2015 Supreme(SC) 898

SUPREME COURT OF INDIA
A.K. SIKRI, ROHINTON FALI NARIMAN, JJ.
SRI S.N. WADIYAR (DEAD) THROUGH LR – APPELLANT
VERSUS
COMMISSIONER OF WEALTH TAX, KARNATAKA – RESPONDENT
CIVIL APPEAL NOS. 6873-6881 OF 2005, 6882 OF 2005, 1338 OF 2006, 7251 OF 2015 (ARISING OUT OF SLP (C) NO. 18960 OF 2006) AND CIVIL APPEAL NOS. 7377-7378 OF 2005
Decided on : 21-09-2015

IMPORTANT POINT
The estimated price for the purposes of Wealth Tax Act for a property covered under the Ceiling Act would be the compensation fixed for it under the Ceiling Act.

Headnote:(a) Wealth Tax Act – Section 7 – Valuation of property – Estimated price – Price to be estimated assuming sale in open market in the ordinary way – However, the Ceiling Act would have depressing effect on the price. (Para 24, 25)

       76 ITR 471; 247 ITR 351 – Relied upon

       (b) Urban Land (Ceiling and Regulation) Act, 1976 – Section 3, 10(1), 6(1) and 8 r/w section 7, Wealth Tax – In terms of section 3 assessee was not entitled to hold vacant land in excess of ceiling – Assessee filing statement u/s 6(1) – Draft statement u/s 8 prepared and served on assessee – Process having started, non-issue of notification acquiring u/s 10 does not matter – Maximum compensation of 2 lakhs also fixed – Property being under acquisition under the Ceiling Act, any assumed buyer would not pay more than Rs. 2 lakhs for the property as that would be the compensation that he would receive. (Para 29, 30 31)

       Facts of the case:

       The question of law that falls for determination is: Whether, for the purposes of Wealth Tax Act, the market value of the vacant land belonging to the assessee should be taken at the price which is the maximum compensation payable to the assessee under the Urban Land Ceiling Act, 1962?

       The Property in question, the Bangalore Palace, 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 Assessment Years 1967-1968 to 1976-1977. During pendency of this application, the Urban Land (Ceiling and Regulation) Act, 1976 came into force w.e.f. 17.02.1976. It was adopted by the State of Karnataka. The property area is within the Bangalore Urban Agglomeration, hence fell within the purview of the Act. The assessee filed statement as required under Section 6(1) of the Ceiling Act on 10.09.1976. On 16.09.1976, he filed an application under Section 20 of the Act for exemption of his lands under the Ceiling Act to the State Government.

       The Wealth Tax Officer adopted the value as per Settlement Commission for Assessment Years 1976-1977, 1977-1978 and 1978-1979 at Rs.13.18 crores (for both land and buildings). For the Assessment Year 1979-1980, since there was no report of the Valuation Officer, the Commissioner of Appeals worked out the value of the Property at Rs.19.96 crores for the Assessment Year 1979-1980, which was adopted by Wealth Tax Officer for Assessment Year 1980-1981 as well. For the Assessment Years 1981-1982, 1982-1983 and 1983-1984, the Wealth Tax Officer fixed the value of land and building at Rs.18.78 crores, Rs.29.85 crores and Rs.29.85 crores respectively. For Assessment Year 1984-1985, the Wealth Tax Officer took the value at Rs.31.22 crores on the basis of the order passed by the Commissioner (Appeals) for earlier years.

       On the other hand, in the proceedings under the Ceiling Act, the Competent Authority passed an order determining vacant land in excess of the ceiling limits, and ordered action be taken to acquire excess land under the Karnataka Town & Country Planning Act, 1961. 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.

       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.

       Simultaneously, the orders of the Wealth Tax Officer was also challenged by the assessee before the Commissioner (Appeals).

       The Commissioner of Income Tax (Appeals) made slight modifications to value adopted for Assessment Years 1981-1982 and confirmed the valuation of Wealth Tax Officer for Assessment Years 1982-1983 and 1983-1984. However, in respect of appeals relating to Assessment Years 1977-1978 to 1980-1981, the Commissioner (Appeals) passed the orders accepting that the urban land appurtenant to Property be valued at Rs.2,00,000/-. Similar orders came to be passed by the Commissioner of Income Tax (Appeals) for the Assessment Years 1984-1985 and 1985-1986 also.

       The issue before the Income Tax Appellate Tribunal was only with regard to valuation of vacant land attached to the Property, since the assessee had accepted the valuation in regard to residential and non-residential structures within the said property area and appurtenant land thereto.

       The Income Tax Appellate Tribunal, Bangalore passed the order directing the vacant land be valued at Rs.2 lakhs for each year from Assessment Years 1977-1978 to 1985-1986.

       The Tribunal made a Statement for reference to the High Court. The question 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.

       The assessee took up the matter further before the High Court in the form of a writ petition. When this writ petition was still pending, the Ceiling Act was repealed.

       The dispute of valuation has arisen only with regard to valuation of the vacant land attached to the Property which had come within the mischief of the Ceiling Act.

       The reference was answered by the High Court holding that although the prohibition and restriction contained in the Ceiling Act had the effect of decreasing the value of the Property still the 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.

       Finding of the Court:

       The compensation fixed under the Ceiling Act would be the estimated price under the Wealth Tax Act.

       Result: Appeal allowed.