Delhi High Court
Namo Narayan Agarwal vs Wealth Tax Officer. on 13 May, 1996
Equivalent citations: (1996)55TTJ(DEL)544
ORDER
B. M. KOTHARI, A. M. :
Both these appeals involve consideration of some common points, hence, we find it convenient to dispose of these appeals by this common order.
2. The assessee has raised the following identical grounds in these two appeals :
"1. That the CWT(A) erred on facts and in law in upholding the action of the AO in including value of agricultural land in the taxable wealth of the appellant.
2. That the CWT(A) erred on facts and in law in observing, inter alia, that the land was not agricultural land on the date of valuation and that no agricultural operations were carried on during the period preceding the date of valuation.
3. That the CWT(A) erred on facts and in law in confirming the valuation of the agricultural land at Rs. 38,59,083 when the land had been declared surplus under the Urban Land (Ceiling & Regulation) Act, 1976."
3. The WTO, Bareilly, determined the value of land (amount receivable from Bareilly Development Authority) at Rs. 38,59,083 as against the assessees claim that the aforesaid land was agricultural land and was not liable to wealth-tax. According to the assessee, the value of the aforesaid land, even if it is regarded as liable to wealth-tax, should have been taken at Rs. 1,80,000. The WTO observed that in the year under consideration, the assessee has entered into an agreement with Bareilly Development Authority (hereinafter referred to as BDA) vide agreement dt. 5th March, 1984, for sale of the lands in question @ Rs. 39.52 per sq. mt. + 15% solatium thereon. The assessee also handed over the possession of the said land vide Dakhalnama, dt. 21st March, 1984. The AO observed that the assessee was no longer the owner of the asset on the valuation date. He had only the legal right to receive compensation from BDA. The value of the aforesaid asset was determined by the WTO as per discussion made in para 5 of the assessment order which is reproduced hereunder :
"5. As per letter dt. 5th Dec., 1985, issued by Sri Ganesh Dutt Punetha, Secretary, BDA, Bareilly, value of the said land has been taken at Rs. 38,59,082.87 (Rs. 10,00,000 advance tax paid on 9th Oct., 1984 + Rs. 28,59,082.87). Value of the said land as per agreement dt. 5th March, 1984, has been worked out as under :
Rs.
Area of Plot No. 239 : 53,366 sq. mt. @ Rs. 39.52 per sq. mt.
21,09,024 Area of Plot No. 99 : 18,760 sq. mt. @ Rs. 39.52 per sq. mt.
7,41,395 28,50,419 Add : 15% solatium thereon 4,27,562 32,77,981 Since the value of the said land has been estimated by the BDA at higher value, the value of the said land will be taken at Rs. 38,59,083 as shown in the letter dt. 5th Dec., 1985. In view of the above, net wealth of assessee is computed as under."
4. In asst. yr. 1985-86 the WTO determined the value of the said assets at Rs. 28,59,083, as a sum of Rs. 10 lakhs was received by the assessee from BDA on 10th Sept., 1984.
5. The CIT(A) in his order dt. 30th Oct., 1990, for asst. yr. 1984-85, inter alia, gave the following findings :
(a) The mere fact that an agreement was made with BDA on 5th March, 1984, and a Dakhalnama was executed on 21st March, 1984, and possession of land situated at S. No. 239 was given to BDA on that date would not result in transfer of title over the said land in favour of BDA. The assessee continued to be the owner of the land covered by the said agreement as on the relevant valuation date.
(b) The land covered by the agreement executed with BDA could be treated as transferred only after 13th Sept., 1986, when necessary order was passed by the Land Acquisition Officer.
(c) The value of the aforesaid asset will, therefore, have to be determined on the basis that the land continued to be owned by the appellant as an asset on the relevant valuation dates pertaining to asst. yrs. 1984-85 and 1985-86.
