1997 (4) TMI 108 - AT - Wealth-tax

Summary

Issues: Valuation of freehold land, interest rate on deposits, collection charges deduction, capitalization rate, valuation of excess land under occupation.

Valuation of Freehold Land:
The judgment involves cross-appeals by the assessee and the Department for the asst. yrs. 1988-89 to 1991-92 concerning common issues related to the valuation of freehold land. The land, with a total area of 18,996 sq. mts., had a portion leased out and a factory building on it. The Directorate of Industries permitted the retention of the land by the assessee under certain conditions. The approved valuer assessed the value based on lease receipts and deductions, while the DVO calculated it differently, including interest on deposits and applying a capitalization rate. The AO adopted the DVO's figures, leading to disputes over interest rate, collection charges, and capitalization rate. The Tribunal ultimately accepted the assessee's plea for interest rates and capitalization, and valued the excess land under occupation at Rs. 10 per sq. mt., remanding the issue of the correct area under occupation back to the AO for verification.

Interest Rate on Deposits and Collection Charges Deduction:
The assessee contested the interest rate on deposits and collection charges deduction, seeking 12% interest for certain years and 15% for others, along with a 5% collection charges deduction. The DVO and CWT(A) supported the 15% interest rate and 2% collection charges deduction. The Tribunal ruled in favor of the assessee, adopting the interest rates as per their plea and allowing the 5% collection charges deduction, finding no further relief necessary.

Capitalization Rate:
The capitalization rate was a point of contention, with the DVO setting it at 8%, the assessee claiming 12%, and the Department arguing for 8%. The Tribunal sided with the assessee, accepting the 12% capitalization rate due to the possibility of valuing the land at Rs. 10 per sq. mt., which the assessee did not insist upon.

Valuation of Excess Land under Occupation:
The judgment addressed the valuation of excess land under the occupation of the assessee, which the DVO assessed based on actual sale considerations. The Tribunal found the assessee's proposition to value the land at Rs. 10 per sq. mt., the maximum compensation under the Urban Land Ceiling Act, reasonable. It referred to a similar decision in another case and remanded the issue of the correct area under occupation back to the AO for verification, directing the valuation at Rs. 10 per sq. mt.

Conclusion:
Ultimately, the Tribunal partially allowed the appeals of the assessee while dismissing those of the Department, settling the disputes over interest rates, collection charges deduction, capitalization rate, and the valuation of excess land under occupation in favor of the assessee.