The Commissioner of Wealth Tax v. M/S Express Infrastructure P

Judgment which reads thus : "7. It is not in dispute that 'urban land' is to be included to calculate 'net wealth' for the purpose of wealth tax under the Act. However, certain lands are not to be treated as 'urban land' which are mentioned in Explanation 1(b). But Section 2(e)(a) of the Act was inserted by the Finance Act 1992 (Act No.18/1992) w.e.f. 01.04.1993. The purpose was to exempt some of the lands from wealth tax with the objective of stimulating investment in productive assets. It is in the context that the land occupied by any building which has been constructed with the approval of the appropriate authority is excluded from the definition of urban land. On a plain reading of the said clause it becomes clear that in order to avail the benefit, following conditions have to be satisfied:

(a) The land is occupied by any building;

(b) Such a building has been constructed;

(c) The construction is done with the approval of the appropriate authority;"

¶16Having considered the Judgment of the Karnataka High Court, Madras High Court and Kerala High Court, the Hon'ble Supreme Court has ultimately held in Giridhar G.Yadalam's case cited supra to the following effect: "15. After giving our due consideration to the submissions of the learned counsel for both the parties and after going through the judgments of different High Courts, we are of the opinion that the view taken by the High Court of Karnataka in its judgment dated 21.03.2007 is the correct view in law and the contrary view taken by the Kerala and Madras High Courts is erroneous and is liable to be set aside.

¶16We have already pointed out that on the plain language of the provision in question, the benefit of the said clause would be applicable only in respect of the building 'which has been constructed'. The expression 'has been constructed' obviously cannot include within its sweep a building which is not fully constructed or in the process of construction. The opening words of clause (ii) also become important in this behalf, where it is stated that 'the land occupied by any building'. The land cannot be treated to be occupied by a building where it is still under construction. If the contention of Mr. Jain is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid. It would be too far fetch, in such a situation, to say that the land stands occupied by a building that has been constructed thereon. Even Mr. Jain was candid in accepting that when the construction of building is still going on and is not completed, literally speaking, it cannot be said that the building 'has been constructed'. It is for this reason that he wanted us to give the benefit of this provision even in such cases by reading the expression to mean the same as 'is being constructed'. His submission was that the moment construction starts the urban land is put to 'productive use' and that entitles the land from exemption of wealth-tax. This argument of giving so called purposive interpretation has to be rejected for more than one reasons. These are:

(i) In taxing statute, it is the plain language of the provision that has to be preferred where language is plain and is capable of one definite meaning.

(ii) Strict interpretation to the exemption provision is to be accorded, which is the case at hand.

(iii) The purposive interpretation can be given only when there is some ambiguity in the language of the statutory provision or it leads to absurd results. We do not find it to be so in the present case.

¶17No doubt, the purpose and objective of introducing Section 2(e)(a) in the Act was to stimulate productive assets. However, the event when such a provision is to be attracted is also mentioned in Explanation 1(b) itself carving out those situations when the land is not to be treated urban land. The Legislature in its wisdom conferred the benefit of exemption in respect of urban vacant land only when the building is fully constructed and not when the construction activity has merely started. On the contrary, if the argument of the assessee is accepted, that would lead to absurd results in certain cases. For example, what would be the position if the construction of the building starts but the said construction is abandoned mid way? If we accept the argument of the assessee, in such a case, assessee would be given the exemption from payment of wealth tax in the initial years and the same benefit would be denied in the year when it is found that construction was abandoned and, therefore, not complete. It would result in granting of benefit in the previous year(s), though that was not admissible. Such a situation cannot be countenanced. Presumably, because of this reason, the Legislature wanted to treat only that land to be excluded from the definition of 'urban land' at the stage when the building has been fully constructed on the said land.

¶18We do not agree with the submission of Mr. Jain that the situation when building is fully constructed has been covered by Section 2(e)(a)(v) read with Explanation 1(b) as it would fall under Section 2(e)(a)(i). We have already reproduced the aforesaid Section and find that it deals with altogether different situations. As pointed out above, Explanation (1) thereof excludes certain categories of 'Urban Land' and we are concerned herewith clause (ii) of this Explanation. By 1992 amendment, Section 2(e)(a) was added which contains the definition of 'asset'. Clause (v) thereof includes urban land. Thus, urban land is to be included as an 'asset' for the purpose of giving extended meaning to it. Urban Land is defined in Explanation 1 Clause (b) to Section 2(e)(a).

