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Sumatilal Chimanlal Shah Vs. Controller of Estate Duty, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberEstate Duty Reference No. 10 of 1975
Judge
Reported in(1982)26CTR(Guj)209; [1982]138ITR143(Guj)
ActsEstate Duty Act, 1953 - Sections 36
AppellantSumatilal Chimanlal Shah
RespondentController of Estate Duty, Gujarat
Appellant Advocate B.K. Mehta, Adv.
Respondent Advocate N.U. Raval, Adv.
Cases ReferredMrs. Khorshed Shapoor Chenai v. Asst.
Excerpt:
direct taxation - repealed act - section 36 of estate duty act, 1953 and land acquisition (bombay amendment) act, 1948 - whether provisions of act of 1948 relevant in determining value of land as on death of deceased as said act had been declared void from its inception by supreme court - provisions of act of 1948 declared void by supreme court - act becomes inapplicable - provisions of such act not relevant in determining value of land. - - the learned advocate-general raised the following three contentions :1. the tribunal committed an error in law inasmuch as it failed to decide the crucial question as to what the highest bider would have offered in the hypothetical sale in the open market, which s. the land owner as well as the assistant collector, thana, went in appeal before.....b.k. mehta, j. 1. at the instance of the accountable person for the estate of the deceased, one maniben shivlal, the following three questions have been referred to us under s. 64(1) of the e.d. act, 1953 : '1. whether, on the facts and in the circumstances of the case, the tribunal was right in holding that the provisions of the land acquisition (bombay amendment) act, 1948, were not relevant in determining the value of the land as on the death of the deceased as the said act had been declared void from its inception by the supreme court 2. whether, on the facts and in the circumstances of the case, the tribunal was right in holding that the words 'if sold' in section 36(1) of the estate duty act, 1953, create a fictional position under which the tribunal had to assumes and proceed to.....
Judgment:

B.K. Mehta, J.

1. At the instance of the accountable person for the estate of the deceased, one Maniben Shivlal, the following three questions have been referred to us under s. 64(1) of the E.D. Act, 1953 :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of the Land Acquisition (Bombay Amendment) Act, 1948, were not relevant in determining the value of the land as on the death of the deceased as the said Act had been declared void from its inception by the Supreme Court

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the words 'if sold' in section 36(1) of the Estate Duty Act, 1953, create a fictional position under which the Tribunal had to assumes and proceed to value the property on the basis that there was an open market the land in question could be sold

3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the brokerage of Rs. 32,406 paid on the sale of the land was not deductible in computing the value of the property ?'

4. These questions arise on the facts and in the circumstances narrated hereinbelow. The said Maniben died on January 12, 1962, leaving a will dated February 20, 1936, and a codicil dated January 1, 1962. The accountable person - the applicant herein - submitted the estate duty account on July 12, 1962. In the said account, the accountable person valued plots of land belonging to the deceased bearing S. Nos. 600 and 601 within the revenue limits of village Wadaj, within the City of Ahmedabad, admeasuring about 12,614 sq. yards at Rs. 2,00,000 as on the relevant date of the death of the deceased, that is, January 12, 1962. It appears that the deceased had entered into a agreement on December 7, 1959, for sale of the said land with Satyavadi Co-operative Housing Society Ltd. to sell the said plot for Rs. 3,56,708 at the rate of Rs. 22 per sq. yard. According to the said agreement, the deceased-vendor agreed to convey the said property within four years from the date of the agreement and further agreed to hand over the possession immediately in consideration of which the vendee agreed to pay rent at the rate of Rs. 16,855 per annum till the conveyance was executed. It appears further that on December 21, 1959, the Government of the erstwhile State of Bombay issued a notification under s. 4 of the Land Acquisition Act, 1894, declaring that the said land was likely to be needed for the public purpose of construction of houses of Haridwar Co-operative Housing Society Ltd. Subsequently, however, the said notification was cancelled by the Govt. of Gujarat by its notification of February 17, 1962, which is admittedly after the death of the deceased. The said land was, therefore, sold to Satyavadi Co-operative Housing Society Ltd. for Rs. 3,56,708 persuade to the aforesaid agreement and the vendors paid a brokerage of Rs. 32,406 for the said transaction.

5. A question arose as to what should be the value of the land in the course of assessment for the purposes of estate duty and the accountable person claimed that the value should be fixed on the basis of the prices prevailing on January 1, 1948, in view of the Land Acquisition (Bombay Amendment) Act, 1948, and not the price for which the land was agreed to be sold to Satyavadi Co-operative Housing Society Ltd., that is, Rs. 56,708. The Asst. Controller of E. D., however, did not find any substance in this contention since the said Bombay Amendment Act of 1948 was declared to be still-born and, therefore, void ab initio by the Supreme Court in N. B. Jeejeebhoy v. Assistant Collector, Thana Prant, Thana, AIR 1965 SC 1096. In that view of the matter, the Asst. Controller estimated the value of the said land at the price at which it was agreed to be sold, that is, Rs. 3,56,708.

6. The accountable person, being aggrieved with this order, carried the matter in appeal before the Appellate Controller, where, besides this principal question of the valuation of the land, a further contention about the admissible deduction of Rs. 32,406, being the amount of brokerage paid on the sale of the land, was urged. The Appellate Controller, however, rejected both the contentions urged on behalf of the accountable person and confirmed the order of the Asst. Controller.

7. The accountable person, therefore, carried the matter in appeal before the Tribunal. The Tribunal was of the opinion that the valuation of the land sought to be acquired under the Land Acquisition Act, 1894, could not be assessed as on January 1, 1948, as prescribed under the Bombay Amendment Act inasmuch as the said Act was declared to be void from its inception since the Legislature had no competence to enact such a statute. The Tribunal further held that the principal value of any property is to be estimated at the price which it would fetch 'if sold in the open market' at the time of the deceased's death as prescribed under s. 36 of the E.D. Act. This method of estimating the principal value does not postulate that there should be an actual sale in the open market. What is envisaged under the said s. 36 is that there is an open market and the property could be sold in such market. The Tribunal found as a common ground that if the land was not under acquisition, and if the Bombay Amendment Act was not operative, the land in question would have certainly fetched the price of Rs. 3,56,708 and the fact that it was in fact sold for that amount to Satyavadi Co-operative Housing Society Ltd., after the cancellation of the notification under s. 4 of the Land Acquisition Act, could not be overlooked. The Tribunal, therefore, confirmed the finding of the authorities as regards the principal value of the property in question. As regards the question of brokerage, the Tribunal disallowed the claim following the decision in Pandit Lakshmi Kant Jha v. CWT : [1973]90ITR97(SC) . It is in these circumstances that the accountable person prayed for a reference of the questions set out hereinabove for our opinion.

