Wealth tax---

---- Net wealth---Valuation of agricultural lands---Government taking over surplus land under Land Ceiling Act ---W.T.O. adopting guideline valuation under Wealth Tax Act and Wealth Tax Rules ---W.T.O. not taking into account threat of take-over by Government, restriction placed upon transferability of lands, amount payable to tenants in occupation of lands and hazards of litigation---Compensation determined under Land Ceiling Act to be taken as market value of lands for purposes of wealth tax---Such valuation would not be different from guideline valuation.

The assessee who possessed agricultural lands of about 1,918 acres sold about 766 acres before the valuation, dates March 31, 1970 and March 31, 1971 (assessment years 1970-71 and 1971-72), leaving about 1,152 acres on the respective valuation dates. While filing the returns of wealth for the assessment years in question, the assessee did not include the value of the agricultural lands in the returns on the ground that the agricultural lands were not subject to wealth tax, relying upon a decision of the Punjab and Haryana High Court, which was later on reversed by the Supreme Court. Thereafter, the Wealth Tax Officer estimated the value of the lands at Rs.24.57 lakhs, in accordance with the guidelines given for valuation under the Wealth Tax Act, 1957, and the Wealth Tax Rules, 1957, for inclusion in the net wealth of the assessee. The assessee contended before the Wealth Tax Officer that the guideline valuation adopted by the Wealth Tax Officer did not take into account the amount payable to the tenants if the lands were in occupation of the tenants and that since the lands were likely to be taken over by the Government as surplus lands under the Land Ceiling Act, there were restrictions imposed upon their transferability and in view of that the market value was greatly depressed. The Wealth Tax Officer rejected the latter contention but accepted the first contention and making a provision for payment to the tenants, valued the lands at Rs.18 lakhs. On appeal to the Appellate Assistant Commissioner, the assessee contended that the Government had taken over about 993 acres under the Land Ceiling Act leaving only about 159 acres with the assessee, that the lands left with the assessee consisted of agricultural lands and gardens which did not come within the purview of the Land Ceiling Act, that in respect of the value of the lands taken over by the Government the assessee received a compensation of only Rs.4,60,782 and that in respect of the lands allowed to be retained by the Government some lands were sold in subsequent years and in respect of these lands the value worked out to only Rs.45,280. The Appellate Assistant Commissioner accepted the contention of the assessee and directed the Wealth Tax Officer to value the lands on the above basis. On further appeal the Tribunal affirmed the order of the Appellate Assistant Commissioner taking into account the compensation actually received by the assessee, the real threat of take over by the Government and the restrictions placed upon the transferability of the lands and the hazards of litigation. On a reference:

Held, affirming the decision of the Tribunal, that when the value of the lands was determined by the Government, the Government heard the claimants and took into account the character of the land, the value of the land in the nearby vicinity and other advantages and disadvantages with regard to the location of the land, etc. Therefore, it could not be said that the value determined under the Land Ceiling Act would be something different from the value determined under the Guideline Valuation in accordance with the Wealth Tax Act, 1957, and the Wealth Tax Rules, 1957. Therefore, the Tribunal was right in holding that the sum of Rs.4,60,782 being the compensation determined by the Government should be taken as the market value of the lands as on the valuation, dates March 31, 1970 and March 31, 1971.

CWT v. K.S. Ranganatha Mudaliar (1984) 150 ITR 619 (Mad.) ref.

S.V. Subramanian for C.V. Rajan for the Commissioner.

P.P.S. Janarathana Raja for the Assessee.

JUDGMENT

K.A. THANIKKACHALAM, J. ---In pursuance of the order passed by this Court, dated March 3, 1981, in T.C.P. Nos.349 and 350 of 1980, the Tribunal referred the following common question of law relating to the assessment years 1970-71 and 1971-72, for the opinion of this Court under section 27(3) of the Wealth Tax Act, 1957:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs.4,60,782 being the compensation determined by the Government of Tamil Nadu should be taken as the market value of the lands as on the valuation, dates March 31, 1970 and March 31, 1971, especially when the compensation has not been determined or .paid during the assessment year and the assessee continued to be the owner of the estate?"

For the assessment years 1970-71 and 1971-72, the relevant valuation, dates are March 31, 1970, and March 31, 1971, respectively. The assessee possessed vast tracts of agricultural lands of about 1,918.98'/2 acres, out of which 766.11'/2 acres were sold before the valuation dates, leaving 1,152.87 acres on the respective valuation dates. While filing the returns of wealth for the assessment years under consideration, the assessee did not place any value upon these agricultural lands on the ground that the agricultural land was not subject of wealth tax, relying upon the decision of the Punjab and Haryana High Court. This decision of the Punjab and Haryana High Court was later on reversed by the Supreme Court. The Wealth Tax Officer, who noticed this pronouncement of law, proceeded to value these lands for the purpose of inclusion in wealth tax assessment. According to the guidelines given for valuation, he estimated the value of the land at Rs.24.57 lakhs. The basis was however not disclosed in the assessment order. It was represented to him that the guidelines valuation should not be accepted for two reasons. One was that the guidelines valuation did not take into account the amount payable to the tenants, if the lands were in the occupation of tenants. Secondly, since the lands were likely to be taken over by the Government as surplus lands under the Land Ceiling Act; there was restrictions imposed upon their transferability and in view of that, the market value was greatly depressed. The Wealth Tax Officer did not agree with the latter contention, but agreeing with the first contention and making a provision for payment to the tenants, valued these lands at Rs.18 lakhs.

