Karnataka High Court
M/S Verde Developers (P) Ltd vs The Commissioner Of Wealth Tax on 30 June, 2022
Bench: P.S.Dinesh Kumar, Anant Ramanath Hegde
W.T.A No.11 OF 2016
C/W W.T.A NO.9 OF 2016
W.T.A NO.10 OF 2016
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 30 DAY OF JUNE, 2022
PRESENT
THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR
AND
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
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C/W
W.T.A No.9 OF 2016
W.T.A No.10 OF 2016
IN W.T.A No.11 OF 2016
BETWEEN :
M/S. NOORANI PROPERTIES (P) LTD
'APARANTA', NO.2208, 80 FT ROAD
HAL 3RD STAGE, KODIHALLI
BANGALORE-560 008
REPRESENTED BY ITS
MANAGING DIRECTOR
SURJIT SINGH DHINGRA ... APPELLANT
(BY DR. C.P. RAMASWAMY FOR
SHRI. BALRAM R. RAO, ADVOCATES)
AND :
1. THE COMMISSIONER OF WEALTH TAX
BMTC BUILDING, 80 FT. ROAD
KORAMANGALA
BANGALORE-560 095
2. THE WEALTH TAX OFFICER
WARD-12(2), BMTC BUILDING
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2
80 FT. ROAD
KORAMANGALA
BANGALORE-560 095 ... RESPONDENTS
(BY SHRI. K.V. ARAVIND, ADVOCATE)
THIS WTA IS FILED UNDER SECTION 27-A OF WEALTH TAX
ACT 1957, ARISING OUT OF ORDER DATED 12.02.2016
PASSED IN WTA NO.43 TO 45/BANG/2014, FOR THE ASSESSMENT
YEAR 2004-05 TO 2006-07 PRAYING A) TO FORMULATE THE
SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER
THE SAME IN FAVOUR OF THE APPELLANT.
B) TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE
EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE
TRIBUNAL IN WTA NOS. 43 TO 45/BANG/2014 DATED 12.02.2016.
C) TO PASS SUCH OTHER ORDERS, AS THIS HON'BLE COURT
DEEMS FIT AND PROPER TO MEET THE ENDS OF JUSTICE.
IN W.T.A No.9 OF 2016
BETWEEN :
M/S. VERDE DEVELOPERS (P) LTD
APARANTA NO.2208, 80 FEET ROAD
HAL 3RD STAGE, KODIHALLI
BANGALORE-560 008
REPRESENTED BY
ITS MANAGING DIRECTOR
SURJIT SINGH DHINGRA ... APPELLANT
(BY DR. C.P. RAMASWAMY FOR
SHRI. BALRAM R. RAO, ADVOCATES)
AND :
1. THE COMMISSIONER OF WEALTH TAX
BMTC BUILDING, 80 FT. ROAD
KORAMANGALA
BANGALORE-560 095
2. THE WEALTH TAX OFFICER
WARD-12(2), BMTC BUILDING
80 FT. ROAD
KORAMANGALA
BANGALORE-560 095 ... RESPONDENTS
W.T.A No.11 OF 2016
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W.T.A NO.10 OF 2016
3
(BY SHRI. K.V. ARAVIND, ADVOCATE)
THIS WTA IS FILED UNDER SECTION 27-A OF WEALTH TAX
ACT 1957, ARISING OUT OF ORDER DATED 12.02.2016
PASSED IN WTA NO.48 TO 51/BANG/2014 (IN COMMON ORDER
WTA NO.46-51/BANG/2014), FOR THE ASSESSMENT YEAR 2004-
05 TO 2007-08 PRAYING A) TO FORMULATE THE SUBSTANTIAL
QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN
FAVOUR OF THE APPELLANT. B) TO ALLOW THE APPEAL AND SET
ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN
THE ORDER PASSED BY THE TRIBUNAL IN WTA NOS. 48 TO
51/BANG/2014 (IN COMMON ORDER WTA NO.46-51/BANG/2014)
DATED 12.02.2016. C) TO PASS SUCH OTHER ORDERS, AS THIS
HON'BLE COURT DEEMS FIT AND PROPER TO MEET THE ENDS OF
JUSTICE.
