Short note on Case Law 162-ITR-106 ( KAR ) - Dwelling unit on agricultural land claimed in Income tax

Short note on the case law 162-ITR-106 ( KAR )

Compiled by Mandar Gadre b.e.civil Regd Valuer Land and building

mandar@valuergadre.com

Karnataka High Court

M.A. Sreenivasan vs Commissioner Of Wealth-Tax on 7 October, 1985

Equivalent citations: (1986) 51 CTR Kar 115, 1986 162 ITR 106 KAR, 1986 162 ITR 106 Karn, 1986 24 TAXMAN 543 Kar

Author: K Puttaswamy

Bench: K Puttaswamy, S Hakeem

 Decision in Favour of the Assesse.

1.      The assessee had purchased  an extent of 10 acres 31 guntas of land situated at Rajmahal Village, Bangalore North Taluk, now part of a posh residential locality called Rajmahalvilas extension of the City of Bangalore, from the Maharajah of Mysore.

2.      Later the assesses constructed a bungalow on the same land where he spent @ ₹ 2.50 Lakhs some time in 1968-69.

3.       For the assessment years 1971-72 to 1974-75, relevant to the corresponding valuation dates, the assessee filed his returns under the Wealth-tax Act, 1957 ("the Act"), before the Wealth-tax Officer, Assessment-2. Circle-II, Bangalore, inter alia, claiming exemption of the value of the said residential building under section 5(1)(ivb) of the Act. On April 22, 1975, the Wealth-tax Officer by separate but identical orders completed the assessments for the said years and rejected the assessee's said claim for exemption. Aggrieved by the said orders of the Wealth-tax Officer, the assessee filed appeals before the Appellate Assistant Commissioner, Bangalore Range-II, who by his common order dated June 24, 1976, dismissed them. Aggrieved by the said orders of the Appellate Assistant Commissioner and the Wealth-tax Officer, the assessee filed second appeals before the Tribunal which by its common order dated May 27, 1977, dismissed them.

4.       Sri K. P. Kumar, learned advocate, appeared for the assessee. Sir K. Srinivasan, learned senior standing counsel, assisted by Sri H. Raghavendra Rao, learned junior standing counsel, appeared for the Revenue. Both the sides have relied on a number of rulings in support of their respective contentions. jSri Kumar has contended that on the facts that are not in dispute and found by the Tribunal, the claim made by the assessee for exemption of the value of the residential building under section 5(1)(ivb) of the Act was well-founded and the question, therefore, requires to be answered in favour of the assessee.

5.       To support this the following cases were referred.

a.        Maharajadhiraj of Darbhanga v. CIT, AIR 1928 Pat 468 Division Bench of Patna High Cour

b.        Rajendra Narayan Bhanja Deo v. CIT, AIR 1929 Pat 449 Full Bench of the Patna High Court

c.       Kanan Devan Hills Produce Co. Ltd. v. CWT [1968] 67 ITR 823, the High Court of Calcutta

d.       Kanan Devan Hills Produce Co. Ltd. v. CWT [1968] 67 ITR 823, the High Court of Calcutta

6.      

I The following section was referred

 The Act has been enacted to levy on the net wealth of those who fall within the provisions of the Act. The Act came into force from April 1, 1957. Section 2 of the Act defines certain terms occurring in the Act. Section 2(e) defines the term "assets" as including property of every description, movable or immovable, but does not include those excepted therein from time to time. Section 3 of the Act which is the charging section provides for levy of wealth-tax on the net wealth on the corresponding valuation date at the rates specified in the Schedule.jSection 4 of the Act makes detailed provision for determining the net wealth of different classes of assessees for computation of net wealth.

13. Section 5 of the Act provides for certain exemptions in determining the net wealth of an assessee and the consequent levy of wealth-tax under the Act. Section 5(1)(ivb) of the Act, that is material and that was in force, reads thus :

"5. Exemption in respect of certain assets. -(1) Subject to the provision of sub-section(1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets not be icluded in the net wealth of the assessee -........

(ivb) one building or one group of building owned 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 required by the cultivator or the receiver of rent or revenue, by reason of his connection with the land, as dwelling house, store-house or outhouse;"

14. This section exempts one building or one group of building owned by a cultivator or receiver of rent or revenue from out of the agricultural land. But the proviso subjects in to three conditions. Firstly, the building or group of buildings must be on the immediate vicinity of the agricultural lands. Secondly, the building or group of buildings must be used or required for carrying on agriculture on the agricultural lands or for collecting rents or revenue from those agricultural lands. Lastly, there should be connection or nexus between such building and the lands which itself can be used as a dwelling house, store-houses or as an outhouse. If these conditions are satisfied, then the cost of construction of the buildings or the group of buildings or the facilities or comforts provided therein, has no relevance to the claim for exemption. All these are matters for the assessee to decide and modulate.

Note : Above compilation is based on the data available on the web at https://indiankanoon.org/doc/1889245/
Reference Practical Valuation Vol 11 by  Shri B Kanaga Sabapathy and K Arun

 The court came to the conclusion that the ruling was in favour of the Assesse and against the Revenue.