Prabhakar Keshav Kunde and Others vs Commissioner of Income Tax and Another

D.G. Karnik, J.—All these appeals involve a common issue and were disposed of by the Tribunal, Panaji Branch, Panaji, by a common order dt. 13th Feb., 2004, and hence they are heard and disposed of by this common order.

The appellants are family members and were co-owners of the property surveyed under No. 28/1 admeasuring 1,66,750 sq. mtrs., Survey No. 33/1 admeasuring 39,700 sq. mtrs. and Survey No. 33/2 admeasuring 550 sq. mtrs., known as "Rajabaga" or "Quindelibaga", situated at Village Nagorcem, Palolem (hereinafter referred to as ''the said property"). The property is included in the jurisdiction of Canacona Municipal Council, in Sub-District of Canacona, District of South Goa.

By a sale deed dt. 11th May, 1994, the appellants sold the said property to M/s Deeksha Holding (P) Ltd., for a consideration of Rs. 3,27,49,000. In pursuance of a notice issued u/s 17(1) of the WT Act, 1957, each of the appellants filed a return of their wealth on 16th Aug., 2000. Mr. Prabhakar Kunde, the appellant in Appeal No. 12 of 2004, who had 25 per cent share in the property, declared his taxable wealth to be Rs. 3,42,500. He claimed that the value of the said property was Rs. 86,600 and declared the value of one-fourth share therein to be Rs. 21,400. Before the AO, he contended that though the said property was sold for a sum of Rs. 3,27,49,000, the entire sale price could not be taken as the value of the property assessable to wealth-tax. According to him, the said property was abutting Arabian Sea on the western side and abutting a river on the northern side. In view of the Environment (Protection) Act, 1986, a large portion of the said property abutting and falling within 500 mtrs. of the Arabian Sea and the river was not build-able. According to him, the portion which was not buildable could not be treated as "an urban" property in view of Expln. 1(b) of Section 2(ea)(v) of the WT Act. According to him, about 90 per cent of the said property fell within 500 mtrs. of the high tide line and as per the CRZ Regulations framed as per the Environment (Protection) Act was not buildable. Consequently, the only ten per cent of the property which was buildable and could be regarded as "an urban area" and the value of that urban area could only be included in computing his total wealth assessable to tax under the WT Act. The AO did not accept the contention. The CIT(A) held that under the CRZ Regulations, Ministry of Environment permits construction of the area between 200 mtrs. to 500 mtrs. of high tide line and as such the construction was permissible even under the CRZ Regulations He, therefore, held that the entire property was an urban property and the value of the entire property was to be taken into consideration while computing the total wealth of the appellants. The Tribunal also confirmed the view of the two authorities below. Hence, this appeal.

By an order dt. 26th June, 2004, this Court admitted the appeal by framing the following substantial questions of law:

Whether on the facts and circumstances of the case and in law, the Tribunal is right in coming to the conclusion that as the entire area was used for developing into ''beach resort'', the said landed property is liable to wealth-tax under the WT Act ?

Whether the entire land in question is an ''asset'' within the meaning of Section 2(ea) of the WT Act ?

By the sale deed dt. 11th May, 1994, M/s Deeksha Holding (P) Ltd., purchased the said property for establishing holiday beach resort. Since then, the said property is being used as a holiday resort. The price paid by M/s Deeksha Holding (P) Ltd., was for the entire property which consists of partly buildable area and partly unbuildable area. It is not disputed before us that the price paid by M/s Deeksha Holding (P) Ltd. was a market price and represents the market value of the total property. Part of the total property is undoubtedly buildable and the part of the property is unbuildable. There was no apportionment of the price i.e. the sale deed does not specify what price was paid for the buildable portion of the property and what price was paid for the unbuildable portion of the property.

Counsel for the Revenue submitted that since the property was sold as a whole, it was not necessary to bifurcate the buildable portion and the non-buildable portion and the entire price must be treated as a price of the said property and must be included in the total wealth of the appellants.

Counsel for the appellants submitted that since the part of the property was buildable and part of the property was not buildable, the price of the property which was not buildable was required to be segregated from the price of the property which is buildable because u/s 2(ea) of the WT Act, the non-buildable property was not liable to be included while computing the wealth (assets) under the WT Act. Section 2(ea) of the WT Act, defines "the assets" in relation to the assessment year commencing on 1st April, 1993 or under subsequent assessment years and includes in it "urban land". The expression ''urban land'' has been defined in Expln. (b) to Section 2(ea) of the WT Act and reads thus:

(b) ''urban land'' means land situate:

(i) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date; or

(ii) in any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specified in this behalf by notification in the Official Gazette.

but does not include land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as stock-in-trade for period of ten years from the date of its acquisition by him.

The definition of urban land excludes from the definition of urban land any land on which construction of a building is not permissible. The land which is unbuildable under any law for the time being in force is not an urban land and, as such, is not an asset within the meaning of Section 2(ea). Consequently, the land which is not buildable under any law for the time being in force is not included in assessable wealth of a person. Since the said property consists of a part of a land which is buildable and part of the land which is not buildable, the AO ought to have excluded the value of the portion of the land which was unbuildable while computing the wealth of the appellants.

The learned Counsel for the respondent-CIT submitted that a very small portion of the said land was not buildable while the counsel for the appellants submitted that a large part of the said land was non-buildable. Perusal of the order of the AO as well as the appellate authority does not disclose what portion of the said land was buildable and what portion was not buildable. That is a question of fact, which we cannot determine. In the absence of any findings of the two authorities below on the question of fact as to what portion of said land i.e. how much area of the total area was buildable and what portion of land was not buildable and what would be the market value of the buildable portion of the said property excluding the non-buildable (non-urban land), the above matter would have to be remanded back to the AO for determining what portion of the land was buildable and what portion of the land was not buildable, and the value of the respective portions. Needless to say that the portion which was not buildable cannot be regarded as "an urban land" within the meaning of Section 2(ea) of the WT Act and cannot be included in computing taxable wealth of the assessee.

For these reasons, the appeals are allowed. The impugned orders are set aside and the matters are remanded back to the AO for determination and computation of the taxable wealth afresh in the light of what is stated above.