(d) The value of land at S. No. 239 which was finally acquired by BDA consequent upon the order of Land Acquisition Officer made in October, 1986 will have to be valued at the rate at which the BDA had purchased the same from the assessee. The total sale consideration of plot bearing No. 239 paid by BDA to the assessee was Rs. 24,42,335. He further observed that the value of plot situated at S. No. 99 will also have to be valued at the same rate, as that was also a subject-matter of agreement dt. 5th March, 1984, executed with BDA regardless of the fact that the said land at S. No. 99 was not finally acquired by the BDA. While arriving at such conclusion the CIT(A) was of the view that the BDA agreed to pay the rate of Rs. 39.52 per sq. mt. + 15% solatium after taking into consideration the fact that the land in question has been declared as surplus land under provisions of ULC Act. Therefore, the impact of the applicability of ULC Act in relation to the said land has already been taken into consideration while arriving at the agreed rate on which the assessee agreed to transfer the land to BDA.
(e) The CIT(A) also held that the land in question cannot be regarded as agricultural land. For arriving at such conclusion he relied upon several judgments including the various tests laid down by the Honble Gujarat High Court in the case of CIT vs. Siddharth J. Desai (1983) 139 ITR 628 (Guj). The CIT(A) thus in principle agreed with the value determined by the AO except to the extent that the WTO arrived at the value of the two plots of land at Rs. 32,77,981 but has adopted the value of the said lands while computing taxable wealth at Rs. 38,59,083 on the basis of a letter dt. 5th Dec., 1985, received from the Secretary, BDA. But he did not reconcile the difference between the aforesaid two figures. He, therefore, restored back the matter for the limited purpose of verification of the final value paid by BDA for acquiring land in question.
6. The learned counsel for the assessee submitted that so far as land at S. No. 239 is concerned, agricultural operations were in fact carried on on the said land in asst. yr. 1984-85. He submitted that the document evidencing cultivation on the said land in Crop Year 1391 was submitted before the authorities below which shows that agricultural operations were carried out in the previous year relating to asst. yr. 1984-85. The authorities below have not properly understood as to the correct period covered by the Crop Year. He submitted that Crop Year starts from 1st July, and ends on 30th June. The previous year relevant to asst. yr. 1984-85 covers the period from 1st April, 1983 to 31st March, 1984, and the corresponding Crop Year will have to be computed as under :
Period English Year Conversion Factor Crop Year 1st April to June 1983 1983 - 593 1390 July 1983 to December 1983 1983 - 592 1391 January 1984 to June 1984 1984 - 593 1392 On the basis of the aforesaid details along with the relevant entries in the Revenue records placed at page 24 of the paper book showing cultivation done in Crop Year 1391, he submitted that agricultural operations were carried on in asst. yr. 1984-85 on the said land. The WTO and the CIT(A) ought to have, therefore, accepted the land at S. No. 239 as agricultural land, which is not liable to levy of wealth-tax.
7. However, the learned counsel submitted that in asst. yr. 1985-86, the assessee had received a sum of Rs. 10 lakhs towards the sale value of land at S. No. 239 from BDA and, therefore, he would not like to press his point that the land at S. No. 239 should be treated as agricultural land in asst. yr. 1985-86. He also submitted that the entries in the revenue records placed at page 25 of the paper book also shows that no cultivation was done at the said land in the Crop Year 1392. He only urged that the balance sale consideration receivable from BDA in respect of sale value of land at S. No. 239 which was Rs. 14,42,335 (total sale value Rs. 24,42,335 minus Rs. 10 lakhs received in asst. yr. 1985-86) should be taken at discounted value, as it was uncertain as on the valuation date, namely, 31st March, 1985, as to when the aforesaid balance amount will be received by the assessee.
