2011 (5) TMI 379 - HC - Wealth-tax

Urban land - Value of land - Rs.847/- or Rs.2, 77, 64, 000/-. right in land - assessee could use the land in issue and the buildings constructed thereon only for the purposes of a club. The permission that was granted was only qua the assessee. The permission of the Lieutenant Governor obviously could not have been one in rem since the applicant was the assessee. The provisions of section 19(1) (vi) of ULCRA as prevalent at the relevant point in time make it clear that while exemption from other provisions of ULCRA was available in respect of vacant land held by certain kinds of entities including a club the exemption was not automatic. - Held that - the Tribunal was right in holding that the permission was available only to the assessee. In other words there was no automatic transfer of the permission assuming the land in issue was transferred to another even if it was a club. - assessees rights in the land in issue had to be valued at Rs.847/- - Decided in favor of assessee. Surplus land - AO took the view that since the possession of the land in issue had not been taken (by the state government) the assessee continued to be its owner and hence after calculating its value for the purpose of Wealth Tax brought it to tax. - Held that - The only reason the Tribunal had concluded that the land in issue was not amenable to tax was that with the passing of the notification under Section 10(3) of the ULCRA it ceased to be the assessees asset. That situation having been reversed in our view the logical sequitur would be that Tribunals judgment on this aspect would have to be set aside. Accordingly the question raised before us has to be answered in favour of the revenue and against the assessee.

Issues Involved:
1. Valuation of land for Wealth Tax purposes.
2. Treatment of land declared surplus under the Urban Land Ceiling Act, 1976.
3. Addition of value of construction of a country club to the net wealth of the assessee.

Detailed Analysis:

Issue 1: Valuation of Land for Wealth Tax Purposes

The primary issue was whether the Tribunal was correct in valuing the land at Rs. 847/- instead of Rs. 2,77,64,000/-. The land in question was a leased property, and the Assessing Officer valued it at Rs. 2200 per sq. metre based on government rates. However, the Tribunal agreed with the assessee that the land should be valued at the premium paid, i.e., Rs. 847/-, due to restrictive clauses in the lease deed and the specific permission granted under section 19(1)(vi) of ULCRA.

The Tribunal's decision was based on various restrictive clauses in the lease, including the requirement for the lessor's approval for any transfer and the stipulation that the land could only be used for club purposes. The Tribunal concluded that these restrictions significantly impeded the transferability and market value of the land. The High Court upheld the Tribunal's view, stating that the valuation at Rs. 847/- was reasonable given the restrictive covenants and the specific permission granted by the Lieutenant Governor.

Issue 2: Treatment of Land Declared Surplus under the Urban Land Ceiling Act, 1976

The second issue involved the treatment of land in Village Gadaipur, which had been declared surplus under the ULCRA. The Tribunal ruled that once a notification under section 10(3) of ULCRA was issued, the land vested absolutely in the State Government, and the assessee no longer held ownership, thus excluding it from the net wealth.

However, the High Court considered the subsequent repeal of ULCRA by the Repeal Act of 1999. The Court noted that the Repeal Act did not save transactions where only a notification under section 10(3) had been issued without possession being taken. Consequently, the land would revert to the assessee's ownership, making it part of the net wealth for the relevant assessment years. The Court reversed the Tribunal's decision, holding that the land should be included in the assessee's wealth for tax purposes.

Issue 3: Addition of Value of Construction of Country Club to Net Wealth

The third issue was contingent on the resolution of the second issue. Since the High Court determined that the land in Village Gadaipur should be included in the assessee's net wealth, the value of the country club constructed on this land also needed to be included. The Tribunal's deletion of the addition was thus overturned, and the High Court ruled in favor of the revenue, directing that the value of the country club be included in the net wealth of the assessee.

Conclusion:

The High Court disposed of the references and appeals by addressing each issue in favor of the revenue, except for the valuation of the leased land, which was upheld at Rs. 847/-. The land declared surplus under ULCRA and the value of the country club were included in the net wealth of the assessee, reversing the Tribunal's decisions on these matters.

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