Mysuru’s Erstwhile Royal Family not exempt from Wealth Tax, says Karnataka HC [Read Judgment]

In a 113 page Judgment delivered by Karnataka High Court, has held that, The 28-acre land at the Palace Grounds, which is in the custody of Mysuru’s erstwhile royal family is not exempted from Wealth Tax.

The department had appealed the judgement passed by the Income Tax Appellate Tribunal in 2014 that justified the contention of the sisters of royal family scions that the “urban land” is exempt under Section 2(EA) of the Wealth Tax Act, 1957.

While allowing the appeal filed by Income Tax Department, the division bench comprising of Justice Vineet Kothari and Justice S Sujatha observed that, the Income Tax Appellate Tribunal (ITAT) was not justified in law in holding that 28 Acres of land located within the Corporation limits of the Bangalore City does not fall within the definition of ‘Assets’ in Section 2 (ea)(b) of the Wealth-Tax Act, 1957 and no Wealth Tax on these lands is chargeable.

The Court also held that the Wealth Tax would be chargeable for these Assessment Years in question in the hands of the Respondent Assessees as the “urban lands” in question ‘belonged to’ the Assessees on the respective ‘Valuation Dates’ relevant to A.Y. 1999-2000 to A.Y. 2004-05 in question.

“There was no total prohibition against raising of any sort of construction of a Building on the lands in question either under the interim Orders of the Hon’ble Supreme Court or by virtue of Karnataka Parks, Play Fields and Open Places (Preservation and Regulation) Act, 1985 and in view of the fact that temporary or semi-permanent constructions were raised from time to time on these lands in question, the ‘urban lands’ in question ‘belonging to’ the Assessees could not fall in the Exclusion Clause (b) of Explanation to Section 2 (ea) of the Wealth-Tax Act, defining the term ‘Assets’.”

“The Income Tax Appellate Tribunal (ITAT) was not justified in setting aside the “Protective Assessments” made by the Assessing Authority for the Assessment Years A.Y. 1999-2000 to A.Y. 2004-05 in question. The Assessing Authority would be free to now proceed to make substantive assessments in the hands of the Respondent Assessees”, the Court also added.