TaxTMI 
TaxTMI 
2012 (6) TMI 525
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....s in rejecting the valuation report of a Govt. approved valuer on surmise, conjecture & untenable grounds. 1.3 That CWT(A) ought to have held that the land held by the appellant was not an un encumbered & free from liens & appellant could not have sold it in the open market. 2. That on the facts and in the circumstances of the case and in accordance with the provisions of law, the learned Commissioner of Wealth Tax (Appeal) has erred in confirming the action of the learned Assessing officer charging interest u/s 17B of the Wealth-tax Act, 1957, amounting to Rs.18,29,556/-. 3. That on the facts and in the circumstances of the case and in accordance with the provisions of law, the learned Commissioner Of Wealth Tax (Appeals) has erred in confirming the action of the learned Assessing Officer in initiating penalty proceedings u/s 18(1)(c) of the Wealth Tax Act, 1957 without recording his satisfaction that the appellant company had concealed the particulars of its wealth or furnished inaccurate particulars of such wealth. 4. That aforesaid grounds are without prejudice to one and another. 5. That the order passed by the learned Commissioner Of Wealth Tax (Appeals) is bad....
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....and therefore, the land's selling price and buyer were already determined by contract. 3.2. The WTO thereafter proceeded to make the assessment and in the assessment order, the WTO determined the valuation of stock-in-trade of land (13.152 acres which was held for more than 10 years as on the valuation date i.e. 31.3.2001) at Rs.20,94,12,045/- as against assessee's valuation of Rs.32,82,412/- as per its agreement of 25.10.1983. The WTO, however, accepted the balance sheet otherwise and allowed the debts outstanding against the said land of Rs.85,05,459/- and determined the taxable wealth of the appellant company at Rs.20,09,06,586/-. The WTO for the valuation of land adopted purchase value of the land in 1998 and thereafter increased the value of the land by 10% each year on compound basis.. He ultimately increased the value of land by 30% as compared to the rate of 1998 and determined the estimated market valuation of the property. 3.3. In determining the market value of the property, the WTO referred to the Part H of Schedule III i.e. Residuary Rule 20 for the valuation of the property. As according to the WTO, there was no other rule available in the Schedule for determini....
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....eveloping and selling large area of land despite ceiling laws. The subsidiary companies however declare the entire land so acquired by them as their stock in trade since it is registered in their names. When the land is conveyed in favour of DLF Universal or its nominees (final buyers) it is shown as sales and reduced from their stock-in trade." ii) It is submitted that the sale made on the basis of this agreement to DLF Universal Ltd. is being accepted in the income-tax assessment proceedings of both the Buyer and the Seller. Reference is made to the orders of the Assessing Officers passed u/s.143(3) of the I.T. Act in the case of M/s. Mayur Recreational & Development Ltd. in A.Y. 2003-04 and that of assessee M/s. Nachiketa Real Estates Pvt. Ltd. for A.Y. 2006-07, which are placed on paper book. It is thus clear that the validity and effect of agreement dated 25.10.1983 in all the years has been accepted and recognized in the respective assessments by the department. iii) The assessment order dated 27.3.2006 passed u/s.143(3) for assessment year 2003-04 of the Income-tax Act in the case of M/s. Mayur Recreational & Development Ltd. the system of sale/purchase agreement had b....
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....anganathan Mudaliar & Another (Madras.) - 230 ITR 922 - CWT vs. R.P. Padmavathy Ammal (Madras.) vii) Learned counsel contends that the judgments relied by authorities below are distinguishable. With regard to the judgment in the case of CWT vs. Prince Muffakham Jah Bahadur Chamlijan 247 ITR 351 ITR (SC), the AR submitted that it was on the proposition whether an "inalienable right" to live in a property for life is taxable asset under the Wealth-tax Act or not and method to work out the value of an inalienable right. Similarly, in the case of Ahmed G.H. Ariff and Others vs. CWT 76 ITR 471 (SC) relied upon by the authorities below, the Hon'ble Supreme Court was examining the issue as to whether "annuity" is a right capable of included in the wealth-tax or not. In the case of Purshottam N. Amarsay vs. CWT 88 ITR 417 (SC), relied upon by the authorities below, the Hon'ble Supreme Court was examining as to how the "right to support maintenance and advancement of life" was to be valued on a hypothetical basis, whereas assessee's case stands on totally different footing. viii) It is emphasized by the learned counsel that the asset involved in this case is admittedly land held as....
