COMMISSIONER OF WEALTH TAX VS RAJ KUMARI BHUBANESHWARI KUMARI
1995 P T D 1221
[210 I T R 711]
[Rajasthan High Court (India)]
Before V. K. Singhal and Arun Madan, JJ
COMMISSIONER OF WEALTH TAX
Versus
RAJ KUMARI BHUBANESHWARI KUMARI
D.B. Wealth Tax Reference No. 116 of 1984, decided on 02/03/1994.
Wealth tax---
----Valuation of assets---Provincial Act restricting transfer of property in excess of specified limits---Valuation Officer valuing assessee's properties at Rs.12,68,000---Appellate authorities valuing the property at Rs.3 lakhs---Effect of Provincial Act was not to reduce value of property to Rs.3 lakhs---Matter remanded---Indian Wealth Tax Act ---Rajasthan Urban Property (Restriction on Transfer) Act, 1973.
The Wealth Tax Act does not take note of hypothetical possibilities in the matter of valuation of assets. It merely concerns itself with what is the true market value of the assets in question on the valuation date. If an asset is subject to certain hazards including the liability of certain debts to be deducted from the asset, then that factor which has the effect of diminishing the market value of the asset is a relevant factor to be taken into consideration while estimating the value of the asset in the open market.
The State Legislature enacted the Rajasthan Urban Property (Restriction on Transfer) Act, 1973. Section 5 of the Act places restrictions on transfer and under its subsection (1) after the commencement of the Act, no person owning urban property in excess of the specified limit shall transfer such property by way of sale, mortgage, gift or otherwise or effect a partition or create a trust thereof and any transfer made, partition effected or trust created in contravention of the provisions of this clause shall be null and void.
The Income Tax Officer while making the wealth tax assessment of the assessee for the year 1974-75 referred the matter under section 16-A of the Wealth Tax Act, 1957, to the Valuation Officer and the value of Rs.12,68,000 was adopted after giving due opportunity to the assessee. An appeal was preferred before the Appellate Assistant Commissioner who adopted the value at Rs. 3 lakhs. The matter was challenged before the Income Tax Appellate Tribunal who confirmed the order of the Appellate Assistant Commissioner. On a reference:
'Held, that the provisions of the Rajasthan Act placed restrictions on the right to transfer of the property of value more than Rs. 3 lakhs but it could not be taken that the valuation of the property had been reduced to Rs. 3 lakhs. The Tribunal was not justified in coming to the conclusion that because of the provisions of the Rajasthan Act the value of the property had to be restricted to Rs. 3 lakhs alone.
Ahmed G.H. Ariff v. CWT (1970) 76 ITR 471 (SC); Calcutta Electric Supply Corporation v. CWT (1971) 82 ITR 154 (SC); CGT v. Khajan Chand (Kaviraj) (Dr.) (1990) 182 ITR 469 (Delhi); CWT v. Promila Bali (Smt.) (1983) 141 ITR 942 (Delhi); CWT v. Raghubar Narain Singh (1984) 146 ITR 228 (SC); CWT v. Ranganatha Mudaliar (Y-S.) (1984) 150 ITR 619 (Mad.) and Gouri Prasad Goenka and Family (HUF) v. CWT (1993) 203 ITR 700 (Cal.) ref.
G.S. Bapna for the Commissioner.
N.M. Ranka for the Assessee.
JUDGMENT
The Income Tax Appellate Tribunal has referred the following questions of law arising out of its order, dated July 8, 1982, in respect of the assessment year 1974-75 under section 27(1) of the Wealth Tax Act, 1957 (hereinafter called "the Wealth Tax Act"):
"(1) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the provisions of the Rajasthan Urban Property (Restriction on Transfer) Act, 1973, were applicable for determining the market value of the plots for the purposes of the wealth tax on the relevant date of valuation?
(2) Whether, on the facts and in the circumstances of the case, the finding of the Income Tax Appellate Tribunal that the market value of the plots on the relevant valuation date could not be more than' Rs.3,00,000 in view of the provisions of the Rajasthan Urban Property (Restriction on Transfer) Act, 1973, is perverse and contrary to the material on record?
The brief facts of the case are that the State Legislature enacted the Rajasthan Urban Property (Restriction on Transfer) Act, 1973 (hereinafter called as "the Act"). Under section 2(f) of the Act, the expression "value" has been defined as under:
'"Value' in reference to any urban property means the price which it would fetch, if sold in the open market at the commencement of the Rajasthan Urban Property (Restriction on Transfer) Ordinance, 1973 (Rajasthan Ordinance 5 of 1973), and in reference to any urban property which comes into existence after the commencement of the said Ordinance, the price, which it would fetch at the time of its coming into existence."
Section 5 of the Act has placed restrictions on transfer and under its subsection (1) after the commencement of the Act, no person owning urban property in excess of the specified limit shall transfer such property by way of sale, mortgage, gift or otherwise or effect a partition or create a trust thereof and any transfer made, partition effected or trust created in contravention or the provisions of this clause shall be null and void.' Section 8 provides for offences and punishments on the contravention of the provisions of section 5 and section 9 deals with the taking of cognizance of the offences.
