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Addl. Fourth Wealth-tax Officer Vs. S.N. Desai - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Reported in(1984)10ITD492(Mum.)
AppellantAddl. Fourth Wealth-tax Officer
RespondentS.N. Desai
1. the assessee is an individual. the appeals are all filed by the department and the cross-objections by the assessee. while several issues relating to valuation and also the nature of some properties being agricultural were raised before the wto and subsequently before the commissioner (appeals) in the departmental appeals, the only issue ultimately before the tribunal relates to the valuation of several immovable properties and also the value adopted in respect of compensation to be received for an item of immovable property acquired by the government. objection has been raised in the departmental appeals against the commissioner accepting the assessee's claim that in respect of the topiwala theatre, a business asset included in the net wealth, a sum of rs. 6 lakhs and odd.....
1. The assessee is an individual. The appeals are all filed by the department and the cross-objections by the assessee. While several issues relating to valuation and also the nature of some properties being agricultural were raised before the WTO and subsequently before the Commissioner (Appeals) in the departmental appeals, the only issue ultimately before the Tribunal relates to the valuation of several immovable properties and also the value adopted in respect of compensation to be received for an item of immovable property acquired by the Government. Objection has been raised in the departmental appeals against the Commissioner accepting the assessee's claim that in respect of the Topiwala theatre, a business asset included in the net wealth, a sum of Rs. 6 lakhs and odd representing assets lost to the assessee should be deducted from the net wealth or in the alternative, be deleted from the net wealth as non-existent assets. The assessee filed returns of net wealth for these years showing the value of the assets including the immovable properties at figures based on the valuation given by his valuer. The wealth-tax assessments relate to the assessment years from 1967-68 to 1975-76. For some of these assessment years, the WTO has referred the valuation of some of the propertiesunder Section 16A of the Wealth-tax Act, 1957 ('the Act'), to the departmental valuer. The departmental valuer's valuation was adopted for some of the assessment years but for other assessment years, the valuation was done after the relevant valuation dates for a subsequent assessment year. The WTO adopted the departmental valuer's figure of valuation for all these assessment years. In the departmental appeals, a general ground of appeal has been raised to the effect that the Commissioner (Appeals) erred in not accepting the valuation of the immovable properties made by the Departmental Valuation Officer and subsequently adopted by the WTO. Especially, a reference was made to the valuation adopted by the WTO in respect of the property at Goregaon. The Commissioner (Appeals)'s order to the extent that it reduces the quantum of compensation receivable by the assessee in respect of certain immovable properties acquired by the Government ignoring the quantum of compensation by the Courts in 1973 is also challenged. A general reference is made in the departmental appeals to the reduction in the value adopted by the WTO in respect of agricultural/non-agricultural lands. The specific properties, the valuation of which is objected to, are not referred to in the departmental appeals.

2. In the cross-objections for all the assessment years 1967-68 to 1974-75, the assessee has claimed that the value, as determined by the Commissioner (Appeals), of some of the properties is excessive and should be substantially reduced. The cross-objections by themselves do not indicate which are the properties in respect of which the valuation put by the Commissioner (Appeals) is excessive, as claimed in the cross-objections. For the assessment year 1975-76, the departmental appeal has challenged, as an alternative ground, the Commissioner (Appeals)'s order to the extent it deleted the addition of Rs. 2,76,000 made by the ITO in respect of the valuation of the Topiwala theatre.

The assessee's cross-objections for the assessment years 1975-76 and 1976-77 have challenged, without prejudice to the general ground about the valuation being excessive, that certain properties at survey Nos.

77/3, 92/1 and 91/1, Pahadi, Goregaon, ought to be valued at nil instead of at certain specific values fixed by the Commissioner (Appeals) as the properties were in the possession of the court receiver in whose hands separate assessments were being made and the departmental valuer had also valued these properties at full price.

Apparently, the cross-objections of the assessee relating to this point challenge the double assessment of the value of the above asset in dispute and in the hands of the court receiver, being included twice for wealth-tax purposes in the net wealth of the assessee himself, once through the court receiver and for the second time directly in his own hands ; thus, subjecting this asset to double assessment. At the time of the hearing of the appeals and the cross-objections, complaint was made by the learned counsel for the assessee that as against a normal valuation fixed and to be fixed on these litigated assets, the court receiver has not properly challenged the valuation put in, in the assessments made in his hands by the WTO, even though the valuation adopted by the WTO was harsh and abnormally high. In other words, apart from the double taxation aspect of these assets involved in the litigation, the very valuation agreed to or not disputed by the court receiver in regard to this item is challenged by the assessee as being excessive and not properly defended by the court receiver. The assessee as a direct party paying the tax would have justified a much lower valuation and supported it with relevant data unlike the court receiver.

3. All these appeals and the cross-objections are consolidated as they were heard together by the Tribunal. The assessee has not substantially pressed, if not actually withdrawn, his objection to the valuation put on agricultural lands, some of which were included and valued as non-agricultural assets. In modifying the valuation adopted by the WTO for some of the assets, the valuation of which is in dispute, in his rather elaborate and lengthy order, the Commissioner (Appeals) has discussed some of the general principles of valuation contested by the assessee as well as the department, before applying these principles to particular immovable properties belonging to the assessee. In deciding these appeals, we shall discuss these general principles which were discussed at length by the parties and in respect of which certain justifications have been given by the Commissioner (Appeals). We shall also individually deal with the disputed valuation of the different properties for all the years under appeal separately.

