TMI Blog2012 (7) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... ES for Respondent(s) CAV JUDGMENT (Per : HONOURABLE THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA) In a Reference under Sec.27[1] of the Wealth Tax Act, 1957, Income Tax Appellate Tribunal made a reference on the following question, said to be a question of law: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the valuation based on compensation receivable under the Urban Land [Ceiling Regulation] Act, 1976? 2. A Division Bench of this Court, when took up the matter, it doubted the decision of the earlier Division Bench of this Court in the case of Commissioner of Income-Tax v. G.S.Krishnavati Vahuji Maharaj Kalyanraiji Temple, reported in 264 ITR 517 [Guj], in view of the decision of the Supreme Court in the 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions, did not find force in the contention of the Assessee and confirmed the order of the Assessing Officer. 5. Being still aggrieved, the Assessee preferred an appeal before the Income Tax Appellate Tribunal [ Tribunal for short], wherein the same plea was taken and number of decisions of different Courts were referred to and relied upon by both the parties. The Tribunal, having noticed that the land in question was the subject matter of ULC Act, after provisional declaration that seemed to have reached finality, distinguished the decision rendered by the Madras High Court on the ground that in those cases, land had already been acquired and thereby confirmed the order passed by the Commissioner of Wealth [Appeals] as well as the order passed by the Assessing Officer. 6. 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eave Petition filed by the Revenue against the said judgment, by judgment reported in [2005] 277 ITR [SC] 1. 9. In case of Commissioner of Wealth-Tax v. Simpson and General Finance Co. Ltd. [No.1], reported in [2006] 285 ITR 429 [Mad], Madras High Court again followed the same principle and held 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. Therefore, valuation of the property cannot be made by adopting the market rate. The decision of the Tribunal that immovable property was subject to the urban land ceiling laws and should only be valued as per the compensation payable under the Ceiling Act was upheld. 10. The same ratio was followed by Madras 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Urban Land Ceiling Act. 13. The Supreme Court, in the case of Calcutta Electric Supply Corporation v. Commissioner of Wealth-tax, reported in [1971] 82 ITR 154 observed that; section 7 of the Act does not take of hypothetical possibilities in the matter of valuation of the assets. It merely concerns itself as to what is the true market value of the assets in question on the valuation date. 14. In the case of Ahmed G.H.Ariff and others v. Commissioner of Wealth Tax, Calcutta, reported in 1969[2] Supreme Court Cases, 471, the Supreme Court held as under: It has been rightly observed by the High Court that when the statute uses the words if sold in the open market it does 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market value of the land at the time of the transfer. The Supreme Court held that the said covenant ran with the land and it would bind whosoever was the holder of the leasehold interest for the time being and that the said covenant which is in the nature of a burden on the leasehold interest had the effect of depressing the value which the leasehold interest would fetch if it was free from the burden or disadvantage attached to the leasehold interest and that when the leasehold interest for the land had to be valued, the burden or disadvantage attached to the leasehold interest has to be duly discounted in determination of the price which the leasehold interest would fetch. 17. In the case of Khorshed Shapoor Chenai v. Asst. CED, reported in [1980] 122 ITR 21 [SC], which was a case arising 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 1 st March, 2000, upheld the decision of the Commissioner of Wealth-tax [Appeals], that the valuation of the land owned by the Assessee in excess of limit laid down under the Land Ceiling Act is to be made on the basis of the compensation which the Assessee would be entitled to receive under the said Act. For the Assessment Year 1991-92, when the matter was again taken up, the assessee Aims Oxygen Pvt. Ltd., had to move before the Income Tax Appellate Tribunal, Ahmedabad Bench B , Ahmedabad, in WTA No. 910-Ahd-95. In the said case, in view of the decision of the Tribunal passed in the case of the Assessee for the Assessment Years 1988-89 to 1990-91, by order dated 12 th May, 2000, the Income Tax Appellate Tribunal, Ahmedabad directed to examine the issue in light of the said decision. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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