8. The learned Advocate-General appearing on behalf of the accountable person at the outset declared that he did not press question No. 3 which pertains to the inadmissibility of the brokerage amount for purposes of deduction from the value of the estate. We are, therefore, concerned only with questions Nos. 1 and 2 which, in effect and substance, relate to the determination of the principal value of the property in question, namely, the land. The learned Advocate-General raised the following three contentions :

'1. The Tribunal committed an error in law inasmuch as it failed to decide the crucial question as to what the highest bider would have offered in the hypothetical sale in the open market, which s. 36 of the Estate Duty Act requires the Assistant Controller to imagine, took place at the time of deceased Maniben's death.

2. In so far as the Tribunal imputed the knowledge of the subsequent fact of the declaration of the invalidity of the Bombay Act by the Supreme Court, it considered an extraneous circumstance which was not germane to the question of valuation as on the relevant date prescribed under s. 36 of the E.D. Act.

3. In any view of the matter, the Tribunal committed an error of law in failing to appreciate in proper perspective the effect of the existence of the s. 4 notification which was in force on the date of the demise of Maniben which would invariably depress the principal value of the property in question since the notional bidder would be very much conscious that the purchaser would have only a right to compensation as determined under the Land Acquisition Act.

9. We will deal with the first two contentions together as they are interrelated. At the outset it musts be conceded that on the crucial date, which is relevant for the purposes of determining the principal value of a property as prescribed under s. 36 of the E.D. Act, the notification of the Government of the erstwhile State of Bombay under s. 4 of the Land Acquisition Act, 1894, declaring that the land was likely to be needed for the public purpose of construction of houses for the Haridwar Co-operative Housing Society was very much in force. It was dated December 21, 1959. It should be recalled that Maniben died on January 12, 1962. It should be further stated that the aforesaid notification was cancelled by the Govt. of Gujarat by its subsequent notification of February 17, 1962. We must also not lose sight of the fact that on the crucial date of the demise of Maniben, the Land Acquisition (Bombay Amendment) Act, 1948, was in force. The Bombay Amendment Act was placed on the statute book with effect from 18th March, 1948, and it extended to the whole State of Bombay and was to remain in force for a period of 20 years. The effect of the ammendments made by s. 3 of the Bombay Act was that if any land is acquired under the Land Acquisition Act, 1894, during the continuance of the Bombay Act, in determining the amount of compensation to be awarded for such land, the court would take into consideration, inter alia, the market value of the land at the date of the publication of the notification under s. 4, sub-s. (1) or at the relevant date which was prescribed to be the first day of January, 1948, under the Bombay Amendment Act, whichever was less. In other words, the effect of the Bombay Amendment Act was that in respect of the land acquired for a housing scheme, the compensation amount was frozen at the price as on 1st January, 1948. This Bombay Amendment Act was challenged in acquisition proceedings initiated by the Government of the erstwhile State of Bombay in respect of the land of one N. B. Jeejeebhoy pursuant to the notification under ss. 4 and 6 of May 28, 1948, and/or July 14, 1949, respectively. The possession of the land was taken over under s. 17 of the Land Acquisition Act on December 31, 1949. In the reference to the civil court under s. 18 of the Land Acquisition Act, for purposes of determination of the compensation, the civil judge valued the land as on January 1, 1948, as prescribed under the Bombay Amendment Act, 1948, and did not award any amount on account of solatium. The land owner as well as the Assistant collector, Thana, went in appeal before the High Court of Bombay. One of the contentions urged on behalf of the land owner was about the validity of the Act. The High Court of Bombay upheld the validity of the Bombay Amendment Act and, therefore, allowed the appeal filed by the Assistant Collector restoring the award of the Land Acquisition Officer. The land owner, therefore, carried the matter in appeal before the Supreme Court. The first question urged before the Supreme Court was that inasmuch as the Bombay Amendment Act did not comply with the provisions of s. 292 of the Government of India Act, 1935, it was void ab initio. Upholding this contention Subba Rao J., speaking for the court, held as under after referring to s. 299(2) of the Government of India Act, 1935 (p. 1099) :

'Under this sub-section the power the make any law by an appropriate legislature was subject to the conditions laid down therein. The power thereunder could not be exercised unless the conditions were complied with. They were fetters on the legislative power. Section 299 of the Government of India Act in express terms said that the appropriate legislature had no power to make any law authorising the compulsory acquisition for public purposes of any land, etc., unless the law provided for the payment of compensation for the property acquired. If 'compensation' was not so provided, it affected the competency of the appropriate Legislature to make the said law. If it did not have power, the law so made was a nullity. It is as if it did not exist on the statute book.'

10. The court thereafter proceeded to consider the question whether the Act provided for compensation within the meaning of s. 292 of the Government of India Act. The court ruled that having regard to the extension given to the Bombay Amendment Act from time to time it was in effect and substance a permanent legislation. The court thereafter proceeded to hold as under (p. 1101) :

' (9) The Amending Act in the matter of fixing compensation demonstrably contravended the provisions of s. 299 of the Government of India Act, 1935. Under the Amending Act, as we have already noticed, though a land may be acquired subsequent to the said Act, the compensation payable in respect thereof will be the value of it as on January 1, 1948. Under the Amending Act the said dating back has no relevance to the matter of fixing the compensation for the land. It is not a 'just equivalent' of what the owner has been deprived of, for the value of the land on that date may be far less than that obtaining on the date of the notification under s. 4 of the Land Acquisition Act. We, therefore, hold that the Amending Act was void as the Legislature made it in contravention of the express provisions of s. 299 of the Government of India Act. It was a still-born law.'

