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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 728 OF 2011

GIRIDHAR G. YADALAM .....APPELLANT(S)

VERSUS

COMMISSIONER  OF  WEALTH  TAX  &  ANR.

.....RESPONDENT(S)

W I T H

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

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CIVIL APPEAL NO. 741 OF 2011

CIVIL APPEAL NO. 742 OF 2011

CIVIL APPEAL NO. 743 OF 2011

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

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CIVIL APPEAL NO. 762 OF 2011

CIVIL APPEAL NO. 763 OF 2011

CIVIL APPEAL NO. 764 OF 2011

CIVIL APPEAL NO. 765 OF 2011

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

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A N D

SLP (CIVIL) NO. 19012 OF 2012

J U D G M E N T

A.K. SIKRI, J.

Leave granted in SLPs.

In these cases, we are concerned with the interpretation that is to  

be accorded to the provisions of Explanation 1(b) to Section 2(ea)(v) of  

the Wealth Tax Act,  1957 (hereinafter  referred to as the 'Act').   This  

Explanation defines 'Urban Land'.  Urban land is exigible to wealth tax  

under  the  aforesaid  Act.   However,  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:-

(i) 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

(ii) the land occupied by any building which has been constructed with the  

approval of the appropriate authority; or

(iii) 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  

(iv) any land held by the assessee as 'stock-in-trade'  for  a period of  ten

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years from the date of its acquisition.    

2. To put it pithily, what calls for interpretation is clause (ii) above, namely,  

what is the meaning that is to be attributed to the expression “the land  

occupied by any building which has been constructed with the approval  

of the appropriate authority.”

3. 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.   

4. Civil  Appeal No.728/2011 has arisen from the judgment of  Karnataka  

High  Court which has been filed by the appellant/assessee (hereinafter  

referred to as the 'assessee').  It has taken the view that from the plain  

language  of  the  aforesaid  clause,  the  building  has  to  be  completely  

erected on the land in order to get it covered by exclusion clause.   

5. In the appeals which are filed by the Revenue, challenge is to the orders  

passed by the Madras High  Court  which has taken a contrary view.  

From this narration, it becomes clear that there is one common issue  

and that was the reason for hearing of these appeals together.   

6. Mr. Gopal Jain, learned senior counsel appeared for the assessee in the

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lead matter i.e. Civil Appeal No.728/2011.  For the sake of brevity we  

would take note of the facts from this appeal:

Assessee herein is the HUF which is the co-owner of a land measuring  

30,663.04 sq. metres, situated at Survey No.67/2, 67/3, 67/4 and 67/5 of  

Adugodi  Village  and  a  portion  of  Survey  No.  151  of  Kornamangala  

Village  of  Begur  Hobli  of  Bangalore  South  Taluq,  Bangalore  District,  

bearing  City  Survey  No.  CTS/2.  The  assessee  entered  into  various  

development  agreements  with  one  M/s.  Prestige  Estates  Properties  

Private  Ltd.  for  construction  of  residential  flats.   The  development  

agreement  was considered by the assessing officer  in  the course of  

assessment  proceedings.   Assessee  claimed  that  it  had  retained  

ownership of the land until flats are fully constructed and possession of  

the  assessee's  share  was  handed  over  to  it.   The  development  

agreement  constituted  only  permissive  possession  according  to  the  

assessee  for  the  limited  purpose  of  construction  of  flats.   Assessee  

contended that assessee continues to be the owner of the land for the  

Financial  Years  1995-96  and  subsequent  years  till  the  sale  of  flats.  

Notice under Section 17 of the Act was issued to the assessee and he  

filed return of wealth of Rs.8,48,000/- on 20.08.2003.  After considering  

the contention to treat the property as urban land and brought it to tax  

under  an  order  dated  31.03.2005,  an  appeal  was  filed  before  the  

Assistant  Commissioner  of  Wealth  Tax  (Appeals),  Bangalore.   The

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appeal  stood allowed in  the light  of  an earlier  order  of  the  Tribunal.   

Revenue  thereafter  filed  an  appeal  to  the  Tribunal.   The  Tribunal  

following its decision in WTA No. 4-5/B/03 dated 22.03.2004 dismissed  

the appeal filed by the Revenue.  The Revenue took up the matter in  

further appeals before the High Court of Karnataka. The High Court has  

upset the order of the ITAT holding that the assessee is not entitled to  

the benefit of clause (ii) of Explanation 1(b) to Section 2(e)(a)(v) of the  

Act,  as  the  building  had  not  been  constructed  and  was  still  under  

construction during the Assessment Year.   