The Income Tax Officer while making the assessment for the year 1974-75 referred the matter under section 16-A of the Wealth Tax Act to the Valuation Officer and the value of Rs.12,68,000 was adopted after giving the opportunity to the assessee. An appeal was preferred before the Appellate Assistant Commissioner who adopted the value at Rs.3 lakhs. The matter was challenged before the Income Tax Appellate Tribunal who confirmed the order of the Appellate Assistant Commissioner.
Arguments of learned counsel for both the parties have been heard. Mr. Ranka, learned counsel for the respondent, has placed reliance on the decision of the Dehli High Court in the case of CWT v. Smt. Promila Bali (1983) 141 ITR 942, wherein there were restrictions on the right of transfer and it was considered that a leasehold right can have a market value only if a transfer is permitted under the terms of the contract. If there is only a personal right which is not transferable, then it would not be possible to value the property on the basis that it was an absolute right equal to ownership. In these circumstances, the value of the property was taken on the basis of the initial contribution made by the members of the society to acquire the said plots of land. From a perusal of the said judgment, it would be evident that the restrictions were placed on the right of transfer and in such a situation it has to be considered what is the fair market value. A reasonable deduction would be available in such a case where any restriction is placed by the Legislature with regard to the transfer of the right. In the case of Ahmed G.H. Ariff v. CWT (1970) 76 ITR, 471 (SC), the matter was with regard to wakf-alal-aulad where the property was not transferable. It was observed by the apex Court that it has to be assumed that there was an open market and hence the value could be found. The decisions which have been relied upon are clearly distinguisable. The same is the position with regard to the decision in the case of CGT v. Dr. Kaviraj Khajan. Chand . (1990) 182 ITR 469 (Delhi), where there was also a complete prohibition on transfer for the first ten years and the value of the gift was held assessable on the basis of the price paid by the respondents. The decision of the Calcutta High Court in the case of Gouri Prasad Goenka and Family (HUF) v. CWT (1993) 203 ITR 700 has also been relied upon to show that if the land is subject to the Urban Land (Ceiling and Regulations) Act, 1976, the property could not be transferred, then the valuation has to be made on the basis of the compensation which is paid under the said Act. Reliance has also been placed on the decision of the Madras High Court in the case of CWT v. K.S. Ranganatha Mudaliar (1984) 150 ITR 619, wherein the Madras High Court has taken the view that the amount which has been received by way of compensation under the Ceiling Act has to be taken as the value of the property.
The decisions which have been relied upon by Mr. Ranka are in respect of certain properties which have been restricted from being transferred and are to be acquired and in such a case the amount which is payable by way of compensation is considered to be the market value because the owner would get the said amount which he is entitled to receive. In the present case, the restriction which has been placed is temporary restriction which was subsequently, withdrawn. Since we are concerned with the period during which the restrictions remained in force it is to be seen whether the ceiling of Rs.3 lakhs can be said to affect the value of the property restricting it to Rs.3 lakhs alone. There may be a property of crosses of rupees which could not be transferred in view of the provisions of the Act and there maybe another property of Rs. 5 lakhs can it be said that both the properties should be valued at Rs.3 lakhs alone. In the present case, the provisions of the Act placed the restrictions on the right of transfer of the property which had earlier the valuation of more than Rs. 3 lakhs but it cannot be taken that the valuation of the property has been reduced to Rs. 3 lakhs. The contention of Mr. Ranka that a needy seller could sell the property for the value of less than even Rs.3 lakhs in view of these provisions and, therefore, it should be valued at Rs. 3 lakhs cannot be accepted because a person cannot transfer the property which is having value more than Rs. 3 lakhs by making transfer at a figure less than Rs.3 lakhs. The restrictions are on the property itself which could not be transferred. Therefore, the valuation of the property cannot be considered, to be restricted to Rs. 3 lakhs.
In the case of Calcutta Electric Supply Corporation v. CWT (1971) 82 TR 154, it was observed by the apex Court that the fact that the value of one or more of the assets of one undertaking when sold under compulsion of law because of some statutory provision does not by itself show that it is not a, valuable asset. Section 1 of the Act does not take note of hypothetical possibilities in the matter of valuation of the assets. It merely concerns itself as to what is the true market value of the assets in question on the valuation date.
In view of the above observations, we are of the opinion that because of the Act, it was only the restriction which was placed on the right of the owner to transfer the property, therefore, the valuation is affected, but is not restricted to Rs. 3 lakhs alone. In the case of CWT v. Raghubar Narain Singh (1984) 146 ITR 228, the apex Court held that if an asset is subject to certain hazards including the liability of certain debt to be deducted from the asset, hen that factor which has the effect of diminishing the market value of the asset is a relevant factor to be taken into consideration while estimating the "value of the asset in the open market. In these circumstances, we are of the view that the Tribunal was not justified in coming to the conclusion that, because of the provisions of the Act, the value of the property has to be restricted to Rs. 3 lakhs alone. The matter is sent back to the Tribunal to hear there objections of the assessee with regard to valuation of the property and decide the valuation in accordance with the observations made above.
Consequently, the reference is answered in favour of the Revenue. and against the assessee. No orders as to costs.
M.B.A./814/F.T. ???????????????????????????????????????????????????????????????????????????????? Reference answered.