4. One of the principles which came up for discussion before us related to the binding nature of the valuation made by the assessee as well as the Departmental Valuation Officers. According to the learned counsel for the department, the valuation furnished by the assessee based on his valuer's report was found by the WTO to be low. The valuation furnished by the departmental valuer as a result of reference madeunder Section 16A was binding on the WTO and this value has been adopted by the WTO. The normal principles of valuation scientifically laid down have been followed by the Valuation Officers of the revenue in fixing the value of these assets. In respect of valuation of some of the assets, according to the learned departmental counsel, the order of the ITO applying the provisions of Section 52(2) of the Income-tax Act, 1961 ('the 1961 Act'), for the purpose of capital gains and the relevant order of the Tribunal deleting the additions made by the ITO by reference to Section 52(2) are not relevant. The order of the Tribunal deleting the additions is more based on the technical aspect of the interpretation of Section 52(2) on which stress is laid by the learned counsel for the department. Even so, in our opinion, the order cannot be ignored even for the purpose of the Act and valuation for the purpose of the said Act because ultimately the valuation to be adopted for the purpose of wealth-tax is based on the value the assets will fetch in the open market when sold. In regard to the sales to which the provisions of Section 52(2) have been applied, as a matter of fact, that no other payment than that warranted by other evidence, by the transfer documents, etc., is proved cannot be overlooked. In accepting the valuation of these properties, therefore, we cannot hold that the Commissioner (Appeals) is in error in relying on the Tribunal's order.

5. Another issue on which the Commissioner (Appeals) in fixing his valuation, has relied is the fact that the Valuation Officer's draft was made sometime after the date of the assessment order. The Commissioner (Appeals) has by and large, gone generally on the valuation made by the technical officers, even though for some of the years, that was made either before the relevant assessment year or valuation date or subsequent to these. According to him, the valuation of the properties had changed from day to day depending on the circumstances, such as, whether it was unencumbered, whether it was tenanted or occupied by the trespassers, etc. So far as the land and buildings are concerned, apart from the location of the land, in the view of the Commissioner (Appeals), the use to which the land can be put to was also relevant. The price a willing buyer would pay would, according to the Commissioner (Appeals), depend and take into account the point of time at which he would be in a position to enjoy in its entirety the plot and land including matters relating to the lease of the building. The Commissioner (Appeals) found that the Valuation Officers took into account the reversionary value of the land. After the decision of the Calcutta High Court in the case of CIT v. Smt.

Ashima Sinha [1979] 116 ITR 26 the question of considering the reversionary value of the land has to be reconsidered.

6. The assessee made some submissions before us on the question of valuation of immovable property consisting of land and building. In the first place, whether such a property should be valued on the land and building method or on capitalisation of income method is important.

Different methods of valuation had to be adopted for leased out properties. Consideration is also to be given for the effect of rent control. The Commissioner (Appeals) found that the Valuation Officer had taken the net annual return, capitalised the same for a specific number of years and since the buildings were old, considered the land value separately bifurcating the same for a specific number of years.

In Parks' book on Principle and Practice of Valuation at page 38, it is observed that when a property is valued on the basis of the rent received, the result is the value of the land and building is taken together and it is thereafter again apportioned. The Calcutta High Court pointed out that where the capitalisation of the net income is adopted as the basis and the reversion is considered, the value of the land is taken twice ; once included in the amount arrived at by the yield or rental method and again, for a second time, under the reversionary method. The Commissioner (Appeals) did not find any justification for considering the reversionary value of the land in spite of taking into account the capitalised value of the maintainable income for a fairly long period. Referring to the discussion on the point in Parks' book on Principle and Practice of Valuation and in particular, an instance of lease for long periods like 99 years, he held that the reversionary interest is to be considered on the basis of remoteness which itself has to be considered not in isolation but in relation to facts and realities obtaining. Against the available facts and the circumstances present, the Commissioner (Appeals) held that a period of fifteen years and more should be considered as too remote.

The Commissioner (Appeals) found that the view of the Valuation Officer that encroached land and land subject to trespass by unauthorised persons would be available to the owner-assessee within a reasonable time is too optimistic as against the equally unduly pessimistic view of the assessee's architect that in the case of a dilapidated building a hypothetical buyer would have to take into account the landlord's obligation to give the tenant either an alternative accommodation or an accommodation in the new construction at nil or at substantially concessional considerations. Taking into account both the extreme views, the Commissioner (Appeals) fixed the period of fifteen years and more as remote for taking into account any reversionary interest. If the buyer finds that the alternate use of the land so as to produce the higher income is postponed by a period of more than fifteen years, according to the Commissioner (Appeals), he would be justified in ignoring the reversionary interest.

7. We have considered this matter at length. The two valuers of the department as also the architect, who made the valuation for the assessee, were heard. There seems to be a little confusion in the whole approach of valuing the land with or without the building involving the computation of reversionary interest. Prima facie, as will be supported by the decisions like that of the Calcutta High Court in CED v. Radha Devi Man [1968] 67 ITR 761. the two principal methods of valuation are that of capitalising the 'income' and the land and building method. The Supreme Court has recommended in suitable cases, the former method especially where the effect of Rent Control Act, etc., is substantial on the property. It is in very rare circumstances, therefore, that the land and building method would be an appropriate method of valuation.

An instance may, perhaps, be where the land attached to the building is substantial, much more than what is necessary for the proper enjoyment of the building itself. Another may be a case where the building is almost dilapidated and the occupationary prospects are almost nil so that what is left would be only the land and the almost scrap value of the building. In all other normal cases, perhaps, the better method of valuation would be the capitalisation method.

8. It is in connection with the latter that the controversy about the reversionary interest has arisen. According to us, the principal drawback of the method adopted by the valuers seems to be that even while adopting the capitalisation method, in principle, they refer to the yield in gilt-edged securities and also work out the annual income on the basis of available rent, expenses, etc. An examination of the several valuation reports before us in the present appeals reveals this. With the capitalisation method, as recommended, it is a simple process of finding out what lump sum amount one would pay to fetch the annual yield the property is fetching from year to year. In other words, what cash a person would substitute for getting rid of the property in question without any alteration in the future income or capital holding. If, thus, a house property gives an annual income of Rs. 10,000 and a likelihood of this continues for some years, the value that can be substituted for the house property would be a reasonable sum which should give the seller the capital yielding an annual income of Rs. 10,000 with the same capital availability intact at the time when the building cannot be let out, being dilapidated or pulled down.

