Bombay High Court

Ramniklal R. Mehta vs Wto on 3 April, 2003

Equivalent citations: (2004) 86 TTJ Mumbai 166

ORDER

G.C. Gupta, J.M.:

These ten appeals by the assessee for the assessment years 1983-84 to 1992-93 are directed against the order of the CWT(A). Since common issues are involved in these appeals, these are being disposed of with this common order. The DVO has filed an application for adjournment of the case on the plea that he is devoting full time in disposing off the time barring cases. We find that the case was adjourned on 12-6-2001, at the request of the learned Departmental Representative and the last opportunity to the DVO was allowed for 12-7-2001. On 12-7-2001, the DVO did not appear and the case was adjourned to 14-8-2001. On 14-8-2001, the DVO did not attend and the case was adjourned to 13-9-2001, at the request of the learned Departmental Representative as a last opportunity to the DVO. The case was adjourned on 13-9-2001, by the order of the Bench and the parties were informed in the Court. On the next dates the case was adjourned by the order of the Bench and the case was finally fixed for 21-2-2003. There being no sufficient reason for seeking adjournment of the appeal by the DVO, the application for adjournment moved by the DVO is rejected by the Bench and the case is being decided after hearing the learned Departmental Representative and the learned counsel for the assessee.

2. The grounds of appeal No. 1, 2 and 3 are not pressed by the learned counsel for the assessee and are accordingly dismissed.

3. The grounds of appeal No. 4 to 6 relates to the valuation of the properties at Mulund and Ghatkopar. The learned counsel for the assessee submitted that the assessee is owning these properties at Mulund and Ghatkopar since the year 1940. He submitted that the properties at Mulund and Ghatkopar are in the shape of open lands with no constriction thereon and are covered under the provisions of Urban Land Ceiling Act. He argued that the valuation of open plot of land at Mulund and Ghatkopar were determined by the DVO at a very high figure as under :

Valuation Dates

Fair Market Value of property

Mulund Plot

Ghatkopar Plot

31.3.1983

51 lacs

8 lacs

31.3.1986

117 lacs

17 lacs

31.3.1989

209 lacs

27 lacs

31.3.1992

418 lacs

31 lacs

31.3.1994

481 lacs

57 lacs

4. The learned counsel for the assessee argued that these open lands at Mulund and Ghatkopar were declared "excess lands" vide order dated 24-12-1980, passed under the provisions of Urban Land Ceiling Act. He submitted that the appeal against the said order dated 24-12-1980, passed under ULC Act was decided against the assessee by the appellate authority vide order dated 19-3-1983. On further appeal, the Hon'ble High Court decided in favour of the assessee vide order dated 7-7-1993, and both the properties in the shape of open lands at Mulund and Ghatkopar were declared on "not excess land" under the provision of ULC Act. He submitted that on 27-8-1993, the Mulund land was provided an access by public street vide notification issued by the State Government. The Mulund land was sold on 21-4-1994, for a consideration of Rs. 4.81 crores. Regarding Ghatkopar land, the learned, counsel for the assessee submitted that it is totally surrounded by slum and the entire land is encroached by slum and the land was declared "slum" by the Government on 28-9-1977 and the same status quo is continuing till date. The learned counsel for the assessee argued that on the relevant valuation dates, the lands at Mulund and Ghatkopar are covered under the provisions of ULC Act and therefore the value thereof cannot be taken more than the amount of compensation by the assessee which comes to Rs. 3.5 lacs only under the ULC Act. He argued that the revenue is wrong in determining the fair market value of the properties and then deducting amount calculated at the rate of 10 per cent of, the FMV on account of litigation pending on the valuation dates. He relied on a series of judgments in support of his arguments reported as CWT v. KS. Ranganatha Mudaliar & Ors. (1984) 150 ITR 619 (Mad), Gouri Prasad Goenka & Family (HUF) v. CWT (1993) 203 = 700 (Cal), Smt. Sumanben Jhaveri v. Eighth Wealth Tax Officer (1987) 32 Taxman 275 (Bom)(Mag), Bombay Cable Co. (P) Ltd. v. Dy. CWT (1997) 59 TTJ (Bom) 294, Sri Kan tadattanarsimharaja Wadiyar v. Asstt. CWT (1994) 48 ITD 550, 554, 555 (Bang), Sanitax Chemicals Ltd v. Dy CWT (1996) 57 ITD 323 (Ahd), Wealth Tax Officer v. Smt. Lataben U. Sheth (1989) 35 TTJ (Ahd) 546. The learned counsel for the assessee argued that there is one another aspect of the case, i.e., both the open lands at Mulund and Ghatkopar are "land locked" and accordingly no development thereon can be undertaken by the assessee. The application made by the assessee in this regard for approval of the development plan were rejected by the authorities time and again for the reason that the plan for building on any plot cannot be approved unless the site in question is accessible by means of an access road of requisite width as provided in D.C. Rules. The learned counsel for the assessee cited various orders of the authorities rejecting the development plan of the assessee vide order dated 12-2-1965 and 21-6-1982.

