Urban land held as part of Industrial undertaking ceases to have its independent character for wealth tax purposes

Scope of section 2(ea) does not include 'urban land' but once land so held is part of industrial undertaking or factory, it ceases to have independent character as an urban land; it would be part of industrial undertaking

A. The revenue required the assessee to show cause as to why value of land, shown in the balance sheet won’t be to be included in his taxable wealth. The assessee explained that impugned land was not includible in taxable wealth as the same constituted integral part of factory;

B. The AO made addition of the value of impugned land in the net wealth of assessee by observing how could an assessee sell the land over which a factory building was situated or the land which was being used for business purposes;

C. The Commissioner of Wealth Tax (A) (CWT(A)) deleted the impugned addition. Aggrieved AO filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The scope of section 2(ea) does not include 'urban land' but once the land so held is part of the industrial undertaking or factory it ceases to have the independent character as an urban land. It would be part and parcel of the industrial undertaking or factory;

2) The mere fact that a part of land, which was held as factory, was sold by the assessee as a piece of land would not change the character of asset in the hands of the assessee;

3) There could be situations in which a part of factory land might be sold as 'land' but as long as it was a part of the factory, it couldn’t have any other character in the hands of the assessee than factory as such;

4) A vacant piece of land, even if it can be sold as 'land', as such, continues to be a business asset as long as vacant land is an integral part of factory. Therefore, the land sold was a part of the factory premises and order of CWT(A) was to be upheld – DY.CIT V. HSIL LTD. (2013) 38 taxman 45 (Kolkata - Trib.)