2012 (6) TMI 525 - AT - Wealth-tax

Determining the value of urban land - valuation to be determined based on the market value Ignorance of agreement entered between assesse and DLF as it is self serving Held that - The valuation to be determined based on the market value cannot be accepted as the agreement ordains that all the transactions of sale of land are fixed at cost Rs.2,000/- per acre, the module has been held by ITAT and by department to be at the arms length year after year - AO was not justified in treating the said agreement as self-serving document and should not be held as a void for wealth tax purposes, as the department itself has held it to be a valid agreement in income-tax proceedings - business assets embedded in the urban land became liable to tax with effect from 1.4.1993 and it cannot be said that this agreement, even though valid for all other purposes is void for the purposes of the Wealth Tax Act by application of this section and the value of the asset cannot be determined ignoring the agreement of 25.10.1983 - the land in question is held as stock in trade a business asset and the method of valuation as laid down in rule 14 and Schedule III part D is also applicable and on both counts the valuation adopted by AO cannot be upheld - no scope to determine the valuation as adopted by the WTO/CWT(A) in favour of assessee.

Summary

Issues Involved:
1. Valuation of urban land.
2. Charging of interest under section 17B of the Wealth-tax Act, 1957.
3. Initiation of penalty proceedings under section 18(1)(c) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Valuation of Urban Land:

The primary dispute centers on the valuation of urban land held by the assessee company, which was amalgamated with 17 other companies as per a High Court order effective from 1.4.2003. The Wealth Tax Officer (WTO) determined the value of the land at Rs. 20,94,12,045/- based on the market value, while the assessee argued it should be valued at Rs. 32,82,412/- as per an agreement dated 25.10.1983 with M/s DLF Universal Ltd., which set a pre-agreed selling price of cost plus Rs. 2,000/- per acre.

The WTO rejected the valuation report of a government-approved valuer and considered the agreement as a self-serving document, thus determining the land's value based on the market rates. The Commissioner of Wealth Tax (Appeals) [CWT(A)] upheld this valuation, arguing that the land was not under any obligation to be sold at the pre-agreed rate.

The assessee contended that the agreement was a bona fide commercial arrangement accepted in various income tax assessments and that the valuation should be determined as per Rule 14(1) of the Wealth-tax Rules in Schedule III, part 'D', which considers the value of the closing stock for income tax purposes. The Tribunal agreed with the assessee, stating that the agreement had been consistently implemented and accepted by the department in income tax proceedings. It held that the WTO's valuation was arbitrary and not in accordance with the statutory rules of valuation.

The Tribunal emphasized that the valuation of the property should consider the advantages and disadvantages attached to it, as established in various judicial precedents. It concluded that the land should be valued as per the agreement and the rules laid down in Schedule III, part 'D', thus reversing the valuation adopted by the lower authorities and deleting the addition made by them.

2. Charging of Interest under Section 17B:

The assessee contested the charging of interest amounting to Rs. 18,29,556/- under section 17B of the Wealth-tax Act, 1957. However, the Tribunal did not specifically address this issue in detail, focusing primarily on the valuation of the land. The outcome of this issue is implicitly tied to the resolution of the primary issue regarding the land's valuation.

3. Initiation of Penalty Proceedings under Section 18(1)(c):

The assessee also challenged the initiation of penalty proceedings under section 18(1)(c) of the Wealth-tax Act, 1957, arguing that there was no satisfaction recorded by the Assessing Officer that the assessee had concealed particulars of its wealth or furnished inaccurate particulars. The Tribunal did not delve into this issue separately, as the primary focus was on the valuation of the land.

Conclusion:

The Tribunal allowed the assessee's appeal, reversing the valuation adopted by the lower authorities and deleting the additions made. It held that the valuation should be determined as per the agreement with M/s DLF Universal Ltd. and the rules laid down in Schedule III, part 'D' of the Wealth-tax Rules. The Tribunal appreciated the arguments presented by both parties and pronounced the order in open court on 25.1.2012.