IMPORTANT POINT
Urban land is to be included as an asset for the purpose of giving extended meaning to it.

Judgment

A.K. Sikri, J.

In these cases, we are concerned with the interpretation that is to be accorded to the provisions of Explanation 1(b) to Section 2(ea)(v) of the Wealth Tax Act, 1957 (hereinafter referred to as the 'Act'). This Explanation defines 'Urban Land'. Urban land is exigible to wealth tax under the aforesaid Act. However, the definition of 'urban land' in explanation 1(b) excludes certain category of lands. As per Explanation 1(b) to Section 2(ea)(v), 'urban land' to mean land situate – but does not includes:-

(i) land classified as 'agricultural land' in the records of the Government and used for agricultural purposes or 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

(ii) the land occupied by any building which has been constructed with the approval of the appropriate authority; or

(iii) 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

(iv) any land held by the assessee as 'stock-in-trade' for a period of ten years from the date of its acquisition.

2. To put it pithily, what calls for interpretation is clause (ii) above, namely, what is the meaning that is to be attributed to the expression “the land occupied by any building which has been constructed with the approval of the appropriate authority.”

3. In the context of these appeals the question is as to whether the land would be excluded from the 'urban land' only when building is completely constructed thereupon or it would be covered by the aforesaid clause even if the building activity is started and the building is not yet complete.

4. Civil Appeal No.728/2011 has arisen from the judgment of Karnataka High Court which has been filed by the appellant/assessee (hereinafter referred to as the 'assessee'). It has taken the view that from the plain language of the aforesaid clause, the building has to be completely erected on the land in order to get it covered by exclusion clause.

5. In the appeals which are filed by the Revenue, challenge is to the orders passed by the Kerala and Madras High Courts which have taken a contrary view. From this narration, it becomes clear that there is one common issue and that was the reason for hearing of these appeals together.

6. Mr. Gopal Jain, learned senior counsel appeared for the assessee in the lead matter i.e. Civil Appeal No.728/2011. For the sake of brevity we would take note of the facts from this appeal: Assessee herein is the HUF which is the co-owner of a land measuring 30,663.04 sq. metres, situated at Survey No.67/2, 67/3, 67/4 and 67/5 of Adugodi Village and a portion of Survey No. 151 of Kornamangala Village of Begur Hobli of Bangalore South Taluq, Bangalore District, bearing City Survey No. CTS/2. The assessee entered into various development agreements with one M/s. Prestige Estates Properties Private Ltd. for construction of residential flats. The development agreement was considered by the assessing officer in the course of assessment proceedings. Assessee claimed that it had retained ownership of the land until flats are fully constructed and possession of the assessee's share was handed over to it. The development agreement constituted only permissive possession according to the assessee for the limited purpose of construction of flats. Assessee contended that assessee continues to be the owner of the land for the Financial Years 1995-96 and subsequent years till the sale of flats. Notice under Section 17 of the Act was issued to the assessee and he filed return of wealth of Rs.8,48,000/-on 20.08.2003. After considering the contention to treat the property as urban land and brought it to tax under an order dated 31.03.2005, an appeal was filed before the Assistant Commissioner of Wealth Tax (Appeals), Bangalore. The appeal stood allowed in the light of an earlier order of the Tribunal. Revenue thereafter filed an appeal to the Tri