Back
SUPREME COURT OF INDIA
P.N. BHAGWATI AND S. MURTAZA FAZAL ALI, JJ.
Commissioner of Wealth tax, New Delhi, Appellant
Versus
P. N. Sikand, Respondent.
Civil Appeal No. 1174 of 1974,
D/- 1-4-1977. 1658
Advocates Appeared
Mr. R. M. Mehta, Sr. Adv., (Mr. P. L. Juneja, Adv. with him), for Appellant; Mr. G. C. Sharma, Sr. Adv., (M/s. M. L. Khanna, Anup Sharma, Miss Jaswal K. K. and K. R. Nagaraja and Mr. D. K. Jain, Advs. with him), for Respondent.
Wealth Tax Act, 1957 - Section, 7 - Assignment Or Transfer - Claim and recover from the lessee a certain specified - Controversy in this appeal relates to assessment year relevant valuation date being December - Assesses is assessed to wealth tax as an individual - His net wealth on valuation date included property situate on plot Block - Property consisted of leasehold interest in land together with house built upon it - Land belonged to President of India and it was leased by President of India to one Devi on terms and conditions set out in an agreement of lease December - Leasehold interest was acquired from Devi by assesses - Premium for grant of lease was and annual rent was fixed at Rupees subject to certain variations - Terms and conditions of lease are little important and so far material they may be reproduced as follows – Held, If question is asked as to what is real wealth of assessed in terms of money so far as leasehold interest is concerned answer would inevitably be that it is priceless per cent unearned increase value of land - It is difficult to see how per cent of unearned increase in value of land which belongs to less or can be regarded as part of wealth of assesses - Position would undoubtedly be different where payment is made by an assesses which is an application of part of price received by him - Where such is case whole of price would represent net realizable worth of asset in hands of assesses and what is paid out by assesses would be merely disbursement made after price reaches assesses as his own property - That was position - Wealth Tax and where question arose whether expenditure in connection with brokerage commission or other expenses which would be liable to be incurred by assesses in effectuating sale would be deductible from market value of shares in determining their value for purpose of assessment to wealth tax - This Court held that in computing value of shares assesses is not entitled to deduction of brokerage and commission from valuation of shares as given in Stock Exchange quotations or quotations furnished by well known brokers - It was pointed out by this Court that It is not - Amount which vendor would receive after deduction of this expense but price which asset would fetch when sold in open market which would constitute value of asset for purpose Act - Obviously this view was taken because entire price when received would belong to assesses and payment of brokerage and commission would be merely application of part price in meeting expenditure necessary for effectuating sale and hence it would not be deductible in ascertaining net realizable worth of shares in hands of assessee - Appeal dismissed
Judgment
BHAGWATI, J. - This appeal raises a rather difficult but interesting question of law relating to valuation for the purpose of the Wealth Tax Act, 1957 of leasehold interest in land, when there is a covenant in the lease that the lessee shall not be entitled to assign the leasehold interest without obtaining the prior approval in writing of the lessor and the lessor shall be entitled to claim and recover from the lessee a certain specified proportion of the unearned increase in the value of the land at the time of the assignment.
2. The controversy in this appeal relates to the assessment year 1968-69, the relevant valuation date being 31st December, 1967. The assessee is assessed to wealth tax as an individual. His net wealth on the valuation date included a property situate on plot No. 12, Block No. 39, Kautilya Marg. Chanakyapuri. The property consisted of leasehold interest in the land together with a house built upon it. The land belonged to the President of India and it was leased by the President of India to one Vashesharan Devi on the terms and conditions set out in an agreement of lease dated 30th December. 1954 and the leasehold interest was acquired from Vashesharan Devi by the assessee. The premium for the grant of the lease was Rs. 24,400/- and the annual rent was fixed at Rupees 610/-, subject to certain variations. The terms and conditions of the lease are a little important and, so far material, they may be reproduced as follows:
"13. The lessee shall before any assignment or transfer of the said premises hereby demised or any part thereof obtain from the lessor or such officer or body as the lessor may authorise in this behalf approval in writing of the said assignment or transfer and all such assignees and transferees and the heirs of the lessee shall be bound by all the covenants and conditions herein contained and be answerable in all respect therefor:
Provided also that the lessor be entitled to claim and recover a portion of the unearned increase (i.e. the difference between the premium already paid and current market value) in the value of land at the time of transfer (whether such transfer is of an entire site or only a part thereof), the amount to be recovered being 50 per cent of the unearned increase.
The lessor shall have a pre-emptive right to the property after deducting 50 per cent of the unearned (torn) said."
The assessee constructed a large building on the land and the question arose as to how the leasehold interest of the assessee in the land together with the building should be valued. This property had been valued in the past assessment years at Rs. 6,00,000/- and the assessee had accepted this valuation and not challenged it. But in the assessment for the assessment year 1968-69 the assessee valued this property in its return of net wealth at Rs. 4,52,000/- on the basis of a certificate obtained from M/s. Anand Apte and Jhabvala, Architects who are approved valuers recognised by the Department. The Architects estimated the value of the property at Rs. 5,82,268/- and from this figure, they deducted a sum of Rs. 1,30,000/- representing 50 per cent of the unearned increase in the value of the land, which under the terms and conditions of the lease belonged to the lessor and arrived at the value of Rs. 4,52,000/-. The Wealth Tax Officer did not accept the estimate of the valuation made by the Architects and taking the annual rent of Rs. 1,30,000/- fetched by the property as the basis, computed the net annual rent at Rs. 82,956/- and arrived at the figure of Rupees 8,29,560/- as the value of the property by applying the multiple of ten to the annual rental value of Rs. 82,956/-. The Wealth Tax Officer rejected the claim of the assessee to deduct from the value of the property 50 per cent of the unearned increase in the value of the land on the ground that this claim was based "merely on hypothetical presumptions" but reduced the value of the property from Rs. 8,29,960/- to Rs. 6,00,000/-, sin
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