11. The effect of this decision of the Supreme Court was that the Bombay Amending Act was a nullity inasmuch as it was enacted by the Legislature without competence in that behalf; it was still-born and, therefore, non est for all purposes. A law which is unconstitutional for lack of legislative competence is void ad initio an must be treated as non est (vide Sundararamier & Co. v. State of A.P. : [1958]1SCR1422 and Behram Khurshed Pesikaka v. State of Bombay 0065/1954 : 1955CriLJ215 . The effect of the declaration of the invalidity of the Bombay Amendment Act by the Supreme Court in Jeejeebhoy's case, : [1965]1SCR636 , would be that it was non est for all intents and purposes and the decision will operate as a law of the land under art. 141 of the Constitution in the sense that it is binding on all courts and tribunals as if the Bombay Amendment Act did not exist on the statute book at all. This legal position is fairly conceded by the learned Advocate-General. His contention was that since the declaration of the invalidity has been made by the Supreme Court in October, 1964, it cannot be urged that this invalidity was in fact known to the notional bidders at the hypothetical sale which the Act requires to be imagined to have taken place at the time of Maniben's death since we have to consider what would in fact have happened if this imaginary sale had taken place. In the submission of the learned Advocate-General, if the court imagines that the notional bidders were cognizant of the invalidity of the Bombay Amendment Act, it would be tantamount to saying that the bidders were omniscient. They could not have been omniscient, according to the learned Advocate-General would be that the bidders would be omniscient. In other words, in effect, the submission of the learned Advocate-General was that the bidders could have been imputed with the knowledge which they could have acquired by reasonable diligence and not what could have happened as a result of the subsequent declaration of law by the Supreme Court. The learned Advocate-General emphasised that as a matter of fact the Bombay High Court upheld the validity of the legislation by its decision in First Appeals Nos. 318 and 611 of 1954 pronounced on March 26, 1958. It would be more reasonable to proceed, in the actual state of affairs, on the basis that the notional bidders would make their offers as if the Bombay Amendment Act was very much in force. In support of his contention, the learned Advocate-General relied on the decision of the House of Lords in Lynall v. IRC [1972] AC 680; 83 ITR 563.

12. Though apparently these two contentions seem to be very forceful, in our opinion, they do not have much substance in them. If the legal position is clear that the effect of the decision of the Supreme Court holding an Act to be void is to render that Act as 'still-born', 'dead' and 'non-existent', it is tantamount to saying that the statute did not exist on the statute book at all : (vide B. Shama Rao v. Union Territory of Pondicherry : [1967]2SCR650 and Deep Chand v. State of U.P. : AIR1959SC648 . If this is the true legal position, and we have no doubt in our mind about it, nor has the learned Advocate-General seriously contested this position, we do not think that the first two contentions of the learned Advocate-General can be said to be well founded for the following reasons : In the first place, it cannot be successfully urged that though in law the Amending Act was in effect and substance wiped out of the statute book, still it existed for the purposes of determining as to the state of affairs existing on the relevant date. This very argument was refused by the Supreme Court in Jeejeebhoy's case : [1965]1SCR636 , when an attempt was made on behalf of the State Govt. to have the Bombay Amending Act under art. 31(5)(a) of the Constitution by urging that the existing laws other than the laws enacted before 18 months of the commencement of the Constitution and certified by the President were saved. It was common ground that no certification as required by art. 31(6) was obtained. The question was, whether the Act was an existing law at the commencement of the Constitution. The Attorney-General contended that if a law was factually made before the Constitution, it would be an existing law. Negativing this contention, the Supreme Court referred to the definition of 'existing law' under art. 366(1) of the Constitution and ruled as under (p. 1101, col. 2) :

'To have the status of an existing law, the law should have been made by a Legislature having power to make such law. We have held that the Amending Act was still-born and it was void at the inception. Therefore, it was not an 'existing law' within the meaning of art. 31(5) of the Constitution.'

13. We do not think that the learned Advocate-General was justified in arguing that since this Bombay Amending Act was in fact in existence, it would be difficult if not impossible, to impute to the notional bidder the knowledge of its absence from the statute book arising as a result of the subsequent declaration by the Supreme Court. The learned Advocate-General urged that the notional bidder could not have with all diligence and knowledge on his part anticipated such a declaration by the Supreme Court. He invited our attention to the observations from the decision of Lord Reid in Lynall's case [1972] AC 680; 83 ITR 563 . The facts in that case were that following the death of Mrs. Lynall, estate duty became payable on 67,980 ordinary shares in a private limited company. The shares were a minority holding. The financial results of the company were impressive having regard to its profit record, liquidity position, dividend returns and cash flow. The accounts for the year ending July 31, 1962, disclosed a substantial increases in profits though they were not adopted in the annual general meeting. Private documents of the directors indicated that they were considering floatation of a part of capital, though it was doubtful and remote about the likelihood of the public issue. In the context of estimating the principal value of such shares under s. 7(5) of the Finance Act, 1894, expert evidence was adduced on behalf of the Crown that it was an invariable practice amongst the board of directors to answer reasonable questions put by the purchaser or his adviser when substantial blocks of shares in private companies were placed in market for sale. The executors of the will of the deceased valued the shares at pound 5-10s. a share. In an appeal by the executors under s. 10 of the Finance Act, 1894, Plowman J. fixed the value at pound 3-10s. a share since in his opinion only published information and the information which the director would in fact have given in answer to the reasonable questions could have relevance to the question of valuation and the private documents of the directors were not admissible. On appeal, the Court of Appeal reversed that decision as in its opinion the said documents were admissible with the result that the valuation was increased to pound 4-10s. a share. The executors carried the matter in appeal to the House of Lords. The executors raised a contention which was not open to them in the courts below that the decision of the House of Lords in IRC v, Crossman [1937] AC 26; 2 EDC 537 was wrong and that by reason of the restriction in the company's articles of association on the transfer of shares to outsiders, the deemed price of shares in a hypothetical sale which had to be made under s. 7(5) and, therefore, principal value could only be pound 1-10s. a share. Rejecting this contention about the decision in Crossman's case being incorrect, it was held that s. 7(5) of the Finance Act, 1894, was merely machinery for estimating the value and accordingly the value of the shares for the purposes of estate duty was to be estimated at the price which they would fetch in the open market on the terms that the purchaser should be entitled to be registered and to be regarded as holder of shares subject to the provisions of the articles, inter alia, relating to alienation and transfer of shares of the company. However, reversing the view of the appeal court, it was held that the confidential information contained in the private documents of the directors ought not to be regarded as available to an hypothetical purchaser and, therefore, the value of the shares was to be assessee at pound 3-10s. a share as estimated by Plowman J.

14. The learned Advocate-General invited our attention to the following observations in the speech of Lord Reid at p. 694 of [1972] AC 680 (see also p. 567 of 83 ITR) :

'We must decide what the highest bidder would have offered in the hypothetical sale in the open market, which the Act requires us to imagine took place at the time of Mrs. Lynall's death. The sum which any bidder will offer must depend on what he known (or things he knows) about the property for which he bids.

The decision of this case turns on the question what knowledge the hypothetical bidders must be supposed to have had about the affairs of Linread. One solution would be that they must be supposed to have been omniscient. But we have to consider what would in fact have happened if this imaginary sale had taken place, or at least - if we are looking for a general rule - what would happen in the event of a sale of this kind taking place. One thing which would not happen would be that the bidders would be omniscient. They would derive their knowledge from facts made available to them by the shareholder exposing the shares for sale. We must suppose that, being a willing seller and an honest man, he would give as much information as he was entitled to give. If he was not a director he would give the information which he could get as a shareholder. If he was a director and had confidential information, he could not disclose that information without the consent of the board of directors.

