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TMI Blog2016 (9) TMI 1139X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law is answered in favour of the assessee and against the revenue. - DB Wealth Tax Reference No. 11/1999 - - - Dated:- 26-8-2016 - Ajay Rastogi And J. K. Ranka, JJ. For the Petitioner : Parinitoo Jain For the Respondent : Gunjan Pathak JUDGMENT J. K. Ranka, J. 1. Instant Wealth Tax Reference u/Sec. 27(1) of the Wealth Tax Act has been referred by the Income Tax Appellate Tribunal, Jaipur Bench at the instance of this Court to refer the following question of law. It is relevant for the assessment years 1976-77 and 1977-78:- Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the provisions of Urban Land (Ceiling Regulation) Act, 1976 are applicable for determining the market value of the plot for purposes of Wealth-tax on the relevant valuation date ? 2. The brief facts for disposal of the reference is about the fair market value of the land owned by respondent assessee admeasuring 16000 sq.mt. in Ajmer District though the assessee owned 18000 sq. mt. of land and the dispute confines to 16000 sq. mt. of land which according to the assessee in view of the Urban Land (Ceiling Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 sq. mt. of land is concerned, agreed with the contention of the assessee and held that the value of the excess land be assessed @ ₹ 5/- per sq. mt. and accordingly directed to value the excess land of 16000 sq. mt., totaling ₹ 80,000/-. 5. Ld. counsel for the Revenue contended that there is no whisper in any of the proceedings that the assessee by that time filed declaration or declared the excess land under the ULCAR Act and merely mentioning that the aforesaid land has come under the ULCAR Act is no defence. No evidence was laid in furtherance of the claim about the said land having been surrendered to the Govt. and at least some tangible evidence of filing a declaration was required to have been placed and Tribunal ought not to have accepted the contention without proper evidence. 6. Counsel further contended that in past the value was being shown at ₹ 2,98,000/- and the Tribunal, as a matter of fact, expressed in so far as 2000 sq. mt.of land is concerned judicial notice can be taken that the value of the land is certainly escalated by time. However, the AO accepted the same value as was assessed in the previous assessment years and taking into con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a statement before the competent authority having jurisdiction specifying the location, extent, value and such other particulars as may be prescribed of all vacant lands and of any other land on which there is a building, whether or not with a dwelling unit therein, held by him (including the nature of his right, title or interest therein) and also specifying the vacant lands within the ceiling limit which he desires to retain: Provided that in relation to any State to which this Act applies in the first instance, the provisions of this sub- section shall have effect as if for the words Every person holding vacant land in excess of the ceiling limit at the commencement of this Act , the words, figures and letters Every person who held vacant land in excess of the ceiling limit on or after the 17 th day of February, 1975 and before the commencement of this Act and every person holding vacant land in excess of the ceiling limit at such commencement had been substituted. 10. Sec.6 casts a statutory obligation on every person to make a declaration of holding vacant land in excess of the ceiling limit within the period prescribed to the competent authority with no discret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt thereof and such other relevant factors as the circumstances of the case may require; and (b) fix, subject to the maximum rates specified in that clause, the rate per square metre of vacant land in each zone, having regard to the availability of vacant land in the zone, the trend of price rise of vacant land over a period of twenty years in the zone before the commencement of this Act, the amount invested by the Government for the development of the zone, the existing use of vacant land in the zone and such other relevant factors as the circumstances of the case may require. (4) Different rates may be fixed under clause (b) of sub-section (3) for vacant land situated in different zones within each urban agglomeration. (5) Notwithstanding anything contained in sub-section (1) where any vacant land which is deemed to have been acquired under sub- section (3) of section 10 is held by any person under a grant, lease or other tenure from the Central Government or any State Government and-- (i) the terms of such grant, lease or other tenure do not provide for payment of any amount to such person on the termination of such grant, lease or other tenure and the resumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, once the Act envisages compensation of ₹ 5/- per sq.mtr., the value of the land in so far as the assessee is concerned, was required to be computed at the rate of ₹ 5/- per sq. mt. only. 13. Sec. 7 (1) of the Wealth Tax Act prescribes as under:- 7.(1).Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. 14. The above envisages that the value of an asset should be estimated as if it would fetch if sold in the open market on the valuation date but in this case since the ULCAR Act had come into force, therefore, the value could not have been more that what was prescribed under the ULCAR Act and the said value becomes the fair market value so to say the State Government purchases the land @ ₹ 5/- per sq.mtr which becomes the value, if sold in the open market on the valuation date. 15. The Apex Court in the case of Sri S.N. Wadiyar (Dead) through LR (supra) had an occasion to consider such issue arising out of the market value of the vacant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing notification Under Section 10 of the Act for this purpose, would not fetch more than ₹ 2 lakhs as the assumed buyer knows that the moment this property is taken over by the Government, he will receive the compensation of ₹ 2 lakhs only. We are not oblivious of those categories of buyers who may buy disputed properties by taking risks with the hope that legal proceedings may ultimately be decided in favour of the Assessee and in such a eventuality they are going to get much higher value. However, as stated above, hypothetical presumptions of such sales are to be discarded as we have to keep in mind the conduct of a reasonable person and ordinary way of the presumptuous sale. When such a presumed buyer is not going to offer more than ₹ 2 lakhs, obvious answer is that the estimated price which such asset would fetch if sold in the open market on the valuation date(s) would not be more than ₹ 2 lakhs. Having said so, one aspect needs to be pointed out, which was missed by the Commissioner (Appeals) and the Tribunal as well while deciding the case in favour of the Assessee. The compensation of ₹ 2 lakhs is in respect of only the excess land which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad-infra:- In our view, therefore, when land cannot be sold in the open market, the question of valuation on the hypothetical basis as to what price it would have fetched had it been sold in the open market could not arise even assuming that such land may be sold subject to the restrictions imposed by the Urban land Ceiling Act. In that process, one has to take into account the remote possibility of such land being granted full or partial exemption giving liberty to the assessee to dispose of it as he likes or subject to such restrictions as may be imposed as the conditions for exemption. In valuing such a property, one has to take into account the state of affairs as prevailing on the relevant valuation date. The Tribunal has not adverted to this aspect of the matter at all. In our view, admittedly, when the land is in excess within the meaning of the Urban Land Ceiling Act, the method which has been adopted for valuation of such land cannot be sustained. To ignore the prohibitions and restrictions of the Ceiling Act in valuing a vacant land in excess and liable to be acquired by the Government and to value it as freely transferable land will amount to an arbitrary act resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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