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TMI Blog1984 (6) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... be deleted from the net wealth as non-existent assets. The assessee filed returns of net wealth for these years showing the value of the assets including the immovable properties at figures based on the valuation given by his valuer. The wealth-tax assessments relate to the assessment years from 1967-68 to 1975-76. For some of these assessment years, the WTO has referred the valuation of some of the properties under section 16A of the Wealth-tax Act, 1957 ('the Act'), to the departmental valuer. The departmental valuer's valuation was adopted for some of the assessment years but for other assessment years, the valuation was done after the relevant valuation dates for a subsequent assessment year. The WTO adopted the departmental valuer's figure (if valuation for all these assessment years. In the departmental appeals, a general ground of appeal has been raised to the effect that the Commissioner (Appeals) erred in not accepting the valuation of the immovable properties made by the Departmental Valuation Officer and subsequently adopted by the WTO. Especially, a reference was made to the valuation adopted by the WTO in respect of the property at Goregaon. The Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged the valuation put in, in the assessments made in his hands by the WTO, even though the valuation adopted by the WTO was harsh and abnormally high. In other words, apart from the double taxation aspect of these assets involved in the litigation, the very valuation agreed to or not disputed by the court receiver in regard to this item is challenged by the assessee as being excessive and not properly defended by the court receiver. The assessee as a direct party paying the tax would have justified a much lower valuation and supported it with relevant data unlike the court receiver. 3. All these appeals and the cross-objections are consolidated as they were heard together by the Tribunal. The assessee has not substantially pressed, if not actually withdrawn, his objection to the valuation put on agricultural lands, some of which were included and valued as non-agricultural assets. In modifying the valuation adopted by the WTO for some of the assets, the valuation of which is in dispute, in his rather elaborate and lengthy order, the Commissioner (Appeals) has discussed some of the general principles of valuation contested by the assessee as well as the department, before appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the Valuation Officer's draft was made sometime after the date of the assessment order. The Commissioner (Appeals) has by and large, gone generally on the valuation made by the technical officers, even though for some of the years, that was made either before the relevant assessment year or valuation date or subsequent to these. According to him, the valuation of the properties had changed from day to day depending on the circumstances, such as, whether it was unencumbered, whether it was tenanted or occupied by the trespassers, etc. So far as the land and buildings are concerned, apart from the location of the land, in the view of the Commissioner (Appeals), the use to which the land can be put to was also relevant. The price a willing buyer would pay would, according to the Commissioner (Appeals), depend and take into account the point of time at which he would be in a position to enjoy in its entirety the plot and land including matters relating to the lease of the building. The Commissioner (Appeals) found that the Valuation officers took into account the reversionary value of the land. After the decision of the Calcutta High Court in the case of CIT v. Smt. Ashima Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that in the case of a dilapidated building a hypothetical buyer would have to take into account the landlord's obligation to give the tenant either an alternative accommodation or an accommodation in the new construction at nil or at substantially concessional considerations. Taking into account both the extreme views, the Commissioner (Appeals) fixed the period of fifteen years and more as remote for taking into account any reversionary interest. If the buyer finds that the alternate use of the land so as to produce the higher income is postponed by a period of more than fifteen years, according to the Commissioner (Appeals), he would be justified in ignoring the reversionary interest. 