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Onus rests with assessee to prove that certain landed property qualifies as business asset where it claims that it will not attract wealth tax: ITAT

2019-TIOL-1499-ITAT-COCHIN

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH, COCHIN

WTA Nos. 07-09/Coch/2018
Assessment Years: 2010-11, 2011-12 & 2012-13

INCOME TAX OFFICER
CORPORATE WARD-2(1), KOCHI

Vs

M/s SPECTRUM SOFT TECH SOLUTIONS PVT LTD
MAHAKAVI G ROAD, KARAKKAMURI, KOCHI-682011
PAN NO:AAECS 5977P

Chandra Poojari, AM & George George K, JM

Date of Hearing: July 16, 2019
Date of Decision: July 17, 2019

Appellant Rep by: Smt A S Bindhu, Sr DR
Respondent Rep by:
 Shri P Rejinark, Adv.

Income Tax – Business asset – Wealth tax

The assessee had filed its return for the relevant AY. During the course of the assessment proceedings, the details filed by the assessee in connection with the IT assessment for the A.Y. 2012- 13, it was found that the assessee owned landed property. As per the title deeds of the property, it was purchased in the F.Ys 2003-04 and 2004- 05. As such this is an urban land exigible to wealth tax, a letter was issued to the assessee. In response to the notice, the assessee filed a reply stating that the land was actually used for the parking place of staff and customers and was shown in the Balance Sheet as a productive asset and was used for the purpose of business. However, the assessee could not produce any supporting documents/materials to substantiate their claim. It was also found that out of the total extent of land, assessee had sold 23.143 cents of land. Therefore, the AO took the market value of the land on the basis of this sale by reducing 10% in reverse order. Accordingly, the AO took the aggregate value of land owned by the assessee at Rs 1.86 cr. On appeal, the CIT(A) was of the opinion that the landn is a business asset during the relevant AY, which being a commercial asset cannot be subjected to wealth tax. Thus, the addition on this count was deleted by the CIT(A).

On appeal, the Tribunal held that,

Whether the onus rests with the assessee to prove that certain landed property is a business asset, where the assessee claims that the same will not attract wealth tax – YES: ITAT

++ the authorized representative of the assessee filed an affidavit stating the land had been used as parking space for the employees of the assessee-Company. Thus, the Tribunal is of the opinion, the affidavit filed by the assessee is a fresh document which was not made available with the lower authorities and it is required to be examined by the AO so as to find out whether the land has been used as parking space for the employees of the assessee-Company. Further, it is the duty of the assessee to prove the landed property is a business asset when the assessee claimed it is not liable for wealth tax. Since the assessee has filed affidavit which was not made available to the AO on earlier occasion. Therefore, Tribunal direct the AO to carry out necessary enquiries regarding possibility of using the land as parking space for the employees of the assessee and if the land is used as parking space for the employees of the assessee-Company, then only AO should treat the asset as business asset and not liable for wealth tax. Hence, this Tribunal remanded back this issue to the file of the AO for fresh consideration.

Revenue’s appeal partly allowed

ORDER

Per: Chandra Poojari:

These appeals filed by the Revenue are directed against the common order of the CIT(A)-I, Kochi dated 09/08/2018 and pertain to the assessment years 2010-11, 2011-12 and 2012-13.

2. The Revenue has raised the following common grounds of appeals:

1. The orders of the Commissioner of Income Tax (Appeals)-l, Kochi opposed to the facts and circumstances of the case.

2. The CIT(A) erred in holding that 46.102 cents of land at Palarivattom, Kochi is not chargeable to wealth tax on the ground that the same was used for parking of vehicles belonging to the employees of the assessee company and hence was a business asset.

3. The CIT(A) failed to appreciate that the exclusion of an asset from chargeability to wealth tax in the event of the same being used as business asset applies only to ‘Any building or land appurtenant thereto’ covered in sec. 2(ea)(i) and not to urban land covered in section 2(ea)(v) of the Wealth Tax Act.

4. The CIT(A) ought to have appreciated that the exceptions provided in respect of ‘Urban Land’ such as land classified as agricultural land, land on which construction of a building is not permissible, land held for industrial purpose for 2 years or more or land held as, stock-in-trade for 10 years etc do not cover the assessee’s claim regarding use as parking space and ought to have upheld the order of the Assessing Officer.

5. It is prayed that the orders of the learned Commissioner of Income Tax (Appeals)-l, Kochi be reversed and that of the Assessing Officer restored.

6. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the Commissioner of Income Tax(Appeals) may be set aside and that of the Assessing Officer restored.