Aggrieved, the assessee filed an appeal before the Appellate Assistant Commissioner. It was brought to the notice of the Appellate Assistant Commissioner that the Government had finally taken over 993.71 acres under the Land Ceiling Act, leaving only159.16 acres with the assessee, that the lands left with the assessee consisted of agricultural lands and gardens, which did not come within the purview of the Land Ceiling Act: that in respect of the value of the lands taken over the by Government the assessee received a compensation of only Rs.4,60,782; that in respect of the lands allowed to be retained by the Government, some lands were sold in subsequent years arid in respect of these lands, the sale value alone would be taken and the value worked out to about Rs.45,280. The Appellate Assistant Commissioner, therefore, directed the Wealth Tax Officer to value these lands on the above basis.

Aggrieved by this, the Department filed an appeal before the Appellate Tribunal. The question that was debated before the Tribunal concerned only the value to be fixed upon the land taken over by the Government under the Land Ceiling Act. Taking into account the compensation actually received subsequently, the real threat of take over and the restrictions placed upon the transferability of the land and the hazards of litigation, the Tribunal held that the valuation as fixed by the Appellate Assistant Commissioner was quite reasonable and could be accepted from all standards. Accordingly, the Tribunal confirmed the valuation of these lands at Rs.4,60,782.

Before us, learned senior standing counsel appearing for the Department, submitted that the first appellate authority was not correct in accepting the value of the land as on the valuation dates on the basis of the compensation amount awarded by the Government. It was further submitted that the Appellate Assistant Commissioner has not taken into consideration all the depressing factors before fixing the value of the land on the basis of the compensation awarded. It was further submitted that the Wealth Tax Officer determined-the value of the land in the year 1972 and the Appellate Assistant Commissioner determined the value in the year 1977 and the Appellate Assistant Commissioner has not given any consideration for the changing circumstances, which would increase the value of the land for the subsequent periods. It was, therefore, submitted that the Tribunal was not correct in accepting the value of the land as determined by the Appellate Assistant Commissioner for the assessment years under considering.

?On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that the order passed by the Tribunal is reasonable, since the Tribunal has taken into consideration all the elements, leading to depressing the market value of the land in question, which are actually acquired by the Government under the Land Ceiling Act.

We have considered the rival submissions. The fact remains that in the wealth tax assessment of the assessee, for the assessment years 1970-71 and 1971-72, the respective valuation, dates are March 31, 1970, and March 31, 1971. The point for consideration is to determine the value of the lands which were taken over by the Government amounting to 993.71 acres. The Wealth Tax Officer considering the fact that a portion of the compensation is payable to tenants in the occupation of the lands, determined the value of the land at Rs.18 lakhs. The Appellate Assistant Commissioner taking into consideration the value determined by the Government under the Land Ceiling Act and other depressing factors, directed the Wealth Tax Officer to accept the value of the lands as determined by the Government under the Land Ceiling Act, which comes to Rs.4,60,782. Some lands were sold in subsequent years and the value was worked out to Rs.45,280. On appeal, the Tribunal accepted the view taken by the Appellate Assistant Commissioner that when the land was acquired by the Government and compensation was paid in respect thereof, that should be accepted as the value of the land in question. In the Land Ceiling Act also the valuation date roughly comes to the valuation dates as in the wealth tax assessment. When the land value of the lands was determined by-the Government. the Government is hearing the claimants the Taram and the character of the land, the value of the land in the nearby vicinity and other advantages and disadvantages, with regard to the location of the land, etc. Therefore, it cannot be said that the value determined under the Land Ceiling Act would be something different from the value, which has got to be determined under the guidelines value as per the Wealth Tax Rules and the Wealth Tax Act. A similar question came up for consideration before this Court in the case of CWT v. K.S. Ranganatha Mudaliar (1984) 150 ITR 619, wherein this Court held that the valuation on the basis of compensation receivable under the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961, was justified. Therefore, even though the Appellate Assistant Commissioner had not elaborately stated the reasons for accepting the compensation awarded under the Land Ceiling Act, the Tribunal, which is the highest fact-finding authority, in its order, has given ample reasons for accepting the value in accordance with the compensation awarded under the Land Ceiling Act. Therefore, we see that there is no infirmity in the order passed by the Tribunal in accepting the compensation awarded under the Land Ceiling Act as the value of the land as on the relevant valuation dates. In that view of the matter, we answer the question referred to us in the affirmative and against the Department. No costs.

M.B.A./1831lFC????????????????????????????????????????????????????????????????????????????????? Order accordingly.