1. These appeals arise out of wealth-tax proceedings and relate to the assessment years 1970-71 to 1974-75. The appeals have been preferred by the revenue and as common contentions are involved, we proceed to dispose of the appeals by this common order.
2. The assessee, a HUF, owned wet lands to the extent of 57.52 acres and dry lands to the extent of 92.12 acres. Most of these lands were tenanted. The assessee had put forth the plea at the time of assessments that portions of these agricultural lands had been transferred. The WTO held that as the transfer of property was not registered and even the entire sale proceeds had not been received by the assessee, the transfers were not complete and the assessee continued to be the legal owner of the properly. The assessee had sought for exclusion of 3 acres of wet land and 0.5 acres of dry land in relation to the assessment year 1970-71, and for the subsequent years exclusion was sought of the value of 41.72 acres of wet land and 73.49 acres of dry land. What the WTO did was to include the value of lands themselves, which were said to have been transferred, in the assessee's net wealth on the ground that the assessee continued to be the owner thereof and he deducted therefrom amounts received by way of advance which was Rs. 3,000 for the assessment year 1970-71, Rs. 1,03,600 for the assessment year 1971-72 and amounts on similar basis in the subsequent years. The assessee appealed and contended before the AAC that the value of the lands in respect of which persons had been put in possession and part consideration obtained should be totally excluded. The AAC took the view, following the decision of the Andhra Pradesh High Court in V. Sankaraiah v. Land Reform Tribunal AIR 1976 SC 58, that the transfers were valid in law and the assessee was no longer the owner of the land and, therefore, the value of the land should be excluded in computing the net wealth of the assessee. He, therefore, directed the exclusion of the value of the lands. But, at the same time, he stated that the amounts receivable under the documents as well as received earlier should be taken into consideration.
3. The revenue is aggrieved with the decision of the AAC. The learned departmental representative submitted that the assessee continued to be the legal owner of the land till such time as the documents in question were registered. The second proposition he sought to make was that even if an asset was inalienable, it was settled law that it was property and looking to the judgment of the Supreme Court in Purshottam N.Atnarsay v. CWT 88 ITR 417, even where property was incapable of being sold, the interest of the owner had to be valued. Thus, he submitted that the lands were rightly valued by the WTO and the AAC was in error in directing exclusion of the values.
4. The learned counsel for the assessee, on the other hand, submitted that even if the legal title remained with the assessee, it was only a husk which had no value and the lands really belonged to the persons in whose favour documents were executed (hereinafter referred solely for the sake of convenience as "transferees")- According to him, the lands belonged to the transferees only and the land ceased to belong to the assessee, looking to the ratio of the judgments of the Andhra Pradesh High Court in Authorised Officer v. Kalyanam China Venkata Narasayya  1 APLJ 98 and in Mutha Reddy Venkataratnam Chowdhry v. State of Andhra Pradesh  1 APLJ 44. The learned counsel submitted that it is the real owner alone who could be taxed for wealth-tax purposes and not the ostensible owner and in this regard, reference was made to the decision in CWT v. Smt. H.H. Rajkuverba  86 ITR 783 (Mys.). He stressed that after execution of documents and putting the transferee in possession, even though the full consideration was not paid and only part consideration was received, the assessee did not have the right to recover the. property if balance of consideration was not paid, but only had the right to sue for the balance of consideration and to have a charge on the property to the extent the balance was not paid.
Finally, the learned counsel submitted that since what was valued was the land itself, and that alone was subject-matter of appeal, it was not open to us to value the title which remained with the assessee which would be a different asset even were we to hold that such title had a value. The learned departmental representative in reply relied on the decision of the Andhra Pradesh High Court in CIT v. Nawab Mir Barkat All Khan 1974 Tax LR 90, to canvass the proposition that as long as a registered document was not executed, even if full consideration had been received, a transferor would continue to be the owner of the property and that in India there was no distinction between legal ownership and beneficial ownership. While this was a decision given in income-tax proceedings, the learned departmental representative submitted that in wealth-tax assessment also it was held that the value of properties was inaudible by the decision in CWT v. Late Nawab Sri Mir Osman All Khan Bahadur 1974 Tax LR 367 (AP). In reply, the learned counsel for the assessee submitted that the judgments of the Andhra Pradesh High Court relied on by the learned departmental representative had not noticed the judgment of the Supreme Court in the case of R.B.Jodhamal Kuthiala v. CIT  82 ITR 570 and that the Punjab and Haryana High Court in the case of Smt. Kalarani v. CIT  130 ITR 321 had referred to this aspect in differing from the judgment of the Andhra Pradesh High Court. The learned counsel went on to state that where there was a conflict between the ratio of the judgment of the Supreme Court and that of the High Court, the ratio enunciated by the Supreme Court alone had to prevail. In R.B. Jodhamal Kuthiala's case (supra), he submitted, the Supreme Court had laid down that the word "owner" had different meanings in different contexts and viewed from that angle, he submitted, in the present case, the value of the properties which were stated to have been put in possession of the transferees under various documents, could not be included in the hands of the assessee.
