TaxTMI 
TaxTMI 
2015 (9) TMI 1065
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....his question has arisen, we are taking note of the facts of Civil Appeal Nos. 6873-6881/2005: The appellant herein is assessed to wealth tax under the Act. The Assessment Years in these appeals are 1977-1978 to 1986-1987. The valuation of the property which is the subject matter of wealth tax under the Act is the urban land appurtenant to Bangalore Palace (hereinafter referred to as the 'Property'). The total extent of the property is 554 acres or 1837365.36 sq. mtr. It comprises of residential units, non-residential units and land appurtenant thereto, roads and masonary structures along the contour and the vacant land. The vacant land measures 11,66,377.34 sq. mtr. The aforesaid Property was the private property of late Sri Jaychamarajendra Wodeyar, the former ruler of the princely state of Mysore. He died on 23.09.1974. There were disputes with regard to the wealth tax assessments pertaining to the Assessment Years 1967-1968 to 1976-1977. After the death of Sri Jayachamarajendra Wodeyar, his son Sri Srikantadatta Wodeyar, the assessee applied to Settlement Commission to get the dispute settled with regard to valuation of Property and lands appurtenant thereto for Assessm....
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....o part of the vacant area could be commercially exploited nor colonised for residential purposes. The vacant land area was also not transferable under the Act. Any sale was null and void. As per Section 11(6) of the Urban Land Ceiling Act, the maximum compensation that could be received by the assessee was Rs. 2 lakhs. 7. Before any Notification could be issued under Section 10(1) of the Ceiling Act, the assessee questioned the aforesaid order passed by the Competent Authority under Sections 8 and 9 of the Ceiling Act before the Karnataka Appellate Tribunal. 8. Simultaneously, the orders of the Wealth Tax Officer passed under the Act fixing the value of the land for different Assessment Years for the purpose of Act was also challenged by the assessee before the Commissioner (Appeals). In these appeals, the contention of the assessee was that the value of the property was covered by the Ceiling Act for which maximum compensation that could be received by the assessee was only Rs. 2 lakhs. The appeals filed for the Assessment Years, namely, 1980-1981, 1982-1983 and 1983-1984 were disposed off by the Commissioner of Income Tax (Appeals) by a common order dated 09.01.1990 in which he....
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....stion that was raised for adjudication before the High Court was whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the value of the vacant land, appurtenant to the Property, should be taken at Rs. 2 lakhs for the purpose of wealth tax assessment for the years in question, as having regard to the provisions of the Urban Land Ceiling Act, the maximum amount of compensation payable to the assessee is only Rs. 2 lakhs. 12. When the aforesaid reference was pending adjudication by the High Court, certain important developments took place in relation to the proceedings under the Ceiling Act. The appeal which was filed by the assessee before the Karnataka Appellate Tribunal against the order dated 27.07.1989 passed by the Competent Authority under the Ceiling Act was dismissed by the Tribunal on 15.07.1998. The assessee took up the matter further before the High Court in the form of a writ petition. In this writ petition, the assessee also challenged the constitutional validity of the provisions of the Ceiling Act and made an interim prayer to the effect that pending disposal of the writ petition notification under Section 10(1) of the Ceili....
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.... value of the land cannot be the maximum compensation that is payable under the provisions of the Ceiling Act. Thus, the question referred has been answered against the assessee. 16. The High Court, in its impugned order, took note of the aforesaid facts and accepted the position that the Property in question which is within the Bangalore urban agglomeration was covered by the Ceiling Act and the provisions of the said Act applied to this Property. It also noted that by virtue of Section 4 of the Repeal Act, all legal proceedings pending under the Ceiling Act immediately before the commencement of the Repeal Act stood abated except those proceedings which are relatable to the land possession whereof has been taken over by the State Government or any person authorized by the State Government or by the Competent Authority. Since, in the instant case, admittedly possession had not been taken, which remained with the assessee for want of notification under Section 10, the proceedings abated and the said vacant land remained with the assessee. Thereafter, the High Court took note of certain relevant provisions of the Act and we may also capture the position contained in those provision....
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....rovision which provides for procedure for determining the value of assets that are subject to wealth tax. The High Court observed that as per Section 7 of the Act, the value of the asset shall be estimated to the price, which in the opinion of the Wealth Tax Officer, the asset would fetch if sold in the open market on the valuation date. The words "price it would fetch if sold in the open market" do 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 the open market and, on that basis, the value has to be found out. The Court noted that though the rules, namely, Wealth Tax Rules, 1957 were framed, they did not provide for valuation of urban land and, therefore, the asset must be valued in the ordinary way by determining what it would fetch if it were sold in the assumed market and what willing purchaser would pay for it. The Court also accepted that in view of Ceiling Act coming into force, the restrictions and prohibitions contained in the Ceiling Act would have the effect of depressing the value which the lands would fetch if they were free from the said restrictions....
