The Delhi High Court recently declared that the ownership of the property can be presumed for the purpose of wealth tax if the possession and control of the property in dispute vests upon the assessee.
The Respondent Assessee M/s Mohan Exports (I) Ltd. is stated to be the owner of the land and building at 8 and 9, Zamrudpur Community Centre, Kailash Colony, New Delhi. During the assessment proceedings, the Assessing Officer noted that the Assessee had not disclosed the value of the property in its total taxable wealth. In response to a query raised by the AO in that regard, the Assessee stated that the property in question had not been registered in its name and therefore in terms of the Wealth Tax Act, 1957 the value of the said property could not be added in computing the net wealth of the Assessee. For AY 1985-86, initially, the assessment was completed by an order under Section 16(3) of the WT Act for total value at Rs. 1,47,42,259 which included the value of the property at 8 and 9, Zamrudpur Community Centre, Kailash Colony as well as land in Daruhera, District Mahendargarh.
In an appeal filed against the said assessment order by the Assessee, the Commissioner of Wealth Tax set aside the assessment order on the issue of the value of the aforementioned properties and remanded the matter to the AO for a fresh determination. Upon remand, the AO referred to the issue concerning the fair market value of both the properties to the valuation officer. By report dated 28th March 1994 the valuation officer of the Income Tax Department determined the value of the property at 8 and 9, Zamrudpur Community Centre, Kailash Colony, New Delhi at Rs.1,49,50,600. This value formed the basis for computation of the net wealth of the Assessee. The valuation of the land in Daruhera, District Mahendargarh was determined at Rs. 13 lakhs. The AO finalized the fresh assessment order on 30th March 1994 computing the total wealth at Rs. 1,67,36,100.
This was again challenged by the assessee before the Commissioner (Appeals). The Commissioner by an order dated 30th August 1996. Specific to the property at 8 and 9, Zamrudpur Community Centre, Kailash Colony, New Delhi, the claim of the Assessee was that since on the date of such valuation the Assessee was not yet the legal owner of the property as the lease deed had not been executed by the DDA in favor of the Assessee. Therefore it was not an ‘asset’ under Section 40 (3) of the Finance Act 1983. The CIT (A) accepted the above plea and held that the value of the land at 8 and 9, Zamrudpur Community Centre, Kailash Colony, New Delhi was not liable to be included in the net wealth of the Assessee as on the relevant date the lease deed had not been executed in favour of the Assessee. The CIT (A) followed the order dated 30th November 1995 passed in the appeals for AYs 1989-90 and 1990-91 in favourof the Assessee.The ITAT, on appeal filed by the Revenue also confirmed this decision. Therefore, the matter was brought before the High Court.
The question of law Whether ITAT was correct in law in holding that value of the land at 8 and 9, Zamrudpur Community Centre, Delhi cannot be included in the taxable wealth of the Assessee under the Finance Act, 1983 read with the Wealth Tax Act, 1957?
The Court in the instant case, observed that in a situation where the possession and control of the property vests with the Assessee to the exclusion of everyone else and it is the Assessee who is exploiting the property for its own purposes, it is not open to the Assessee to contend that the property in question does not belong to it. Therefore, the decision was delivered in favor of Revenue.
Read the Judgment here.
[googleapps domain=”drive” dir=”file/d/0B3j3oXdY53gVc3pwTHNLU21QUnM/preview” query=”” width=”640″ height=”480″ /]