7. We have considered this matter at length. The two valuers of the department as also the architect, who made the valuation for the assessee, were heard. There seems to be a little confusion in the whole approach of valuing the land with or without the building involving the computation of reversionary interest. Prima facie, as will be supported by the decisions like that of the Calcutta High Court in CED v. Radha Devi Jalan [1968] 67 ITR 761, the two principal methods of valuation are that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period. Any speculatory yield as in the case of gilt-edged securities would be absolutely irrelevant to the above computation. A willing buyer of a hypothetical market is, certainly, not interested in finding out what a gilt-edged security will fetch for him. He is more interested, as stated above, in the normal yield of the asset with its undestructibility in terms of wealth, though not in the nature of the asset at any point of time in future. On the contrary, the method adopted by the valuers, in our opinion, leads to this anomaly ; if the present worth of the building is computed at Rs. 1 lakh yielding an annual income of Rs. 10,000 if a person sells it for Rs. 1 lakh at the end of a period and that amount will be available to him even at the end of ten or twenty or more years after it fetches an annual income of Rs. 10,000. If the reversionary principles apply to the above, the present value of the asset should be taken on 'capitalisation' method at gilt-edged security rate of Rs. 1 lakh and add to it the reversionary value of the still existing unaltered Rs. 1 lakh at the end of the period. Certainly this cannot be the correct computation. We are not sure whether by adoptin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inability to have a say in the sales on account of adverse possession, etc., certainly, it cannot be stated that these sales figures are manipulated to reduce wealth-tax liability. Even if, therefore, in a normal case to adopt a sale price for valuation of a property, the department can claim an elaborate examination of the sales in details. In the present case, that is not necessary. Added to this is the situation that in respect of some of the sales the department attempted to apply the provisions of section 52(2) but unsuccessfully. This aspect has been dealt with earlier. It is also seen that in none of the cases where the sales have been completed, the department has started acquisition proceedings under section 269 of the 1961 Act, which it, certainly, would have done if there was any suspected understatement. The learned counsel for the department pointed out that in respect of some of the sales, there was only a mere agreement and the sale document was not before the WTO enabling him to start acquisition proceedings. This argument ignores the fact that no immovable property of value of more than Rs. 100 can be transferred, in law, without an executed registered deed. It ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or estimate work involved substantial. When a property is actually sold for a particular price near about the valuation date, we really do not see how as a practical measure, the sale price could not become the basis of or even the value to be adopted for wealth-tax purposes. There would be, in our opinion, lesser chance of error in the guess work involved here than in working out the figure after taking into account several variables. We, therefore, uphold the Commissioner (Appeals)'s view that where the sales are made, unless the sales could be challenged on the ground of manipulation for wealth-tax purposes, the sale figures would represent better figures on estimate, than one based on several indeterminate factors. 12. Even the adoption of a sale figure itself involves an adjustment for working out the value of the same property for the earlier year. This also involves an estimate but the extent of estimate involved would be lesser than if the whole valuation is based on an estimate. The valuation, therefore, for earlier years than the year of sale would have to be fixed based on the trend of the price, any change involved in the market, etc. The Commissioner (Appeals) has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortant point which came up for consideration is about the valuation returned by the assessee himself which was higher than the value worked out by the Commissioner (Appeals). It is pointed out for the department that when the assessee had himself returned the value that should be regarded as representing the value of the asset as approximately as possible, the mere fact that an individual valuation put on some basis by the valuers should give a value less than the figure returned by the assessee should not be the reason for adopting the valuers' figure rather than the returned figure. The learned counsel for the assessee has challenged this position. It is not a question of the assessee being tied down to a value shown by him. Referring to the provisions of sections 2(m), 3 and 7 of the Act, the learned counsel for the assessee has pointed out that what the law requires is to fix the value of each asset and then aggregate their values for arriving at the net wealth under the 1957 Act : the sole authority for adopting the particular valuation is the WTO unlike under the 1961 Act, where the income is fixed according to the Income-tax Rules, 1962 obtaining and the said Act. Nothing is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice, be as vague as possible. The actual value would depend on several factors, like the time of valuation, the particular need for purchasing such property in the market, presence or absence of any special purchaser, etc. As correctly stated by the learned counsel for the assessee, the valuation has to be made under section 7 which provides for such a valuation which the WTO would fix. If, therefore, in a particular case, the factors justify a lower valuation than that fixed by the assessee, we see no reason why we should ignore this latter value and adopt some uncertain value returned by the assessee. 