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....t is not open to the assessee to sell the land, therefore, the value of the land could not be more than what the Government was to offer to the assessee under the provisions of the Ceiling Act. The High Court concluded its answer in the penultimate para as under: "36. Before we conclude, we once again emphasise that it sale of the land or the property is subject to restrictions under Central or State legislation's such as the Urban Land Ceiling Act, Karnataka Land Reforms Act, etc., the property or the land has to be valued only after taking note of the restrictions and prohibitions which will have the effect of depressing the value, which the land would fetch if sold free from any restrictions and prohibitions, for the reason, if there are such restrictions, the value of the property or land would be normally be reduced, but at the same time, it cannot be said that it would fetch only the maximum compensation payable under the urban Land Ceiling Act. As stated earlier, Section 7 of the Wealth Tax Act, assumes that there is a hypothetical open market and there are hypothetical purchasers and hypothetical bids and hypothetical sale to a person prepared to give the highest valu....
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....o be contemplated by the Assessing Officer. It is so held by this Court in Ahmed G.H. Ariff v. Commissioner of Wealth Tax 76 ITR 471 in the following words: "...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. It is well settled that where the legislature uses a legal term, which has received judicial interpretation, the Courts must assume that the term has been used in the sense, in which has been judicially interpreted." 23. Following guidelines provided in the case of Commissioner of Wealth Tax v. Prince Muffkham Jah Bahadur Chamlijan 247 ITR 351 also needs to be noted as it becomes very handy for our purposes: "...in the absence of a rule which can apply to the valuation of a particular asset, that asset must be valued in the ordinary way, by determining what it would fetch if it were sold in an assumed market, the value being what an assumed w....
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....ted out of the vacant land held by each of the transferees in the same proportion as the area of the vacant land transferred to him bears to the total area of the land transferred to all the transferees. (2) Where any excess vacant land is selected out of the vacant land transferred under sub-section (1), the transfer of the excess vacant land so selected shall be deemed to be null and void. (3) In any State to which this Act applies in the first instance and in any State which adopts this Act under clause (1) of article 252 of the Constitution, no person holding vacant land in excess of the ceiling limit immediately before the commencement of this Act shall transfer any such land or part thereof by way of sale, mortgage, gift, lease or otherwise until he has furnished a statement under section 6 and a notification regarding the excess vacant land held by him has been published under sub-section (1) of section 10; and any such transfer made in contravention of this provision shall be deemed to be null and void. 10. Acquisition of vacant land in excess of ceiling limit. - (1) As soon as may be after the service of the statement under section 9 on the person concerned, the c....
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.... a person in excess of the ceiling limit immediately before the commencement of the Act till a statement under Section 6 is furnished and a notification regarding excess land has been published under Section 10(1) of the Act. Any transfer made in contravention of this sub-section shall be deemed to be null and void. Section 6(1) of the Ceiling Act statutorily obligates that every person holding vacant land in excess of the ceiling limit as on or after the 17th day February 1976 is required to file a statement in the prescribed form, specifying the vacant land within the ceiling limit which he desires to retain. The first proviso to Section 6(1) of the Ceiling Act makes the operation of the Act retrospective in fixing 17th February 1975, as the date to determine whether a person holds vacant land in excess of the ceiling limit. If for any reason, the statement is not filed by the person holding vacant land in excess of the ceiling limit, the competent authority may direct him to file such statement within a fixed period. Under Section 8 of the Ceiling Act, on the basis of the statement filed under Section 6 of the Ceiling Act, a draft statement is prepared by the competent authori....
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....-section (3). Sub-section (5) of Section 10 of the Ceiling Act provides that the competent authority shall issue a notice in writing to any person who may be in position to surrender or deliver possession to the State Government or to the person duly authorised in this behalf. The person to whom the notice is issued is given 30 days time to comply with the notice. Under sub-section (6), if a person fails to deliver possession within that period, the competent authority will take necessary steps to take possession itself. Sections 11 and 14 of the Ceiling Act provide for determination of the amount payable to the person concerned for the vacant land acquired and for the mode of payment of the amount to such person. Section 18 of the Ceiling Act lays down the penalty that may be imposed for concealment of particulars in the statement filed under Section 6 of the Act. Section 20 of the Ceiling Act confers on the State Government the power to exempt any person holding vacant land in excess of the ceiling limit from the provisions of the Act. Under Section 33 of the Ceiling Act, any person aggrieved by an Order passed by the competent authority under the Act may file an appeal befor....