Giridhar G. Yadalam v. Commissioner of Wealth-Tax & Anr
[Citation -2015-LL-0724-17]

Citation 2015-LL-0724-17
Appellant Name Giridhar G. Yadalam
Respondent Name Commissioner of Wealth-Tax & Anr.
Court SUPREME COURT
Relevant Act Wealth-tax
Date of Order 24/07/2015
Judgment View Judgment
Keyword Tags construction of a building • business or profession • appropriate authority • construction activity • benefit of exemption • land appurtenant • stock-in-trade • guest house • farm house • urban land
Bot Summary: 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:- 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 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 ten years from the date of its acquisition. 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. Certain lands are not to be treated as 'urban land' which are mentioned in Explanation 1(b). But Section 2(e)(a) of the Act was inserted by the Finance Act 1992 w.e.f. 01.04.1993. With the commencement of construction of a building, land ceases to be identifiable as 'urban land' due to constructive utilization of vacant land. The character of land has changed it is being put to use and it ceases to be urban land during the period of conversion. Presumably, because of this reason, the Legislature wanted to treat only that land to be excluded from the definition of 'urban land' at the stage when the building has been fully constructed on the said land.


1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 728 OF 2011 GIRIDHAR G. YADALAM .....APPELLANT(S) VERSUS COMMISSIONER OF WEALTH TAX & .....RESPONDENT(S) ANR. WITH CIVIL APPEAL NO. 729 OF 2011 CIVIL APPEAL NO. 730 OF 2011 CIVIL APPEAL NO. 731 OF 2011 CIVIL APPEAL NO. 732 OF 2011 CIVIL APPEAL NO. 733 OF 2011 CIVIL APPEAL NO. 734 OF 2011 CIVIL APPEAL NO. 735 OF 2011 CIVIL APPEAL NO. 736 OF 2011 CIVIL APPEAL NO. 737 OF 2011 CIVIL APPEAL NO. 738 OF 2011 CIVIL APPEAL NO. 739 OF 2011 CIVIL APPEAL NO. 741 OF 2011 CIVIL APPEAL NO. 742 OF 2011 CIVIL APPEAL NO. 743 OF 2011 Page 1 2 CIVIL APPEAL NO. 744 OF 2011 CIVIL APPEAL NO. 745 OF 2011 CIVIL APPEAL NO. 746 OF 2011 CIVIL APPEAL NO. 747 OF 2011 CIVIL APPEAL NO. 748 OF 2011 CIVIL APPEAL NO. 749 OF 2011 CIVIL APPEAL NO. 750 OF 2011 CIVIL APPEAL NO. 751 OF 2011 CIVIL APPEAL NO. 752 OF 2011 CIVIL APPEAL NO. 753 OF 2011 CIVIL APPEAL NO. 754 OF 2011 CIVIL APPEAL NO. 755 OF 2011 CIVIL APPEAL NO. 756 OF 2011 CIVIL APPEAL NO. 757 OF 2011 CIVIL APPEAL NO. 758 OF 2011 CIVIL APPEAL NO. 759 OF 2011 CIVIL APPEAL NO. 760 OF 2011 CIVIL APPEAL NO. 761 OF 2011 CIVIL APPEAL NO. 762 OF 2011 CIVIL APPEAL NO. 763 OF 2011 CIVIL APPEAL NO. 764 OF 2011 CIVIL APPEAL NO. 765 OF 2011 Page 2 3 CIVIL APPEAL NO. 766 OF 2011 CIVIL APPEAL NO. 767 OF 2011 CIVIL APPEAL NO. 768 OF 2011 CIVIL APPEAL NO. 769 OF 2011 CIVIL APPEAL NO. 770 OF 2011 CIVIL APPEAL NO. 771 OF 2011 CIVIL APPEAL NO. 772 OF 2011 CIVIL APPEAL NO. 773 OF 2011 CIVIL APPEAL NO. 774 OF 2011 CIVIL APPEAL NO. 775 OF 2011 CIVIL APPEAL NO. 776 OF 2011 CIVIL APPEAL NO. 777 OF 2011 CIVIL APPEAL NO. 778 OF 2011 CIVIL APPEAL NO. 779 OF 2011 CIVIL APPEAL NO. 780 OF 2011 SLP (CIVIL) NO. 19011 OF 2012 AND SLP (CIVIL) NO. 19012 OF 2012 Page 3 4 JUDGMENT A.K. SIKRI, J. In these cases, we are concerned with interpretation that is to be accorded to provisions of Explanation 1(b) to Section 2(ea)(v) of Wealth Tax Act, 1957 (hereinafter referred to as 'Act'). This Explanation defines 'Urban Land'. Urban land is exigible to wealth tax under aforesaid Act. However, 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 records of Government and used for agricultural purposes or land on which construction of building is not permissible under any law for time being in force in area in which such land is situated; or (ii) land occupied by any building which has been constructed with approval of appropriate authority; or (iii) any unused land held by assessee for industrial purposes for period of two years from date of its acquisition by him; or (iv) any land held by assessee as 'stock-in-trade' for period of ten years from date of its acquisition. Page 4 5 2. To put it pithily, what calls for interpretation is clause (ii) above, namely, what is meaning that is to be attributed to expression land occupied by any building which has been constructed with approval of appropriate authority. 3. In context of these appeals question is as to whether land would be excluded from 'urban land' only when building is completely constructed thereupon or it would be covered by aforesaid clause even if building activity is started and building is not yet complete. 