5. We have considered the rival submissions, As the documents themselves were not on record, though referred to in the orders of the authorities below, we called for the sale documents. These were in Telugu and translations of the same have been filed. The documents were executed by Shri K. Appadu Dora in some instances and by his wife Smt.
K. Annapurnamma in other instances. Shri Appadu Dora has executed in all about 13 documents covering wet lands of 22.58 acres and dry lands of 75.43 acres and Smt. Annapurnamma has executed documents covering wet lands of 15.77 acres, Thus, the wet land which is the subject of transferees being put in possession was to the extent of 38.35 acres and dry land to the extent of 75.43 acres. Part of these related to transactions prior to 31-3-1970 and the balance subsequent to 1-4-1970.
There is a slight difference in total areas as mentioned by the authorities below which was the subject of documents.
6. The learned departmental representative sought to contend that these documents were fresh evidence which the authorities below had not gone into. We are unable to agree. The facts that there were various documents and various persons were put in possession have been referred to by the WTO and he has even excluded advances received. Therefore, the very documents which formed the basis of such assumptions and which were in existence at the material time cannot be considered as fresh evidence merely because they were not specifically looked into or taken on record by the WTO when the facts contained therein were relied on by the authorities below. We held that this was part of the original evidence itself and, accordingly, becomes relevant in deciding the issues before us.
7. To determine what value, if any, should be taken for the lands in which transferees were put in possession and in respect of which there were documents, we would take a specimen agreement dated 30-7-1970, the contents of which read as under : I. Pre sale agreement made on the day of the 30th July, 1970 between Smt. Kommuru Annapurnamma w/o Appadu Dora of Bhogapuram Village, Bheemunipatnam Taluk, Visakhapatnam District and Sri 1. Pytireddi Prakhar Rao s/o Appa Rao. 2. Pytireddy Jeevana Rao s/o Appa Rao Vendees of Koraput District, Nowrangapur.
II. Whereas I agree to sell the Gerayeii wet/dry land described in Para 3 of the Schedule and whereas you agreed to purchase the said properly, I have agreed to sell the said property to you for Rs. 14.000 (fourteen thousand only). In pursuance of this agreement, I have received Rs. 8,000 (eight thousand only) as part payment made by you to me on this day and agreed to receive the remaining balance of Rs. 6,000 at the time of registration. I agree, as per the draft sale deed give.) by you, to get sale deed registered in your favour.
The registration charges shall be equally shared by us. From this day onwards you are liable to pay land tax, etc., on this property and you are put in possession of the property conveyed today (30-7-1970) hereunder and shall remain in possession of same for ever.Name of Old Patta Old Survey New Patta New Survey ExtentVillage No. No. No. No. 27 322 459 37/1 4-46 East 24 137/2B 381 162/6 3.32 28 2C/3 (Wet) 188 5A,137/1 The Scheduled property of acre 7-78 both wet and dry conveyed from Varapula Chandrayya by sale deed on 30-6-1960 and the same conveyed from my husband Kommuru Appadu Dora by settlement deed are put to possession for ever immediately.