In the present case if we are to suppose that the bidder only had information which he could obtain himself or which could be given without the consent of the board then admittedly pound 3-10s. is the correct estimate of what the highest bid would haves been. But the revenue maintains and the Court of Appeal would seem to have held that it must be supposed that the board would have authorised the hypothetical seller to communicate highly confidential information to all who might come forward as bidders.'

15. On the basis of this observation, the learned Advocate-General urged with vehemence that if in the present case before us the knowledge about the invalidity of the Bombay Amending Act is imputed to the notional bidder as on the date of the death of Maniben, it would be tantamount to saying that the bidders would be omniscient and more particularly because the Bombay Amending Act was upheld by the Bombay High Court and, therefore, the bidder could not have anticipated that the said Act would be declared invalid by the Supreme Court in future. We are afraid, this submission of the learned Advocate-General on the basis of the decision of the House of Lords is out of context inasmuch as the problem of valuation in Lynall's case [1972] AC 680; [1972] 83 ITR 563, was in the context as to whether the information contained in the private documents about the flotation of further capital and the chances of public issue could have been available to a prospective purchaser because the director would not have been under obligation to furnish the said information in answer to the query by the purchaser or his adviser. As a matter of fact Lord Reid, immediately in the paragraph subsequent to the one which we have extracted above, observed as under (p. 568 of 83 ITR) :

'Bidders would know that both Mrs. Lynall and her husband were elderly and that they held most of the shares. Their general experience would tell them that in such circumstances it is common for a private company to make a public issue and remove restrictions on the transfer of its shares. The successful bidder would have to lock up a sum of pound 2,00,000 or more until there was a free market in the shares. If there was a prospect of an early public issue he would be prepared to pay considerably more than if it were uncertain whether or when the company would 'go public'.'

16. This observation is very illustrative in the sense that the knowledge gathered from general experience in such deals of shares of a private company having such impressive financial results would also be a relevant factor. The context with which we are concerned is altogether different and here the question of availability of the information or knowledge by diligent efforts of the purchaser or his adviser does not arise. We are confronted with a fictional situation arising as a result of the declaration by the Supreme Court about the invalidity of the Bombay Amending Act freezing the prices of the land sought to be acquired as on the relevant date of the death of the estate owner. In other words, the situation is not the availability of information as a result of voluntary and diligent efforts of a purchaser and his adviser who is out to purchase the shares of a private limited company and the consequent and corresponding obligation of the directors of such company to furnish the information. Even in that context the court has considered the knowledge of the purchaser or his adviser acquired out of his experience in such transactions of transfer of shares of a private company. It would not be wholly correct in law to urge that in no circumstances the subsequent events are of any consequence at all and that it is only the actual state of affairs existing on the relevant date which can be considered for purposes of ascertaining the market value of an estate or property under the Land Acquisition Act. In Minister v. Thistlethwayte [1954] 2 All ER 843 (PC), in the context of the assessment of compensation for the compulsory acquisition of land subject to Land Sales Control, the question of admissibility of evidence relating to sales of land after removal of such control had arisen. The measure of compensation payable to the respondents in that case who were land-owners was calculated on the price which a vendor willing but not anxious to sell would haves agreed to if it were not for the Land Sales Control then in force and the price which a willing purchaser would have given to obtain the land, although he would have then been subject to Land Sales Control in re-selling. In determining the amount of compensation on that basis, evidence was adduced and admitted of prices obtained for comparable land and development thereof about six months after the termination of the Land Sales Control. In effect, the evidence was of comparable sales instances and the development which had taken place about two years after the date of compulsory resumption. The National Security (Economic Organisation) Regulations, inter alia, provided that no person could acquire any land by sale, lease, transfer or assignment, or in any other manner, and land without the consent in writing of the treasurer. The respondents before the Privy Council were trustees of a will of one William Moore, and were at all relevant times the registered proprietors for an estate in fee simple of the lands sought to be compulsorily purchased by the New South Wales Government under a notification of September 20, 1946. The land in question was being used as a golf course but it was suitable for development by sub-division into residential lots and the laying of roads and drainage would have been necessary, if so developed. At the date of resumption (compulsorily purchase) which is the relevant date for purposes of compensation under the Public Works Act, 1922 (NSW), the Land Control Regulations were in force and they ceased to apply to the land in question with effect from 1948 when the National Security (Economic Organisation) Regulations were repealed and replaced by the Lands Sales Control Act, 1948, which did not apply to vacant land with the result that the land in question being treated as vacant land was not governed by the new legislation. The main question before the valuation court was the proper measure of compensation. One of the contentions urged on behalf of the trustees of the estate was that the compensation should be assessed in accordance with the principles approved by the High Court in Commonwealth v. Arklay [1952] 87 CLR 159, while on behalf of the Minister it was contended that the price should be determined at the figure at which the Treasurer would have consented to the purchase of the land at the date of resumption. In this context Lord Tucker, after referring to the lest laid down in Arklay's case, observed as under (p. 847 of [1954] 2 All ER 847) :

'Their Lordships can find nothing to question in this approach to a novel situation created by the existence of emergency legislation of a temporary nature rendering wholly inappropriate the time-honoured test of market value at a particular date in terms of a willing seller and a willing buyer without further qualification. It must not be forgotten that it is the value of the land to the owner that has to be ascertained, and that the willing seller and purchaser is merely a useful and conventional method of arriving at a basic figure, to which must be added, in appropriate cases, further sums for disturbance, severance, special value to the owner and the like. Furthermore, when the subject-matter of control is the sale of land suitable for development and the control is of a temporary nature and may reasonably be expected to be lifted in the near future-at the date of resumption hostilities had ceased for over a year-circumstances are present which permit of differentiation of a case such as this from others involving consumable goods, or goods which would ordinarily be suitable for immediate sale. Whatever formula is adopted, it must be one which gives effect in such cases as the present to the element of value to the owner in being deprived of his right to retain his property with a view to sale in the future at a date which may reasonably be expected to be not far distant at a price which will almost certainly exceed the present controlled price.'

