The main legal point established in the judgment is that the commencement of construction and the use of the land for business purposes are crucial factors in determining the exclusion of assets from the purview of the Wealth Tax Act.

CHITRA VENKATARAMAN,J

1. The Revenue is on appeal against the order of the Tribunal arising under the Wealth Tax Act. The following substantial question of law was raised for consideration:

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that a land on which the foundation is laid for building a hotel should be treated as a business asset not exigible to Wealth Tax under Section 40A(3) of the Finance Act?"

2. The assessment years under consideration are 1996-97 and 1997-98. The assessee is a company carrying on hotel business. It is seen from the facts that the assessee purchased lands during 1993-94 followed by further addition during the subsequent year viz., 1996-97. It had obtained permission for construction from Madras Metropolitan Development Authority, who issued the same on 30.3.1995. The assessee is stated to have commenced the construction work during January, 1996. In support of the construction work, the assessee also filed necessary evidence from its contractor. Till the end of March 1998, the construction was going on and in fact, during the assessment year 1998-99, the construction was almost over. It is seen from the order of assessment that since the assessee had already commenced the construction of a hotel, the assessee filed NIL return for the assessment year 1995-96, claiming that the land acquired for its hotel project at Saidapet, Chennai, was not to be treated as a taxable asset under Section 2(ea) of the Wealth Tax Act. The Assessing Officer, however, determined the net wealth of Rs.16,84,600/- before giving basic exemption of Rs.15,00,000/-. The Assessing Officer held that considering the fact that the assessee had acquired land during the previous year relating to valuation date 31.3.1993 and till the date of passing of the assessment order, the assessee had not completed its hotel construction, it could not claim that the building was “put to use” so as to claim benefit of exclusion from the definition of 'asset' and the commencement of construction could not be considered as completion of construction. Having regard to the fact that tax holiday was allowed under the Wealth Tax Act only for two years in respect of urban land and that the lands acquired upto 31.3.1994 were not put to use till 31.3.1996, in the absence of any revenue generation out of the lands acquired, the lands could not be held to have been put to use. Consequently, the value of the lands were required to be included in the chargeable wealth. Aggrieved by the assessment, the assessee went on appeal before the Commissioner of Wealth Tax (Appeals), who held that except for the year ending 31.3.1998, the assessee was not entitled to claim that the asset had been put to use. Hence, the Commissioner of Wealth Tax (Appeals) dismissed the appeals pertaining to the assessment years 1995-96, 1996-97 and 1997-98, but allowed the appeal only as regards the assessment year 1998-99, thereby excluded the asset from the purview of the Wealth Tax Act. Aggrieved by the order in respect of assessment years 1996-97 and 1997-98, the assessee went on appeal before the Income Tax Appellate Tribunal.

3. The Tribunal held that since the assessee had admittedly commenced construction even before the valuation date 31.3.1996 and 31.3.1997 and the assessee had invested substantial amount for construction, the assessee was entitled to have the benefit of exclusion clause as per the definition of “asset” given under Section 2(ea) of the Wealth Tax Act. Aggrieved by this, the Revenue is on appeal before this Court.

4. Learned Standing counsel for the Revenue pointed out that when the idea of omitting Section 40A(3) of the Finance Act, 1983 and the introduction of amendment to Section 2(ea) of the Wealth Tax Act with effect from 1.4.1993 was to restrict the exclusion only to those cases where the land has been put to productive use and on the admitted facts herein, the assessee having failed to construct the