Whether in a case as above it would make any difference if the property is treated as leased out or tenanted or is treated as otherwise is the question. In our view, it may not make any difference so long as you are actually taking into account the annual yield for the available number of years and the possibility of what happens at the end of the period. Any speculatory yield as in the case of gilt-edged securities would be absolutely irrelevant to the above computation. A willing buyer of a hypothetical market is, certainly, not interested in finding out what a gilt-edged security will fetch for him. He is more interested, as stated above, in the normal yield of the asset with its undestructibility in terms of wealth, though not in the nature of the asset at any point of time in future. On the contrary, the method adopted by the valuers, in our opinion, leads to this anomaly ; if the present worth of the building is computed at Rs. 1 lakh yeilding an annual income of Rs. 10,000 if a person sells it for Rs. 1 lakh at the end of a period and that amount will be available to him even at the end of ten or twenty or more years after it fetches an annual income of Rs. 10,000. If the reversionary principles apply to the above, the present value of the asset should be taken on 'capitalisation' method at gilt-edged security rate of Rs. 1 lakh and add to it the reversionary value of the still existing unaltered Rs. 1 lakh at the end of the period. Certainly this cannot be the correct computation. We are not sure whether by adopting the yield on the gilt-edged securities instead of the correct rule in terms of rent, etc., the computation would become more worthwhile or scientific. Even if that be so, the valuation put for the department cannot be supported because even if the gilt-edged security multiple is adopted as the basis, the computation made here is based on actual rent with deduction for taxes, repairs, etc. This would be a case of mixing up several methods leading to confusion all around. The Calcutta High Court's observations read with the extract from the Parks' book on Principle and Practice of Valuation also supports the above view. In any case, for the purpose of taking the value for wealth-tax purposes, it is clearly the market value, meaning thereby the price which a willing seller would be prepared to pay, that has to be computed rather than any abstract valuation based on theory.

9. Another point which has come up for consideration is the effect of sales in the value of the properties. The Commissioner (Appeals) has adopted the price at which some of the properties have been sold some time after the valuation date as the basis of evaluating the property for wealth-tax purposes. The learned counsel for the department has challenged this on two grounds. Firstly, that the valuation details of the sales not having been looked into, the sale figure cannot be adopted as the value. The second objection raised is that the sale not being on the relevant valuation date would not, even from a theoretical point of view, be a substitute for the valuationunder Section 7 of the Act. In our view, both these objections are not relevant especially, on the facts of the present case. The history of the case shows that the assessee, the owner of extensive properties, has very few properties under his exclusive control so as to be a willing seller of the properties. Most of the properties are in the hands of tenants, trespassers or in adverse possession of outsiders. Against this background to claim that the sale price represent a better approach to the problem of valuation than any other method would, to say the least, be unrealistic. In none of the cases referred to by the Commissioner (Appeals), has the department pointed out any manipulation in the sales or a make-belief to show that the sale figures are manipulated figures.

Apart from the question of the assessee's almost absolute inability to have a say in the sales on account of adverse possession, etc., certainly, it cannot be stated that these sales figures are manipulated to reduce wealth-tax liability. Even if, therefore, in a normal case to adopt a sale price for valuation of a property, the department can claim an elaborate examination of the sales in details. In the present case, that is not necessary. Added to this is the situation that in respect of some of the sales the department attempted to apply the provisions of Section 52(2) but unsuccessfully. This aspect has been dealt with earlier. It is also seen that in none of the cases where the sales have been completed, the department has started acquisition proceedingsunder Section 269 of the 1961 Act, which it, certainly, would have done if there was any suspected understatement. The learned counsel for the department pointed out that in respect of some of the sales, there was only a mere agreement and the sale document was not before the WTO enabling him to start acquisition proceedings. This argument ignores the fact that no immovable property of value of more than Rs. 100 can be transferred, in law, without an executed registered deed. It may be that in some of the cases, the registration was done after a particular valuation date but this would not affect either the fact of the sale or the sale price itself. It is pointed out that in respect of some of the properties, sale agreements have been entered into and this, to some extent, has been made use of by the Commissioner (Appeals) in fixing the value. Sale agreements, certainly are not conclusive proof of the value of the properties or the prices at which they, later on, got transferred but, certainly, they are indicators as to the value on which reliance can be placed. It also requires to be noted, in this connection, that before the Commissioner (Appeals) both the department's valuers and the WTO were present. This would, certainly, have enabled them to attack the sale, if it could be suspected of being a collusive affair.

10. It was pointed out on behalf of the learned counsel for the assessee that the figure of actual sale of the property would have represented a more reliable value of the property than the hypothetical concept worked out on assumptions and presumptions. The sales, in the present case apart from in some cases being involuntary, are at arm's length and not to closely related parties. It is also pointed out that the assessees, with extensive properties like these and unable to sell one or the other property at random, could not make any manipulation as to the price to avoid wealth-tax. The hypothetical sale and the hypothetical sale price bristled with a lot of assumptions and conjectures, against which a real sale figure, according to the learned counsel, would certainly, be preferable. Attention is invited in this connection to the difference in the provisions of wealth-tax and estate duty enactments. Section 7 postulates notional sale of a property which the WTO regards as reasonable. Implicit in the above, according to the counsel, is the expectation that the notional sale would be as near the real sale price as possible.

11. The Wealth-tax Act is an annual Act. The value of a property fluctuates from year to year, if not from day to day, due to various factors. Whether one adopts the capitalisation or the land and building method or any other method of valuation, in arriving at the notional market price on the valuation date, the number of variables involved are numerous, assumptions to be made very many and the guess or estimate work involved substantial. When a property is actually sold for a particular price near about the valuation date, we really do not see how as a practical measure, the sale price could not become the basis of or even the value to be adopted for wealth-tax purposes. There would be, in our opinion, lesser chance of error in the guess work involved here than in working out the figure after taking into account several variables. We, therefore, uphold the Commissioner (Appeals)'s view that where the sales are made, unless the sales could be challenged on the ground of manipulation for wealth-tax purposes, the sale figures would represent better figures on estimate, than one based on several indeterminate factors.

12. Even the adoption of a sale figure itself involves an adjustment for working out the value of the same property for the earlier year.

This also involves an estimate but the extent of estimate involved would be lesser than if the whole valuation is based on an estimate.

The valuation, therefore, for earlier years than the year of sale would have to be fixed based on the trend of the price, any change involved in the market, etc. The Commissioner (Appeals) has taken this into account and in valuing the property, which we are adopting below, also this is kept in view.

