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2016 (9) TMI 1139 - RAJASTHAN HIGH COURT

2016 (9) TMI 1139 - RAJASTHAN HIGH COURT - TMI - Applicability of provisions of Urban Land (Ceiling & Regulation) Act, 1976 for determining the market value of the plot for purposes of Wealth-tax on the relevant valuation date - Held that:- Once there is a restriction on transfer of any land falling under the ULCAR Act, the fair market value of the property would be depressed on account of such restrictions/considerations. Admittedly, in the instant case, it was not open to the assessee to sale .....

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of the excess land ad-measuring 16000 sq. mt., would be ₹ 80,000/- @ ₹ 5/- per sq.mt.. - Consequently, the question 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 Appel .....

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ference 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 & Regulation) Act, 1976 (for short, 'ULCAR Act') came into force w.e.f. 17/02/1976 and applicable in the State of Raj. On 09/03/1976 & any person holding excess land under the ULCAR Act was requir .....

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ssee and therefore, the AO assessed the value of the land for both the assessment years of ₹ 2,98,000/- which was noticed in the earlier assessment years. 3. The matter was assailed before the Commissioner of Income Tax (Appeals) (for short, CIT(A)') before whom it was reiterated that the Government of India restricted the area of the open vacant land by a person to be 2000 sq. mt. in so far as district Ajmer is concerned where the subject land is situated and it was contended that ULC .....

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nment. However, the CIT(A) was not inclined and accordingly rejected claim of the assessee and upheld the view of the AO. 4. The matter was assailed before the Tribunal and it was reiterated that under the Wealth Tax Act, only fair market value of an immovable property is required to be taken into consideration and once the land came under the ULCAR Act or hit by the said provisions, fair market value could not have been more than ₹ 5/- per sq. mt as scheduled in the ULCAR Act. The Tribuna .....

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ed 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 witho .....

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ining the market value at a figure of only ₹ 5/- per sq. mt. is unjust and further contended that it is not that in every case only ₹ 5/- per sq. mt. has to be adopted and the ULCAR Act provides that the maximum compensation could be at ₹ 2 lac and therefore, in the alternative, she contented that the value is required to be assessed of the excess land maximum at ₹ 2 lac and not ₹ 5/- per sq. mt. or say ₹ 80,000/-. 7. Per-contra, ld. counsel for the assessee c .....

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n accordance with provisions of the ULCAR Act, the Tribunal came to a correct conclusion. He relied upon a judgment rendered by the Apex Court in the case of Sri S.N. Wadiyar (Dead) through LR Vs. Commissioner of Wealth Tax, Karnataka : (2015) 378 ITR 9 (SC) and contended that the self same question about the fair market value under ULCAR Act has been duly considered by the Apex Court wherein it is held that the value gets depressed because of provisions of ULCAR Act. 8. We have heard ld. counse .....

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the said Ceiling Act, Ajmer falls in category "D" with the maximum land holding being 2000 sq. mt. Sec. 6 of the ULCAR Act provides ad-infra:- "6.(1) Every person holding vacant land in excess of the ceiling limit at the commencement of this Act shall, within such period as may be prescribed, file 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 othe .....

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f 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 compet .....

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o purchase land which was under the ULCAR Act. In fact, the ULCAR Act prohibits a person to sale or alienate or gift the property after the ULCAR Act having come into force. The value is required to be noticed on the date when the ULCAR Act came into force. Section 11 of the ULCAR Act further provides that :- 11. Payment of amount for vacant land acquired.- (1) Where any vacant land is deemed to have been acquired by any State Government under sub-section (3) of section 10, such State Government .....

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g- (i) ten rupees per square metre in the case of vacant land situated in an urban agglomeration falling within category A or category B specified in Schedule I; and (ii) five rupees per square metre in the case of vacant land situated in an urban agglomeration falling within category C or category D specified in that Schedule. (2) The net average annual income referred to in clause (a) of sub-section (1) shall be calculated in the manner and in accordance with the principles set out in Schedule .....

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bject 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 .....

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rson on the termination of such grant, lease or other tenure and the resumption of such land by the Central Government or the State Government, as the case may be; or (ii) the terms of such grant, lease or other tenure provide for payment of any amount to such person on such termination and resumption, then,- (a) in a case falling under clause (i), no amount shall be payable in respect of such vacant land under sub-section (1); and (b) in a case falling under clause (ii), the amount payable in r .....

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nce with the provisions of this section as also the person, or, where there are several persons interested in the land, the persons to whom it shall be paid and in what proportion, if any. (8) Before determining the amount to be paid, every person interested shall be given an opportunity to state his case as to the amount to be paid to him. (9) The competent authority shall dispose of every case for determination of the amount to be paid as expeditiously as possible and in any case within such p .....

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clause 3 of Sec.11 of the ULCAR Act that the compensation shall not exceed ₹ 2 lac but that is if exceptional case is made out by a person to fall in the category of claiming an amount of ₹ 2 lac. In other words, had it been a case, say of 50000 sq. mt. of excess land, the compensation could not have been ₹ 2,50,000/- (50,000x5) as it could not have exceeded by ₹ 2 lac. and thus restricted with outer limit of ₹ 2 lac. Therefore, once the Act envisages compensation .....

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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 Ape .....

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ion Under Section 10(1) of the Ceiling Act had not been issued. However, the process had started as the Assessee had filed statement in the prescribed form as per the provisions of Section 6(1) of the Ceiling Act and the Competent Authority had also prepared a draft statement Under Section 8 which was duly served upon the Assessee. Fact remains that so long as the Act was operative, by virtue of Section 3 the Assessee was not entitled to hold any vacant land in excess of the ceiling limit. Order .....

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date(s), would clearly be wrong even on the analogy/rationale given by the High Court as it accepted that restrictions and prohibitions under the Ceiling Act would have depressing effect on the value of the asset. Therefore, the valuation as done by the Assessing Officer could not have been accepted. 31. Let us proceed on the same lines as delineated/drawn by the High Court itself, namely, one has to assume that the property in question is saleable in the open market and estimate the price whic .....

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taken over by the Government and is awaiting 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 i .....

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khs. 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 is covered by Sections 3 and 4 of the Ceiling Act. The total vacant land for the purpose of Wealth Tax Act is not only excess land but other part of the land which would have remained with the Assessee in any case. Therefore, th .....

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Apex Court, observed ad-infra:- "On the aforesaid facts, as it is evident that the land in question was declared surplus land under the Urban Land [Ceiling & Regulations] 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 re .....

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dated 16th March, 1989. 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 the open market rate, without any restriction and prohibition. In the result, the question, as referred for our opinion is required to be answered in the negative, against the Revenue and in favour of the Assessee." 17. Calcutta High Court in the case of Gauri Prasa .....

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and 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, wh .....

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