4. Civil Appeal No.728/2011 has arisen from judgment of Karnataka High Court which has been filed by appellant/assessee (hereinafter referred to as 'assessee'). It has taken view that from plain language of aforesaid clause, building has to be completely erected on land in order to get it covered by exclusion clause. 5. In appeals which are filed by Revenue, challenge is to orders passed by Kerala and Madras High Courts which have taken contrary view. From this narration, it becomes clear that there is one common issue and that was reason for hearing of these appeals together. 6. Mr. Gopal Jain, learned senior counsel appeared for assessee in Page 5 6 lead matter i.e. Civil Appeal No.728/2011. For sake of brevity we would take note of facts from this appeal: Assessee herein is HUF which is co-owner of land measuring 30,663.04 sq. metres, situated at Survey No.67/2, 67/3, 67/4 and 67/5 of Adugodi Village and portion of Survey No. 151 of Kornamangala Village of Begur Hobli of Bangalore South Taluq, Bangalore District, bearing City Survey No. CTS/2. assessee entered into various development agreements with one M/s. Prestige Estates Properties Private Ltd. for construction of residential flats. development agreement was considered by assessing officer in course of assessment proceedings. Assessee claimed that it had retained ownership of land until flats are fully constructed and possession of assessee's share was handed over to it. development agreement constituted only permissive possession according to assessee for limited purpose of construction of flats. Assessee contended that assessee continues to be owner of land for Financial Years 1995-96 and subsequent years till sale of flats. Notice under Section 17 of Act was issued to assessee and he filed return of wealth of Rs.8,48,000/- on 20.08.2003. After considering contention to treat property as urban land and brought it to tax under order dated 31.03.2005, appeal was filed before Assistant Commissioner of Wealth Tax (Appeals), Bangalore. Page 6 7 appeal stood allowed in light of earlier order of Tribunal. Revenue thereafter filed appeal to Tribunal. Tribunal following its decision in WTA No. 4-5/B/03 dated 22.03.2004 dismissed appeal filed by Revenue. Revenue took up matter in further appeals before High Court of Karnataka. High Court has upset order of ITAT holding that assessee is not entitled to benefit of clause (ii) of Explanation 1(b) to Section 2(e)(a)(v) of Act, as building had not been constructed and was still under construction during Assessment Year. 7. It is not in dispute that 'urban land' is to be included to calculate 'net wealth' for purpose of wealth tax under Act. However, certain lands are not to be treated as 'urban land' which are mentioned in Explanation 1(b). But Section 2(e)(a) of Act was inserted by Finance Act 1992 (Act No.18/1992) w.e.f. 01.04.1993. purpose was to exempt some of lands from wealth tax with objective of stimulating investment in productive assets. It is in context that land occupied by any building which has been constructed with approval of appropriate authority is excluded from definition of urban land. On plain reading of said clause it becomes clear that in order to avail benefit, following conditions have to be satisfied: (a) land is occupied by any building; (b) Such building has been constructed; Page 7 8 (c) construction is done with approval of appropriate authority; 8. Notwithstanding aforesaid plain language, endeavour of Mr. Gopal Jain is to impress upon us to read said clause to include even that land where construction of building activity has been started. He, thus, wants that words 'has been constructed' is to be read as 'is being constructed'. His attempt to persuade us is predicated on following premise. Mr. Jain argued that clause added purposes interpretation i.e. objective for which this clause was added, namely, to stimulate investment in productive assets, has to be kept in mind. In this behalf, he argued that Explanation 1(b) has carved out exceptions/exemptions based on object and purpose of amendment to Wealth Tax Act in 1992. These exceptions have to be construed in line with legislative intent at time which Section 2(ea) was inserted, which was to stimulate investment in productive and non-productive assets and only specified assets were subject to wealth tax. On that premise, he emphasised that in each of aforesaid clauses this objective was kept in forefront. Qua Exception (I) he stressed that where land is classified as 'agricultural' and used for agricultural purposes, it will not fall within definition of 'urban land' and is exempted from