13. Another point which came up for consideration mainly urged from the side of the assessee is that the departmental valuers have mechanically and theoretically, worked out the value of the properties on the basis of certain formulae. In this context, it is pointed out that the land and building method adopted by them is clearly outmoded since it does not take into account the fact of unauthorised occupation of the land by squatters, the social trend which towards the trespassers is more courteous and tolerated than they deserve and the very order of official legislation enuring to the benefit of the adverse possessors.

According to the learned counsel, these particular aspects have not been considered by the valuers who have gone on the basis of theoretical methods of valuation having absolutely no relevance to the nature of the land or the attendant circumstances. The effect of these extraneous but significant factors on the valuation of the properties cannot, in the view of the learned counsel, be ignored.

14. In our view, this criticism of the valuation made for the department cannot be brushed aside as untenable. The departmental valuers have worked out the value, certainly, based on elaborate details and facts. Even so, in our view, the valuation has assumed the market value based on certain actual sales, etc., of properties referred to in the individual valuation reports. Granting that the information about these sales are accurate and have been verified, neither the reports nor any other data give us an idea of how far these sale properties are comparable to the present assessee's properties to be valued, even the nature of occupation of the similar properties sold, whether they are self-occupied, whether they are on lease and if so under what conditions the nature of the property itself, etc., are not available. Apart from, therefore, the information of adverse possession, unfavourable lease, difficulty in sale, etc., both legally and factually, which are relevant to these properties, the valuation report does not take into account even the difficulties due to adverse possession, etc. In valuing the properties, therefore, we have no hesitation in holding that a suitable adjustment for all these difficulties should be made.

15. Another important point which came up for consideration is about the valuation returned by the assessee himself which was higher than the value worked out by the Commissioner (Appeals). It is pointed out for the department that when- the assessee had himself returned the value that should be regarded as representing the value of the asset as approximately as possible, the mere fact that an individual valuation put on some basis by the valuers should give a value less than the figure returned by the assessee should not be the reason for adopting the valuers' figure rather than the returned figure. The learned counsel for the assessee has challenged this position. It is not a question of the assessee being tied down to a value shown by him.

Referring to the provisions of Sections 2(m), 3 and 7 of the Act, the learned counsel for the assessee has pointed out that what the law requires is to fix the value of each asset and then aggregate their values for arriving at the net wealth under the 1957 Act : the sole authority for adopting the particular valuation is the WTO unlike under the 1961 Act, where the income is fixed according to the Income-tax Rules, 1962 obtaining and the said Act. Nothing is left to the assessee or even the WTO under the sections of the Act. It is also pointed out that under the Act apart from mentioning the existence of an asset, nothing is left to the assessee. Section 7 of the 1957 Act in this respect is unlike Section 2(24) of the 1961 Act, the entire responsibility for working out the net wealth being on the WTO.16. It is really not necessary for us to go into the objections raised by the assessee. That what has to be taken into account is the value of the asset as determined under the Act is in no doubt. What requires to be stressed is that the basis of assessment for wealth-tax purposes is the value as fixed by the WTO. After hearing the parties, we see no reason to dispute the above claim. It requires, however, to be stated that the method of valuation on the basis of hypothetical market, etc., followed by the WTO is, in no way, repugnant to the provisions of Section 2(m), 3 or 7. Even if, therefore, a particular value is returned for a property by the assessee, it would not be correct to say that a value less than that should not be adopted by way of computation if the facts and the law relating to them justify that. It is true where the value returned by the assessee himself could, apart from all other evidences, be justified on the basis of other facts, that valuation could be insisted upon. It is stated that when an assessee owns a property, the value put by him on his property can best represent its value. We do not clearly agree with this view. Any ordinary assessee may be not in a position, except in a vague manner, to know the value of his property. Hence, he makes a reference to experts, like valuers and architects. Even here, different experts differ in their working or in arriving at the final figure of valuation. It cannot, therefore, be really stated that what the assessee has returned as the value of the property would be the best value one can think of. The fallacy lies in the fact that even the owner of a property, in several cases, cannot fix the value of his property accurately or even subject to a limited margin. This is because the price which a willing buyer would pay depends on so many factors. A layman assessee cannot be expected to analyse each one of these factors to come to a correct conclusion about the value. He may have a particular idea of the worth of the property but that would, in practice, be as vague as possible. The actual value would depend on several factors, like the time of valuation, the particular need for purchasing such property in the market, presence or absence of any special purchaser, etc. As correctly stated by the learned counsel for the assessee, the valuation has to be madeunder Section 7 which provides for such a valuation which the WTO would fix. If, therefore, in a particular case, the factors justify a lower valuation than that fixed by the assessee, we see no reason why we should ignore this latter value and adopt some uncertain value returned by the assessee.

17. We have gone into the details available with regard to the several properties in the WTO's assessment order, the valuation reports furnished by the assessee's valuer and the departmental valuers and the other details available. The Commissioner (Appeals) has also dealt with at length with the details of these properties in coming to the values fixed by him in the several assessment years 1967-68 to 1974-75 for these properties. In the discussion below, we have pointed out the instances where modification, if any, of the Commissioner's order is called for. Subject to this, the values estimated by him are confirmed.

18. The Commissioner (Appeals) dealt with this item in paragraphs 27 to 34 of his order. The District Valuation Officer (DVO) has valued this property at Rs. 5,33,000 and from this allowed a deduction for the charge created in favour of the assessee's mother. The final value was fixed at Rs. 4,96,000 for all assessment years up to 1972-73 and Rs. 5,96,000 for the assessment years 1973-74 and 1974-75. For this property the assessee's valuer had put a valuation of Rs. 4,61,000 as on 31-3-1968. The assessee himself returned the figures of Rs. 3,93,160 for 1967-68, Rs. 4,61,000 for 1968-69, 1969-70, 1970-71, Rs. 3,75,820 for 1971-72 and Rs. 81,985 for the last three years. This property was conveyed to the Rasadhara Co-operative Housing Society in November 1971 after which the assessee retained for himself nine flats, out of which four were under the tenancy of the Commissioner of Police. Since the assessee's mother had a right of residence, it was pointed out that the other tenants were not interested in purchasing this. The DVO has valued this property at Rs. 5,32,870 on the very day when it was transferred to the tenants for a price of Rs. 3,75,820. The same valuation is being adopted by the DVO for the earlier years as well.