IN W.T.A No.10 OF 2016
BETWEEN :
M/S. TRIAD RESORTS AND HOTELS (P) LTD
APARANTA NO.2208, 80 FEET ROAD
HAL 3RD STAGE, KODIHALLI
BANGALORE-560 008
REPRESENTED BY
ITS MANAGING DIRECTOR
SURJIT SINGH DHINGRA ... APPELLANT
(BY DR. C.P. RAMASWAMY FOR
SHRI. BALRAM R. RAO, ADVOCATES)
AND :
1. THE COMMISSIONER OF WEALTH TAX
BMTC BUILDING, 80 FT. ROAD
KORAMANGALA
BANGALORE-560 095
2. THE WEALTH TAX OFFICER
WARD-12(2), BMTC BUILDING
80 FT. ROAD
KORAMANGALA
BANGALORE-560 095 ... RESPONDENTS
(BY SHRI. K.V. ARAVIND, ADVOCATE)
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4
THIS WTA IS FILED UNDER SECTION 27-A OF WEALTH TAX
ACT 1957, ARISING OUT OF ORDER DATED 12.02.2016
PASSED IN WTA NO.39 TO 42/BANG/2014 (IN COMMON ORDER
WTA NO.37-42/BANG/2014), FOR THE ASSESSMENT YEAR 2004-
05 TO 2007-08 PRAYING A) TO FORMULATE THE SUBSTANTIAL
QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN
FAVOUR OF THE APPELLANT. B) TO ALLOW THE APPEAL AND SET
ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN
THE ORDER PASSED BY THE TRIBUNAL IN WTA NOS. 39 TO
42/BANG/2014 (IN COMMON ORDER WTA NO.37-42/BANG/2014)
DATED 12.02.2016 C) TO PASS SUCH OTHER ORDERS, AS THIS
HON'BLE COURT DEEMS FIT AND PROPER TO MEET THE ENDS OF
JUSTICE.
THESE WTAs, HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 06.06.2022 COMING ON FOR PRONOUNCEMENT OF
JUDGMENT, THIS DAY, P.S.DINESH KUMAR J, PRONOUNCED THE
FOLLOWING:-
JUDGMENT
These appeals by the assessees are directed against
common impugned order dated February 12, 2016
passed by the ITAT1 in W.T.As. No.37 to 42/Bang/2014,
W.T.As. No.43 to 45/Bang/2014 and W.T.As. No.46 to
51/Bang/2014 and they have been admitted to consider
following questions of law:
Income Tax Appellate Tribunal 'C' Bench
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"1. On the facts and circumstances of the case
and in law whether the learned Tribunal was correct
in law in holding perversely that the appellant
continued to be the owner of urban land under
section 2(ea) of the Wealth Tax Act, 1957 despite
the fact that the appellate (after transferring the land
to the developer through JDA dated 05-12-2000)
retained only the right to receive 15.3% of the total
built up area, which does not fall within the
exhaustive definition of "assets" under section 2(ea)
of the Wealth Tax Act, 1957?
2. On the facts and circumstances of the case
and in law whether the learned Tribunal ignored the
binding decisions of this Hon'ble Court rendered on
interpretation of section 2(47)(v) of the Income-tax
Act, 1961 squarely applicable to the facts of the case
and perversely applied ratio rendered in
interpretation of section 2(47)(vi) of the Income-tax
Act, 1961?
3. On the facts and circumstances of the case
and in law whether the learned Tribunal was correct
in holding there was no transfer of the urban land by
the appellant despite the fact that the developer was
put in possession of the said property under Clause
13.2 of the JDA date 05-12-2000?
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4. On the facts and circumstances of the case
and in law whether the learned Tribunal was correct
in law holding that entries in books of account
determine the nature of an asset ignoring the
provisions of Clause (b) of Explanation 1 to Clause
(ea) of section 2 of the Wealth Tax Act, 1957?. "
2. We have heard Shri. C.P. Ramaswamy,
learned Advocate for the assessees and
Shri. K.V. Aravind, learned Senior Standing Counsel for
the Revenue.
