regarding appeal in case of Smt. Lalita Dalmia which was stated that ground Nos. 1 to 6 are covered by the order of the Tribunal in WTA No. 664/Del/1996 for assessment year 1993-94, decided by the Tribunal vide its order dated 27-3-2002. Findings of the Tribunal have been given at p. 7 paras 11 and 12 of its orders."

11. On the basis of the above referred orders of the Tribunal, the matter stands covered and the appeal of the assessed is liable to be allowed on this basis alone. However, since the learned Departmental Representative has submitted detailed written arguments and has specifically insisted for disposal of the appeal on merits, by considering his written and oral submissions, we proceed to discuss the legal and factual aspects involved in the departmental appeal.

12. In view of ground Nos. 1, 2 and 3 taken by the assessed in this appeal and in view of the written submissions of the learned senior Departmental Representative, referred to above, the issues which arise for adjudication are as under :

"A. Whether the share of the assessed in plot No. W-7, Greater Kailash-II, New Delhi had been declared as vacant land under the provisions of the Urban Land (Ceiling & Regulation) Act, 1976, if so, its effect ?

B. Whether the share of the assessed in the said plot was an asset within the meaning of sub-clause (b) of section 2(ea) of the Wealth Tax Act ?"

13. The contention of the assessed was that 1/8th undivided share of the assessed in the vacant land at W-7, Greater Kailash-II, New Delhi was not covered within the meaning of "urban land" within the purview of clause (b) of ExpIn. 1 to section 2(ea) of the Wealth Tax Act, 1957. In support of this argument, it was pleaded that vide order dated 18-10-1982 passed by the Competent Authority under the provisions of section 4(1) of the Urban Land (Ceiling & Regulation) Act, 1976, almost entire share of the assessed in the aforesaid plot was held to be in excess of the ceiling under the said Act. It was pointed out that only 10.34 sq. mts. area in the said land remained in the share of the assessed and except this, the entire area of the plot owned by the assessed was not covered within the definition of "urban land". It was also pointed out that earlier, i.e., vide order dated 14-3-1986 exemption was granted to the assessed for construction of group housing scheme but as the prescribed period of three years passed and the plan could not be sanctioned, period of exemption expired and when again application was moved for exemption in the year 1991, the authority vide order dated 7-8-1991 refused to renew the exemption granted vide letter dated 14-3-1986 and thus as on the relevant date, i.e, the date of valuation, a large portion of share in the plot of the assessed remained excess vacant land on which no exemption remained in force and since it was excess vacant land construction was not permissible on it.

14. The above facts are also borne out from the statement of facts as well as from the order of Tribunal Delhi "F Bench dated 27-3-2002 rendered in WTA Nos. 662 and 664/Del/1996 in the case of assessed along with other appeals (paras 2, 11 and 12).

15. In the setting of these facts, we consider the relevant legal provisions. So far as the definition of "asset" is concerned, section 2(ea) states that asset includes property of any description movable or immovable, etc. By virtue of amendment introduced with effect from 1-4-1993, the definition of asset has been modified and as per this definition the urban land is also included in the asset by virtue of sub-clause (v) of section 2(ea). However, urban land has been defined by sub-clause (b) of ExpIn. 1 to section 2(ea) as under :

(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 assessed for industrial purposes for a period of two years from the date of its acquisition by him (or any land held by the assessed as stock-in-trade for a period of ten years from the date of its acquisition by him)."

16. By virtue of the above definition, it is clear that urban land does not include land on which construction of building is not permissible.

17. The urban building (Ceiling & Regulation) Act provides the machinery for imposition of ceiling of vacant land.

18. The object behind the Act is also as under :

"An Act to provide for the imposition of ceiling on vacant land in urban agglomerations, for the acquisition of such land in excess of the ceiling limit, to regulate the construction of building on such land and for matters connected therewith with a view to preventing the concentration of urban land in the hands of a few persons and speculation and profiteering therein and with a view to bringing about an equitable distribution of land in urban agglomerations to subserve the common good."

19. In the case of Pushpak Grah Nirman Samiti v. State of Madhya Pradesh AIR 1996 MP 14 as per the statement of objects and reasons, the bill was intended to achieve, inter alia, measures to discourage construction of luxury housing leading to conspicuous consumption of building material and to ensure the equitable utilisation of such materials. Thus, the intention of the legislature was also to regulate construction of buildings on vacant land.

