The main legal point established in the judgment is the need to ignore the restriction against alienation for the purpose of valuation under section 7 of the Wealth-tax Act and the consideration of the possibility of a reduced price due to such restrictions.

K. Shivashankar Bhat, J.—These two references are under the provisions of the Wealth-tax Act at the instance of the Revenue. The respondent (hereinafter referred as "assessee") was a member of the Government Servant's Co-operative Housing Society Ltd., New Delhi. The said society was allotted land by the Delhi Development Authority under a lease-cum-sale basis. The assessee was allotted 1,040 sq. yds. of land by the said society for which the assessee paid Rs. 32,640 in the year 1970. As per the lease agreement, the assessee was to hold the land for a minimum period of 10 years and construct a building on the plot allotted to him. Under the lease agreement, the assessee cannot sell or transfer the plot to a person who is not a member of the society. The assessee also shall not sell the plot except with the previous consent in writing of the society. In case permission is granted by the society for the sale, it is entitled to impose conditions as it thinks fit and it is entitled to recover a portion of the unearned increase in the value, the amount to be recovered being 50% of the unearned increase. The assessee filed his original return declaring the value of the plot at Rs. 32,641. But a revised return was filed declaring the value at Rs. 2,08,000. The Wealth-tax Officer took the value of the plot at Rs. 250 per sq. yd. on the basis of the value adopted in the earlier year. He allowed deduction of 50% which will be appropriated by the Delhi Development Authority if the plot is sold. Thus, he determined the value of the plot at Rs. 1,46,320. The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that, as per the lease agreement, there is a restriction on the sale of the property. The property was originally allotted in June, 1970, and, even after completion of 10 years, the assessee has not constructed any building. He referred to a letter dated September 8, 1978, produced by the assessee from the society rejecting the application for transfer or sale of the plot as the building has not been completed. Hence, such an application will not be entertained till a period of three years has elapsed after the completion of the building. He also held that, in view of the restrictive clauses provided in the sub-lease agreement, the Wealth-tax Officer cannot value the property at the market value. There is no comparable sale of property in this area as the entire land was allotted to co-operative societies on lease-cum-sale basis. He held that a reasonable appreciation in investment should be at the rate of 10% every year. On that basis, the determined the market value of the property as on March 31, 1975, at Rs. 52,565 and directed the Wealth-tax Officer to take the value of the property at Rs. 52,565. The Revenue as well as the assessee appealed to the Appellate Tribunal.

2. The Appellate Tribunal held that the assessee had paid only Rs. 32,640 and the restrictive clause in the agreement was a clog against alienation. Whenever permission is granted by the society, 50% of the unearned increase will be recovered by the society. Consequently, the Appellate Tribunal direct the Wealth-tax Officer to take the value of the plot at Rs. 32,640 as against the value of Rs. 1,46,320 determined by the Wealth-tax Officer. Consequently, a reference was sought and the following question is referred AEXD :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in directing the Wealth-tax Officer to take the value of the plot at Rs. 32,640 as against the value of Rs. 1,46,320 determined by the Wealth-tax Officer."

3. Mr. Chander Kumar, learned counsel for the petitioner, contended that the restrictive clause will have to be ignored for the purpose of valuation under section 7 of the Wealth-tax Act, the value will have to be the fair market value if sold in the open market. Therefore, it is necessary to imagine the availability of a free market and arr