wealth tax. Agricultural land, although vacant, if put to agricultural use (i.e. productive) is exempt from wealth-tax. He argued that this exception is Page 8 9 with reference to land which is vacant for reason that construction is not permissible under any law. As reason for non-construction of building cannot be attributed to assessee, exception has been made on account of which it will not be considered as asset and is exempted from wealth tax. 9. Mr. Jain further argued that in this very hue, exception (ii) also needed to be interpreted. His submission was that word 'constructed' is used in context of exempting land occupied by any building which is being constructed with approval of appropriate authority . With commencement of construction of building, land ceases to be identifiable as 'urban land' due to constructive utilization of vacant land. When building is under construction, it is 'work-in- progress'/construction activity is on-going but spills over. However, character of land has changed it is being put to use and, therefore, it ceases to be urban land during period of conversion. 10. According to Mr. Jain, if building is constructed and construction is complete, asset will go out of definition of 'urban land' contained in Section 2(ea)(v) read with Explanation 1(b) as it would fall under Section 2(ea)(i) which covers buildings. Section 2(ea)(i) reads as follows: (i) any building or land appurtenant thereto (hereinafter referred to as 'house'), whether used for residential or commercial purposes or for purpose of maintaining Page 9 10 guest house or otherwise including farm house situated with twenty-five kilometers from local limits of any municipality (whether known as Municipality, Municipal Corporation or by any other name) or Cantonment Board, but does not include-- (1) house meant exclusively for residential purposes and which is allotted by company to employee or officer or director who is in whole-time employment, having gross annual salary of less than ten lakh rupees; (2) any house for residential or commercial purposes which forms part of stock-in-trade; (3) any house which assessee may occupy for purposes of any business or profession carried on by him; (4) any residential property that has been let-out for minimum period of three hundred days in previous year; (5) any property in nature of commercial establishments or complexes; 11. Mr. Jain also submitted that stand of respondent that only completed buildings are to be brought into ambit of word 'has been constructed' is not tenable since completed buildings fall under different clause i.e. clause (ea)(i). According to him, if that is accepted then in such cases, Section 2 (ea)(v) read with Explanation 1(b) would not be required at all since completed building is covered independently in Section 2(ea)(i). He, thus, submitted that seen in this context, expression 'has been constructed' must be read as 'is being constructed' in order to give effect to legislative intent. He relied upon decision of this Court in case of M. Nizamuden v. Page 10 11 Chemplast Sanmar Limited and Others1, wherein it is held that: It is well settled that if exception has been added to remedy mischief or defect, it should be so construed that remedies mischief and not in manner which frustrates very purpose. Purposive construction has often been employed to avoid lacuna and to suppress mischief and advance remedy. It is again settled rule that if language used is capable of bearing more than one construction and if construction is employed that results in absurdity or anomaly, such construction has to be rejected and preference should be given to such construction that brings it into harmony with its purpose and avoids absurdity or anomaly as it may always be presumed that while employing particular language in provision absurdity or anomaly was never intended. 12. Taking his argument further, Mr. Jain submitted that likewise, exception (iii) is with reference to 'unused land' held by assessee for industrial purposes. exemption from wealth tax for such land is for period of two years from date of its acquisition by assessee. After two years, such land, if unused is amenable to wealth tax. However, if assessee starts construction of either factory or any building for industrial purpose within period of two years and construction spills over beyond exempted period, exemption would still continue irrespective of whether construction is completed within two years. Similarly, land held as 'stock-in-trade' is exempt from wealth tax for period of ten years since, though vacant, it is held for business purposes. 