3. Shri. Ramaswamy submitted that assessee-
Companies are owners of different extent of lands
situated in Patandar Agrahara village, K.R.Puram Hobli,
Bengaluru. They entered into a Development Agreement
dated December 5, 2000 with M/s. Classic Infrastructure
and Development Ltd.('CIDL' for short), a subsidiary
Company of M/s. ITC Ltd. In pursuance of the
agreement, they handed over the physical possession of
their respective properties along with original title deeds.
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They have cumulatively received a sum of
` 28.88 crores as refundable deposit. CIDL did not
develop the property, but on the other hand determined
the agreement on August 29, 2007. On the same day a
Settlement Agreement was entered into between the
appellants, CIDL and M/s. ITC Ltd., and the appellants
were compelled to convey the properties in question in
favour of ITC Ltd.
4. The Assessing Authority took up appellants'
cases for scrutiny assessment and issued Notices under
Section 17 of the Wealth Tax Act, 1957 for the
Assessment Years 2004-05 to 2006-07. In response to
the Notices, appellants filed 'NIL' returns. The Assessing
Authority initiated proceedings and passed orders under
Section 16(3) read with Section 17 of the Wealth Tax Act
dated December 30, 2009 and determined the net wealth
in the case of:-
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• A.G. Noorani as ` 7.42 crores, ` 11.68 crores
and ` 12.93 crores for the Assessment Years
2004-05, 2005-06 and 2006-07 respectively;
• Verde Developers3 as ` 16.32 crores,
` 25.35 crores, ` 27.73 crores and ` 40.66 crores
for the Assessment Years 2004-05, 2005-06 and
2006-07 and 2007-08 respectively;
• Triad Resorts4 as ` 7.48 crores, ` 11.53 crores,
` 12.62 crores and ` 18.55 crores for the
Assessment Years 2004-05, 2005-06 and 2006-07
and 2007-08 respectively.
5. Appellants challenged Assessing Authority's
orders before CIT5 (Appeals) and the same were partly
allowed. Feeling aggrieved, appellants approached the
ITAT and by the impugned common order ITAT has
dismissed those appeals.
Appellant in WTA No.11/2016
Appellant in WTA. No.9/2016
Appellant in WTA No.10/2016
Commissioner of Income Tax (Appeals)
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6. Shri. Ramaswamy further submitted that
appellants had filed additional grounds before the ITAT
during the course of hearing of the appeal and the same
have not been considered. Appellants also filed
miscellaneous petitions registered as M.Ps. No.25 to
35/Bang/2016 and they have been dismissed with certain
adverse observations.
7. Shri. Ramaswamy took us through the Master
Development Agreement dated December 5, 2000
between appellants and the CIDL and urged that
appellants had handed over possession of their lands to
the Developer. He submitted that under Clause 13.1 of
the agreement, parties were required to file applications
before the appropriate authority under Chapter XXC of
the Income Tax Act, 19616, and the Department had
issued 'No objection' under Section 269UL(1) of the Act
'IT Act' for short
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dated March 12, 2001 and the name of the transferee
mentioned therein is CIDL.
8. Shri. Ramaswamy placed reliance on the
following authorities:
• CIT Vs. Dr. T.K. Dayalu7
• CIT Vs. Shri. N Vemanna Reddy8
• Kedarnath Jute Manufacturing Company Ltd. Vs.
Commissioner of Income Tax (Central), Calcutta9
• Kiran Singh Vs. Chaman Paswan10
• P.V. Doshi Vs. Commissioner of Income Tax,
Gujarat11
• CIT and another Vs. Smt. Meenakshi Devi Avaru
(Decd.) through legal heirs12
• Suraj Lamp and Industries Pvt. Ltd Vs. State of
Haryana and another13
ITA 3209/2005 c/w. 3165/2005 decided on 20.06.2011
ITA No. 591/2008 decided on 18.08.2014
[1971] 82 ITR 363 (SC)
1954 AIR (SC) 340
[1978] 113 ITR 22 (Guj)
[2019] 410 ITR 306 (Kar)
[2012] 340 ITR 1 (SC)
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9. Thus substance of Shri.Ramaswamy's
argument is, possession of the properties in question was
transferred to CIDL. Hence they were not liable to pay
wealth tax for the assessment year in question.
