Commissioner of Wealth Tax vs John L. Chackola

C.N. Ramachandran Nair, J.—These are wealth-tax appeals filed by the revenue against the orders of the Tribunal holding that departmental appeals filed before it were not maintainable because tax effect involved is below the threshold limit prescribed by CBDT in their Instruction No. 2 of 2005, dated 24-10-2005 (2005) 198 CTR (St) 41. We have heard senior Counsel appearing for the revenue and Sri. P. Balakrishnan, counsel appearing for the respondent- assessee. During hearing senior Counsel pointed out that issue involved is whether urban land with semi-constructed building is wealth assessable under the Wealth Tax Act. Even though tax effect is below the limit prescribed under para 2 of Instruction No. 2 of 2005, for department to maintain appeal before the Tribunal, senior Counsel referred to Clause (3) of the said instruction, which is as follows:

The Board has also decided that in cases involving substantial question of law of importance as well as in cases where the same question of law will repeatedly arise, either in the case concerned or in similar cases, should be separately considered on merits without being hindered by the monetary limits.

Counsel appearing for the respondent on the other hand referred to the present instruction issued by the Board which is Instruction No. 5 of 2008 dated 15-5-2008 (2008) 217 CTR (St) 1 wherein Clause (8) the following exceptions are provided:

Adverse judgments relating to the following should be contested irrespective of the tax effect:

(a) Where the constitutional validity of the provisions of an Act or rule areunder challenge.

(b) Where Boards order, notification, instruction or circular has been held to be illegal or ultra vires.

(c) Where revenue audit objection in the case has been accepted by the" department.

Counsel for the assessee also referred to the decision of the Bombay High Court in CIT v. Madhukar K. Inamdar (HUF) (2009) 27 DTR (Bom) 132, and contended that current circular should be followed by Tribunals and Courts while considering maintainability of appeals, and if pending appeals are not maintainable under the provisions of the new circular, those appeals should be withdrawn or dismissed as not maintainable. However, senior Counsel has referred to Clause (11) of Instruction No.... 5 of 2008 which is as follows:

This instruction will apply to appeals filed on or after 15-5-2008. However, the cases where appeals have been filed before 15-5-2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed.

The first question to be considered is which is the instruction to be followed for considering the maintainability of the appeals before the Tribunal and second question to be considered is even if provisions of the subsequent instruction are applied, whether appeals are still maintainable by virtue of Clause (11) of the said instruction.

When the Tribunal considered the maintainability of the appeals, Instruction No. 5 of 2008 was not there at all. In fact, they have considered the maintainability of the appeals with reference to Instruction No. 2 of 2005 which in exception Clause (3) provides for entertaining of appeals below the tax effect if the question of law involved is substantial question Of law of importance as well as cases where the same question of law will repeatedly arise for decision in successive years of assessment. We have to necessarily consider maintainability of appeals with reference to the question raised in the appeals and further whether such question will arise for subsequent years. The purpose of an exception Clause is to ignore tax effect for the year of assessment, if the issue is recurring, because the decision will have cumulative effect for all the years. The question raised is with regard to exigibility to tax of urban land with semi-constructed building. The purpose of the amendment to Wealth Tax Act to give effect to Dr. Raja Chellaiah committee report, is to ensure that non-productive asset is taxed. The question on liability for wealth-tax on semi-constructed building on urban land which is prima facie a non-productive asset is a substantial question of law arising in the case of several assessees and the same will repeatedly arise in the case of the very same assessee. Therefore we are of the view that all these cases will fall within the exception Clause namely, Clause (3) of Instruction No. 2 of 2005, dated 24-10-2005. The contention of counsel for the assessee that by virtue of subsequent Instruction No. 5 of 2008, appeal is not maintainable is also not acceptable because it is specifically mentioned in Clause (11) of that instruction that instruction will apply only for appeals filed after 15-5-2008 and it is also specifically provided that maintainability of appeals prior to that should be considered with reference to the instruction in force at the time of filing of the appeals. Going by Clause (11) of Instruction No. 5 of 2008, it is clear that instruction applicable in the case of assessee is Instruction No. 2 of 2005 under which we have already found that appeals are maintainable by virtue of operation of Clause (3) of that instruction. We are unable to agree with the view expressed by the Bombay High Court in the decision above referred because they have not considered in detail the exception Clause provided in both the instructions. We therefore hold that appeals are maintainable before the Tribunal no matter the tax effect is below the threshold limit prescribed by CBDT. We therefore allow the appeals by reversing the order of the Tribunal and restore the appeals to file of the Tribunal for deciding the matter on merits after issuing notice to both sides. On merits, departmental counsel has relied on judgment of this Court in WT Appeal No. 1 of 2009. There will be direction to the Tribunal to go through the said judgment and apply the principle laid down there while deciding the issues involved in the appeals.