3. The facts of the case as narrated in WTA No. 07/Coch/2018 are that as per the details filed by the assessee in connection with the IT assessment for the A.Y. 2012- 13, it was found that the assessee owned landed property costing Rs. 2,10,73,480/- on 31/03/2010. As per information available on records, the assessee owned 69.245 cents of land at Palarivattom, Edapally South village of Kochi Corporation and no building was situated in the land. As per the title deeds of the property available in record, the said property was purchased in the F.Ys 2003-04 and 2004- 05. As such this is an urban land exigible to wealth tax. On 03/11/2017 a letter was issued to the assessee as below.

” As per the information available on records the company is having land to the extent of 69.245 cents situated at Edapally village. However, in the return of Wealth filed, you had declared taxable wealth at Rs. Nil. Please explain.”

3.1 In response to the notice, the assessee filed a reply stating that the land was actually used for the parking place of staff and customers and was shown in the Balance Sheet as a productive asset and was used for the purpose of business. However, the assessee could not produce any supporting documents/materials to substantiate their claim. It was also found that out of the total extent of land, assessee had sold 23.143 cents of land in March 2012 for Rs.74,96,000/-(Rs. 3,23,900/- per cent). Therefore, the Assessing Officer took the market value of the land on the basis of this sale by reducing 10% in reverse order. As such, the value of land for the year worked out to Rs. 2,70,000/- per cent for this year. Accordingly, the Assessing Officer took the aggregate value of immovable property (land) owned by the assessee at Rs. 1,86,96,000/-(270000×69.245).

4. Before the CIT(A), the assessee contended that the company purchased 69.245 cents of land at Palarivattom, Edapally village of Cochin Corporation during 2003 to 2005 and the same was shown under the head fixed assets in the balance sheet of the company. Hence, it was submitted that this was a productive asset and the land was used by the staff of the company for parking their vehicles during their working hours in the company. However, the Assessing Officer did not accept the explanation of the assessee and since the assessee had not given any other evidence, the land was treated as a capital asset and subjected the same to wealth tax. The CIT(A) observed that the Assessing Officer had not mentioned as to what kind of other evidence was needed to be submitted. The Assessing Officer had also not made any attempt to disprove that the land was being used as a parking space. According to the CIT(A), if the Assessing Officer did not believe the assessee, a site visit could have been undertaken by the Assessing Officer to find whether the land is being used as parking space or not. Since there was nothing on record to disprove the contention of the assessee, the CIT(A) was of the opinion that the land in question is a business asset during the years under consideration which being a commercial asset cannot be subjected to wealth tax. Thus, the addition on this count was deleted by the CIT(A) for all the assessment years.

5. Against this, the Revenue is in appeal before us.

6. We have heard the rival submissions and perused the record. The Ld. AR has filed an affidavit dated 15/07/2019 stating as follows:

“It is respectfully submitted that the land was not vacant urban land and it had been being used as Parking Space for Employees of the Company during the impugned periods.

The main business of the Company is in the field of Software Export and about 400 employees are working the company during various shifts of day and night. many employees of the Company are coming from far away places from Kochi and used to return their home weekly, biweekly or at periodic intervals and not on a day to day basis. Since most of the employees reach the Office of the Company by vehicles, the Parking of their vehicles could not be kept at the premises of the Company due lack of space. Therefore separate parking area was become necessary for keeping the vehicles of the employees for many days. Hence the land had been used as the Parking area of the Company during AY 2010-11,2011-12 and 2012-13.

Thus, according to the Ld. AR, the impugned land had been used as parking space for the employees of the assessee-Company. In our opinion, the affidavit filed by the assessee is a fresh document which was not made available with the lower authorities and it is required to be examined by the Assessing Officer so as to find out whether the impugned land has been used as parking space for the employees of the assessee-Company. Further, it is the duty of the assessee to prove the impugned landed property is a business asset when the assessee claimed it is not liable for wealth tax. On the other hand, the CIT(A) observed that the Assessing Officer has to prove it which is not correct. We vacate this finding of the CIT(A). Since the assessee has filed affidavit which was not made available to the Assessing Officer on earlier occasion, we direct the Assessing Officer to carry out necessary enquiries regarding possibility of using the impugned land as parking space for the employees of the assessee and if the land is used as parking space for the employees of the assessee-Company, then the Assessing Officer should treat the said asset as business asset and not liable for wealth tax. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration. Thus, the grounds of appeals of the Revenue are partly allowed for statistical purposes.

9. In the result, the appeals of the Revenue are partly allowed for statistical purposes.

(Order pronounced in the open Court on this 17.07.2019)

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