17. The Privy Council agreed with the ratio of Arklay's case [1952] 87 CLR 159, and answered the first question submitted for its opinion that the price should be estimated which a willing vendor would agree to if he were allowed to sell and a willing purchaser being aware of his limitation arising out of the control of land sales in re-selling and for that purpose the Privy Council held that the evidence of sale instances in the period subsequent to the removal of the control would be admissible. Lord Tucker in his speech opined as under (p. 848) :

'There could be no evidence, as at the date of resumption, of sales comparable to the hypothetical sales to be envisaged and, consequently, no evidence of the extent of demand or the prices which might be offered by purchasers. If evidence is available of prices obtained on the lifting of controls shortly after the date of resumption it will be relevant as giving some indication of the volume of demand and level of prices which might be expected to have existed at the date of resumption. The larger the interval between resumption and lifting of control the less cogent the evidence becomes, and it must be a question of degree in every case to say at what stage it is inadmissible as wholly irrelevant. In the present case, the interval was two years, but, haveing regard to the fact that hostilities had ceased at the date of resumption, their Lordships do not consider that the conditions prevailing at the date when control ceased were so different from those which must be deemed to have existed at the time of the hypothetical sale assumed in the Arklay formula [1952] 87 LR 159, as to render the evidence inadmissible as irrelevant. It is, of course, true that any figure so obtains will require to be discounted by the circumstance that the hypothetical purchaser will be prevented from re-selling above the control price if he should be minded so to do during the continuance of control. On the other hand, there was the reasonable prospect that, by the time he had developed the land for sub-divisional sales, the control would have been lifted. The judgment of Sugerman J. shows that he gave full weight to such considerations in arriving at his final figure.'

18. The contention of the learned Advocate-General that under no circumstances the court is entitled to consider any evidence or material subsequent to the relevant date does not appear to be well founded since what the law requires in estimating the principal value of the estate is what price it would have fetched 'if sold in the open market'. In other words, the test would be what price a willing vendor who is not anxious to sell would agree to if he is allowed and a willing purchaser would deem to obtain the land having regard to the circumstances that may be prevailing at the relevant date, and for assessing the principal value, the court may be justified, in a given case, to admit evidence of the price obtained on sales effected after termination of the price control of sale control, as the case may be.

19. In Arklay's case [1952] 87 CLR 159, the respondent, Arklay, brought a suit to recover compensation for the acquisition by the Commonwealth of Australia of her land situated at Coburg in the State of Victoria under the Land Acquisition Act, 1906-1936. The date of acquisition was December 12, 1946, but under the Act the value of the land must be assessed according to its value on the 1st January, preceding the date of acquisition and, therefore, on the facts of that case it was 1st January, 1946. The property acquired in the case comprised of the shop premises together with the land. The sale of the land was controller by the National Security (Economic Organisation) Regulations then in force. In the trial court, Webb J. held that the Treasury would not have approved of the sale of the subject land at a higher price than pound 3,400 including all the interests in the land in improvements; but that would not have represented their true value at that time and a prudent owner would have preferred to await the removal of controls rather than sell the land at that price and the value of the land in improvements within six months of the removal of controls would have been about pound 4,550. The State, therefore, carried the matter in appeal on the question of principle that the trial court could not have assessed for the loss of the land and the improvements at more than their market value as on 1st January, 1946. The appeal raised a neat question of principle whether in case of a land compulsorily acquired under the Land Acquisition Act, during the period of control and having no additional potential value, the assessment of compensation may exceed the higher price which a controlling authority might be expected to allow according to s. 28(1)(a) of the Land Acquisition Act, 1906-1936, and the compensation was to be assessed on an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and a purchaser each willing to trade but neither of whom was anxious so to do. The best evidence of such a price is that of comparable sales of other lands on the date of resumption. The Economic Organisation Regulations which were enacted during the hostilities with a view to preventing inflation, though did not directly fix the sale price of the land, required the consent of the Treasurer for sale, which was to be granted on an application accompanied by a valuation by an independent valuer specifying the amount which would have been a fair and reasonable price for the land at at the specified date, that is, 10th February, 1942. Though there was no specific regulation to prevent the Treasurer allowing a higher price than the one prevailing on the aforesaid date, the obvious purpose of the Regulations was of pegging the prices in the vicinity of those valuations. The said Regulations ceased to be effective in 1948. In other words, on the date of the acquisition, the Control Regulations were in force. The High Court ruled in that background as under :

'The particular question upon which we are asked to express an opinion on this appeal is the question of principle already mentioned. On this question we have no doubt that under the Land Acquisition Act, in estimating the value of lands to an owner dispossessed during controls, the valuer should estimate the price which a vendor willing but not anxious to sell would agree to, if he were allowed, and a willing purchaser would give to obtain the land, although in his turn he would be subject to the controls in reselling. To arrive at the result the is at liberty, if on the evidence that seems the most satisfactory method, to take into account both items under discussion......

In the case of goods produced during a period of price control for immediate sale and consumption the fixed price might well provide fair compensation. But the Land Acquisition Act is dealing with compensation for the compulsory acquisition of land. It is an Act designed to provide just terms for the acquisition at all times whether Australia be at peace or war. Land is a permanent asset and it has a value capable of surviving temporary controls and financial strains and stresses that occur during hostilities.

In the present case Webb J. allowed for these elements. It would not be proper for this court in an appeal of this nature to substitute its own opinion of the amount that should be allowed for that of the court below unless it were satisfied that the court below had acted on some wrong principle of law or that the value was entirely erroneous.'

20. The larger question whether for application of the test of a willing vendor and a willing buyer for purposes of assessing the compensation or estimating the principal value of the property for the purpose of estate duty, the controls or lack of controls are irrelevant (vide Spencer v. Commonwealth [1907] 5 CLR 418), is not required to be gone into since the limited problem with which we are confronted is, whether, as contended by the learned Advocate-General, the actual state of affairs existing on the date of the demise of Maniben is only to be considered irrespective of the subsequent events of the decision of the Supreme Court declaring the price control legislation, namely, the Bombay Amending Act, as still-born and non est. We are afraid, we cannot agree with the learned Advocate-General that though in effect and substance the decision of the Supreme Court declares the law as it is from inception, it is to be ignored for purposes of estimating the principal value of an estate since s. 36 of the E.D. Act enjoins that it should be estimated to be the price which the estate would fetch if sold in the open market at the time of the deceased's death. The learned Advocate-General invited our attention to the material para. at p. 486, under the caption 'Principal Value' from Green's Death Duties, 7th Edn., which reads as under :

'The sale postulated by s. 7(5) is a hypothetical one which must be assumed to take place on the day on which the death occurs, and not within some reasonable but undefined time thereafter.'

21. He also invited our attention to a similar paste from Dymond's Death Duties, 15th Edn., 1973, from Chap. XV of the value for Estate Duty at p. 721 where the paragraph appears under the caption : 'At the time of the death of the deceased'. It reads as under :

'All the learned law Lords in the Buccleuch case [1967] 1 AC 506, agreed that the words 'at the time of the death' point to a definite time - the day on which the death occurred - and do not mean within a reasonable times after the death....'

