Royal family's 28-acre land not exempt from tax: HC

The 28-acre land at the Palace Grounds, which is in the custody of Mysuru’s erstwhile royal family, is not exempt from wealth tax, the High Court of Karnataka ruled on Thursday, upholding the contention of the Income Tax Department.

A division bench of Justices Vineet Kothari and S Sujatha passed the order on Thursday, allowing an appeal filed by the Commissioner of Income 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 the wealth tax has been abolished since the assessment year 2016-17 — as per the Finance Bill of 2015 — the department’s appeals pertained to assessment years 1999-2000 to 2004-05.

The high court held that the tribunal was not justified in setting aside the ‘Protective Assessment’ made by the Assessing Authority (IT) from 1999-2000 to 2004-05.

“The Assessing Authority would be free to now proceed to make substantive assessments in the hands of the Respondent Assessees and Wealth Tax on these lands would be chargeable,” the order read.

The court also noted that though permanent construction is not allowed on the land in question, temporary or semi-permanent constructions were raised from time to time on it. Hence, the land does not fall within the ambit of the Exclusion Clause (b) of Explanation to Section 2(EA) of the Wealth Tax Act, defining the term ‘assets’.