Therefore, the orders passed by the Assessing Authority
and subsequent appellate orders are not sustainable in
law.
10. In reply Shri. Aravind, learned Senior
Standing Counsel for the Revenue submitted that there is
no material on record which would establish that the
possession of the properties was handed over to the
CIDL. Therefore, there is no error in the impugned
order. He placed reliance on the following authorities:
• Commissioner of Income tax Vs. Balbir Singh
Maini14
[2017] 398 ITR 531 (para 18 & 20)
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• Seshasayee Steels (P.) Ltd. Vs. Assistant
Commissioner of Income Tax, Company Circle
Vl(2), Chennai15
11. We have carefully considered rival contentions
and perused the records.
12. Wealth Tax is chargeable under Section 3 of
the Wealth Tax Act, 1957. It is a tax in respect of the
net wealth of every individual, HUF and Company. Net
Wealth is defined in Section 2(n) as 'the amount by
which the aggregate value computed in accordance with
the provisions of the Act of all assets wherever located.
As per Section 2(ea), 'urban land' falls within the
definition of 'assets'. It is not in dispute that the
appellants own urbun land and they are assessable for
Wealth tax.
[2020] 421 ITR 46 (para nos. 11,13,14 and 17)
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13. Appellants' case is, they had entered into a
Joint Development Agreement with the CIDL for
development of their lands. A careful perusal of the
Master Development Agreement16 shows that the
appellants as owners of properties mentioned in the
Schedules - I, II and III had earlier entered into an
Agreement on April 18, 1996 with CIDL for development
of property measuring 18 acres 23 guntas into an
integrated Business Park with an approximate built-up
area of 17,00,000 sq. ft. They had also entered into an
MOU in April 1996 and a supplemental MOU in June
1996. In supersession of all previous agreements and
instruments, appellants and CIDL have entered into the
MDA. As per Clause 3 of the MDA, the Developer has
paid Rs.28,49,55,543/- to appellants and also agreed to
pay further sum aggregating to Rs.28,88,75,000/-
refundable or adjustable in accordance with the
provisions of the agreement. As per Clause 4 of the
'MDA' for short
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agreement, each appellant was entitled for 15.3% of the
built-up area in the respective lands owned by them
together with proportionate undivided share in the land.
Clause 6 of the agreement shows that after demarcating
the appellants' built-up area, the Developer was entitled
to sell or deal the remaining built-up area and the
proportionate undivided share in the land. Appellants
were also entitled to retain their portion or sell the same
through the Developer.
14. By its letter dated August 29, 2007, CIDL has
determined the MDA dated December 5, 2000, by mutual
consent, without any further obligation on any of the
parties. It is stated in that letter that appellants had
refunded the Security deposit placed by CIDL. Appellants
have also entered into a Settlement Agreement with
CIDL and M/s. ITC Ltd. They have also executed a Sale
Deed in favour of M/s. ITC Ltd. All transactions have
taken place on the same day namely August 29, 2007.
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15. It was argued by Shri. Ramaswamy that
appellants had no choice, but to accept the terms put
forth by the M/s. ITC and CIDL. He has also placed for
our reference, a letter dated May 19, 2001, written by
one Mr. Surjit Singh Dhingra to CIDL. It is stated therein
that the NOC from the appropriate authority was faxed
and the original was couriered on March 14, 2001 and
subsequently, CIDL had taken possession of the
properties on March 26, 2001. Shri. Ramaswamy has
also placed a photocopy of the Consignment note issued
by DTDC Courier company.
16. The ITAT in paras 11 and 12 of its order,
adverting to Wipro Ltd., Vs. DCIT17 has held that JDA
does not call for any title or transfer of any interest in the
immovable property. Further, by referring to CWT Vs.
Bishwanath Chatterji18 and Late Nawab Sir Meer Osman
282 CTR (KAR) 346
103 ITR 356
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Ali Khan , it has held that the Assessee Companies
continued to be the owners of the land and liable to pay
Wealth Tax.