22. We do not think that these passages can be of much assistance to the cause espoused by the learned Advocate-General since s. 7(5) of the Finance Act, 1894, or for that matter s. 36 of the Estate Duty Act which assumes the existences of an open market at the date f the death. At p. 407 in Green's Death Duties this assumption is referred to in the following terms :

'.... The existence of an open market at the date of death must be assumed even though in fact the necessary conditions could not then have been fulfilled.....'

23. It should be recalled that in Lynall's case [1972] AC 680; 83 ITR 563 (HL), on which the learned Advocate-General heavily relied, Lord Reid said at p. 695 as under (see p. 569 of 83 ITR) :

'No doubt sale in the open market may take many forms. But it appears to me that the idea behind this provision is the classical theory that the best way to determine the value in exchange of any property is to let the price be determined by economic forces - by throwing the sale open to competition when the highest price will be the highest that anyone offers.'

24. The learned Advocate-General, in our opinion, with respect, overlooks the significant words 'if sold' in s. 36 of the E.D. Act which is in pari materia with s. 7(5) of the U.K. Finance Act, 1894, since the decision of the House of Lords in IRC v. Crossman [1937] AC 26; 2 EDC 537 has well recognised that the Act is concerned with a hypothetical sale and not an actual one. This principle has been enunciated by a majority of the House of Lords in Crossman's case and confirmed unanimously in Duke of Buccleuch v. IRC [1967] 1 AC 506 and Lynall's case [1972] AC 680; [1972] 83 ITR 563. Lord Guest, in Buccleuch's case, while confirming the above principle, has held, as under (pp. 541, 543) :

'In fact it is irrelevant in arriving at the valuation to consider what would have been the circumstances attending an actual sale.... It is not necessary to assume an actual sale; a hypothetical market must be assumed for all the items of property at the date of death. The impossibility of putting the property on the market at the time of death or of actually realising the open market price is irrelevant. In other words, you do not have to assume that the property had actually to be sold; the assumption is that it is sold at the moment of death.'

25. Similarly, Lord Morris of Borth-y-Gest in Lynall's case [1972] AC 680, 696; [1972] 83 ITR 563, observed as under :

'So a sale in the open market must be assumed and this in some case will involve an assumption of the satisfaction of such conditions as would have to be satisfied to enable such a sale to take place.'

26. In Dymond's Death Duties, 15th edn., 1973, at p. 717, the following principles have been digested from different cases under the title 'If sold' :

'It makes no difference that an actual sale may be necessary, e.g., to raise the duty (as in Buccleuch [1967] 1 AC 506 ) because a compulsory sale is prescribed by the articles of association of a company in which the deceased held shares (as happened to Sir William Paulin's estate in the Crossman case [1937] AC 26; 2 EDC 537 . Nor does it matter that an actual sale would fetch a much lower price (as in Crossman) or a much higher price (as in Lynall [1972] AC 680; [1972] 83 ITR 563 (HL), where the executors had confidential information which would have added some pound 70,000 to the value of the deceased's shares). Finally, it is irrelevant that a sale in the open market is forbidden, e.g., by restrictions in a company's articles of association (as in Crossman and Lynall) or even by statute. Thus, where a German national, domiciled in Germany, died there in 1915, possessed of securities in this country which were under the control of the Public Trustee as Custodian, there 'principal value' of the securities was held to be the ordinary market price of similar securities [In re Aschrott : Clifton v. Strauss [1927] 1 Ch 313; 2 EDC 336 (Ch D)]. Compare also British Motor Trade Association v, Gilbert [1951] 2 All ER 641 , Mouat v. Betts Motors Ltd. [1959] AC 71 and Building and Civil Engineering Holidays Scheme Management Ltd. v. Post Office [1966] 1 QB 247 , all of which were concerned with property subject to a covenant not to sell.

The decision in In re Aschrott was a particular application of the more general principle, elaborated by the courts in the share valuation cases discussed below, that the whole property which passes on the death, and not merely such property as could actually be sold, must be subjected to the test of notional sale in a hypothetical free market; and it shows that restrictions on free sale, even though imposed by statute, may have to be ignored. This is not unreasonable, since the existence of such restrictions does not normally preclude the deceased or the beneficiaries from enjoying the property. The decision in Priestman Collieries Ltd. v. Northern District Valuation Board [1950] 2 KB 398 , where it was held that for the purpose of compensation under s. 13(4) of the Coal Industry Nationalisation Act, 1946, the 'open market' value of certain mining timber was the value as restricted by a Control of Timber Prices Order, is not considered to have any general theoretical application to valuation for estate duty; in the course of the judgment it was said that no direct or conclusive assistance was derived from authorities which dealt with other phrases in other contexts, and, the court, in holding that the term 'open market' in s. 13(4) did not contemplate 'a purely hypothetical open market which is to be regarded as exempt from any restrictions imposed by law' was influenced by a provision in s. 13(5) in the light of which it construed the term as meaning the actual market, which is not its meaning under s. 7(5) of the Finance Act. 1894.'

27. In CWT v. Purshottam N. Amersey : [1969]71ITR180(Bom) , a Division Bench of the Bombay High Court was concerned with the question as to whether the Tribunal was justified in holding that the interest of the assessee under a settlement had no value since his only interest was his personal interest for the support, maintenance and advancement in life and, therefore, incapable of being transferred to a third party. Kotval J., speaking for the court, in that case held that the Tribunal committed an error of law in utilising the provision contained in s. 7(1) of the W.T. Act which provides a machinery for determining the value of the assets so as to nullify the effect of the charging section, and pointed out the fallacy in the contention as under (p. 190) :

'What has been done in the present case is that, utilising the provisions of the Act which only provides a machinery for determining the value of the asset, a conclusion has been reached that the asset in this case has no value whatever, in other words, that it is not an asset at all. The fallacy of this reasoning lies in this that it was not clearly realised that the purpose of section 7 was not to indicate what is not an asset but merely to indicate how it has to be valued if it is an asset.'