1 (2010) 4 SCC 240 Page 11 12 13. Learned senior counsel also extensively read judgment of Kerala High Court wherein interpretation suggested by him has been accepted and benefit of exemption from wealth tax in respect of such land where building is still under construction has been extended. 14. Mr. Rupesh Kumar, learned counsel appearing for Revenue emphatically countered aforesaid submissions of Mr. Jain. He submitted that cardinal principle of interpreting taxing statute was to give literal construction to language used therein. He further submitted that provision in question was in nature of 'exemption provision' where again strict interpretation is to be accorded and onus is upon assessee to show that he falls within four corners of exempted clause. He also submitted that when language of statute was unambiguous and clear, question of giving purposive interpretation does not arise in matters pertaining to taxing statutes. 15. After giving our due consideration to submissions of learned counsel for both parties and after going through judgments of different High Courts, we are of opinion that view taken by High Court of Karnataka in its judgment dated 21.03.2007 is correct view in law and contrary view taken by Kerala and Madras High Courts is erroneous and is liable to be set aside. Page 12 13 16. We have already pointed out that on plain language of provision in question, benefit of said clause would be applicable only in respect of building 'which has been constructed'. expression 'has been constructed' obviously cannot include within its sweep building which is not fully constructed or in process of construction. opening words of clause (ii) also become important in this behalf, where it is stated that 'the land occupied by any building'. land cannot be treated to be occupied by building where it is still under construction. If contention of Mr. Jain is accepted, assessee would become entitled to benefit of said clause, at that very moment, commencement of construction even with construction moment one brick is laid. It would be too far fetch, in such situation, to say that land stands occupied by building that has been constructed thereon. Even Mr. Jain was candid in accepting that when construction of building is still going on and is not completed, literally speaking, it cannot be said that building 'has been constructed'. It is for this reason that he wanted us to give benefit of this provision even in such cases by reading expression to mean same as 'is being constructed'. His submission was that moment construction starts urban land is put to 'productive use' and that entitles land from exemption of wealth-tax. This argument of giving so called purposive interpretation has to be rejected for more than one reasons. Page 13 14 These are: (i) In taxing statute, it is plain language of provision that has to be preferred where language is plain and is capable of one definite meaning. (ii) Strict interpretation to exemption provision is to be accorded, which is case at hand. (iii) purposive interpretation can be given only when there is some ambiguity in language of statutory provision or it leads to absurd results. We do not find it to be so in present case. 17. No doubt, purpose and objective of introducing Section 2(e)(a) in Act was to stimulate productive assets. However, event when such provision is to be attracted is also mentioned in Explanation 1(b) itself carving out those situations when land is not to be treated urban land. Legislature in its wisdom conferred benefit of exemption in respect of urban vacant land only when building is fully constructed and not when construction activity has merely started. On contrary, if argument of assessee is accepted, that would lead to absurd results in certain cases. For example, what would be position if construction of building starts but said construction is abandoned mid way? If we accept argument of assessee, in such case, assessee would be given exemption from payment of wealth tax in initial years and same benefit would be denied in Page 14 15 year when it is found that construction was abandoned and, therefore, not complete. It would result in granting of benefit in previous year(s), though that was not admissible. Such situation cannot be countenanced. Presumably, because of this reason, Legislature wanted to treat only that land to be excluded from definition of 'urban land' at stage when building has been fully constructed on said land. 18. We do not agree with submission of Mr. Jain that situation when building is fully constructed has been covered by Section 2(e)(a)(v) read with Explanation 1(b) as it would fall under Section 2(e)(a)(i). We have already reproduced aforesaid Section and find that it deals with altogether different situations. As pointed out above, Explanation (1) thereof excludes certain categories of 'Urban Land' and we are concerned herewith clause (ii) of this Explanation. By 1992 amendment, Section 2(e)(a) was added which contains definition of 'asset'. Clause (v) thereof includes urban land. Thus, urban land is to be included as 'asset' for purpose of giving extended meaning to it. Urban Land is defined in Explanation 1 Clause (b) to Section 2(e)(a). 