7. It  is not in dispute that 'urban land' is to be included to calculate 'net   

wealth' for the purpose of wealth tax under the 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 the Act  was inserted by the  

Finance Act 1992 (Act No.18/1992) w.e.f. 01.04.1993.  The purpose was  

to  exempt  some  of  the  lands  from  wealth  tax  with  the  objective  of  

stimulating investment in productive assets.  It is in the context that the  

land  occupied  by  any  building  which  has  been  constructed  with  the  

approval of the appropriate authority is excluded from the definition of  

urban land. On a plain reading of the said clause it becomes clear that in  

order to avail the benefit, following conditions have to be satisfied:

(a)  The land is occupied by any building;

(b) Such a building has been constructed;

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(c) The construction is done with the approval of the appropriate authority;

8. Notwithstanding  the  aforesaid  plain  language,  an  endeavour  of  Mr.  

Gopal Jain is to impress upon us to read the said clause to include even  

that land where the construction of building activity has been started.  

He, thus, wants that the words 'has been constructed' is to be read as 'is  

being constructed'.   His attempt to persuade us is  predicated on the  

following premise.   

Mr. Jain argued that the clause added purposes interpretation i.e. the  

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 the object and purpose of the amendment to the Wealth Tax  

Act in 1992.  These exceptions have to be construed in line with the  

legislative intent  at  the 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 the aforesaid clauses this objective was  

kept in the forefront.  Qua Exception (I) he stressed that where land is  

classified as 'agricultural' and used for agricultural purposes, it will not  

fall within the 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

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with reference to land which is vacant for the reason that construction is  

not permissible under any law.  As the reason for non-construction of a  

building cannot be attributed to the assessee, an exception has been  

made on account of which it will not be considered as an 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 the word 'constructed' is used  

in the context of exempting a land “occupied by any building which is  

being constructed with the approval of appropriate authority”.  With the  

commencement  of  construction  of  a  building,  land  ceases  to  be  

identifiable as 'urban land' due to constructive utilization of vacant land.  

When  a  building  is  under  construction,  it  is  'work-in-

progress'/construction activity is on-going but spills over.  However, the  

character of land has changed – it is being put to use and, therefore, it   

ceases to be urban land during the period of conversion.   

10. According to Mr. Jain,  if  a building is constructed and construction is  

complete, the asset will go out of the 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 the purpose of maintaining

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a  guest  house  or  otherwise  including  a  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  a  Cantonment Board, but does not include-- (1)  a house meant exclusively for residential purposes  and which is allotted by a company to an employee or  an  officer  or  a  director  who  is  in  whole-time  employment, having a 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 the assessee may occupy for  the purposes of any business or profession carried on  by him;

(4) any residential property that has been let-out for a  minimum period of three hundred days in the previous  year;

(5)   any  property  in  the  nature  of  commercial  establishments or complexes;”

11. Mr.  Jain  also  submitted  that  the  stand  of  the  respondent  that  only  

completed buildings are to be brought into the ambit of the word 'has  

been constructed' is not tenable since completed buildings fall under a  

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  a  completed  building  is  covered  

independently in Section 2(ea)(i). He, thus, submitted that seen in this  

context, the expression 'has been constructed' must be read as 'is being  

constructed' in order to give effect to the legislative intent.  He relied  

upon  the  decision  of  this  Court  in  the  case  of  M.  Nizamuden  v.

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Chemplast Sanmar Limited and Others1, wherein it is held that:

“It  is well  settled that if  exception has been added to  remedy the mischief or defect, it should be so construed  that remedies the mischief and not in a manner which  frustrates the very purpose.  Purposive construction has  often been employed to avoid a lacuna and to suppress  the mischief  and advance the  remedy.   It  is  again  a  settled  rule  that  if  the  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  a  construction  that  brings  it  into  harmony  with  its  purpose  and  avoids  absurdity  or  anomaly  as  it  may  always  be  presumed  that  while  employing  a  particular  language  in  the  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 the assessee for industrial  

purposes.  The exemption from wealth tax for such land is for a period of  

two years from the date of its acquisition by the assessee.  After two  

years, such land, if unused is amenable to wealth tax.  However, if an  

assessee  starts  construction  of  either  a  factory  or  any  building  for  

industrial purpose within a period of two years and construction spills  

over beyond the exempted period, the exemption would still  continue  

irrespective of whether the construction is completed within two years.  

Similarly, land held as 'stock-in-trade' is exempt from wealth tax for a  

period  of  ten  years  since,  though  vacant,  it  is  held  for  business  

1

(2010) 4 SCC 240

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purposes.   

13. Learned senior counsel also extensively read the judgment of the Kerala  

High  Court  wherein  the  interpretation  suggested  by  him  has  been  

accepted and the benefit of exemption from wealth tax in respect of such  

a land where the building is still under construction has been extended.

