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TMI Blog2012 (7) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Ahmed G.H. Ariff v. Commissioner of Wealth Tax, Calcutta, reported in AIR 1971 SC 1691, and referred the matter for hearing by a Larger Bench. 3. The Assessee, Aims Oxygen Pvt. Ltd., Vadodara, which is engaged in the business of manufacturing industrial gases at its factory, filed return of net wealth on 28 th September, 1984, wherein, value of the open land situated at Old Padra Road, was shown at Rs. 62,538/-. As the Assessing Officer was of the opinion that the valuation given by the Assessee Company was shown at the same price at which the said land was acquired pursuant to land acquisition proceedings as early as in 1960, he referred the matter to the Departmental Valuation Officer under Sec.16A of the Wealth Tax Act, 1957 ["Wealth Tax" for short] for assessing the fair market value of the said open land along with other properties of the Assessee Company. The Departmental Valuation Officer submitted his report on 10th March, 1989 which was served on the Assessee. In the meantime, the Assessee got another Govt. Regd. Valuer's report on 16th March, 1989 and on that basis, it filed revised return of wealth showing value of the open land in question at Rs. 1,44,146/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to the learned counsel for the Assessee, the land in question having been declared surplus, as the value of the property would be normally reduced, the Assessing Officer should have accepted reduced market value of the land, as prepared by Govt. Regd. Valuer and submitted by the Assessee, particularly, when the market value of the very property had reduced at market rate than accepted by the Revenue for the other financial years. Per contra, according to the learned counsel for the Revenue, in view of the words " if sold in open market", it is to be presumed that there is open market and the property can be sold in such market and on that basis, the valuation has to be made, and the question of reducing the value of the land on the ground of restrictions and prohibitions is not justifiable. 7. To determine the issue, we will refer to the decisions referred by both the parties and also some other decisions. We have also noticed the relevant facts. In case of Commissioner of Wealth Tax v. Ranganatha Mudaliar [K.S.], reported in 150 ITR 619 [Mad], when the matter fell for consideration before the Division Bench of Madras High Court, the Court observed that normally, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adras High Court in the case of Commissioner of Wealth-Tax v. Simpson and General Finance Co. Ltd. [No.2], reported in [2006] 285 ITR 431 [Mad]. 11. The matter earlier fell for consideration before a Division Bench of this Court in the case of Commissioner of Income-Tax v. G.S. Krishnavati Vahuji Maharaj Kalyanraiji Temple, reported in [2003] 264 ITR 517 [Guj], and this Court noticed the fact that whenever there is any restriction on the transfer of any land, it is a matter of common knowledge that the value of the property or land, as the case may be, would be normally reduced. Having noticed that the land owned by the Assessee was covered under the provisions of the Urban Land [Ceiling & Regulation] Act, 1976, the Court agreed with the view taken by the Tribunal and held that the value of the land cannot be assessed more than what the government was to offer under the provisions of the Ceiling Act. 12. In the case of Commissioner of Wealth-Tax v. Sri Srikantaddata Narasimharaja Wadiyar, reported in [2005] 279 ITR 226, a Division Bench of the Karnataka High Court, having noticed that the competent authority had neither issued any notification under Section 10[1] nor under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umed that there is an open market and the property can be sold in such a market and on that basis, the value has to be found out. It is a hypothetical case which is contemplated and the Tax Officer must assume that there is an open market in which the asset can be sold." 15. In the case of Pandit Lakshmi Kant Jha v. Commissioner of Wealth- tax, reported in [1973] 90 ITR 97, the Apex Court observed as under: "There is nothing in the language of section 7[1] of the Act which permits any deduction on account of the expenses of sale which may be born by the assesee if he were to sell the asset in question in the open market. The value according to section 7[1] has to be the price which the asset would fetch if sold in the open market. In a good many cases, the amount which the vendor would receive would be less than the price fetched by the asset. The vendor may, for example, have to pay for the brokerage commission or may have to incur other expenses for effectuating the sale. It is not, however, the amount which the vendor would receive after deduction of those expenses but the price which the asset would fetch when sold in the open market as would constitute the value of the asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising under the E.D. Act, the Supreme Court held where the assessee's land has been acquired under the Land Acquisition Act, the assessing authority will have to estimate the value of the property acquired having regard to its peculiar nature, its marketability and the surrounding circumstances including the risk or hazard of litigation looming large at the relevant date. 18.From the aforesaid decisions rendered by one or the other Court, the settled law can be summarized as follows: [i] The words 'if sold in open market' do not contemplate actual sale or the actual state of the market, but only enjoins that it should be assumed that there is an open market and the property can be sold in such a market and on that basis, the value has to be found out. It is a hypothetical case which is contemplated and the Tax Officer must assume that there is an open market in which the asset can be sold. [ii] Whenever there is any restriction on transfer of any land, value of the property or land, as the case may be, would be normally reduced and the valuation is to be ascertained taking note of the restrictions and prohibitions contained in the Ceiling Act as if the land is notified as excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. 20. On the aforesaid facts, as it is evident that the land in question was declared surplus land under the Urban Land [Ceiling & Regulation] Act, 1976 which was having depressing effect on the value of the asset, the valuation had to be made on the basis of assumption that the purchaser would be able to enjoy the property as the holder, but with restrictions and prohibitions contained in the ULC Act and in such case value of the property or land would be reduced. Following the same principle, the Revenue, having already accepted the depressed valuation during the Assessment Years 1988-89 to 1990 and then for Assessment Year 1991-92, it was not open to the Revenue to assess the property on the basis of the market value, which normally could have fetched without any restriction or prohibition, but ought to have accepted the value of open land with such restriction and prohibition at Rs. 1,44,146/-, as assessed by the Govt. Regd. Valuer by report dated 16 th March, 1989. 21. In view of the finding aforesaid and the settled law as discussed above, we are of the considered view that the Appellate Tribunal was incorrect in holding that immovable property should be valued as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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