20. As per section 5, transfer of vacant land is regulated. Sections 6 to 17 lay down the machinery for acquisition of vacant land held by a person in excess of his ceiling land. The particulars of land, etc., are to be given in the draft statement to be prepared as per section 8. The final statement is to be prepared as per section 9 and the same is to be published as provided in section 10, which lays down the procedure for acquisition of vacant land in excess of ceiling limit. Sub-clause (4) of section 10 specifically prohibits transfer of the vacant land. By virtue of sub-clause (3) of section 10, after the publication of notification under sub-section (1), the declared excess vacant land shall deem to have vested absolutely in the State Government free from all encumbrances with effect from the date so specified.

21. Sub-section (4) of section 10 which prohibits transfer by any mode and also construction on vacant land is as under :

"(4) During the period commencing on the date of publication of the notification under sub-section (1) and ending with the date specified in the declaration made under sub-section (3)

(i) no person shall transfer by way of sale, mortgage, gift, lease or otherwise any excess vacant land (including any part thereof) specified in the notification aforesaid and any such transfer made in contravention of this provision shall be deemed to be null and void; and

(ii) no person shall alter or cause to be altered the use of such excess vacant land."

22. In view of the object of the enactment and restrictions laid down under section 10(4) of the Urban Land (Ceiling & Regulation) Act, 1976, it is clear that the holder of excess vacant land cannot transfer such vacant land nor can alter its character. In other words, he is not permitted to raise construction on such land. Thus, construction is not "permissible" on such land by virtue of the aforesaid provisions of the Act.

23. The contention of the learned Senior Departmental Representative that Land Ceiling Act does not prohibit construction on vacant land and only lays down ceiling limit for acquisition is, therefore, not acceptable. This position has been clarified in several authorities.

24. In the case of Gouri Prasad Goenka & Family (HUF) v. CIT (supra), the assessed filed WT return along with two valuation reports in respect of his land. The first report estimated the market value at Rs. 77,000. Since the plot of the assessed was to be declared as vacant in pursuance of Urban Land (Ceiling & Regulation) Act, in the second report the valuation of the said plot was shown only at Rs. 11,000. The Wealth Tax Officer did not accept the second report and the contention of the assessed and observed that since the land under consideration had not been notified by the Urban Land Ceiling Authority for taking over, the subsequent report cannot be accepted. He thus valued the property at Rs. 1,93,600 after considering its market value. The CIT (A) on the other hand, directed the valuation of the land under consideration to be taken at Rs. 77,000 only which was the value shown by the assessed in 1972. The. Tribunal, on further appeal, restored the order of the assessing officer. In reference before the Honble High Court, it was contended that the Tribunal failed to take into consideration the provisions of Urban Land Ceiling Act and the disadvantage of the restrictions flowing there from. It was pleaded by the learned counsel for the assessed that the only valuation which could have been taken in such circumstances was the compensation which was payable by the Government when the land vests in the Government under the Act. The Honble High Court accepted this contention and observed as under :

"We have considered the rival contentions. In our view, the Tribunal did not approach this issue from the correct angle. Whenever a person holds vacant land in excess of the ceiling limit, he cannot dispose of such land at all. It cannot be sold in the open market. It is true that the vacant land does not automatically vest in the State Government but the owner may hold it subject to certain conditions. Until a notification is issued under section 10(3) of the Land Ceiling Act, the land does not vest in the Government. Once the land vests in the State Government, there is no question of exemption being granted under section 20 of the Land Ceiling Act. In this case, a notification has been issued. The assessed had made an application in this case for exemption under section 20 of the Land Ceiling Act. Even in 1991, as has been stated by Mr. Bajoria, such exemption has neither been given nor rejected and the land remained as excess land all these years."

The Honble High Court further held that :

"In our view, therefore, when land cannot be sold in the open market, the question of valuation on the hypothetical basis as to what price it would have fetched had it been sold in the open market could not arise even assuming that such land may be sold subject to the restrictions imposed by the Urban Land Ceiling Act. In that process, one has to take into account the remote possibility of such land being granted full or partial exemption giving liberty to the assessed to dispose of it as he likes or subject to such restrictions as may be imposed as the conditions for exemption. In valuing such a property, one has to take into account the state of affairs as prevailing on the relevant valuation date. The Tribunal has not adverted to this aspect of the matter at all. In our view, admittedly, when the land is in excess within the meaning of the Urban Land Ceiling Act, the method which has been adopted for valuation of such land cannot be sustained. To ignore the prohibitions and restrictions of the Ceiling Act in valuing a vacant land in excess and liable to be acquired by the Government and to value it as freely transferable land will amount to an arbitrary act resulting in undue taxation.