5. The learned Departmental Representative has opposed the arguments of the learned counsel for the assessee. He has relied on the order of the assessing officer and the Commissioner (Appeals). He argued that the assessee has sold the Mulund land for Rs. 4.81 crores and the DVO has allowed the suitable deduction for the litigation etc., faced by the assessee. He argued that both the properties in question were released by the order of the Hon'ble High Court and therefore the assessee was owner in possession of the properties throughout the relevant periods and it cannot be said that the assessee was entitled to only the compensation amount payable to it under ULC Act.

6. We have considered the rival submissions and have gone through the DVO's report carefully. We find that the assessee was owner of the open lands at Mulund and Ghatkopar from the year 1940. These lands were declared "excess lands" on 24-12-1980 by the authorities under ULC Act and appeal against this order was also rejected on 19-3-1983. The issue was decided in favour of the assessee by the Hon'ble High Court on 7-7-1993. Therefore, on all the valuation dates relevant to the assessment years in appeal before us, the open lands at Mulund and Ghatkopar remained "excess lands" under the provisions of ULC Act. In accordance with the scheme of assessment under the provisions of Wealth Tax Act, 1957, the valuation of an asset is to be determined w.r.t. the relevant valuation date only. Admittedly, on all the valuation dates relevant to the assessment years in question, the lands were "excess lands" under ULC Act and therefore its fair market value cannot be determined w.r.t the amount of sale consideration received much after the relevant valuation dates. The sale of Mulund land was effected on 21-4-1994, i.e., after the release of the land from the provisions of the ULC Act by the Hon'ble High Court vide order dated 7-7-1993. We have gone through the copy of the valuation report framed by the DVO of the open lands at Mulund and Ghatkopar for the valuation dates. We find that these properties have been valued by physical method of valuation based on comparable sales instances and a 10 per cent deduction for restrictions and litigations were allowed and the fair market value was arrived at. The agreement to sell for a total consideration of Rs. 4.81 crores, conveyance executed vide deed dated 21-9-1994, was taken into consideration by the DVO in arriving at the fair market value of the properties. Likewise physical method of valuation based on comparable sales instances were adopted by the DVO to determine the value of the property at Ghatkopar and a deduction of 10 per cent for deferring the value of the land for a period of 20 years was allowed considering the non-availability of approach of the Ghatkopar plot and occupation by slum dwellers. In our considered view this method of valuation of fair market value adopted by the DVO is not correct. The properties at Mulund and Ghatkopar were declared "excess land" by the authorities under the ULC Act and remained so on all the valuation dates relevant to the assessment years in appeal and were "land locked" and accordingly to value the properties by physical method of valuation on sale instances of not "land locked" lands and taking into consideration the sale price of the property at a much later date after the release of the property by the Hon'ble High Court, is not sustainable in law. To adopt the rate of sale instances of approachable land to value "land locked" land is not legal since based on uncomparable sales instances. The building plans of these lands were rejected by the authorities of Municipal Corpn. of Greater Bombay time and again since the land in question was not accessible by means of an access road of requisite width as provided in the D.C. Rules. The land at Mulund was sold in the year 1994 after the access to the land by a public street was provided vide notification dated 27-8-1993, by the State Government. This notification dated 27-8-1993, was after the valuation dates in question and accordingly we hold that the valuation based on sale consideration received after the said notification of the Government is not valid. On the relevant valuation dates there was always a risk of an adverse decision by the Hon'ble High Court and regarding the lands at Mulund and Ghatkopar there was a prospect of their being declared "excess lands" by the Hon'ble High Court under the provisions of ULC Act. In view of the hazard and the risk involved in purchasing the rights of the assessee, any purchaser would have calculated and taken into account the risk involved and the time that would have to be spent and the expenditure which may be incurred in litigation and when placed in the market such properties would not have fetched the full amount of FMV of the property. In this case on the relevant valuation dates the assessee apart from the compensation due to it, had merely a right to litigate the correctness of declaration as "excess land" under ULC Act which involves risk, hazard and expenses of litigation looming large on the valuation date, "No one can transfer a better title than what he has" is the golden rule of jurisprudence. The purchaser only steps into the shoes of the transferor. No prudent buyer will purchase a property under litigation without considering the adverse factors attached to the litigation and thus such property shall not have the same value as a property with no litigation shall have in the open market. In this case as on the relevant valuation dates, neither the intimation of the Government dated 27-8-1993, providing access by public street to Mulund land was available nor the Hon'ble High Court order dated 7-7-1993, releasing, both the properties at Mulund and Ghatkopar from "excess lands" under ULC Act was in existence and thus the valuation on the basis of the sale consideration on 21-4-1994, of the Mulund land at Rs. 4.81 crore is not sustainable. However, it does not mean that in the facts of the case the assessee was entitled to value the lands on the basis of compensation receivable at Rs. 3.5 lacs of the properties and we are not inclined to accept the plea of the learned counsel for the assessee to assess the assessee only on the amount of compensation payable to it under the provisions of ULC Act regarding the properties. The litigation as on the relevant valuation dates was pending before the Hon'ble High Court and there was also a likelihood of a favourable decision to the assessee and inspite of the risk and the hazard and the expenses involved in litigation, the rights of the assessee in the lands has a different value than mere compensation receivable under ULC Act as on the relevant valuation dates. The issue before us is how.to evaluate the right of the assessee in the properties in question as on the relevant valuation dates. There is no definite formula to evaluate the value of rights of the assessee in the properties. However, we reproduce the portion of Hon'ble Supreme Court's decision in a case where on the valuation date the claim of extra compensation was pending in the civil Court. In Mrs. Khorshed Shapoor Chenai v. ACED (1980) 122 ITR 21 (SC), the Hon'ble Apex Court reversing the judgment of the High Court held :