8. The learned counsel further submitted that even if it is treated that the land at S. No. 239 cannot be considered as agricultural land in asst. yr. 1984-85, the value of the said land along with value of land at S. No. 99 should be taken at Rs. 1,80,000 because both the aforesaid lands were declared as surplus land vide order dt. 2nd July, 1977, passed under the ULC Act. Once any particular land has been declared as surplus land, the owner of the land is entitled to receive only the compensation as per the provisions contained in ULC Act and he is restrained from transferring the said land. He invited our attention towards the decision of the Tribunal in assessees own case for asst. yr. 1980-81 where the value of the aforesaid land situated at S. No. 239 and S. No. 99 was taken at Rs. 1,75,000. The Tribunal took into consideration the subsequent developments, namely, agreement executed with BDA, possession given to BDA in March, 1984 and other relevant facts. After considering the entire material and evidence, the Tribunal confirmed the order of the CWT(A) accepting the declared value of Rs. 1,75,000.
9. The learned counsel further submitted that so far as land at S. No. 99 is concerned, the assessee has brought no evidence on record to show that any agricultural operations were carried out on the said land in the relevant period pertaining to asst. yrs. 1984-85 and 1985-86 except that the land was treated as agricultural land upto asst. yr. 1983-84. He would, therefore, not like to press the ground that land at S. No. 99 should be treated as agricultural land. He further submitted that this land was also declared as surplus land under ULC Act in the order passed by the concerning authorities in the year 1977. The value of the land at S. Nos. 239 and 99 was determined by the Tribunal at Rs. 1,75,000. The proportionate value of the area covered by land at S. No. 99 will approximately come to Rs. 43,070. He, therefore, urged that the value of this land at S. No. 99 ought to have been taken at Rs. 43,070. The CWT(A) has grossly erred in confirming the view taken by the AO that the value of this land also should be determined at the same rate at which BDA has purchased land at S. No. 239. According to the agreement executed in March, 1984, BDA agreed to take land both situated at S. No. 239 and 99. However, BDA ultimately acquired only the land situated at S. No. 239 and did not purchase the land at S. No. 99. Therefore, the value of land at S. No. 99 should be restricted to the amount of compensation receivable under the provisions of ULC Act. The Tribunal had already determined the value of the entire surplus land located at S. Nos. 239 and 99. The proportionate value ought to have been taken by the Departmental authorities for land at S. No. 99. He placed reliance on judgments reported in CWT vs. Ranganatha Mudaliar & Ors. (1984) 150 ITR 619 (Mad), Gouri Prasad Goenka & Family (HUF) vs. CWT (1993) 203 ITR 700 (Cal), CWT vs. H. V. Mungale (1984) 145 ITR 208 (Bom).
10. The learned Senior Departmental Representative submitted that the assessees representative has himself accepted that the land at S. No. 99 was not used for agricultural purposes in both the years under consideration. He has also admitted that the land at S. No. 239 was also not used for agricultural purposes in the accounting year relating to asst. yr. 1985-86. He has claimed the nature of land at S. No. 239 so far as asst. yr. 1984-85 is concerned should be treated as agricultural land. Therefore, the learned Senior Departmental Representative submitted that he is required to submit his arguments about the nature of land only with regard to land at S. No. 239 for asst. yr. 1984-85.
11. The learned Senior Departmental Representative pointed out that the land at S. No. 239 was agreed to be sold on 5th March, 1984, to BDA. The Dakhalnama (document for handing over possession) was executed on 31st March, 1984. The relevant valuation date was 31st March, 1984. On the relevant valuation date the assessee had already handed over the possession to BDA and, therefore, the same cannot be treated as agricultural land on the relevant valuation date. Even assuming that the land in question was put to agricultural use for a major part of the financial year 1983-84, it would not establish that the land continued to be an agricultural land in the hands of the assessee on 31st March, 1984, as the possession had already been given to BDA on 31st March, 1984.
12. The learned Senior Departmental Representative further submitted that the order passed by the ULC authorities on 22nd July, 1977 (pages 18 to 23) is not a final order for taking over of the surplus land in question. In the said order, it has been specifically mentioned that the owners have submitted an application under s. 20 for grant of exemption which is still pending with the concerning authorities. It has also been observed that notifications are still to be issued under s. 10(1) and 10(3) in relation to construction of residential complexes under Bareilly Mahanagar Scheme. In view of the aforesaid facts it is clear that no final notification had been issued under s. 10(1) till the passing of the aforesaid order on 22nd July, 1977.