17. We have gone into the details available with regard to the several properties in the WTO's assessment order, the valuation reports furnished by the assessee's valuer and the departmental valuers and the other details available. The Commissioner (Appeals) has also dealt with at length with the details of these properties in coming to the values fixed by him in the several assessment years 1967-68 to 1974-75 for these properties. In the discussion below, we have pointed out the instances where modification, if any, of the Commissioner's order is called for. Subject to this, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's valuer fixed the value of this property as on 31-3-1968 at Rs. 39,531. The assessee himself returned it at Rs. 36,510 for 1967-68 and other figures for subsequent years. After taking into account the circumstances of the case including the sale, the value of this property was fixed by the Commissioner (Appeals) at Rs. 25,000. For the years 1963-64 to 1966-67, it would appear that this property was valued at figures at about Rs. 28,000. Looking to all the facts, we see no reason to interfere with the valuation of this property made by the Commissioner (Appeals). BELWALKAR WADI 21. The assessee has shown the value of this property at Rs. 47,200 for 1967-68, Rs. 17,913 for 1968-69, 1969-70, 1970-71, 1971-72 and also 1973-74. For 1972-73, the value was put at Rs. 33,700. The DVO's report as on 31-3-1973 gave a figure of Rs. 6,84,780. Another valuation as on 31-3-1974 gave the value at Rs. 8,28,969. The WTO himself valued this property at Rs. 2,30,000 for 1967-68, Rs. 2,41,000 for 1968-69, Rs. 2,98,000 for 1969-70, Rs. 3,94,000 for 1970-71, Rs. 4,91,000 for 1971-72, Rs. 5,88,000 for 1972-73, Rs. 6,85,000 for 1973-74 and Rs. 8,29,000 for 1974-75. The Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years, the WTO adopted values of Rs. 2,75,000 and Rs. 2,91,000. For the reasons given in detail in his order, the Commissioner (Appeals) fixed the value of these properties separately for its two parts. For Gogate Wadi he fixed the price for the assessment year 1971-72 at Rs. 1,50,000. After this date this was sold. For the Churi Wadi he fixed a value of Rs. 10,000 for all the assessment years. After considering the facts relating to these properties, we do not think that much could be said about the Commissioner (Appeals) adopting the same value of these properties for several years. The factual circumstances are such that in an estimated value there could not be much of a difference from year to year. Of the combined extent of 49,920 sq. yds. which constituted these two properties, 31,970 sq. yds. were sold on 30-3-1972 as the registered conveyance deed of that date indicated. The Departmental Valuation Officer worked out the value of this property at Rs. 5,58,300, which included a reversionary value of the land after 20 years from the date of valuation, 12-8-1975, of Rs. 4,23,555. In the face of the actual land being sold for Rs. 1,50,000 and the land being subject to all the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of these properties the assessee did not show any separate valuation in the returns for the earlier years, such as 1967-68, but subsequently some values were put as from the assessment years 1970-71. These latter values were based on the assessee's valuer's report, dated 31-3-1970 and 31-3-1971. For the assessment year 1967-68, the departmental valuer has put the value of the first three of the above properties at Rs. 93,623, Rs. 2,000 and Rs. 21,000 based on a valuation report dated 31-3-1973, while there was no report for the property at S.No. 20/2, the departmental valuer's report for the last two properties indicated figures of Rs. 28,430 and Rs. 3,92,000, respectively. This was based on a valuation as on 31-3-1967. For the assessment year 1967-68, the WTO adopted figures of Rs. 63,000, Rs. 1,000, Rs. 7,500, Rs. 50,000, Rs. 19,000 and Rs. 6,42,250, respectively. As regards the first item of property, the position appears to be that farmers of the assessee were residing in this land and as tenants paying a small monthly rent for the land only. The structures were constructed by the farmers and the assessee had no right therein. The land measuring 2,109 sq. yds. it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot accepted by the Commissioner (Appeals). This decision has not been challenged before us by the assessee. The valuation, therefore, adopted on the non-agricultural basis, which is also supported by the Court decisions, with regard to this land, has to be considered on that basis. It would appear that in 1955 and 1956 this land was given on lease to two agricultural tenants, but in 1959 this appears to have been got back by the assessee. As pointed out above, the Valuation Officers have valued this property from Rs. 3,04,000 to Rs. 5,75,000. The Commissioner (Appeals) found that the part of this land was acquired for road widening purposes. 