28. In Ahmed G.H. Ariff v. CWT : [1970]76ITR471(SC) , the question arose as to what would be the valuation of the right to an aliquot share in the net income of the properties settled as Wakf-Alal-Aulad under s. 7(1) of the W.T. Act, 1957. It was urged on behalf of the assessee that such a right to share in income is not capable of any valuation since the price which it would fetch, if sold in the open market, could not possibly be ascertained. Negativing this contention, the Supreme Court, speaking through Grover J., ruled as under (p. 477) :

'Such an argument was fully examined in the Bombay case, CWT v. Purshottam N. Amersey : [1969]71ITR180(Bom) , in which the High Court referred to the provisions of the English statutes, which are in pari materia, as also decisions given by the English courts including the one by the House of Lords in Commissioners of Inland Revenue v. Crossman [1937] AC 26; 2 EDC 537 . It has been rightly observed by the High Court that when the statute uses the words, 'if sold in the open market' it does not contemplate actual sale or the actual state of the market, but only enjoins that it should be assumed that there is an open market and the property can be sold in such a market and, on that basis, the value has to be found out. It is a hypothetical case which is contemplated and the tax officer must assume that there is an open market in which the asset can be sold. '

29. The learned Advocate-General, realising this difficulty in the contention, clarified his position that he was not canvassing a proposition that the property must be capable of being sold or for that matter the present property before us was not capable of being sold. In the submission of the learned Advocate-General for the assessee, his submission in effect and substance was that if the prices were restricted on the relevant date, that factor would depress the value of the property and it must go into the consideration of the estimation of the value thereof. We are afraid that this contention is not well founded. In the first place, the legal position is clear enough that we have to proceed on the basis that the market is an open market and, secondly, the impossibility of putting the property in the market at the time of death or of actually realising the open market price are factors which are irrelevant as held in Buccleuch's case [1967] 1 AC 506 . There is an additional reason here in the present case to reject this contention in view of the declaration by the Supreme Court in Jeejeebhoy's case : [1965]1SCR636 , about the Bombay Amending Act being a nullity.

30. We have, therefore, no doubt in our mind that the contention of the learned Advocate-General about the actual state of affairs existing at the relevant date should only be considered irrespective of the subsequent decision of the Supreme Court, must obviously be rejected since the decision of the Supreme Court does not enact or make the law but merely interprets and states 'what the law had always been and must always be understood to have been' (vide Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO : [1975]100ITR651(Guj) . Apart from the effect of the subsequent declaration by the Supreme Court about the Bombay Amending Act being still-born and non est as held in Jeejeebhoy's case : [1965]1SCR636 , the significant governing words 'if sold in the open market', negative the entire reasoning of the learned Advocate-General as formulated in his first two contentions. The learned Advocate-General attempted to persuade us that the fiction arising as a result of the decision of the Supreme Court must be confined within its limit and must not be allowed to travel beyond its scope so as to override the provisions contained in s. 36 of the E.D. Act. We do not think in the first place that there is any deeming fiction under art. 141 of the Constitution of India which provides that the law declared by the Supreme Court shall be binding on all courts within the territories of India. The effect of the law when it is declared by the Supreme Court is, as held by the Division Bench of this court in Parshuram Pottery's case : [1975]100ITR651(Guj) , that the effect of the decision of the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) , was that in so far as it declared that the amounts claimed by the assessee in respect of the provision for taxation are deductible in computing the net wealth of the assessee since they represented 'the debt owed by the assessee' within the meaning of s. 2(m) of the Act, it merely stated what the law had always been and must always be understood to have been and the fact that the same decision was not before the WTO when he made the order of assessment had no material bearing on the question whether the said order disclosed any mistake apparent on the face of the record and the assessment order, in so far disallowed such claim, proceeded on a wrong view of the law, the said assessment order was bad at its very inception and disclosed a mistake apparent from the record and, therefore, liable to be rectified under s. 35 of the I.T. Act. There is, therefore, no question of enlarging the scope of the fiction so as to impinge upon the provisions made in s. 36 of the E.D. Act. Secondly, even if it is a fiction it has got to be carried to its logical end. We do not think that there is any question of any deeming fiction arising as a result of the decision of the Supreme Court. Therefore, these principles of interpretation of law of deeming fiction are not strictly applicable to the facts of the present case before us and, therefore, they cannot has justifiably invoked.

31. Our attention has been invited by the learned Advocate-General to the observations of the Allahabad High Court in Vijay Kumar Kedia v. CED : [1976]104ITR302(All) , where one of the questions referred to the High Court under s. 64(1) of the E.D. Act for its opinion was whether the Tribunal was right in sustaining the valuation of the gold at Rs. 115 per tola in view of its finding that at the material time the value of the gold was at Rs. 62.50 per 10 grammes. In that context the Division bench of the Allahabad High Court observed as under (p. 313) :

'But considering the admission made by the accountable person that the market rate of gold on the relevant date was Rs. 115 per tola, the valuation made by the Appellate Controller did not require any interference. It is obvious that when section 36 of the Estate Duty Act provides that the principal value of any property shall be estimated to be the price which in the opinion of the Controller it would fetch if sold in the open market, it obviously refers to sale of property in an open market in legal manner. If at the time of death of a person there is a law providing that the goods cannot be sold in an open market at a price higher than a particular price they cannot be valued at a price higher than that which could be legally charged for it notwithstanding that persons may be available who may be willing to pay a price higher than its controlled price. Accordingly, the price which could be legally charged, if the gold had been sold in the open market on the date of the death of Sri Babu Lal Kedia, could alone be taken into consideration. The authorities under the Estate Duty Act would not be concerned with the illegal sale of gold or its illegal price.'