19. Kerala High Court as well as Madras High Court have been influenced by arguments premised on purposeful construction which was argument of Mr. Jain and has not been accepted by us. Page 15 16 20. appeals of assessee are accordingly dismissed and those appeals which are preferred by Department against judgments of High Court of Kerala and Madras are hereby allowed. SLPs also stand disposed of, likewise. parties are left to bear their own costs. .............................................J. (A.K. SIKRI) .............................................J. (ROHINTON FALI NARIMAN) NEW DELHI; JULY 24, 2015. Page 16 17 ITEM NO.104 COURT NO.13 SECTION IIIA S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No(s). 728/2011 GIRODHAR G.YADALAM Appellant(s) VERSUS COMMR.OF WEALTH TAX & ANR. Respondent(s) WITH C.A. No. 729/2011 (With Office Report) C.A. No. 730/2011 (With Office Report) C.A. No. 731/2011 (With Office Report) C.A. No. 732/2011 (With Office Report) C.A. No. 733/2011 (With Office Report) C.A. No. 734/2011 (With Office Report) C.A. No. 735/2011 (With Office Report) C.A. No. 736/2011 (With Office Report) C.A. No. 737/2011 (With Office Report) C.A. No. 738/2011 (With Office Report) C.A. No. 739/2011 (With Office Report) C.A. No. 741/2011 (With Office Report) C.A. No. 742/2011 (With Office Report) C.A. No. 743/2011 (With Office Report) C.A. No. 744/2011 (With Office Report) C.A. No. 745/2011 Page 17 18 (With Office Report) C.A. No. 746/2011 (With Office Report) C.A. No. 747/2011 (With Office Report) C.A. No. 748/2011 (With Office Report) C.A. No. 749/2011 (With Office Report) C.A. No. 750/2011 (With Office Report) C.A. No. 751/2011 (With Office Report) C.A. No. 752/2011 (With Office Report) C.A. No. 753/2011 (With Office Report) C.A. No. 754/2011 (With Office Report) C.A. No. 755/2011 (With Office Report) C.A. No. 756/2011 (With Office Report) C.A. No. 757/2011 (With Office Report) C.A. No. 758/2011 (With Office Report) C.A. No. 759/2011 (With Office Report) C.A. No. 760/2011 (With Office Report) C.A. No. 761/2011 (With Office Report) C.A. No. 762/2011 (With Office Report) C.A. No. 763/2011 (With Office Report) C.A. No. 764/2011 (With Office Report) C.A. No. 765/2011 (With Office Report) C.A. No. 766/2011 (With Office Report) C.A. No. 767/2011 (With Office Report) Page 18 19 C.A. No. 768/2011 (With Office Report) C.A. No. 769/2011 (With Office Report) C.A. No. 770/2011 (With Office Report) C.A. No. 771/2011 (With Office Report) C.A. No. 772/2011 (With Office Report) C.A. No. 773/2011 (With Office Report) C.A. No. 774/2011 (With Office Report) C.A. No. 775/2011 (With Office Report) C.A. No. 776/2011 (With Office Report) C.A. No. 777/2011 (With Office Report) C.A. No. 778/2011 (With Office Report) C.A. No. 779/2011 (With Office Report) C.A. No. 780/2011 (With Office Report) SLP(C) No. 19011/2012 (With Office Report) SLP(C) No. 19012/2012 (With Office Report) Date : 24/07/2015 These matters were called on for hearing today. CORAM : HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Gopal Jain,Sr.Adv. Ms. Chinmayee Chandra,Adv. Ms. Khushboo Bari,Adv. Mrs. Nandini Gore,Adv. Page 19 20 Mr. Gopal Jain,Sr.Adv. Ms. Nandini Gore,Adv. Mr. Kartik Bhatnagar,Adv. Ms. Trishula Kulkarni,Adv. Ms. Khushboo Bari,Adv. M/s. Karanjawala & Co. For Respondent(s) Mr. Rupesh Kumar,Adv. Mr. S.A.Haseeb,Adv. Mrs. Anil Katiyar,Adv. Ms. Sadhna Sandhu,Adv. Mr. Vikash Malhotra,Adv. Ms. Swarupama Chaturvedi,Adv. Mr. B. V. Balaram Das,Adv. Mr. Abhijat P. Medh,Adv. UPON hearing counsel Court made following J U D G M E N T appeals of assessee are dismissed and appeals filed by Department against judgments of High Court of Kerala and Madras are hereby allowed. SLPs also stand disposed of, likewise. parties are left to bear their own costs. (SUMAN WADHWA) (SUMAN JAIN) AR-cum-PS COURT MASTER Signed Reportable judgment is placed on file. Page 20 Giridhar G. Yadalam v. Commissioner of Wealth-Tax & Anr
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