The Commissioner (Appeals) fixed the value of this property taking all the facts into account including the sale at Rs. 3,76,000. In our view, this represents a correct figure and does not call for any interference. For the subsequent period, as against the value fixed on an appropriate basis by the assessee at Rs. 81,985, the Commissioner (Appeals) fixed the value of Rs. 1 lakh. This also, in our view, is acceptable.

19. The assessee had not given any separate valuation for this property for the years up to 1970-71, but for the subsequent years some valuation was given. The assessee's valuer put the value of this property as on 31-3-1971 at Rs. 8,125. There was no report of the departmental valuer. The Commissioner (Appeals) has adopted a figure of Rs. 7,000. For the reasons explained in detail by the Commissioner (Appeals) in para 38, the value of this property was fixed at Rs. 4,000 until 1971-72 when it was sold. This calls for no interference.

20. This property, which was with the assessee, was sold on 31-3-1973, for a sum of Rs. 25,000. The assessee's valuer fixed the value of this property as on 31-3-1968 at Rs. 39,531. The assessee himself returned it at Rs. 36,510 for 1967-68 and other figures for subsequent years.

After taking into account the circumstances of the case including the sale, the value of this property was fixed by the Commissioner (Appeals) at Rs. 25,000. For the years 1963-64 to 1966-67, it would appear that this property was valued at figures at about Rs. 28,000.

Looking to all the facts, we see no reason to interfere with the valuation of this property made by the Commissioner (Appeals).

21. The assessee has shown the value of this property at Rs. 47,200 for 1967-68, Rs. 17,913 for 1968-69, 1969-70, 1970-71, 1971-72 and also 1973-74. For 1972-73, the value was put at Rs. 33,700. The DVO's report as on 31-3-1973 gave a figure of Rs. 6,84,780. Another valuation as on 31-3-1974 gave the value at Rs. 8,28,969. The WTO himself valued this property at Rs. 2,30,000 for 1967-68, Rs. 2,41,000 for 1968-69, Rs. 2,98,000 for 1969-70, Rs. 3,94,000 for 1970-71, Rs. 4,91,000 for 1971-72, Rs. 5,88,000 for 1972-73, Rs. 6,85,000 for 1973-74 and Rs. 8,29,000 for 1974-75. The Commissioner (Appeals) fixed the value of this property for all assessment years under appeal at Rs. 1,50,000. It would appear that in a report dated 28-2-1979 the DVO has proposed a valuation of Rs. 3,04,000, but on 17-3-1979 a valuation of Rs. 10,47,000 was adopted. This property was the subject-matter of litigation between several parties, the details of which are available in paras 40-A to 45 of the Commissioner (Appeals)'s order. The WTO has increased the value of this property from Rs. 1,90,000 for 1963-64 to Rs. 8,29,000 for 1974-75. According to the Court decree, the defendent in the suit had to pay a rent only of Rs. 2,703 in monthly instalments of Rs. 100. It also appears that till today the assessee has not got the possession of the property. An averment made for the department that on account of compromise between the lesser and the lessee, the assessee is likely or has got back the property has been shown to be incorrect. The Commissioner (Appeals) has fixed the value of this property at Rs. 1,50,000 for all the years, taking into account the long standing dispute between the tenants and the assessee, the highly speculative chance of the property reverting to the owner, if at all, in a very distant future time and the chance of a prudent investor investing in this property fetching a rent of Rs. 3,000 a year and that too in instalments. In our view, the variables involved in the fixation of the value of this property are so numerous and confusing that the mere arithmetical calculation made by the departmental authorities can scarcely be called realistic. We see no reason to differ from the value fixed by the Commissioner (Appeals) of this property.

22. For these properties, no separate value was returned by the assessee for 1967-68, but for the subsequent years, a combined valuation was put in the returns. The assessee's valuer gave a figure of valuation of Rs. 1,64,400 as on 10-9-1971 for Gogate Wadi and Rs. 79,156 as on 31-3-1968 for Churi Wadi. The departmental valuer fixed the value of both the properties as on 10-9-1971 at Rs. 5,58,300. The WTO adopted a combined value of Rs. 5,53,000, Rs. 6,08,000, Rs. 6,69,000, Rs. 7,36,000 and Rs. 8,10,000 for the assessment years 1967-68 to 1971-72, respectively.

For the assessment year 1972-73, he adopted a value of Rs. 2,51,000.

Gogate Wadi was sold during that previous year. For the subsequent years, the WTO adopted values of Rs. 2,75,000 and Rs. 2,91,000. For the reasons given in detail in his order, the Commissioner (Appeals) fixed the value of these properties separately for its two parts. For Gogate Wadi he fixed the price for the assessment year 1971-72 at Rs. 1,50,000. After this date this was sold. For the Churi Wadi he fixed a value of Rs. 10,000 for all the assessment years. After considering the facts relating to these properties, we do not think that much could be said about the Commissioner (Appeals) adopting the same value of these properties for several years. The factual circumstances are such that in an estimated value there could not be much of a difference from year to year. Of the combined extent of 49,920 sq. yds. which constituted these two properties, 31,970 sq. yds. were sold on 30-3-1972 as the registered conveyance deed of that date indicated. The Departmental Valuation Officer worked out the value of this property at Rs. 5,58,300, which included a reversionary value of the land after 20 years from the date of valuation, 12-8-1975, of Rs. 4,23,555. In the face of the actual land being sold for Rs. 1,50,000 and the land being subject to all the deficiencies earlier mentioned, we do not see any reason why the valuation should not be based on the actual sale price.