By the aforesaid documents, it is clear that (a) there was an agreement to sell land for a consideration, part of which consideration was received, and (b) on the date of agreement itself the transferee was put in possession of the property. The stand of the revenue is that the assessee continues to be the owner of the property, while the stand of the assessee is that the transferee became the beneficial owner. If the transferee had become the beneficial owner and there were no rights left with the assessee, then there is no question of taking any value for the lands in the hands of the assessee. This is what the A AC has done. We are unable to subscribe to the view of the learned counsel for the assessee that were we to hold that there were some rights left with the assessee, such rights could not be valued because it is not the subject-matter of appeal. The subject-matter of appeal was the valuation of land which would mean the valuation of the entire bundle of ownership rights. If out of that bundle of rights only one or two rights are left, certainly the valuation of such rights would have to be made in the hands of the assessee and it is the subject-matter of appeal and it is competent for the Tribunal to adjudicate on the same.
8. In the present case, however, we consider that it would really be of only academic interest to enter into a dissertation on the exact nature of the legal rights which the assessee may or may not have in the property. What Section 7 requires is that the WTO shall estimate the value of the asset if sold in open market on the valuation date. The learned departmental representative had submitted, relying on certain pronouncements of the Supreme Court, that merely because an asset was not saleable, adoption of a market value was not precluded. This proposition is unexceptionable, but has to be viewed in the context of facts. Where there are restrictions in the alienation of property, it is clear and settled law that the market value thereof has to be discounted. The Supreme Court has recognised this principle in CWT v.P.N. Sikand  107 ITR 922 where it has been pointed out that such restrictions would have the effect of depressing the value of an asset from what it would fetch if it were free from the burden or disadvantage. The Court also cautioned that to value an asset on the basis that such a burden or disadvantage was to be ignored would be to value an asset differently in content and quality from that actually owned by an assessee. The question of the depression in market value in the case of shares of private limited companies which were subject to restriction in marketability had come up before the Madras High Court in R. Rathinasabapathy Chettiar v. CWT  93 ITR 555 and adverting to this in the later case of CGT v. S. Venu Srinivasan  112 ITR 771, the Madras High Court observed at page 775 as under : If we do not take this fact into consideration we will be making an unrealistic approach and courts have not been guilty of such an approach for there is a wealth of case law on the subject that this factor must be borne in mind and necessary adjustment towards depreciation in view of this factor of restriction must be taken into account. This Court itself dealt with the matter in the decision in R. Rathinasabapathy Chettiar v. CWT 93 ITR 555 and our attention has not been invited to any other decision of this Court which has taken a view different from what has been laid down in that decision.
9. Reverting back to the present case, keeping in view the ratio of the judgments referred to, what is it that we find? The assessee had executed a document agreeing to execute a sale deed for a particular consideration. Part of the consideration had been received and the transferee had been put in physical possession of the aforesaid property. These are all facts which are not confidential and would be known to a prospective buyer. The question arises if the property which was subject of such an agreement is put on the market by the assessee, whether there would be any willing person to buy the land as such. The answer, in our opinion, is clearly in the negative.' No buyer would hazard to purchase such an encumbered property and, therefore, in view of the nature of the encumbrance consequent to which the buyer would neither get possession nor yield from the property, we have to come to the conclusion that the market value would have to be discounted cent per cent or in other words the market value for such property in the hands of the assessee would be nil. The AAC has stated that the advance received already will be part of the assessee's wealth. He has also stated that the amount to be received would also be taken as the assessee's wealth. This is all the interest that would accrue to the assessee and nothing further. In this state of affairs, it is not necessary to evaluate particular rights which the assessee may have left with him and we would uphold the conclusion of the AAC in so far as the properties were the subject of documents of the nature referred to are concerned.
10. From the details furnished before us, it would appear that there are some differences in areas in the aggregate. We would, therefore, direct that the WTO would verify the extent of the areas covered by the different documents prior to each valuation date and to the extent areas are covered by documents and transferees are put in physical possession prior to valuation date, the value of that land covered by the document would be totally excluded from the assessment and what will be includible would be only the amounts received already under the document and receivable under the documents, as directed by the AAC.The computation would be made for each of the years on the aforesaid basis. In other cases valuation of land itself is in order.
11. The only other ground urged in the appeals by the department is that the AAC erred in reducing the valuation of wet land from Rs. 4,000 per acre to Rs. 2,000 per acre. We find that the AAC has taken this valuation on the basis of the value adopted in the case of a brother of the karta. Whatever is the final valuation adopted in that case, that would be adopted in the present case also. We give this direction because the exact particulars are not readily available with either party in this regard.
12. The result is, the WTO would recompute the net wealth from year to year in accordance with our aforesaid directions. The appeals are allowed in part.