"(1) That the reassessment notice under section 59(a) was liable to be quashed because:

(a) the notice was issued on the wrong assumption that the acquired lands still formed part of the estate of the deceased and had been undervalued;

(b) the assessment was being reopened for the purpose of including in the principal value of the property passing, the enhanced compensation which was not in existence on the date of death of the deceased;

(c) such extra compensation awarded by the civil court was liable to variation in appeals pending before the High Court; and

(d) such extra compensation together with the compensation awarded by the Collector could not be regarded as the proper valuation of the right to compensation as on the date of death of the deceased.

(2) that the rectification notice under section 61 was also liable to be quashed because rectification was undertaken on the ground that the initial valuation adopted in respect of the lands acquired was based on the award of the Collector which was obviously wrong in view of the enhanced compensation awarded by the civil court and the enhanced compensation was sought to be included in the principal value of the estate. This could not be said to be a case for rectification of any mistake apparent from the record; the Controller was really seeking to change his opinion about the valuation of the acquired lands because some other authority viz., the civil Court, had valued them differently,"

7. This decision of the Hon'ble Supreme Court has been followed in a wealth-tax case by Hon'ble Andhra Pradesh High Court in CWT v. Amatul Kareem (1980) 19 CTR (AP) 154 wherein it was held :

"Wherein suit for enhancement of compensation was pending in the civil court on the relevant valuation date, 50 per cent of the actual enhanced compensation plus 50 per cent of the interest awarded was held to be includible to the net wealth of the assessee. It was held-,

'So when the amount of compensation was enhanced by the city civil Court the entire enhanced amount could not be treated as wealth of the assessee for there was always the prospect of the said amount being reduced by the court before which the State had preferred an appeal. In view of the hazard and risk involved in purchasing the right of the assessee to the said compensation, when placed in the market would not have fetched the full amount. Any purchaser would have calculated and taken into account the risk involved, the amount of time that would have to be spent and, the expenditures that would have had to be incurred before offering to purchase the right to receive the enhanced compensation. The Tribunal has taken all these factors into consideration in holding that only 50 per cent of the enhanced compensation could be taken as the wealth by the assessee. Though the amount of compensation determined under the award and later enhanced by the city civil court and confirmed by the Tribunal is the quantification of the original right of the assessee to receive the compensation which flowed from out of the acquisition made under notification dated 25-8-1960, the entire amount of Rs. 4,09,300 which is enhanced amount of Rs. 2,74,454 which was the original amount awarded by the Collector cannot be deemed to be the wealth of the assessee. That entire amount cannot be included in the net income of the assessee. For the assessment years 1960-61 to 1962-63, it would be only 50 per cent of the amount awarded under the award dated 19-4-1960. For the subsequent assessment years 1963-64 to 1970-71, it would be 50 per cent of Rs. 4,09,300 which is the enhanced amount. The entire enhanced amount can never be deemed the wealth of the assessee for those years for that became his absolute wealth only after the appeal was dismissed on 18-12-1970, which is subsequent to the relevant valuation date for assessment years in question."