This has not been shown to be collusive. In fact, we are told that action takenunder Section 52(2) in respect of this property by the department failed. The Commissioner (Appeals)'s action, therefore, in fixing the value of Gogate Wadi at Rs. 1,50,000, the sale price, is upheld.23. As regards Churi Wadi, after 1971 it was fetching a rent of Rs. 300 per year. Earlier, it appears, this was included in a consolidated amount of Rs. 891. This was also a subject-matter of litigation. The Commissioner (Appeals) in his order refers to a valuation put for these and other premises of Rs. 27,000 for the purpose of suit. The departmental valuer's figure of Rs. 2,75,000 to Rs. 3,82,000 for this property has been modified by the WTO to Rs. 2,51,000 and Rs. 2,91,000, respectively. For the assessee it was pointed out that the departmental valuer had completely ignored the facts relating to the suit. In the computation made by him the deferred value of the land is computed at Rs. 2,78,000. This is mainly on the assumption that the owner would get back the vacant possession of the land within 10 years. Apart from the smallness of income and other current facts, apparently the expectation about the property being returned with vacant possession is too optimistic. The Commissioner (Appeals) has also noted a fact supported by the details produced before us that the large number of hutments had been constructed in this property by persons who have been given licences or those who have unauthorisedly encroached on the land. Apart from the fact that these latter persons do not contribute to any income from the land, the question of possession itself of the property by these persons would reduce the land value substantially. What is valued ultimately with regard to this property is the assessee's right, title and interest therein which has been the subject-matter of prolonged litigation. The annual income is only Rs. 300. Taking these facts into account, we do not see any reason to disturb the value of figure put by the Commissioner (Appeals).

24. The other properties considered for valuation are 93/1, Goregaon, S.No. 35/1, S.No. 20/14, Dindoshi, S.No. 20/2, S.No. 104 (PL) and 103/1 and 2, Kamlu and Pandu and others, 104 (PL), Ganga Chawl and Kale Rubber Works. In respect of these properties the assessee did not show any separate valuation in the returns for the earlier years, such as 1967-68, but subsequently some values were put as from the assessment years 1970-71. These latter values were based on the assessee's valuer's report, dated 31-3-1970 and 31-3-1971. For the assessment year 1967-68, the departmental valuer has put the value of the first three of the above properties at Rs. 93,623, Rs. 2,000 and Rs. 21,000 based on a valuation report dated 31-3-1973, while there was no report for the property at S.No. 20/2, the departmental valuer's report for the last two properties indicated figures of Rs. 28,430 and Rs. 3,92,000, respectively. This was based on a valuation as on 31-3-1967. For the assessment year 1967-68, the WTO adopted figures of Rs. 63,000, Rs. 1,000, Rs. 7,500, Rs. 50,000, Rs. 19,000 and Rs. 6,42,250, respectively. As regards the first item of property, the position appears to be that farmers of the assessee were residing in this land and as tenants paying a small monthly rent for the land only. The structures were constructed by the farmers and the assessee had no right therein. The land measuring 2,109 sq. yds. it is stated, has no access except a small street in a zig-zag fashion. The departmental valuer assumed that here also the assessee would get vacant possession some time in 1961 and on that basis computed the value from amounts varying from Rs. 92,623 for 1967-68 to Rs. 1,26,068 for other years.

The Commissioner (Appeals) found that out of these for a piece of land, with an area of 473 sq. yds., the assessee received on sale a price of Rs. 6 per sq. yd. Taking the rent received in respect of this land and other circumstances, the Commissioner (Appeals) fixed the value of this land at Rs. 12,000 as against the figure of Rs. 63,000 fixed by the WTO. The Commissioner (Appeals)'s figure does not call for any interference. The last figure is less than the figure fixed by the departmental valuer, but the WTO, while ignoring the patent facts of occupation, lease, etc., not taken into account by the departmental valuer, has computed still a higher figure of value. This, in our opinion, is not justified. With regard to the value of further four properties above noted, having regard to the facts, we see no reason to interfere with the valuation given by the Commissioner (Appeals).

25. The value put by the Commissioner (Appeals) in respect of properties at 104 (PL) and 103/1 and 2 also seems to be reasonable. For the assessment year 1967-68, the WTO has taken a value of Rs. 19,000 for this property. Part of this property was sold on 12-10-1971 and another on 13-4-1972. The sales seem to have been accepted by the WTO.The Commissioner (Appeals) has fixed the value for this property, having regard to these facts, we do not see any reason to interfere with the value put by him.

26. The property at SI. No. 103/1 and 2 and SI. No. 104/8 to 13 measuring up to 9,175 sq. yds. was valued by the assessee's valuer as on 31-3-1970 at Rs. 2,26,524. The departmental valuer fixed the value of this property as on 31-3-1967 at Rs. 3,92,000. As against the value adopted by the WTO of Rs. 6,42,250 for 1967-68, Rs. 7,34,000 for 1968-69, Rs. 8,25,750 for 1969-70, etc., the Commissioner (Appeals) fixed a value of Rs. 1,75,000 for all the years up to 1972-73. For the assessment year 1973-74, the Commissioner (Appeals) fixed a value of Rs. 60,000 while for 1974-75, the value came to Rs. 3 lakhs. The assessee had raised a claim with regard to this property that it was agricultural, but this was not accepted by the Commissioner (Appeals).

This decision has not been challenged before us by the assessee. The valuation, therefore, adopted on the non-agricultural basis, which is also supported by the Court decisions, with regard to this land, has to be considered on that basis. It would appear that in 1955 and 1956 this land was given on lease to two agricultural tenants, but in 1959 this appears to have been got back by the assessee. As pointed out above, the Valuation Officers have valued this property from Rs. 3,04,000 to Rs. 5,75,000. The Commissioner (Appeals) found that the part of this land was acquired for road widening purposes. 1,875 sq. yds. were acquired at the rate of Rs. 66 per sq. yd. including solatium of 15 per cent, the balance of land continued to be under notification for acquisition. An agreement to sell property initially for a sum of Rs. 3 lakhs was referred to in the neighbourhood. The Commissioner (Appeals) also based his valuation on this acquisition figure of Rs. 3 lakhs as on 31-3-1974. From 1964 onwards, apparently, this property was notified for acquisition. In 1972, 1,875 sq. yds. were acquired for Rs. 1,39,307 that left a balance of 5,300 sq. yds. The value adopted by the Commissioner (Appeals) up to 31-3-1972 for this property, value of Rs. 1,75,000 compares favourably with the acquisition price realised. For the assessment year 1973-74, the balance of land was at Rs. 60,000.