25. Thus, the Honble court held that the land in dispute should be valued at Rs. 77,000 estimated by the Appellate Assistant Commissioner inasmuch as such valuation was not disputed by the assessed before the Tribunal.

26. The learned Departmental Representative has also placed reliance on the above referred decision. His contention was that until a notification is issued under section 10(3) of the Land Ceiling Act, the land does not vest in the Government and, therefore, such land cannot be deemed to have been transferred from the possession of the assessed or acquired by the State. According to him, so long the proceedings of acquisition are not finalised, the land or the plot remains with the assessed and it is to be treated as an asset. This contention of the learned Departmental Representative is also not acceptable. As pointed out above, after publication of notification and in view of the provisions of section 10, the whole of the declared excess vacant land can neither be transferred nor its character can be altered. In the present case, since notification had been issued, the assessed did not have the power to raise construction on the land declared to be excess vacant land. Thus, the excess vacant land in the share of the assessed was urban land on which construction was not permissible and hence such urban land could not be treated as an asset within the purview of clause (b) of Expln. 1 to section 2(ea) of the Wealth Tax Act.

27. On the basis of discussion made above, whereas issue No. A is decided in affirmative, the next issue, i.e., B is decided in negative.

28. The next submission of the learned Senior Departmental Representative was that exemption was granted to the assessed earlier and by virtue of this exemption she could have constructed building under group housing scheme. He further pointed out that such exemption was again granted and, therefore, the land/plot of the assessed was not acquired under the Land Ceiling Act.

29. We have considered this argument also. The exemption was granted to the assessed by the prescribed authority on 14-3-1986 and as the assessed could not get the plan sanctioned within three years, the exemption was withdrawn. It was specifically refused by the competent authority vide order dated 7-8-1991. The permission for construction was thereafter given on 21-2-1997 under group housing scheme on the plot of the assessed and other co-owners. Thus the factual position is that during the period of 1-4-1994 to 31-3-1995 there was no exemption on the plot of the assessed and thus it could not be said that the construction was permissible on the plot of the assessed by virtue of any order of exemption under section 20 of the Urban Land Ceiling Act. Hence, the character of land in the plot of the assessed remained that of "excess vacant land", held by the assessed.

30. In the case of Gouri Prasad Goenka & Family (HUF) (supra), also the assessed had made an application for exemption under section 20 of the Land Ceiling Act but such exemption was neither granted nor rejected and, therefore, the land was treated as excess vacant land. Similar is the position in the present case. Hence, this contention of the learned Departmental Representative is also rejected.

31. In view of the above, the excess vacant land falling in the share of the assessed was land on which construction was not permissible and in view of sub-clause (b) of ExpIn. 1 to section 2(ea) such land is not includible in the definition of 1 urban land and it cannot, therefore, be treated to be an asset for determination of the value under the Wealth Tax Act.

32. In view of the above findings, we proceed to determine the value of the share of the assessed in plot No. W-7, Greater Kailash-II, New Delhi. In the case of assessed for assessment year 1993-94 the Tribunal vide order dated 27-3-2002 rendered in ITA Nos. 662 and 664/Del/1999 and CO No. 21/Del/2001 held that area admeasuring 197,59 sq. mtrs. in plot of the assessed in Greater Kailash-II fell within the exception clause as contained in ExpIn. 1 to section 2(ea) and the valuation thereof cannot be included in the net wealth of the assessed. Regarding balance area of 10.35 sq. mtrs. the assessing officer was directed to recompute the value by adopting the value at Rs. 5,500 per sq. mr. As the facts remained unchanged during this assessment year, following the order of Tribunal dated 27-3-2002, we direct the assessing officer to recompute the value of the remaining portion of plot of the assessed by following the same method as was given by the Tribunal for assessment year 1993-94. Accordingly, ground Nos. 1, 2 and 3 taken by the assessed stand allowed.

33. In view of our findings given while deciding ground Nos. 1, 2 and 3 above, ground Nos. 4, 5 and 6 taken by the assessed do not require specific adjudication.

34. In the result, assesseds appeal stands allowed accordingly.