Bombay H.C : Land used for internal roads of the factory and playground for workers of the factory is taxable as wealth of the company, when the factory building has not been charged for wealth-tax

High Court Of Bombay

Motwane Manufacturing Co. (P) Ltd. vs. Commissioner Of Wealth Tax

Section FA, 1983, 40(3)(vi)

Asst. Year 1990-91

F.I. Rebello & R.S. Mohite, JJ.

WT Ref. No. 118 of 1998

20th February, 2009

Counsel Appeared :

Mrs. Beena Pillai i/b D.M. Harish & Co., for the Applicant : P.S. Sahadevan, for the Respondent


R.S. Mohite, J. :

The questions of law as referred to this Court under s. 27(1) of the WT Act are as follows :

“(1) Whether the Tribunal was right in law in holding that land used for internal roads of the factory and playground for workers of the factory is taxable as wealth of the company, when the factory building has not been charged for wealth-tax?

(2) Whether the Tribunal was right in law in holding that the approach road and internal roads are treated as part of the building for the purpose of depreciation under the IT Act, 1961 and therefore, the assessee is the owner of the land ?”

2. The brief facts of the case were as under : (a) The applicant company was the owner of a plot of land with several structures standing thereon. For the asst. yr. 1990-91, an assessment was filed by the assessee detailing the details of the user of the aforesaid open plot of land. These details as shown by the assessee were as

3. Open land : Under internal roads & playgrounds 3720.00 M2

4. Open vacant : Land to be considered for this valuation 3334.130 M2 (b) The AO passed an order valuing the open land at Rs. 18,59,715 on the basis of value as determined for earlier asst. yrs. 1988-89 and 1989-90.

(c) In an appeal filed by the assessee before the CIT(A) it was contended that the AO had not considered the grant of exemption from the wealth-tax in respect of land appurtenant, land reserved for playground and other common services. CIT(A) partly allowed the appeal by granting relief in respect of the land appurtenant admeasuring 5346.972 M2 but refused to grant exemption in respect of the open land admeasuring 3728.00 sq. mtrs. over which there were internal roads and a playground. Both Revenue as well as the assessee preferred an appeal before the Tribunal and by its common judgment and order dt. 26th Feb., 1997, the Tribunal dismissed the appeal of the assessee and allowed the appeal of the Revenue to the limited extent of land admeasuring 313.155 sq. mtrs. said to have been surrendered to the Bombay Municipal Corporation. Being aggrieved by the judgment of the Tribunal, the assessee therefore, requested for a reference and the questions already mentioned hereinabove have been therefore, referred.

3. It is a common ground that for the relevant year, wealth-tax in respect of the assessee company was chargeable in accordance with s. 40 of the WT Act, which was introduced by the Finance Act, 1983 (sic—s. 40 of the Finance Act, 1983). Sec. 40(3) set out assets which were chargeable to wealth-tax and s. 40(3)(vi) was in the following terms : (vi) building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godown, warehouse, hotel or office for the purposes of its business or as residential accommodation for its employees or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest room or lunch room mainly for the welfare of its employees and the land appurtenant to such building or part : Provided that each such employee is an employee whose income (exclusive of the value of all benefits or amenities not provided for by way of monetary payment) chargeable under the head “Salaries” under the IT Act does not exceed eighteen thousand rupees.

On a plain reading of the section, it is clear that internal approach roads or playgrounds were not within the exceptions which were carved out by the said sub-section. The exceptions themselves pertain to certain kinds of building and land appurtenant to such buildings or part thereof. Therefore, it is clear that first a building which fell in the category covered by the exception had to exist. Then and only then land appurtenant to such building would also fall within the exception. We are unable to accept the contention that a playground, approach road or internal road can be said to be a building.

Counsel for the applicant made some attempt to contend that land on which construction of a building was not permissible would amount to the vacant land. Reliance was placed on the definition of vacant land in s. 2 of the Urban Land Ceiling Act. The definition clause in the said Act expressly sets out that definitions are restricted for the purposes of the said Act. Counsel for the applicant drew our attention to the judgment of the apex Court in the case of Smt. Angoori Devi vs. State of U.P. & Ors. AIR 1997 SC 875. That judgment also pertains to the definition of vacant land as contained in the Urban Land Ceiling Act. In our view, it would have no bearing on the issue in question. In our view, therefore, issue No. 1 is required to be answered in the affirmative and in favour of Revenue.

6. Insofar as question No. 2 is concerned, it is seen from the record that the assessee himself has never controverted the fact that he was the owner of the entire plot with the structures standing thereon. Since his ownership of the plot in question is admitted, such ownership will include the ownership of the internal roads and approach roads which fall within the plot. It appears that the second question was referred on the basis of a contention raised by the assessee that he was not the owner because the municipal bye-laws required him to reserve a part of his land for approach roads and internal roads. In our view, such approach roads and internal roads even if required to be kept by municipal bye-laws, do not result in change of ownership of the land. These approach/internal roads continue to be used by the owners for their own purposes and it is in this background that such approach roads or internal roads are treated as a part of the building for the purpose of depreciation as per the IT Act, 1961. In our view, the issue of ownership of the asset is not dependent upon the provisions of the IT Act, 1961. Since the ownership of the asset is an independent facet which can be determined independently of the IT Act and as the applicant has categorically admitted his ownership over the plot of land, we do not find it necessary to answer issue No. 2. Hence, issue No. 2 is returned unanswered. Reference stands disposed of accordingly.

[Citation : 329 ITR 413]

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