This also calls for no interference.

27. 16 other items of other properties coming under the agricultural and non-agricultural controversy also had to be valued. In the returns filed no separate value has been shown for these properties. The assessee's valuer, however, gave a valuation for some of these properties such as the New Standard Engineering Co., where the value given as on 31-3-1970 was Rs. 3,34,060. The lands acquired in S.Nos. 79 and 81 were valued by the assessee's valuer at Rs. 62,554 and that in S.No. 119 at Rs. 44,160. There was no report regarding the other lands from the assessee's side. The departmental valuer put the value of the New Standard Engineering Co.'s land as on 31-3-1967 at Rs. 83,000, the lands in S.Nos. 79 and 81 at Rs. 81,000, S.Nos. 140 and 141 at Rs. 11,000 and S.No. 119/3 at Rs. 31,000 and the land at S.Nos. 91/1, 92/1 and 77/3 measuring to 15,045 sq. yds. at Rs. 3,57,000. The value of all lands including those covered by S.Nos. 91/1, 92/1 and 77/3 were valued for the assessment year 1967-68 by the WTO at Rs. 37,98,150. For 1968-69, this was valued at Rs. 43,52,425, for 1969-70 at Rs. 49,56,200, for 1970-71 at Rs. 55,17,270, for 1971-72 at Rs. 45,06,750, for 1972-73 at Rs. 46,72,525, for 1973-74 at Rs. 32,55,000 and for 1974-75 at Rs. 33,43,795. Of these, the New Standard Engineering Co.'s land was sold on 30-4-1972. The Jyotsna Amin's land at S.No. 92/5 was sold on 30-3-1972. The other lands at Anwar Suleman & others, Abdul Kadar Husan, G.S. Pednekar, Mrs. R.R. Sood, B.D. Thakur and S.B.Survey, details of which are available in the assessee's statement and the Commissioner (Appeals)'s order, were sold on various dates between 24-8-1964 and 30-3-1972. The Commissioner (Appeals) in his order valued each one of these items separately and put the value on the basis of the sales and the available circumstances at Rs. 4,26,500.

28. The above included the value of 15,045 sq. yds. at S.Nos. 91/1, 92/1 and 77/3, for which the Commissioner (Appeals) adopted a value of Rs. 75,000. With regard to these lands, the assessee has raised a cross-objection stating that these lands were in the hands of the receiver. The receiver has already filed a return of income and an assessment has been completed on the basis of this return. Thus, prima facie, there is a double assessment with regard to these properties. It is also pointed out that the receiver has not seriously contested the figures adopted by the revenue authorities being almost a non-interested person. This resulted in a substantial enhancement of the value for these properties. The assessee's claim is that apart from the double assessment, which should be avoided, the proper value of these properties should also be adopted.

29. As far as the double assessment is concerned, we have no hesitation in accepting the assessee's claim. The question, however, would be as to whether the assessment should be made here or the assessment made in the receiver's case should subsist. The last matter is not before us.

It would, therefore, be proper to direct that insofar as the same properties have been assessed in the hands of the receiver on behalf of the assessee, it should not be included here. The question, therefore, of going into the question of valuing that property does not arise.

30. From the above it would be clear that the Commissioner (Appeals) has properly gone into the details of each of these properties separately, whereas the WTO who had before him the value of some of the properties given by the departmental valuer, valued the entire set of properties at a lump sum figure of several lakhs, the figure being Rs. 38,00,000 for the assessment year 1967-68. Even though these properties are situated in various places and have different characteristics, apparently the WTO has tarred all these with a same brush of valuation by adopting a single rate per sq. yd. He has also ignored the very valid factor that if not on the first valuation date, subsequent to that most of these properties have been sold for specific prices. The department has not challenged these sales. No suspicion about the genuineness of the sale have also been made. In our view, therefore, the Commissioner (Appeals) has correctly adopted the more realistic value supported by the actual sales of these properties in the place of what apparently is a very high figure of estimation at a uniform rate for properties of varied types situated in different places. We are mentioning this because there is a vast difference between the value adopted by the WTO for these properties and the final figures adopted by the Commissioner (Appeals) with which on an analysis of the complete details furnished before him and also by the parties before us, we agree.

31. Another point of importance, which has cropped up during the discussion, relates to a deduction of Rs. 4,46,962 given by the Commissioner (Appeals). The position here is that the assessee had a plot of land measuring about 22,000 sq. yds. which was divided into four parts. On plot No. 3 of this big plot, stands the Topiwala bungalow, the valuation of which had been discussed in one of the earlier paragraphs of this order. Plot No. 4 was sold in 1972. In plot No. 2 there were originally some small buildings, which were also sold in 1968-69. The FSI relative to this plot also appears to have been sold. It was claimed before the WTO that the assessee did not make proper entries in the business books of account regarding the cost of land that was utilised for construction of roads as also the cost of construction of roads which were an inevitable part of complying with the municipal regulations. The expenditure in this regard came to Rs. 6,46,962. The WTO rejected the assessee's claim for deduction of this asset which was an intangible item in the figure of assets and in effect represented a loss to the assessee. The Commissioner (Appeals) held that in applying the provisions of Rule 2D(d) of the Wealth tax Rules, 1957, the WTO was bound to adjust the above figure of non-existent assets. Taking into account, however, the fact that the assessee sold his FSI rights for a sum of Rs. 2 lakhs, which was accepted by the WTO, the Commissioner (Appeals) allowed a deduction of Rs. 4,46,962.

32. The learned counsel for the department has challenged this allowance. The development expenditure even granting that it was incurred, was of a continuous nature and the plan was executed bit by bit. Even though for accountancy purposes it can be treated as an intangible addition to the assets, in effect it did not represent a loss to the assessee at all. According to the learned counsel, this was not to be allowed at all. Alternatively, it is pointed out that the expenditure has to be adjusted at the rate of progress of development.

