1986 (4) TMI 89 - AT - Wealth-tax

Summary

Issues:
1. Valuation of Floor Space Index (FSI) for wealth tax assessment.
2. Determination of the appropriate rate for valuing FSI.
3. Allowance of deduction for restrictions on amenities and facilities related to FSI.

Issue 1: Valuation of Floor Space Index (FSI) for wealth tax assessment

The assessee, a partner in a firm engaged in land development, received FSI from the Bombay Municipal Corporation in compensation for acquired plots. The FSI was distributed among partners, and the assessee contributed FSI to another firm as capital. The WTO valued the FSI at Rs. 30 per sq. ft., which the assessee contested, claiming FSI had no market value. The tribunal rejected this argument, noting that although FSI may not be transferable, it holds value as evidenced by transactions involving the assessee's contributions to various firms. The tribunal upheld the valuation of FSI by the WTO, considering the contributions made by the assessee to other firms and the prevailing land rates in the area.

Issue 2: Determination of the appropriate rate for valuing FSI

The assessee had valued different portions of FSI at varying rates, which the tribunal found inappropriate. The WTO had fixed the rate at Rs. 30 per sq. ft., considering the location and demand for construction in the area. The tribunal supported the WTO's decision, noting that the rates adopted by the assessee for different parts of FSI were not justified. The tribunal agreed with the valuation method of the WTO, considering the location of the acquired lands and the utilization of FSI in high-demand areas, ultimately upholding the valuation at Rs. 30 per sq. ft.

Issue 3: Allowance of deduction for restrictions on amenities and facilities related to FSI

The WTO allowed a 10% deduction due to restrictions imposed by the Bombay Municipal Corporation on the utilization of FSI. The assessee argued for a higher deduction, suggesting at least 50%, citing the impact on congestion and amenities. The tribunal found a 25% deduction reasonable, balancing the restrictions with the value of FSI. Consequently, the tribunal adjusted the FSI value to Rs. 22.50 per sq. ft., favoring the assessee's argument and allowing a deduction higher than the WTO's initial assessment. The appeal was partially allowed based on this adjustment.

In summary, the tribunal addressed the valuation of FSI for wealth tax assessment, determining the appropriate rate, and allowing a deduction for restrictions on amenities and facilities related to FSI. The decision upheld the valuation of FSI by the WTO, adjusted the rate to Rs. 30 per sq. ft., and allowed a 25% deduction for restrictions, ultimately partially favoring the assessee in the appeal.