¶19The Kerala High Court as well as Madras High Court have been influenced by the arguments premised on purposeful construction which was the argument of Mr. Jain and has not been accepted by us."

¶17From the reading of the said decision of the Hon'ble Supreme Court in Giridhar G.Yadalam's case cited supra, the issue raised on behalf of the assesse right from the beginning till the ITAT has been given a complete answer. In fact the ITAT in the first order in respect of the AY 2008-09 and 2009-10 dated 30.09.2013, in a very short order had dismissed the appeals filed by the Revenue on a short ground that, the issue was covered by the decision of this Court in the case of Rohini Hotels (Madras) Limited. Almost same view has been taken by the ITAT in the order, dated

13.11.2014 pertains to AY 2007-08, where also even though the Judgment of the Karnataka High Court in Commissioner of Wealth Tax and another v. Giridhar G.Yadalam and another Judgment in Karur Vysya Bank Ltd., v. Commissioner of Income-tax, Trichy reported in (2016) 338 ITR 37 had been stated. It was the view of the ITAT that, those Judgments are distinguished by the Madras High Court in Rohini Hotels case cited supra.

¶18Therefore the sum and substance of these two decisions which are impugned herein of the ITAT, Chennai is concerned, the Tribunal mainly relied upon the decision of this Court in Rohini Hotels (Madras) Limited case which has been reversed by the decision in Giridhar G.Yadalam's case cited supra of the Hon'ble Supreme Court.

¶19The Hon'ble Supreme Court has given a complete answer to the stand taken by the assessee to state that, the expression, "has been constructed", obviously cannot include within its sweep a verdict which is not fully constructed or in the process of construction. The Hon'ble Apex Court has further held that, the purpose and objective of introducing Section 2(ea) of the Act was to stimulate productive assets. The situations where the land could not be treated as a urban land as given in explanation (1b) has also been dealt with and interpreted by the Supreme Court saying that the legislature in its wisdom conferred the benefit of exemption in respect of urban vacant land only when the building is fully constructed and not when the construction activity has merely started.

¶20Here in the case in hand, admittedly it is the claim of the assessee that, the assessee after having taken over the land on lease from 18.01.2006, started the construction by laying the pile foundation, though the land was surrendered on 26.03.2007, on that date, i.e., on 26.03.2007 since the land was transferred by way of effecting the sale to and in favour of the assessee, the construction activities that has already been commenced under the lease hold right of the assessee was continuing after becoming the owner of the property and that was over by 2010 and ultimately the project was inaugurated in 2010 May. Therefore in all these period since there has been a continuous construction activities going on, the relevant Assessment Years, i.e., 2007-08, 2008-09 and 2009-10, the land in question cannot be treated as a urban vacant for the purpose of levying tax under the Wealth Tax Act, therefore such a move made by the Revenue imposing tax on the assessee is bad in law. This stand of the assessee stood shattered by virtue of the categorical decision made by the Hon'ble Supreme Court in the Giridhar G.Yadalam's case cited supra.

¶21Before the decision was made by the Hon'ble Supreme Court since the orders were passed by the ITAT on 30.09.2013 and 13.11.2014, the Tribunal's decision was saved by the decision of this Court in Rohini Hotels (Madras) Limited case. Since the Rohini Hotels (Madras) Limited case decision has been reversed by the decision of the Hon'ble Supreme Court as cited supra, the orders passed by the ITAT which are impugned herein would have no legs to stand.

¶22Resultantly, the arguments advanced by the learned Senior counsel appearing for the assessee since could not be accepted, the Revenue's stand and the arguments advanced by the Revenue counsel is to be accepted.

¶23In the result, the following orders are passed in these Appeals :

(a) that the orders of the ITAT which are impugned herein are set aside.