Apart from the fact that this would make any allowance dependent on the particular valuation date, it is also pointed out that the expenditure at any rate will have to be allotted to four different properties on a proportionate basis.

33. According to the Municipal Rules, the assessee has to part with a part of the land for laying down roads, etc. The assessee had also to incur expenditure in connection with the laying down of the roads and other utilities. This item, therefore, is clearly a loss to the assessee. When all other assets are taken into account, it is, therefore, the requirement of law and the statute that the non-existent asset should be deleted from the computation. The case of the department is first, that the entire amount should not be allowed to be deducted from the net assets and secondly, that since the expenditure was incurred progressively from year to year, the relevant part of the expenditure only should be allowed for each valuation date. As regards the first, in our view, that does not represent the correct position.

May be, the assessee has incurred the expenditure for all the four parts of the plot. In his books of account this will go down as a non-existent but intangible asset. When the other properties are sold off and the sale price was duly taken into account, this would not make any difference to this item. Whatever was received on the sale of these properties have been included in the net wealth. The non-existing asset, therefore, will have nothing to do with them. Even the question of it being built up over the years will not make any difference, since an overall view of the situation has to be made in the first place and valuation involves the cumulative consideration of so many variables.

This allowance by the Commissioner (Appeals) is upheld. It requires, however, to be mentioned that the Commissioner (Appeals) has deducted the value of the FSI. Consistent with the vary of a non-existing asset, we see no reason to make such a deduction of Rs. 2 lakhs from the intangible item of Rs. 6,46,962. The assessee is, however, not on appeal on this ground. So we leave it there.

34. The last point of dispute relates to the valuation of the compensation received from the Government of Maharashtra for the land acquired by the Government for the Aarey Milk Dairy. These lands were acquired in 1947. The acquisition was followed by a prolonged litigation on the compensation question right up to the Supreme Court.

Ultimately, some time in 1972, the assessee received a sum of Rs. 2,93,000 towards principal and cumulative interest. For the assessment years 1963-64 to 1973-74, the WTO included towards this asset amounts varying from Rs. 2,17,819 to Rs. 2,93,000. The assessee's claim that being a contested asset nothing could be included in the net wealth for this property was correctly rejected by the Commissioner (Appeals).

Taking into account the pending appeal, loss of interest, etc., relating to this asset which any purchaser would take into account, the Commissioner (Appeals) fixed the value of this asset up to the assessment year 1971-72 at Rs. 1 lakh and thereafter at Rs. 2 lakhs till the date of receipt. In the departmental appeal this has been challenged. The learned counsel has pointed out that considering the original amount awarded by the land acquisition authorities and the assessee's own challenge for a larger compensation, there was no justification for any reduction of this amount. Even the order of the civil judge put the compensation for it at Rs. 2,73,000. The assessee had appealed against it. According to the learned counsel, there was no question, therefore, of the value of this land coming to any figure below that fixed by the civil judge in the first place and the final Court in the second. A purchaser would certainly have in view the value of the land in the neighbourhood and the possible amounts it can fetch if sold to an outsider. Judged from this point of view and taking into account the absence of any serious contest from the Government's side, the value put by the WTO was very reasonable.

35. For the assessee it is pointed out that even if this claim that no value should be put on this uncertain asset is not accepted, only a small value can be put on this. Even though the Land Acquisition Officer has fixed a particular amount in view of the speculative chance regarding the final figure of compensation, no purchaser would have purchased this asset for any reasonable amount. The cost of litigation has to be taken into account.

36. Taking all the facts into account, we hold that the value fixed by the Commissioner (Appeals) is very much on the low side. In a speculative asset of this type, whose value is subject to alteration from stage to stage of the litigation, the purchaser looks to several factors before making a purchase of it. Apart from the uncertainties and the mental element going into the recovery of the asset, litigation expenses and in the case of prolonged litigation potential statutory and other changes, etc., have also to be taken into account. Even so, the value put by the Commissioner (Appeals) appears to us to be low.

The land was acquired somewhere about 1947. In October 1954 the Land Acquisition Officer deposited in the Court a sum of Rs. 1,21,000. The subsequent order of the civil judge fixed the compensation at Rs. 2,73,089. There appears to have been no challenge from the side of the Government. From the above facts, it would be clear that no purchaser would expect to get from the Courts a decision reducing the value of the compensation already fixed from stage to stage. The availability of an amount for solatium of future interest cannot also be ignored.

Taking these facts into account, we would fix the value of this asset at Rs. 1,50,000 up to 1970-71 and Rs. 2,50,000 for the subsequent two years.

37. Before parting with the case, we would like to mention that this appeal concerns itself with a valuation of a large number of properties. Several details were furnished before the WTO and the Commissioner (Appeals). The valuers, both of the assessee as well as department, had done substantial spade work with regard to the valuation of the properties and represented before the authorities below as well as before us. The paper book furnished in this connection runs to several hundred pages. The Commissioner (Appeals) has written an elaborate order hitting almost a century in terms of number of pages. Before us the matter was discussed at length, both in terms of principles as well as the valuation of individual items of properties, with reference to the valuation reports of the assessee's valuer and the departmental valuer. We had also the best assistance from the counsels on both sides. In coming to our conclusions about the appeals, we have availed of all these rich material before us. Apart from referring to the large amount of material gathered and work put in by the Commissioner (Appeals), we must make particular reference to the elaborate arguments advanced before us by the counsels as well as the valuers. The grounds of appeal of the department have broadly challenged the reduction given by the Commissioner (Appeals) but has not indicated to what properties the challenge really applies. Against this background, the learned counsel for the department has discussed before us all the properties covered by the wealth-tax assessments for all the years under appeal and in respect of each of these properties the valuation has been gone into. Except where we have made alterations and modifications, we may be taken to have agreed with the valuation fixed by the Commissioner (Appeals).

38. All the departmental appeals are partly allowed. In the cross-objections of the assessee except for the years 1975-76 and 1976-77, the assessee has only claimed that the valuation put by the Commissioner (Appeals) is excessive. Our order above deals with the valuation of all the properties. The assessee's ground for the cross-objections for those two years have also been covered. All the cross-objections are partly allowed.

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