1,875 sq. yds. were acquired at the rate of Rs. 66 per sq. yd. including solatium of 15 per cent, the balance of land continued to be under notification for acquisition. An agreement to sell property initially for a sum of Rs. 3 lakhs was referred to in the neighbourhood. The Commissioner (Appeals) also based his valuation on this acquisition figure of Rs. 3 lakhs as on 31-3-1974. From 1964 onwards, apparently, this property was notified for acquisition. In 1972, 1,875 sq. yds. were acquired for Rs. 1,39,307 that left a balance of 5,300 sq. yds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receiver. The receiver has already filed a return of income and an assessment has been completed on the basis of this return. Thus, prima facie, there is a double assessment with regard to these properties. It is also pointed out that the receiver has not seriously contested the figures adopted by the revenue authorities being almost a non-interested person. This resulted in a substantial enhancement of the value for these properties. The assessee's claim is that apart from the double assessment, which should be avoided, the proper value of these properties should also be adopted. 29. As far as the double assessment is concerned, we have no hesitation in accepting the assessee's claim. The question, however, would be as to whether the assessment should be made here or the assessment made in the receiver's case should subsist. The last matter is not before us. It would, therefore, be proper to direct that insofar as the same properties have been assessed in the hands of the receiver on behalf of the assessee, it should not be included here. The question, therefore, of going into the question of valuing that property does not arise. 30. From the above it would be clear that the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's claim for deduction of this asset which was an intangible item in the figure of assets and in effect represented a loss to the assessee. The Commissioner (Appeals) held that in applying the provisions of rule 2D(d) of the Wealth-tax Rules, 1957, the WTO was bound to adjust the above figure of non-existent assets. Taking into account, however, the fact that the assessee sold his FSI rights for a sum of Rs. 2 lakhs, which was accepted by the WTO, the Commissioner (Appeals) allowed a deduction of Rs. 4,46,962. 32. The learned counsel for the department has challenged this allowance. The development expenditure even granting that it was incurred, was of a continuous nature and the plan was executed bit by bit. Even though for accountancy purposes it can be treated as an intangible addition to the assets, in effect it did not represent a loss to the assessee at all. According to the learned counsel, this was not to be allowed at all. Alternatively, it is pointed out that the expenditure has to be adjusted at the rate of progress of development. Apart from the fact that this would make any allowance dependent on the particular valuation date, it is also pointed out that the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs. 2,93,000 towards principal and cumulative interest. For the assessment years 1963-64 to 1973-74, the WTO included towards this asset amounts varying from Rs. 2,17,819 to Rs. 2,93,000. The assessee's claim that being a contested asset nothing could be included in the net wealth for this property was correctly rejected by the Commissioner (Appeals). Taking into account the pending appeal, loss of interest, etc., relating to this asset which any purchaser would take into account, the Commissioner (Appeals) fixed the value of this asset up to the assessment year 1971-72 at Rs. 1 lakh and thereafter at Rs. 2 lakhs till the date of receipt. In the departmental appeal this has been challenged. The learned counsel has pointed out that considering the original amount awarded by the land acquisition authorities and the assessee's own challenge for a larger compensation, there was no justification for any reduction of this amount. Even the order of the civil judge put the compensation for it at Rs. 2,73,000. The assessee had appealed against it. According to the learned counsel, there was no question, therefore, of the value of this land coming to any figure below that fixed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as department, had done substantial spade work with regard to the valuation of the properties and represented before the authorities below as well as before us. The paper book furnished in this connection runs to several hundred pages. The Commissioner (Appeals) has written an elaborate order hitting almost a century in terms of number of pages. Before us the matter was discussed at length, both in terms of principles as well as the valuation of individual items of properties, with reference to the valuation reports of the assessee's valuer and the departmental valuer. We had also the best assistance from the counsels on both sides. In coming to our conclusions about the appeals, we have availed of all these rich material before us. Apart from referring to the large amount of material gathered and work put in by the Commissioner (Appeals), we must make particular reference to the elaborate arguments advanced before us by the counsels as well as the valuers. The grounds of appeal of the department have broadly challenged the reduction given by the Commissioner (Appeals) but has not indicated to what properties the challenge really applies. Against this background, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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