Wealth-tax valuation of ceiling-regulated land must reflect statutory restrictions and depressed market value, not free-market price.

For wealth-tax valuation, land subject to the Urban Land (Ceiling & Regulation) Act, 1976 had to be valued at its depressed market value, because statutory ceiling limits, transfer restrictions, and capped realizable compensation materially reduced what a willing purchaser would pay on the valuation date. The fair market value under the Wealth Tax Act therefore could not be taken on an unrestricted open-market basis where the ceiling regime applied. The excess vacant land was accordingly valued at the lower statutory rate, and the valuation was to reflect the effect of the ceiling law rather than a notional free-market price.

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Issues: Whether land falling within the Urban Land (Ceiling & Regulation) Act, 1976 had to be valued for wealth-tax purposes at the depressed market value affected by the statutory ceiling and transfer restrictions, rather than at an unrestricted open market rate.

Analysis: Under section 7(1) of the Wealth Tax Act, the asset is to be valued at the price it would fetch in the open market on the valuation date. The Urban Land (Ceiling & Regulation) Act, 1976, which was in force on the relevant valuation dates, imposed a statutory ceiling on vacant land, required declaration of excess land, restricted alienation, and prescribed compensation at a maximum of Rs. 5 per sq. mt. for the relevant category. Those restrictions materially depressed the value of the excess land because a reasonable purchaser would factor in the ceiling regime and the limited realizable value under that statute. The valuation therefore had to reflect the effect of the ceiling law and not an unrestricted market price.

Conclusion: The excess land had to be valued at Rs. 5 per sq. mt., and the question of law was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Where a statutory ceiling law restricts transfer and fixes the realizable compensation for excess vacant land, the fair market value for wealth-tax purposes must reflect that depressed value on the valuation date.

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