(b) The Questions of Law that have been framed in these cases are answered in favour of the Revenue and against the assessee.

¶24Accordingly, all these Appeals filed by the Revenue are allowed. However there is no order as to costs.

(R.S.K., J.) (C.S.N., J.)

29.04.2025 Index : Yes Speaking order tsvn To The Income Tax Appellate Tribunal Madras 'C' Bench

R.SURESH KUMAR, J. and C.SARAVANAN, J tsvn Common Judgment in Tax Case (Appeal) Nos.555, 556 of 2015 and 717 of 2016

29.04.2025

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved Date : 22-10-2024 Pronounced Date : 29-04-2025 CORAM: THE HON'BLE MR. JUSTICE R.SURESH KUMAR and THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case (Appeal) Nos.555 and 556 of 2015 and 717 of 2016 The Commissioner of Wealth Tax Chennai. ........ Appellant in all the cases -vs- M/s. Express Infrastructure (P) Ltd., Express Estates 2, Club House Road, Mount Road, Chennai - 600 002. ........ Respondent in all the cases Prayer in TC(A).No.555 of 2015 : Appeal preferred under Section 27A of the Wealth Tax Act, 1957 against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench, dated 30.09.2013 in W.T.A.No.7/Mds/2013 (Assessment Years 2008-09). Prayer in TC(A).No.556 of 2015 : Appeal preferred under Section 27A of the Wealth Tax Act, 1957 against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench, dated 30.09.2013 in W.T.A.No.8/Mds/2013 (Assessment Years 2009-10). Prayer in TC(A).No.717 of 2016 : Appeal preferred under Section 27A of the Wealth Tax Act, 1957 against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench, dated 13.11.2014 in W.T.A.No.4/Mds/2013 (Assessment Years 2007-08). For Appellant : Mr.Avinash Krishnan Ravi Junior Standing Counsel in all the appeals For Respondent : Mr.Ajay Vohra, Senior Counsel for Mr.P.J.Rishikesh in all the appeals COMMON JUDGMENT R.SURESH KUMAR, J The aforestated Tax Case (Appeals) were admitted on the following Substantial Questions of Law : "(i) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the land remained vacant land in as much as the construction of the building was not completed as on relevant valuation date the said land would not be liable to be charged for wealth tax under Section 2(ea) of the Wealth Tax Act? (ii) Whether the assessee would be entitled to exemption under the Wealth Tax Act, if the building construction is not completed by the end of relevant previous year as the building was under construction as a business asset? (iii) Whether the land on which a complete building would alone qualify for exemption or not ? (iv) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee's 'vacant urban land' is not an 'asset' and not liable to tax under Section (ea) of the Wealth Tax Act? (v) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that even a 'building under construction' exempts the land being assessed as 'vacant urban' from the Wealth Tax provisions?" 2. Since these Appeals were filed by the Revenue against the same Assessee in respect of three Assessment Years, i.e., 2007-08, 2008-09 and 2009-10 under Section 27A of the Wealth Tax Act, 1957, all these Appeals were heard together and are disposed of by this common order. 3. The necessary facts which are required to be noticed for the disposal of these Appeals are as follows : 3.1. The respondent Assessee, herein after called as "Assessee Company" develops and maintains commercial complexes which had not filed any Wealth Tax Return initially. Since the assessing authority formed reasons to believe that its wealth is liable to be assessed, since had escaped assessment, he issued a notice under Section 17(1) of the Wealth Tax Act (hereinafter referred to as "the Act") on 04.08.2010. The Assessee / Respondent filed a return of wealth on 15.09.2010 declaring Nil wealth. 3.2. The Assessee has taken out a vacant land admeasuring 10.64 acres from its sister concern namely Express Newspapers Pvt., Ltd., in short, "the Lessor" on 18.01.2006. Thereafter the lease was surrendered by the Assessee on 26.03.2007, on the same date, i.e., 26.03.2007, a sale was effected to the extent of 9.59 acres, out of the total 10.64 acres and the remaining land had been entrusted to the Chennai Metropolitan Development Authority [CMDA] for public purposes. 3.3. The consideration had been shown as Rs.225 Crores fo