1. These appeals by the revenue and the cross objections by the assessees involve identical issues and hence they are consolidated and disposed of by a common order for the sake of convenience.
2. The CWT(A) erred in directing the Assessing Officer to adopt the value of 28 acres of land at Bangalore Palace and land at Chamundi Vihar, Mysore, at Rs. 2 lakhs being the maximum compensation receivable from the Government, as the lands in question come under Urban Land Ceiling and Regulation Act, 1976, relying on his own decision for the earlier years.
3. The CWT(A) ought to have considered that the above decision has not been accepted and become final as the reference application filed in the case of Sri S.N. Wodeyar, in R.A. Nos. 29 to 37/Bang/94, dated 1-2-1995 arising out of W.T.A. Nos. 4S5 to 490/Bang/90 for the assessment years 1977-78 to 1985-86, have been referred by the ITAT to High Court under Section 256(1).
4. Further, the CWT(A) failed to appreciate that for the purpose of wealth-tax, the value of an asset should be taken at the prevailing market value as on the valuation date.
5. For these and such other grounds that may be urged at the time of hearing, it is prayed that the order of the CWT(A) may be set aside and that of the Assessing Officer restored.
6. The appellant craves leave to add, to alter, amend and/or delete any of the grounds on or before the hearing of the appeal." "1. The order of the CWT(A) - so far as it is against the appellant is against law, facts of the case and weight of evidence.
2. The learned CWT(A) has erred to concluding the right to receive compensation from Government of Karnataka under Urban Land Ceiling and Regulation Act is a 'Taxable Wealth'.
3. The grounds of appeal filed before CWT(A) be read as part and parcel hereof.
4. The appellant pray that she may be permitted to adduce further evidence at the time of hearing of this cross objection." 4. As can be seen from the above, the main dispute centres around the inclusion of a sum of Rs. 2 lakhs being the maximum compensation receivable by the assessee from the Central Government in the taxable wealth. The property in question in respect of which compensation is receivable from the Government is 28 acres of land at Bangalore Palace which comes under the Urban Land Ceiling and Regulation Act, 1976. The CIT(A) following his reasoning given in a similar case of Smt.
Indrakshidevi in WTA Nos. 3, 4 & 5/C-VI/CIT(A)-II 1998-99, dated 24-9-1998, held that the compensation of Rs. 2 lakhs receivable from the Government is liable to be included in the net wealth of the assessee. On the other hand, the WTO had assessed the value of 28 acres of land at Bangalore Palace at a sum of Rs. 6,83,40,900.
5. In the appeal before us the learned DR supported the order of the WTO and points out that the decision relied on by the CIT(A) has not become final as reference application before the High Court under Section 256(1) is pending. According to the learned DR, the value of the asset should be taken at the prevailing market rate as on the valuation date. Hence, he supported the order of the WTO.6. On the other hand Shri H.A.K. Rao, the learned counsel for the assessee points out that as the land is coming under the Urban Land Ceiling and Regulation Act, 1976, the maximum compensation receivable by the assessee comes to only Rs. 2 lakhs and, therefore, the assessee cannot be subjected to tax on a higher amount as estimated by the Assessing Officer. The learned counsel also argued that irrespective of the assessability of the said sum of Rs. 2 lakhs as an amount receivable by the assessee in the earlier years, even the amount of Rs. 2 lakhs cannot be brought to tax for the assessment years starting from 1993-94 onwards in view of the change in law by the amendment to Section 2(ea) of the Wealth-tax Act, 1957 w.e.f. 1-4-1993. The learned counsel refers to the definition of "Urban Land" in the amended provisions and points out that the land in question in the present case does not come within the purview of the said definition. According to the learned counsel, the assessee is not permitted to construct any building within the premises in question on account of the Karnataka Parks, Play-Fields and Open Spaces (Preservation and Regulation) Act, 1985 (Karnataka Act No. 16 of 1985).
7. We have considered the rival submissions and the evidence on record.
We find that the land in question comes under the Urban Land Ceiling and Regulation Act, 1976 and the amount of compensation receivable from the Government on acquisition and the very acquisition of the land in question under the said Act are pending litigation before the Hon'ble Karnataka High Court/Hon'ble Supreme Court in cases involving the members of the royal family of late Shri J.C. Wodeyar. However, at present, it is clear that as against the original amount assessed by the Assessing Officer of Rs. 6,83,40,900 in respect of the each of the present assessees, the amount receivable by them under the ULCR Act comes to Rs. 2 lakhs only. In view of this position, it is found that the ITAT, Bangalore Bench in WTA Nos. 39 to 41/Bang/93, dated 31-8-1998 in the case of ACWT v. Indrakshidevi for the assessment years 1988-89 to 1990-91, held that the maximum compensation amounting to Rs. 2 lakhs only was assessable in the net wealth of the assessee. Similar decision has been rendered in respect of other members of the royal family with regard to the maximum amount of compensation receivable. Since the CIT(A) has relied on the order in the case of Smt. Indrakshidevi, which has been upheld by the ITAT, we do not find any infirmity in the order of the CWT(A) with regard to the quantum of compensation receivable by the assessee in respect of the said land under the ULCR Act, 1976.
