Incomplete flat in a multi storied building cannot fulfilled the definition of asset under sec 2(ea) of the Act

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA

[Before Sri Mahavir Singh, J.M. & Shri C.D. Rao, A.M.]

W.T.A. No. 09/Kol/2009

Assessment Year: 2001-2002

Shri Sanjay Krishna Hegde, Kolkata

(PAN: ABEPH 5001 M)

(Appellant)

Vs.

Assistant Commissioner of Wealth Tax,

Circle-54, Kolkata

 (Respondent)

For the Appellant: Shri Amit Patni, A.R.

For the Respondent: Shri A.K. Pramanick, D.R.

Date of Hearing: 06.02.2012

Date of Pronouncement: 21.02.2012

ORDER

Per Mahavir Singh, Judicial Member,

This appeal by assessee is arising out of order of CWT(A)-XXXVII, Kolkata in Appeal No.143/CIT(A)-XXXVII/WT Cir-54/07-08 dated 20.03.2009. Assessment was framed by ACWT, Circle-54, Kolkata u/s.17/16(3) of the Wealth Tax Act, 1957 (hereinafter referred to as “the Act”) for Assessment Year 2001-02 vide his order dated 29.12.2006.

2. The only issue in this appeal of assessee is against the order of CWT(A) in treating the incomplete flat as an asset within the meaning of section 2(ea) of the Act. For this, assessee has raised following ground:

(1) On the facts and circumstances of the case, the Commissioner of Wealth Tax (Appeals) has legally erred in holding incomplete and not habitable flat at Mumbai as an asset liable to wealth tax.

(2) Without prejudice to Ground No. 1 and in the alternative and on facts and circumstances of the case, the CWT(A) has legally erred in holding that the appellant is not entitled to exemption under section. 5(vi) of the Wealth Tax Act, 1957, though includible as an asset under section 2(ea) on an erroneous premise that the flat was habitable on the valuation date.

(3) Without prejudice to Grounds No. 1 & 2 above and only in the alternative and on the facts and the circumstances of the case the CWT(A) has legally erred in denying the amount of Rs.40 lacs being loan taken specifically for financing the alleged taxable asset.

2. Brief facts are that during the relevant financial year 2000-01, assessee purchased incomplete flat in a multi-storied building situated at Juhu Sai Darshan, 5th N.S. Ext. Road, JVPD Scheme, Mumbai-400 049 for a total consideration of Rs.64.65 lakhs from Jay Builders, Mumbai. The assessee before the Assessing Officer as well as before CIT(Appeals) claimed that the said flat was not in a habitable condition and during the year under consideration, it has spent a sum of Rs.43.65 lakhs and Rs.6.85 lakhs for assessment year 2001-02 and 2003-04 respectively. According to ld. counsel these facts have been noted by Assessing Officer in his assessment order that assessee has invested a sum of Rs.43.65 lakhs in financial year 2001-02 and Rs.6.85 lakhs in financial year 2002- 03. But Assessing Officer treated this investment of Rs.64.65 lakhs in urban land and in view of definition of section 2(ea)(v) of the Act including in net wealth the amount invested during the year at Rs.64.65 lakhs and charged to wealth-tax.

3. Before us also, the assessee’s main contention is that the abovementioned property is an incomplete flat in a multi-storied building and it does not fall within the purview of definition of asset under section 2(ea)(v) of the Act. We find that the flat acquired by the assessee at Juhu Sai Darshan, Mumbai was not fit for habitation as on 31.03.2001 and the fact that the house did not even have basic facilities like plumbing, civil work, electrical work etc. as on 31.03.2001. In view of work undertaken during financial year 2002-03 and bills raised by Ark Designs Private Limited as enclosed in assessee’s paper book at pages 2 & 3 it is an admitted fact that the building is not complete.

4. Ld. counsel for the assessee relied on the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT (Central), Ludhiana –vs.- Smt. Neena Jain reported in [2010] 230 CTR 554 (P&H), wherein the Hon’ble Punjab & Haryana High Court held as under :-

“The contention of the learned counsel for the revenue that any building would fall within the definition of assets, is not only devoid of merit but misplaced as well, because the word “any building” cannot possibly be read in isolation and it has harmoniously to be construed with the remaining portion of section 2(ea) of the Act, i.e. whether the building used for residential or commercial purposes or for the purpose of maintaining a guest house, because incomplete building, as in the present case of the assessee, cannot possibly either be used for residential or commercial purposes or for purposes of maintaining a guest house. Therefore, the word “build ing” has to be interpreted to mean a completely built structure having a roof, dwelling place, walls, doors, windows, electric and sanitary fittings etc. If one or more such components are lacking, then it cannot possibly be saith that) the building is a complete structure for the purpose of section 2(ea) of the Act. A residential house is an unit, which is complete for habitation having the minimum bare required facilities. The Legislative intent underlying the amended provisions of section 2(ea) is clear and implicit that the legislature sought to bring within the ambit of this section all those buildings, which are completed and ready for use of residential, commercial or guest house, as the case may be, as incomplete structure cannot be put to any such use. It is not a matter of dispute that the assessee started the construction in the month of February 2002, which was still incomplete at the period of relevant assessment year.

The next argument of learned counsel for the revenue that if the incomplete building does not fall within the ambit of assets under section 2(ea) of the Act, then the incomplete building of the assessee is liable to wealth tax under the definition of “urban land”, again has no force, because

Explanation 1(b) defines “urban land” to mean the land situated in any area, which is comprised within the jurisdiction of a municipal corporation or committee, any area of committee within such distance, not being more than eight kilometres from the local limits of a municipality or cantonment board etc. but does not include the land occupied by any building, which has been constructed with the approval of the appropriate authority. Again, it is not a matter of dispute that the assessee is constructing the building after obtaining sanction from the appropriate authority. Therefore, we are of the considered view that the incomplete building of the assessee neither falls within the definition of a building, as contemplated under section 2(ea) of the Act, nor within the purview of “urban land” as excluded by Explanation 1(b) of the Act”.

We find from the above facts and circumstances and case law of Hon’ble P&H High Court in the case of Smt. Neena Jain (supra), we allow the claim of assessee and this issue is decided against the revenue. Appeal of assessee is allowed.

ORDER PRONOUNCED IN THE OPEN COURT ON 21 / 02 /2012.

                                                             Sd/-                       Sd/-

                                                     (C. D. Rao)         (Mahavir Singh)

                                              Accountant Member    Judicial Member

Dated: 21 / 02/ 2012

Copy of the order forwarded to:

1. Sanjay Krishna Hedge, Price Water House Coopers Pvt. Ltd.,

Plot Y/14, Block-EP, Sector-V, Salt Lake City, Kolkata-91

2 Assistant Commissioner of Wealth Tax, Circle-54, Kolkata

3. Commissioner of Wealth-tax (Appeals)- ,Kolkata

4. CIT- , Kolkata

5. DR, Kolkata Benches, Kolkata

(True Copy)

Laha, Sr . P.S.

By Order

Assistant Registrar, I.T.A.T., Kolkata