Wealth Tax Appeal No.6 of 2004 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. 1.Wealth Tax Appeal No.6 of 2004 M/s Rockman Cycle Industries Ltd., Ludhiana ...Appellant Versus Commissioner of Wealth Tax (Appeals) (Central), Ludhiana and another ...Respondent 2.Wealth Tax Appeal No.7 of 2004 M/s Rockman Cycle Industries Ltd., Ludhiana ...Appellant Versus Commissioner of Wealth Tax (Appeals) (Central), Ludhiana and another ...Respondent 3.Wealth Tax Appeal No.8 of 2004 M/s Rockman Cycle Industries Ltd., Ludhiana ...Appellant Versus Commissioner of Wealth Tax (Appeals) (Central), Ludhiana and another ...Respondent Date of Decision:-January 13,2010 CORAM: HON'BLE MR.JUSTICE ASHUTOSH MOHUNTA HON'BLE MR.JUSTICE MEHINDER SINGH SULLAR Present: Mr.Akshay Bhan, Advocate for the appellants. Mr.Krishan Mehta, Senior Panel Standing Counsel for the respondents. Mehinder Singh Sullar, J. As common questions of law are involved, therefore, we propose to dispose of all the above-mentioned three appeals, by this Wealth Tax Appeal No.6 of 2004 2 judgment, in order to avoid repetition of facts. However, for facilitation, the facts have been extracted from WTA No.6 of 2004. 2. M/s Rockman Cycle Industries Limited-assessee (for brevity “the assessee”) has filed the above mentioned three appeals against the impugned orders of authorities, invoking the provisions of section 27-A of the Wealth Tax Act, 1957 (hereinafter to be referred as “the Act”), pertaining to the relevant assessment years 1996-97 to 1998-99.. 3. The matrix of the facts, culminating in the commencement of, relevant for disposal of present appeals and emanating from the record, is that during the course of processing of wealth tax returns for the relevant assessment years, it revealed that the assessee(s) had purchased pieces of the land situated in villages Narsingpur and Khandsa in the period relevant for assessment years 1991-92 to 1994-95. The permission to change of the land use for industrial purpose was granted by the department of Town and Country Planning, Haryana on 26.7.1995 and 28.7.1995. The assessee claimed exemption of wealth tax in view of explanation to section 2 (ea) of the Act. The Assessing Authority negatived the claim of the assessee and assessed its wealth tax after adding the value of the land vide assessment order dated 22.3.1999 (Annexure A1). The appeal filed by the assessee was firstly dismissed by the Commissioner of Wealth Tax (Appeals) (Annexure A2) vide order dated 29.2.2000 (Annexure A2) and subsequently by the Income Tax Appellate Tribunal, Chandigarh vide order dated 23.3.2004 (Annexure A3). 4. The assessee still did not feel satisfied with the impugned orders and filed the present appeals, which were admitted to consider the following substantial question of law:- “Whether the action of authorities below acting on their own presumption of holding the agricultural land so acquired by the appellant company as the same being acquired for the industrial purpose, is sustainable in the Wealth Tax Appeal No.6 of 2004 3 eyes of law?” 5. At the very outset, learned counsel for the appellant has contended with some amount of vehemence that no doubt, the assessee had purchased the plots in question for industrial purpose and during the relevant period of assessment years 1991-92 to 1994-95 and claimed exemption of wealth tax under section 2 (ea) of the Act, during the relevant period of assessment years 1996-97 to 1998-99, but the Assessing Authority illegally included the value of the plots while assessing the amount of wealth tax and wrongly rejected the claim of the assessee. Elaborating the matter, the argument of learned counsel, further proceeds that since the assessee could not utilize the plots in question for industrial purpose prior to the grant of permission, to change of land use, so the exemption period of two years should be reckoned from 26.7.1995 and 28.7.1995 when permission of change of land use was granted and not from the actual date of purchase. 6. On the contrary, learned counsel appearing on behalf of the revenue/respondents has argued that since there is no ambiguity in Explanation of section 2 (ea) of the Act and the exemption period of two years relatable to industrial plot would be counted from the date of its acquisition by the assessee and not otherwise, as claimed by the assessee. 7. We have heard the learned counsel for the parties and perused the record and relevant provisions of law with their valuable assistance. 8. Above being the position on record, now the short and significant question that arises for determination in this case, is whether the exemption period of two years, with regard to an industrial plot, would start from the date of permission to change of land use i.e. 28.7.1995, as urged on behalf of the assessee or from the date of acquisition, as claimed by the Wealth Tax Appeal No.6 of 2004 4 revenue. The relevant provisions of section 2 (ea) of the Act is as under:- “2.(ea) "assets", in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means – (i) .............. (1) ............. (2) ............. (3) ............. (4) ............. (5)any property in the nature of commercial establishments or complexes. Explanation : For the purposes of this clause, - (a) ............. (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, Wealth Tax Appeal No.6 of 2004 5 urbanisation of that area and other relevant considerations, specify 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 a period of five years from the date of its acquisition by him].” 