8. In the facts and circumstances of the case we consider that taking into consideration all the factors detailed above the valuation of the properties be determined as under :

9. (1). Mulund Property :

(a) Value as on 31-3-1983.The land being "land locked" land and being declared "excess land" under ULC Art as on the valuation date dated 31-3-1983, the value of land be taken at Rs. 100 per sq. mtr. as against to Rs. 300 per sq. mtr. adopted by the DVO and accordingly FMV of Mulund land, considering the deferrment factor as adopted by the DVO, comes to Rs. 17 lacs as on 31-3-1983. This value shall be adopted for the subsequent two valuation dates, i.e., 31-3-1984 and 31-3-1985.

(b) Value as on 31-3-1986.The value of Mulund land is determined at the value of Rs. 17 lacs.as determined for the valuation dated 31-3-1983 an increase at 20 per cent for inflation and the value would be Rs. 20.4 lacs as on 31-3-1986. This value shall be adopted for the subsequent two valuation dates, i.e., 31-3-1987 and 31-3-1988.

(c) Value as on 31-3-1989.The value of Mulund land is determined at the value of Rs. 20.4 lacs as determined for the valuation dated 31-3-1986 + an increase at 20 per cent for inflation and the value would be Rs. 24.5 lacs as on 31-3-1989. This value shall be adopted for the subsequent two valuation dates, i.e., 31-3-1990 and 31-3-1991.

(d) Value as on 31-3-1992.The value of Mulund land is determined at the value of Rs. 24.5 lacs as determined for the valuation date 31-3-1989, + an increase at 20 per cent for inflation and the value would be Rs. 29.4 lacs as on 31-3-1992.

10. (2). Ghatkopar Property :

(a) Value as on 31-3-1983.The land being "land locked" and being declared "excess land" under ULC Act and being surrounded by slum dwellers and the land being declared "slum" on 28-4- 1977, the value of the land as on valuation dated 31-3-1983 be taken at Rs. 500 per sq. mtr. as compared to Rs. 1000 per sq. mtr. adopted by the DVO and accordingly FMV of Ghatkopar land, considering the deferment factor etc. as adopted by the DVO, comes to Rs. 4 lacs as on 31-3-1983. This value shall be adopted for the subsequent two valuation dates, i.e., 31-3-1984 and 31-3-1985.

(b) Value as on 31-3-1986.The value of Ghatkopar land is determined at the value of Rs. 4 lacs as determined for the valuation date 31-3-1983, + an increase at 20 per cent for inflation and the value would be Rs. 4.8 lacs as on 31-3-1986. This value shall be adopted for the subsequent two valuation dates, i.e., 31-3-1987 and 31-3-1988.

(c) Value as on 31-3-1989.The value of Ghatkopar land is determined at the value of Rs. 4.8 lacs as determined for the valuation dated 31-3-1986, + an increase at 20 per cent for inflation and the value would be Rs. 5.76 lacs as on 31-3-1989. This value shall be adopted for the subsequent two valuation dates, i.e., 31-3-1990 and 31-3-1991.

(d) Value as on 31-3-1992.The value of Ghatkopar land is determined at the value of Rs. 5.76 lacs as determined for the valuation date 31-3-1989 + an increase at 20 per cent for inflation and the value would be Rs. 6.91 lacs as on 31-3-1992.

11. We order to adopt the value of Mulund and Ghatkopar properties on the valuation dates as per paras 9 & 10 of this order and the grounds of appeal of the assessee are partly allowed.

Additional grounds of appeal for the assessment years 1989-90 to 1992-93 :

12. The assessee has taken additional grounds of appeal regarding charging of interest for delay in filing of return of wealth under section 17B of the Act. The learned counsel for the assessee argued that there is no delay in filing of the return of wealth in any of the years and accordingly no interest for late filing of the return should be levied on the assessee. He argued that the assessing officer has passed an order under section 35 of the Act withdrawing the charging of interest under section 17b admitting that it was wrongly charged. He submitted that the benefit of rectification order under section 35 was not available at the time of passing of the order of the CWT(A). The learned Departmental Representative has fairly conceded that there is no delay in filing the return of wealth. In the facts there being no delay in filing the return of wealth by the assessee the additional ground of appeal regarding charging of interest is allowed in favour of the assessee.

13. In the result the appeals of the assessee are partly allowed.