1993 (11) TMI 97 - AT - Wealth-tax

Issues Involved:
1. Valuation of the property at 21, Barakhamba Road, New Delhi.
2. Method of valuation for the property under construction.
3. Consideration of saleable space versus non-saleable space.
4. Deduction for deferred payments and other charges.
5. Determination of true market value for wealth-tax purposes.

Detailed Analysis:

1. Valuation of the Property at 21, Barakhamba Road, New Delhi:
The primary issue revolves around the valuation of the property located at 21, Barakhamba Road, New Delhi. The property, originally a residential building, was being converted into a multi-storey commercial building by M/s Ansal Properties & Industries Pvt. Ltd. (Ansals). The valuation of the property was contested between the assessee and the department, leading to cross appeals.

2. Method of Valuation for the Property Under Construction:
The assessee argued that the property under construction should be valued based on the cost of construction incurred till the valuation dates. They relied on the Madras High Court decision in CWT v. S. Venugopala Konar and the Karnataka High Court decision in V.C. Ramachandran v. CWT. The department contended that the right to sell the saleable space, which was a valuable asset, should be the basis for valuation. The tribunal agreed with the department, stating that the right to sell space in the building was a marketable right and should be valued accordingly.

3. Consideration of Saleable Space versus Non-Saleable Space:
The assessee claimed that only the saleable space should be considered for valuation, excluding areas like basements meant for car parking, driveways, and common passages. The tribunal held that the entire space, including common areas, should be considered for valuation as the rates at which flats were sold included these areas. However, they agreed that non-saleable areas like common passages should not be valued separately.

4. Deduction for Deferred Payments and Other Charges:
The assessee sought deductions for deferred payments, interest, and commercialisation charges payable to L & DO. The tribunal referred to the Andhra Pradesh High Court decision in K.U. Srinivasa Rao v. CWT and the Supreme Court's decisions in CWT v. Vyasaraju Badreenarayana Moorthy Raju and CWT v. Rughubar Narain Singh. They held that instalments payable after the valuation dates should be discounted to their present value, and deductions should be allowed for commercialisation charges, litigation, and interest.

5. Determination of True Market Value for Wealth-Tax Purposes:
The tribunal emphasized that the true market value should be determined based on the rates at which flats were booked. They rejected the department's contention of adopting rates from other buildings. The tribunal laid down a detailed method for calculating the value of the right to space, considering booked rates, instalments, and deductions for deferred payments and other charges.

Conclusion:
The tribunal directed the AO to recalculate the value of the space on the two valuation dates based on the following steps:
1. List and classify the space earmarked for the assessee.
2. Consider the flat space booked at initial and subsequent rates.
3. Value the car parking space at 60% of the ground floor rate.
4. Treat retained space as self-occupied and value it at the initial booking rate with a 50% deduction.
5. Value unbooked space at rates proximate to the valuation dates.
6. Discount outstanding instalments to their present value.
7. Deduct charges for L & DO and other litigation costs.
8. Aggregate the values to determine the net value of the right to space.

The appeals were allowed in part, directing the assessee to provide necessary information for recalculating the value.

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