8. However, as rightly pointed out by the learned counsel for the assessee, the assets assessable under the WT Act underwent some major changes in view of the amendment brought to Section 2 of the WT Act, 1957. The earlier definition of assets as applicable prior to the assessment year 1993-94 occurs in clause (e) of Section 2, the relevant portion of which reads as under : 2(e) "assets" includes property of every description, movable or immovable, but does not include- (1) in relation to the assessment year commencing on the 1st day of April, 1969, or any earlier assessment year- (i) agricultural land and growing crops, grass or standing trees on such land; (ii) any building owned or occupied by a cultivator of, or receiver or rent or revenue out of, agricultural land : Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as a dwelling house or a store-house or an out-house; (iv) a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant; (v) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee; (2) in relation to the assessment year commencing on the first day of April, 1970, or any subsequent assessment year (but before the 1st day of April, 1993)- (ii) a right to any annuity (not being an annuity put chased by the assessee or purchased by any other person in pursuance of a contract with the assessee) in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant; (iii) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee : Provided that in relation to the assessment year commencing on the 1st day of April, 1981 (and the assessment year commencing on the 1st day of April, 1982), this sub-clause shall have effect subject to the modification that for item (i) thereof, the following item shall be substituted, namely:-- "(i) (a) agricultural land other than land comprised in any tea, coffee, rubber or cardamom plantation; (b) any building owned or occupied by a cultivator of, or receiver of rent or revenue out of, agricultural land other than land comprised in any tea, coffee, rubber or cardamom plantation: Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of the rent or revenue by reason of his connection with the land requires as a dwelling-house or a store-house or an out-house; Provided further that in relation to the assessment year commencing on the 1st day of April, 1983 or any subsequent assessment year, this sub-clause shall have effect subject to the modification that for item (i) thereof, the following item shall be substituted, namely :-- "(i) (a) agricultural land and growing crops (including fruits on trees), grass or standing trees on such land; (b) one building or one group of buildings owned or occupied by a cultivator of, or receiver of rent or revenue out of agricultural land : Provided that such building or group of buildings is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as store-house or for keeping livestock; Provided also that in relation to the State of Jammu and Kashmir, this sub-clause shall have effect subject to the modification that for the assets specified in item (i) of this sub-clause, the assets specified in items (ii) to (iii) of Sub-clause (I) shall be substituted and the other provisions of this Act shall be construed accordingly; Section 2(ea) "assets", in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means- (i) any guest house and any residential house (including a farm house situated within twenty-five kilometres from the local limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or any other name or a cantonment board), but does not include- (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than two lakh rupees; (2) any house for residential purposes which forms part of stock-in-trade; (ii) motor cars (other than those used by the assessee in the business of running them on hire or as stock-in-trade); (iii) jewellery, bullion, furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals : Provided that where any of the said assets is used by the assessee as stock-in-trade, such asset shall be deemed as excluded from the assets specified in this sub-clause; (iv) yachts, boats and aircrafts (other than those used by the assessee for commercial purposes); (vi) cash in hand, in excess of fifty thousand rupees, of individuals and Hindu Undivided families and in the case of other persons any amount not recorded in the books of account.
(i) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel; (ii) precious or semi-precious stones, whether or not set in any furniture, utensils or other article or worked or sewn into any wearing apparel; (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 )he 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, 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 three years from the date of its acquisition by him;)" From the above legal provisions, it is clear that there is a drastic change in the definition of assets w.e.f. 1-4-1993 as applicable to the assessment year 1993-94 and subsequent years. Prior to assessment year 1993-94, assets included property of every description movable or immovable, whereas from 1-4-1993 onwards only certain assets as specified within in clause (ea) of Section 2 come within the definition of assets on which wealth-tax is leviable. Explanation (b) under clause (ea) of Section 2 defines urban land, but the said definition excludes land on which construction of a building is not permissible under any law for the time being in force.
9. We have carefully scrutinised the map drawn up by the Bangalore Development Authority in planning District No. 1 according to Comprehensive Development Plan - 2000 AD. We have studied carefully the relevant provisions of KPPOSPR Act, 1985 read with the relevant rules framed under the said Act. Under the said regulations, the open spaces available within the premises of certain buildings as listed in the said Rules shall be kept open without any further constructions except the appurtenant buildings of the same land use which shall have to be of the same architecture blending with the architecture of the main building. It is found that "Bangalore Palace" appears as item No. 5 in the said Rules. It is on the basis of this legal position that the learned counsel has argued before us that construction of any new building is prohibited by the law in force in the open land attributed to the assessee in the WT assessment proceedings, On careful consideration of the concrete evidence produced before us we are convinced by the arguments of the learned counsel that the 28 acres of land in question does not come within the definition of "urban land" as defined in Explanation (b) of Section 2(ea) of the WT Act, 1957 as applicable for the assessment years 1993-94 onwards. Inasmuch as the land in question does not come within the purview of taxable wealth for the assessment years under consideration before us, we hold that the value of the said land cannot be brought to tax for these assessment years.
10. With regard to assessability of a sum of Rs. 2 lakhs, it is clear that the said amount cannot be brought to tax because the right to receive the said amount is not an asset coming within the definition of assets as applicable for the assessment year 1993-94 onwards.
Sub-clause (vi) of Section 2(ea) only mentions "cash in hand" and this term obviously does not include 'amount receivable'. In this view of the matter, we hold that even the amount of Rs. 2 lakhs is not assessable as part of net wealth of the assessce for the assessment years in question, unless it is proved that it is part of cash in hand with the assessee. Obviously, such an amount will be assessable to wealth-tax in the year in which the assessee actually receives the amount when it will become part of the cash in hand or get invested in a taxable asset for the relevant year as per the definition in force for that year. However, as far as the assessment years before us are concerned, we hold that there is no taxability with regard to this amount under the WT Act, 1957.
11. Accordingly, we modify the orders of the CWT(A) and of the WTO and direct the WTO to delete the addition made in respect of the value of the land for the amount receivable as alleged by the Department.
12. In the result, appeals by the Revenue are dismissed and the cross objections filed by the assessees are allowed.