32. We have not been able to appreciate as to how this observation of the Allahabad High Court can be of any assistance to the cause which the learned Advocate-General is espousing before us. In the first place, we are not concerned with the price of goods or articles. In the second place, the real question before us is : what is the effect of the subsequent declaration by the Supreme Court about the invalidity of the Bombay Amending Act. Thirdly, the land is such a commodity which survives the controls and restrictions imposed by the legislation and, therefore, for valuation, the price, or, for that matter, the compensation of the land, the principle enunciated by the Allahabad High Court cannot be pressed into service successfully. The learned Advocate-General, therefore, attempted to persuade us that on the relevant date of the demise of Maniben, the notification dated December 21, 1959, under s. 4 of the Land Acquisition Act, declaring that the said land was likely to be needed for public purpose of the construction of the houses of Haridwar Co-operative Housing Society Ltd. was subsisting and, therefore, that fact would go to depress the value of the property since the hypothetical purchaser would have only the right to receive compensation which involves the risk or hazard of litigation and the assessing authority will be required to estimate the value having regard to all the attendant circumstances including the risk or hazard of litigation staring in the face of the purchaser at the relevant date. In support of his contention, he relied on the decision of the Supreme Court in Mrs. Khorshed Shapoor Chenai v. Asst. CED : [1980]122ITR21(SC) . In the case before the Supreme Court 4 parcels of agricultural land belonging to the deceased, one Rashid Shappoor Chenai, were acquired, two during his lifetime by notifications of June 19, 1961, and January 31, 1962, the possession of which was taken over in January, 1963, and two after his demise by notifications dated November 1, 1963, and February 1, 1964, the possession of which was taken over after the death of the said Rashid Shapoor, for the public purpose of synthetic drugs project factory of the Indian Drugs and Pharmaceuticals Ltd. For the two parcels of land acquired during his lifetime, compensation of Rs. 20,000 was awarded and received by the deceased during his lifetime. As regards the two other parcels of land a total compensation of Rs. 4,29,360 was awarded and paid to the heirs of the said Rashid Shapoor, viz., his widow and son. The widow of the deceased being an accountable person filed accounts of the properties passing on the death of her husband and the assessment was completed in March, 1966. The values of the land acquired were shown in the account at the respective figures of compensation amount, namely, Rs. 20,000 and Rs, 4,29,360. Within two years of Rashid Shapoor's death his son, Shapoor Rashid, died in May, 1965. The widow of the deceased son being an accountable person filed accounts of the properties passing on the death of her husband and the assessment was completed in December, 1966. She also adopted the values of the land acquired by the Government as per the awards awarding compensation. A reference was sought by the heirs of the deceased, Rashid, under s. 18 of the Land Acquisition Act which was accordingly granted and the civil court enhanced the compensation to Rs, 1,90,000 of the first two parcels of land and Rs. 20,45,000 for the other two parcels of land. The Government carried the matter in appeal before the High Court. Pursuant to the order of the civil court enhancing the compensation, the Asst. Controller issued two notices, ones on the widow of the deceased, Rashid, and another on the widow of deceased son, Shapoor, respectively, under s. 59(a) of the E.D. Act calling upon her as to why the assessment should not be reopened and revised, and under s. 61 of the said Act calling upon the widow of the son as to why the mistake apparent from the record should not be rectified in view of the orders of the civil court. Both the notices were challenged by the respective widows by moving the Andhra Pradesh High Court for quashing and setting aside the said notices. Both the impugned notices in that case were upheld by the Andhra Pradesh High Court to be legal and the widows, therefore, carried the matter in appeal before the Supreme Court. Two contentions were urged on behalf of the widow of the deceased, Rashid, against the notice proposing revision of the original assessment orders. The first contention was that the right to further compensation would become property only when the claim would be accepted finally by the court and the enhanced compensation becomes payable; and consequently, therefore, no property could have passed on the death of its owners. The second contention was that assuming that the right to receive compensation survived, even then the notice of reassessment was not competent till the property could be said to be under-valued having regard to the enhanced compensation awarded by the civil court. In the alternative, it was urged that there was no omission or failure on the part of the accountable person in disclosing the primary facts. The Supreme Court, speaking through Tulzapurkar J., agreed with the High Court that there is only one right to receive compensation arising upon acquisition of the land under the Land Acquisition Act and that right survives the award of the Collector depending upon the fact whether the claimant acquiesces therein fully or not; if he does not acquiesce to the offer made in the award, he can prosecute that right in a civil court but this would not mean that the civil court's evaluation of this right subsequently would be its valuation as at the relevant date either under the E.D. Act or the W.T. Act. The learned Advocate-General emphasised the ratio of the decision which is expressed in the following terms at p. 32 :

'This however, does not mean that the civil court's evaluation of this right done subsequently would be its valuation as at the relevant date either under the E.D. Act or the W.T. Act. It will be the duty of the assessing authority under either of the enactments to evaluate this property (right to receive compensation at market value on the date of relevant notification) as on the relevant date (being the date of death under the E.D. Act and valuation date under the W.T. Act). Under s. 36 of the E.D. Act the assessing authority has to estimate the value of this property at the price which it would fetch if sold in the open market at the time of the deceased's death. In the case of the right to receive compensation, which is property, where the Collector's award has been made but has not been accepted or has been accepted under protest and a reference is sought or is pending in a civil court at the date of the deceased's death, the estimated value can never be below the figure quantified by the Collector because under s. 25(1) of the Land Acquisition Act, the civil court cannot award any amount below that awarded by the Collector, the estimated value can be equal to the Collector's award or more but can never be equal to the tall claim made by the claimant in the reference nor equal to the claim actually awarded by the civil court inasmuch as the risk or hazard of litigation would be a detracting factor while arriving at a reasonable and proper value of this property as on the date of the deceased's death. The assessing authority will have to estimate the value having regard to the peculiar nature of the property, its marketability and the surrounding circumstances including the risk or hazard of litigation looming large at the relevant date. The first contention of counsel for the appellant, therefore, fails.'

33. On the basis of this decision it was urged that what has to be borne in mind while assessing the principal value of an estate under s. 36 of the E.D. Act is the nature of the property, its marketability and the hazard of litigation which the owner was facing in view of the notice of acquisition. It was, therefore, urged by the learned Advocate-General that in any case the Asst. Controller in the present case, and for that matter the Tribunal, ignored this detracting factor attached to the property in question in this reference, an error of law has been committed with the result that the valuation of the property has been over-estimated. We are unable to agree with the contention of the learned Advocate-General, since we are not concerned with the valuation of the land which has been already acquired, in connection with which some award is being made, and the owner has sought reference having been dissatisfied with the said award. Apart from the difference in the situation, the notice dated December 21, 1959, of the acquisition of the land with which we are concerned in this reference had been cancelled within about five weeks of the demise of Maniben by the Government by its notification of February 17, 1962. Assuming that the learned Advocate-General was right in urging that the Asst. Controller could not have considered the fact of the cancellation of the notice which has occurred within five weeks of the demise of the owner, Maniben, and he must, therefore, confine himself to the facts existing on the date of the demise, namely, December 12, 1962, even then we are of the opinion that the heirs of the deceased would have been legally justified in claiming compensation of the land if the acquisition notice had been implemented by making an award in claiming compensation in the sum for which the property in question was agreed to be sold under the agreement of December 7, 1959, for Rs. 3,56,708 and for which amount the said land was sold to Satyavadi Co-operative Housing Society Ltd., after the notice of withdrawal of acquisition. The Asst. Controller was, therefore, justified in estimating the principal value of the property at the said amount for which the land was agreed to be sold and in fact was sold. We, therefore, do not think that the decision of the Supreme Court in Mrs. Khorshed Shapoor's case : [1980]122ITR21(SC) is of any assistance to the cause represented by the learned Advocate-General.

34. No other contentions have been urged in this reference.

35. The result is that this reference should be rejected and we answer the questions referred to us as under :

Question No. 1 : In the affirmative, that is, in favour of the Revenue and against the assessee.

Question No. 2 : In the affirmative, that is, in favour of the Revenue and against the assessee.

Question No. 3 : Does not survive since it has not pressed.

36. The assessee shall pay the costs of this reference to the Controller of Estate Duty.


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