9. The co-joint reading of these provisions of section 2 (ea) of the Act would reveal that 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 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, specify in this behalf by notification in the Official Gazette, would fall within the definition of urban land. The explanation added to this clause further postulates that the 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 Wealth Tax Appeal No.6 of 2004 6 constructed with the approval of the appropriate authority or-(i)- or-(ii)-or- (iii)-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 and (iv) or any land held by the assessee as stock-in-trade for a period of ten years from the date of its acquisition by him. 10. The main argument of learned counsel for the assessee that since the assessee obtained the permission to change of land use of the industrial plot on 26.7.1995 and 28.7.1995 and prior to it, the assessee could not use the plot for industrial purpose, so the exemption period of wealth tax as envisaged in Explanation to section 2 (ea) and (b) of the Act would start from that date of permission and not from the date of its acquisition, is neither tenable nor the observations of Delhi High Court in Commissioner of Wealth-Tax v. D.C.M.Ltd. [2007] 290 ITR 615 (Delhi) and this Court in Commissioner of Wealth-tax, Faridabad v. R.K.Mehra [2009] 184 TAXMAN 286 (PUNJ. & HAR.), in which the facts are entirely different, are at all applicable to the present controversy. 11. In Commissioner of Wealth-Tax v. D.C.M.Ltd.'s case (supra), the question for consideration was as to whether the assessee was covered under the explanation inserted with effect from April 1,1994 retrospectively where earlier no exemption was available to the assessee in case of conversion an urban land into stock in trade till the assessment year of 1993-94, particularly when the land was acquired in the year 1980 and possession was taken on April 1,1981 and April 1,1994. Having interpreted the relevant provisions of the Act, it was observed as under:- “The provisions underlined by us in the above provision were inserted by the Finance Act, 1993 and made effective from April 1,1994. We are dealing with the relevant assessment year for 1993-94. On the bare reading of the above provision, it is clear that urban land would not include a Wealth Tax Appeal No.6 of 2004 7 land, on which construction of a building is not permissible under any law for the time being in force in the area where land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or in any unused land held by the assessed for an industrial purpose for a period of two years from the date of its acquisition. It is an admitted case before us that the assessee does not claim benefit of the third clause of the category specified in the provisions. The assessee would obviously have advantage of the land being not included as an urban land because no construction at the relevant time was permissible on the land in question. In alternative, the building which has been constructed, if at all, with the approval of the appropriate authorities. In the Maxim, Generalia verba sunt generaliter intelligenda -it would be a helpful percept to interpretation of the provisions which used words of general nature and despite the fact that it relates to law of revenue would have to be construed generally. The intention of the legislature appears to be that land which falls within the exception afore-referred would have to be excluded from the ambit and scope of the expression "urban land". Once the land or any building thereupon making it a combination of land and building is not an urban land, then it could not be an asset as defined under section 2(ea) of the Act. The result thereof would be not to treat the same as net- wealth of an assessee for the purposes of the provisions of the Wealth Tax Act. The First Appellate Authority had proceeded on the assumption that now orders of Supreme Court dated Wealth Tax Appeal No.6 of 2004 8 May 1,1991 qua re-development had been permitted of the mill area to flatted factory complex and group housing complex. Leave was also granted to demolish the existing building. It is not in dispute before us that till date no permission/approval has been granted by the appropriate authority to the assessee to raise the building in-consonance with the plans and as such the old structure existing is not in- confirmity with law and had not been raised with the leave of any authority. In other words, on the land in question, no construction was permitted and the authorities concerned have not granted its approval so far for raising construction on that land. In either of these cases, the land would stand excluded from the definition of "urban land" chargeable to wealth tax. In relation to one phase, the permission was granted much subsequent to the relevant year of assessment, which as stated on record before us, had also been withdrawn and work was stopped.” 12. On the peculiar facts and circumstances of that case, it was held that no substantial question of law arises for consideration of the Court, as such the appeal was dismissed, leaving the parties to bear their own costs. 