Does exemption under Section 2(ea) of the Wealth Tax Act, 1957 apply to land used for agricultural purposes and so classified in the revenue records?

These are four appeals instituted by the assessee challenging assessments made under the Wealth Tax Act 1957 (in short ‘Act’). Following are the substantial questions of law that have been admitted by this Court on 01.10.2012: 1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in giving the interpretation to urban land under sec.2(ea) of the Wealth Tax Act, 1957, including therein agricultural lands used for agricultural purposes only and so classified in the chitta and adangal extracts of the land revenue authorities? 2. Whether the Tribunal was justified in law, having due regard to the actual cultivation upon the lands, in holding the lands to be urban lands on the sole premise that construction on the land could be permissible on application by assessee, even though none was made as on the relevant valuation date? 3. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in accepting the relevance of the opinion of registration authorities under the state government valuing the land as non-agricultural for levy of stamp duty and holding the lands used for agricultural purposes as urban land for the levy of wealth tax? 4. Whether, having regard to the stand of the Department that ‘agricultural land situated in urban area is not liable to wealth tax’ and also the Finance Minister's statement in the relevant Budget Speech specifically declaring that productive assets (among which will be included agricultural land used for growing crops) would be outside the purview of wealth tax, the Tribunal was justified in treating the agricultural land as urban land liable to wealth tax? 5. Whether the Tribunal erred in not following the judgment of this Hon'ble High Court in the case of CWT vs E.Udayakumar reported in 284 ITR 511 when there being no distinguishable facts or law and holding the agricultural lands as liable for wealth tax?

Mr.Swarnavel, learned counsel for the assessees submits that the issue involved in these appeals stands covered by the amendment to Section 2(ea) of the Wealth Tax Act, 1957 (in short ‘Act’) vide Finance Act, 2013, with retrospective effect from 01.04.1993, and Mr.Mahalingam, learned Senior Standing Counsel appearing for the Department fairly accedes to the submission made.

The appellants, who are joints owners of the following lands, had sought exemption from the levy of wealth tax on the ground that the lands had been utilised for agricultural purposes: Kulavnikapuram, Melapalayam, Tirunelveli 979 Kulavnikapuram, Melapalayam, Tirunelveli 978/2,978/3 Kuruchi village, Coimbatore 333 Melapalayam, Palayankottai 42/1 Melapalayam, Palayankottai 35/1,35/2 & 42/1 Melapalayam, Palayankottai 42/1 Kulavnikapuram, Palayankottai 526/2 Melapalayam, Palayankottai 35/1,35/2 & 42/1 Kuruchi village, Podanur,Coimbatore 337 Kuruchi village, Podanur,Coimbatore 333/1C Kuruchi village, Podanur,Coimbatore 333/1C KuniamuthurAgri Lands 162/2 Peelamedu, Anna Nagar, Coimbatore Kuruchi Village, Coimbatore 333/1C Kuruchi village, Podanur,Coimbatore 333/1C

By way of concurrent orders, the issue was decided adverse to the assessee applying the provisions of Section 2(ea) of the Act that provided for exemption only in respect of lands where construction had been held to be legally impermissible. Since the lands in question did not have the limitation as aforesaid, that is, they did not constitute lands upon which construction was impermissible, the exemption was denied.

While so, the definition of ‘asset’ under Section 2(ea) was amended by insertion of sub-clause (b) to Explanation 1 thereof vide Finance Act 2013, by virtue of which, exemption from wealth tax was extended to land classified in the revenue records as agricultural land, and utilised for agricultural purposes. The amendment was given retrospective effect from 01.04.1993. In this case, the fact that the assessees have been carrying on agricultural activity on the subject lands is undisputed. The present appeals relate to AY 2008-09 and are allowed with the questions of law answered in favour of the assessee.

Since Mr.Swarnavel states that there was recovery of some portion of demands, pending the appeals before the authorities, the assessees may seek appropriate refund of the same from the Department. (A.S.M.,J.) (S.R.K.,J.) 22-09-2026 sl