14. Mr.  Rupesh  Kumar,  learned  counsel  appearing  for  the  Revenue  

emphatically  countered  the  aforesaid  submissions  of  Mr.  Jain.   He  

submitted that the cardinal principle of interpreting taxing statute was to  

give  literal  construction  to  the  language  used  therein.   He  further  

submitted that the provision in question was in the nature of 'exemption  

provision' where again strict interpretation is to be accorded and onus is  

upon the assessee to show that he falls within the four corners of the  

exempted clause.   He also submitted that  when the language of  the  

statute  was  unambiguous  and  clear,  question  of  giving  purposive  

interpretation does not arise in the matters pertaining to taxing statutes.   

15. After  giving our  due consideration to  the submissions of  the learned  

counsel for both the parties and after going through the judgments of  

different High Courts, we are of the opinion that the view taken by the  

High Court of Karnataka in its judgment dated 21.03.2007 is the correct  

view in law and the contrary view taken by the Kerala and Madras High  

Courts is erroneous and is liable to be set aside.  

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16. We have already pointed out that on the plain language of the provision  

in question, the benefit of the said clause would be applicable only in  

respect of the building 'which has been constructed'.  The expression  

'has  been  constructed'  obviously  cannot  include  within  its  sweep  a  

building which is not fully constructed or in the process of construction.  

The opening words of clause (ii) also become important in this behalf,  

where it  is  stated that  'the land occupied by any building'.   The land  

cannot be treated to be occupied by a building where it  is still  under  

construction.   If  the contention of  Mr.  Jain is  accepted,  an assessee  

would become entitled to the benefit  of  the said clause,  at  that  very  

moment, the commencement of construction even with construction the  

moment one brick is laid.  It would be too far fetch, in such a situation, to  

say  that  the  land  stands  occupied  by  a  building  that  has  been  

constructed thereon.  Even Mr. Jain was candid in accepting that when  

the construction of building is still going on and is not completed, literally  

speaking, it cannot be said that the building 'has been constructed'.  It is  

for this reason that he wanted us to give the benefit of this provision  

even in such cases by reading the expression to mean the same as 'is  

being constructed'.  His submission was that the moment construction  

starts the urban land is put to 'productive use' and that entitles the land  

from  exemption  of  wealth-tax.   This  argument  of  giving  so  called  

purposive interpretation has to be rejected for more than one reasons.

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These are:

(i) In taxing statute, it is the plain language of the provision that has to be  

preferred  where  language  is  plain  and  is  capable  of  one  definite  

meaning.

(ii)  Strict interpretation to the exemption provision is to be accorded, which  

is the case at hand.

(iii) The  purposive  interpretation  can  be  given  only  when  there  is  some  

ambiguity in the language of the statutory provision or it leads to absurd  

results.  We do not find it to be so in the present case.

17. No doubt, the purpose and objective of introducing Section 2(e)(a) in the  

Act was to stimulate productive assets.  However, the event when such  

a provision is to be attracted is also mentioned in Explanation 1(b) itself  

carving out those situations when the land is not to be treated urban  

land.  The Legislature in its wisdom conferred the benefit of exemption in  

respect of urban vacant land only when the building is fully constructed  

and  not  when  the  construction  activity  has  merely  started.   On  the  

contrary, if the argument of the assessee is accepted, that would lead to  

absurd  results  in  certain  cases.   For  example,  what  would  be  the  

position if the construction of the building starts but the said construction  

is abandoned mid way? If we accept the argument of the assessee, in  

such a case, assessee would be given the exemption from payment of  

wealth tax in the initial years and the same benefit would be denied in

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the  year  when  it  is  found  that  construction  was  abandoned  and,  

therefore,  not  complete.   It  would  result  in  granting of  benefit  in  the  

previous  year(s),  though  that  was  not  admissible.   Such  a  situation  

cannot  be  countenanced.   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.   

18. We do not agree with the submission of Mr. Jain that the 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  the  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  the  definition  of  'asset'.  

Clause  (v)  thereof  includes  urban  land.   Thus,  urban  land  is  to  be  

included as an 'asset' for the purpose of giving extended meaning to it.   

Urban Land is defined in Explanation 1 Clause (b) to Section 2(e)(a).   

19. The  Kerala  High  Court  as  well  as  Madras  High  Court  have  been  

influenced by the arguments premised on purposeful construction which  

was the argument of Mr. Jain and has not been accepted by us.  

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20. The  appeals  of  the  assessee  are  accordingly  dismissed  and  those  

appeals which are preferred by the Department against the judgments of  

the High Court of Madras are hereby allowed.   The parties are left to  

bear their own costs.    

.............................................J. (A.K. SIKRI)

.............................................J. (ROHINTON FALI NARIMAN)

NEW DELHI; JULY 24, 2015.