13. Sequelly, in case Commissioner of Wealth-tax, Faridabad's case (supra), it was held that farm house constructed on the farm land of the assessee could not be regarded as urban land, as no construction on such land was permissible and no question, much less substantial question of law, would arise for determination of this Court. Accordingly, both the appeals were dismissed. 14. Possibly, no one can dispute in regard to the aforesaid observations, but the same are not at all applicable to the facts of the Wealth Tax Appeal No.6 of 2004 9 present case. In the instant case, the core question for determination is as to whether the period of exemption would start from the date of the acquisition or from the date of grant of permission to change of land use of the plots for industrial purpose. 15. There is no manner of doubt that the legislative intent underlying while incorporating the provisions of Explanation to section 2 (ea) of the Act is clear and implicit that the period of such exemption of any unused land held by the assessee for industrial purpose, would be reckoned for a period of two years from the date of its acquisition by him. The specific independent clause cannot possibly be remixed with other distinct exemption clauses as contemplated under section 2 (ea) and (b) of the Act. Possibly, the Court cannot substitute any other meaning to the clear and implicit legislative intent, until and unless there is any ambiguity in it. As is evident from the bare reading of the relevant provisions, there is no such ambiguity in this respect. 16. Therefore, the assessee's case is not at all covered by the exclusion clause mentioned in Explanation 1 (b) to section 2 (ea). There were certain obligations on the part of the assessee to seek permission to change of land use. The very fact that the assessee applied and permission was granted to change the use of land for industrial purpose, is sufficient to infer that the plots were purchased for industrial purpose. If the assessee is required to obtain certain permission for construction, then it cannot possibly be saith that no construction activity was permissible. The word “permissible” depicted in this clause refers to the legal infirmity, which debars the construction activity on a particular land, subject to the fulfillment of certain terms and conditions. In the present case, there was no legal bar to the construction activity. The only condition required was that the construction could be carried out by taking necessary permission from the concerned authority. Therefore, in this view of the matter, it is held Wealth Tax Appeal No.6 of 2004 10 that the exemption period of two years of wealth tax with regard to unused land of the assessee for industrial purpose would start from the date of its acquisition. 17. Proceeding on these premises, as regards the assessment years 1997-98 and 1998-99, the next submission of learned counsel that since the assessee is not using the indicated land for industrial purpose because the appropriate authority had not given a clear cut permission to enable the assessee to use the land for industrial purpose, therefore, the land could not be included in the computation of its total wealth for the purpose of wealth tax in the assessment year in this respect, is not only devoid of merit but misplaced as well. It is not a matter of dispute that the appropriate authority had given permission to the assessee to use the land for industrial undertaking subject to fulfillment of certain terms and conditions. It is the assessee, who did not fulfill those terms and conditions to enable it to use the land for industrial purpose. It is the assessee, who did not avail the permission to change of land use to run an industrial unit because it did not fulfill the terms and conditions in this connection. Therefore, under these circumstances, the assessee cannot possibly be heard to say that the industrial purpose for which the land was purchased had vanished or no construction activity was permissible. Hence, the assessee is also not entitled for any such exemption of wealth tax during the subsequent relevant assessment years 1997-98 and 1998-99 as well. Thus, the contrary argument of learned counsel for the assessee “stricto sensu” deserves to be and is hereby repelled, in the obtaining circumstances of the case. 18. No other point, worth consideration, has either been urged or pressed by the learned counsel for the parties. 19. In the light of the aforesaid reasons, it is held that the two years' exemption period of tax of industrial plots held by the assessee Wealth Tax Appeal No.6 of 2004 11 would be reckoned from the date of acquisition of plots by it for the purpose of relevant assessment years 1996-97 to 1998-99 and would remain an industrial plot liable to the wealth tax in the subsequent relevant assessment years 1997-98 and 1998-99 and action of the authorities below in this respect, is in conformity with legal process, justified and legally sustainable. Thus, the law point is accordingly answered against the assessee. 20. Resultantly, these appeals are dismissed with no order as to costs. (Mehinder Singh Sullar) Judge (Ashutosh Mohunta) Judge 13.1.2010 AS Whether to be referred to reporter?Yes/No