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2012 (7) TMI 533 - HC - Wealth-taxValuation of immovable property Open Land - land in question was declared surplus land under the Urban Land Ceiling & Regulation Act 1976 which was having depressing effect on the value of the asset Held that - Revenue having already accepted the depressed valuation during the Assessment Years 1988-89 to 1990 and then for Assessment Year 1991-92 it was not open to the Revenue to assess the property on the basis of the market value which normally could have fetched without any restriction or prohibition but ought to have accepted the value of open land with such restriction and prohibition at Rs. 1, 44, 146/- as assessed by the Govt. Regd. Valuer - Appellate Tribunal was incorrect in holding that immovable property should be valued as per the open market rate without any restriction and prohibition - in favour of the Assesee
Issues Involved:
1. Whether the Tribunal was right in law in rejecting the valuation based on compensation receivable under the Urban Land (Ceiling & Regulation) Act, 1976. Detailed Analysis: Issue 1: Valuation of Land under the Urban Land (Ceiling & Regulation) Act, 1976 In a reference under Section 27(1) of the Wealth Tax Act, 1957, the Income Tax Appellate Tribunal posed the question: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the valuation based on compensation receivable under the Urban Land (Ceiling & Regulation) Act, 1976?" Background and Facts: The Assessee, engaged in manufacturing industrial gases, filed a return of net wealth showing the value of open land at Rs. 62,538/-. The Assessing Officer referred the matter to the Departmental Valuation Officer, who valued the land at Rs. 51,18,400/-. The Assessee contended that the land's value should be based on the compensation receivable under the ULC Act, as assessed by a Govt. Regd. Valuer at Rs. 1,44,146/-. The Assessing Officer rejected this contention, and the Commissioner of Wealth Tax (Appeals) confirmed the Assessing Officer's decision. Tribunal's Decision: The Assessee appealed to the Tribunal, which upheld the Commissioner of Wealth Tax (Appeals)'s decision, distinguishing the case from Madras High Court decisions where land had already been acquired. Legal Principles and Precedents: 1. Madras High Court Decisions: - Commissioner of Wealth Tax v. Ranganatha Mudaliar: Valuation must consider restrictions under the Ceiling Act, which depresses value. - Commissioner of Wealth-Tax v. Shardlow India Ltd.: Land should be valued based on compensation under the Ceiling Act, not market rate. - Commissioner of Wealth-Tax v. Simpson and General Finance Co. Ltd. [No.1] and [No.2]: Valuation should account for restrictions, reducing property value. 2. Supreme Court Decisions: - Ahmed G.H. Ariff v. Commissioner of Wealth Tax: Valuation assumes an open market, ignoring actual sale conditions. - Pandit Lakshmi Kant Jha v. Commissioner of Wealth-tax: Valuation should not deduct sale expenses; it considers the price fetched in an open market. - Commissioner of Wealth-tax v. P.N.Sikand: Leasehold interest valuation must account for burdens reducing its value. - Khorshed Shapoor Chenai v. Asst. CED: Valuation must consider peculiarities and marketability, including litigation risks. Court's Conclusion: The court summarized the settled law: - Valuation assumes an open market sale. - Restrictions under the Ceiling Act reduce property value. - If land is deemed acquired under the Ceiling Act, valuation is based on compensation entitlement. Application to Present Case: The land was declared surplus under the ULC Act, affecting its value. The Revenue had previously accepted depressed valuations for earlier assessment years. Thus, the valuation should consider restrictions and prohibitions, not the unrestricted market value. Judgment: The Tribunal erred in valuing the property at open market rates without considering restrictions. The court answered the question in the negative, against the Revenue and in favor of the Assessee, ordering the valuation at Rs. 1,44,146/- as assessed by the Govt. Regd. Valuer.
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