2020 (2) TMI 1058 - HC - Wealth-tax

Wealth tax assessment - valuation of land - value of the asset as on the valuation date - Addition on the basis of the instance of sale occurred subsequent to the date of valuation when the impugned land was subject to Urban Land (Ceiling and Regulation) Act, 1976 as on the date of valuation - HELD THAT - There could not have been a better guide for the Wealth Tax Officer for adopting the market value of the property in question than the actual sale itself which occurred within a few months from the relevant date of the valuation. In present case though the actual sale might have taken place after the valuation date, substantial amount of money was paid prior to the valuation date as an advance consideration. The view taken by the Tribunal cannot be faulted. A conjoint reading of section 7 and section 2(q) of the Act would indicate that the requirement of the law is that the value of any asset for the purpose of this Act shall be its value as on the valuation date. For determining the value of the asset as on the valuation date there cannot be any embargo on the Wealth Tax Officer not to take into consideration valuation of identical assets immediately preceding or succeeding the valuation date or that he has to arrive at the valuation of the asset only as per the valuation report. The decision of the Supreme Court in the case of S. N. Wadiyar 2015 (9) TMI 1065 - SUPREME COURT is not on the proposition that valuation of an identical asset immediately succeeding the valuation date cannot be taken into consideration for determining the valuation of the asset as on the valuation date - in said judgment, it is stated that valuation of the asset has to be on the valuation date which has reference to the last day of the previous year. In other words, it is 31st March and immediately preceding the assessment year. The valuation of the asset arrived at as on that date is the valuation on which wealth tax is assessable. Clarifying the matter further Supreme Court held that the Wealth Tax Officer has to form an opinion about the estimated price if the assets were to be sold in the assumed market and the estimated price would be the one which an assumed willing purchaser would pay for it. No error or infirmity in the view taken by the Tribunal. Further, there is concurrent finding of the two appellate authorities below and we do not find such finding to be vitiated by any material irregularity or perversity, warranting interference in an appellate proceeding under Section 27A of the Act.

Summary

Issues:
Valuation of property for wealth tax assessment under the Wealth Tax Act, 1957 based on a subsequent sale event; Interpretation of the relevant legal provisions and rules governing the valuation of assets for wealth tax purposes.

Issue 1: Valuation of Property for Wealth Tax Assessment:
The appellant challenged the addition made to their net wealth by the Wealth Tax Officer based on the valuation of a property under the Wealth Tax Act, 1957. The dispute arose from the valuation of a property in the assessment year 1991-92, where the Wealth Tax Officer added the difference in the value of the property to the net wealth of the assessee. The first appellate authority and the Tribunal upheld the valuation done by the Wealth Tax Officer. The key contention was whether the value of the property post the valuation date should be considered for assessment. The Tribunal emphasized that the actual sale of the property that occurred shortly after the valuation date was a crucial guide for determining the market value. The Tribunal's decision was supported by the legal provisions under Rule 20 of Schedule III of the Act, which allows the assessing officer to estimate the price the asset would fetch if sold in the open market on the valuation date.

Issue 2: Interpretation of Legal Provisions and Rules:
The legal debate centered around the interpretation of Section 2(q) of the Act defining the "valuation date" and Rule 20 of Schedule III governing the valuation of assets for wealth tax purposes. The appellant argued that the valuation should strictly adhere to the value of the asset on the valuation date without considering post-valuation date events. On the other hand, the Revenue contended that the assessing officer has the discretion to consider valuations of similar assets preceding or succeeding the valuation date to arrive at a justifiable market value. The Tribunal's decision was supported by the Supreme Court's ruling in a similar case, emphasizing the importance of assessing the asset's value as on the valuation date based on hypothetical sales and prevailing circumstances.

In conclusion, the High Court of Bombay dismissed the appeal, stating that no substantial question of law arose in the case. The Court found no error in the Tribunal's decision, which was based on a logical and judicial approach to valuing the property for wealth tax assessment. The judgment highlighted the importance of considering actual sale events and prevailing circumstances in determining the market value of assets for wealth tax purposes, in line with the provisions of the Wealth Tax Act, 1957.