17. Shri. Aravind, for the Revenue has placed
reliance on the following authorities:
• CIT Vs. Balbir Singh Maini20
• Seshasayee Steels (P) Ltd Vs Assistant
Commissioner of IT, Chennai21
18. Clause 13 of the MDA requires the parties to
submit relevant forms for issuance of 'No Objection'
under Chapter XX-C of the IT Act. Clause 13(2) provides
for entering upon respective properties to carry out the
development and construction.
162 ITR 888
[2017] 398 ITR 531 (Para 20)
[2020] 421 ITR 46 (Para 2)
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19. Shri. Ramaswamy has placed for our
consideration, a copy of the 'No Objection' dated March
12, 2001, issued by the appropriate authority under
Chapter XX-C and a letter dated May 19, 2001 by Surjit
Singh Dhingra stating that CIDL had taken possession of
the property on March 26, 2001. The entire case of the
Revenue with regard to the 'possession' has been
considered by the ITAT in paras No.9 to 12 of the
impugned order. The discussion therein, is based on the
JDA/MDA dated December 5, 2000. As per Clause
10.1(g), the owners have covenanted to convey
proportionate undivided interest in favour of proposed
purchaser/nominee of the developer. Annexure-A(viii) to
the agreement shows that the owner has granted two
Powers of Attorney of the same date in favour of the
developer for the purpose of development and sale.
Clause 13(1) & 13(2) of the MDA, refer to the transfer of
possession.
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20. Shri. Ramaswamy has also placed the
following documents for consideration:
• a copy of letter dated January 11, 2000,
written by CIDL to Shri. S.S. Dhingra;
• reply by Shri. S.S. Dhingra dated January 17,
2000;
• copy of order dated April 17, 1999 in O.S.
No.830/1996 in the Court of Additional Civil
Judge, Junior Division, Bengaluru;
• copy of Assessment order dated December 22,
2010 of M/s. Triad Resorts and Hotels Pvt.
Ltd. for A.Y. 2008-09;
• order passed by CIT(Appeals) dated March 20,
2014 of M/s. Triad Resorts and Hotels Pvt.
Ltd. for A.Y. 2008-09.
21. Placing reliance on the above documents, he
submitted that the Assessing Officer has recorded in the
Assessment order that the boundary wall in the property
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in question appears to have been constructed by ITC
Group. The CIT(Appeals) has also noted this aspect in
his order. The order passed by the Civil Court in O.S.
No.830/1996 has been referred to in the letter written by
Shri. Dhingra dated January 17, 2000.
22. A combined reading of Clause 10.1(g), Clause
13.1, 13.2 and Clause A(viii) of the Annexure-A together
with the 'No Objection' under Chapter XX-C of the IT Act
and the letter written by Shri. Dhingra prima facie
demonstrates that the Developers did have power to
alienate their portion of the property; and they had
entered into the property. It is a different matter if the
project did not progress further. A mere failure of the
project does not undo the acts of the parties. Therefore,
in our view, the impugned order passed by the ITAT is
not sustainable and in the facts and circumstances of this
case, it is just and appropriate for the ITAT to have a re-
look into the matter in the light of the contents of MDA,
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NOC issued under Chapter XX-C and the letter written by
Shri. Dhingra.
23. In view of the above, the following:
ORDER
(a) Appeals are allowed.
(b) Orders dated (i) 12.02.2016 in WTA Nos.43 to
45/BANG/2014, (ii) 12.02.2016 in WTA Nos.48 to
51/BANG/2014(in common order WTA Nos.46 to
51/BANG/2014) and (iii) 12.02.2016 in WTA Nos.39
to 42/BANG/2014 (in common Order WTA Nos.37 to
42/BANG/2014) of ITAT are set-aside.
(c) Matters are referred to the ITAT for fresh
consideration in accordance with law, in the light of
the observations contained in this judgment.
(d) In view of the tenor of the (i) order dated
11.08.2016 passed by ITAT in M.P Nos.29 to
31/Bang/2016, (ii) order dated 11.08.2016 passed
by ITAT in M.P Nos.32 to 35/Bang/2016 and
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(iii) order dated 11.08.2016 passed by ITAT in M.P
Nos.25 to 28/Bang/2016, we direct that the appeals
shall be heard by a different Bench other than the
Members who have heard the Misc. petition.
No costs.
Sd/-
JUDGE
Sd/-
JUDGE
SPS