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....and in question was subject to a charge i.e. its sale valuation in assessee's hand being its cost + Rs.2,000/- per acre. The WTO was not justified in arbitrarily determining the value of the land ignoring these vital facts and statutory rules of valuation. 5. Learned CIT (DR) Shri A.D. Mehrotra filed a Paper Book containing 35 pages, consisting of photocopies of judgments, which are relied. Ld. DR referred to the provisions of Indian Contract Act, 1872, for the proposition that only an agreement, which is enforceable by law, is a valid contract. Any agreement which is not enforceable by law is said to be void or voidable. The impugned agreement between M/s. Mayur Recreational & Development Ltd. and M/s. DLF Universal Ltd. dated 25.10.1983 was a void agreement, as the same is in the nature of self serving device and not enforceable. By designing this agreement dated 25.10.1983, the group of assessee companies has avoided tax liabilities including wealth-tax liability, both in the hands of M/s. Mayur Recreational & Development Ltd. as well as in the amalgamated company. It is submitted that the agreement dated 25.10.1983 should be held as void and devoid of legal force as its purp....
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....3. We are of the opinion that arguments made by assessee deserve merit; having accepted the agreement in all income-tax proceedings for more than two decades, it does not lie now with the Department to take a U turn and treat the agreement dated 25.10.1983 as self-serving document in wealth-tax assessments. There are numerous instances when the holding companies or for that matter subsidiary companies enter into business transactions with each other. 7.4. Hon'ble Supreme Court in the case of Vodafone Int. Holding B.U.V. Vs. Union of India has in substance adverted to the issue of separate entity principle; lifting of corporate viel; colourable device and tax avoidance methods; pre-ordained transaction. It has been held that burden is on revenue to prove these tax avoiding attempts by cogent evidence and reasoning, same which cannot be based on suspicion or conjectures. The issue that needs to be examined is, whether such transaction between the group concerns have been entered bona fide and for valid commercial reasons or for tax avoiding purposes. The law allows creation of holding companies and subsidiary companies in Income Tax as well as Companies Act. The impugned agreement....
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....and is acquired by the First Party in the neighborhood, the same shall also be deemed to form part of the land which is subject matter of this agreement." 8.1. It has not been disputed that the money advanced to buy this land was specifically given on loan by the buyer Co. i.e. DLF as per this agreement and has been allowed as debt owed by both the authorities below while calculating net wealth. Besides, as per the details filed by the assessee, this land has also actually been purchased by the buyer i.e. DLF as per the Agreement at cost + Rs.2,000/- per acre in the subsequent years. We are therefore of the opinion that the land held as a business asset i.e. stock-in-trade by the appellant company was also a part of the Agreement dated 25.10.1983. 8.2. This land has been admittedly held as a business asset as stock-in trade right from the date of purchase either by M/s. Mayur Recreational & Development Ltd. and after amalgamation by M/s. Nachiketa Real Estates Pvt. Ltd. and the sale proceeds thereof have been treated as business income in the respective hands right from the inception till date. In our view, this land falls under the definition of 'asset' u/s 2(ea)(v) of the W....
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....rovisions, determined in accordance with rule 20 exceeds the value arrived at in accordance with clause (a) by more than 20 per cent, then the higher value shall be taken as the value of the asset." 9.3. Rule 20 referred to in rule 14(2)(b), this states as under:- "R.20 (1) The value of any asset, other than cash, being an asset which is not covered by rules 3 to 19, for the purposes of this Act shall be estimated to be the price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date. (2) Notwithstanding any thing contained in sub-rule (1) where the valuation of any asset referred to in that sub-rule is referred by the Assessing Officer to the Valuation Officer under section16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date. (3) Where the value of any asset cannot be estimated under this rule because it is not saleable in the open market, the value shall be determined in accordance with such guidelines or principles as may be specified by the Board from time to time by general or special ord....
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....n'ble Court held as under: - "Held, affirming the decision of the High Court, that in determining the value of the leasehold interest of the respondent in the land for the purpose of assessment to wealth-tax, the price which the leasehold interest would fetch in the open market were it not encumbered or affected by the burden or restriction contained in clause (13) of the lease deed, would have to be reduced by 50 per cent of the unearned increase in the value of the land on the basis of the hypothetical sale on the valuation date. The covenant in clause (13) was a covenant running with the land and it would bind whosoever was the holder of the leasehold interest for the time being. It was a constituent part of the rights and liabilities and advantages and disadvantages which went to make burden on the leasehold interest. It had the effect of depressing the value which the leasehold interest would fetch if it were free from the burden or disadvantage. Therefore, when the leasehold interest in the land had to be valued, this burden or disadvantage attaching to the leasehold interest had to be duly discounted in estimating the price which the leasehold interest would fetch. To val....