13. The aforesaid order passed by the ULC authorities on 22nd July, 1977, further shows that the nature of user of the said land had undergone a change in the year 1977 as would be apparent from the observation made in the said order dt. 22nd July, 1977, stating that the said surplus land has been covered under the Town Planning Scheme for construction of residential/industrial use. The learned Senior Departmental Representative also relied upon the judgment of Honble Supreme Court in the case of Sharifa Bibi Mohd. Ibrahim vs. CIT (1993) 201 ITR 631 (SC) to support his contention that the land at S. No. 239 cannot be treated as agricultural land even for asst. yr. 1984-85. He also placed reliance on judgment reported in CWT vs. Officer-in-charge (Court of Wards) (1976) 105 ITR 133 (SC). The learned Senior Departmental Representative thus strongly contended that the land at S. No. 239 cannot be regarded as agricultural land in asst. yr. 1984-85.
14. As regards the valuation of the aforesaid land is concerned, the learned Senior Departmental Representative submitted that the value offered by BDA to the assessee under the agreement executed in the month of March, 1984 is the depressed sale value and that represents the minimum sale value in which the impact of ULC Act has already been taken into consideration. The CIT(A) was fully justified in directing the AO to adopt the valuation on the basis of selling rate at which the assessee had sold the land at S. No. 239 to BDA. He submitted that there is no justification for granting any deduction in respect of discounting of the sale value merely because the payment of a part of the sale consideration was deferred. He submitted that if the land in question would not have been declared as surplus land under ULC Act, it could fetch substantially higher rate than the rate mutually agreed between the assessee and the BDA. Therefore, the question of granting further discounting in the value determined as per the rate agreed with BDA would be unwarranted and unjustified.
15. The learned Senior Departmental Representative further submitted that the facts in asst. yr. 1985-86 are similar so far as the valuation of the asset in question is concerned. He supported the order of the CIT(A) and urged that the same should be confirmed.
16. We have carefully considered the rival submissions made by the learned representatives of the parties and have also gone through the orders of the Departmental authorities as well as various other documents to which our attention was drawn during the course of hearing.
17. We will first deal with the assessees contention that land at S. No. 239 should be treated as agricultural land and should be held to be exempt in asst. yr. 1984-85. After a deep and thoughtful consideration to the entire submissions made by the learned counsel for the assessee, we are of the view that the said submission made on behalf of the assessee cannot be accepted. The reasons for our taking such a view are as under.
18. For determining the nature and fair market value of the assets liable to wealth-tax, the crucial date is the relevant valuation date. The valuation date for asst. yr. 1984-85 was 31st March, 1984. The assessee had already entered into an agreement with BDA on 5th March, 1984 and had handed over the possession of the said land on 21st March, 1984, by executing a Dakhalnama on that date. It is true that the CIT(A) has held that these two documents executed in March, 1984 will not result in transfer of title over the said land in favour of BDA and the assessee will continue to be regarded as owner of the land in question as on the relevant valuation date. Such findings have become final as the Revenue has not preferred any appeal in relation to such findings given by the CIT(A). But it is beyond any bodys comprehension that after transfer of possession of the land in favour of BDA, it can be validly claimed on behalf of the assessee that the land should be treated as agricultural land belonging to the assessee as on 31st March, 1984. The BDA had entered into an agreement for purchase of the said land obviously for construction of residential colonies. The agricultural activity, though it might have continued during the accounting year under consideration, definitely came to an end when the possession of land at S. No. 239 was handed over to BDA. After handing over the possession to BDA for construction of residential colonies/complex, the land in question cannot be said to be meant for agricultural use by the assessee. It would be worthwhile to make a useful reference to the judgment of the Honble Supreme Court in the case of Sharifa Bibi Mohd. Ibrahim (supra). The Honble Supreme Court in that case apart from relying on various facts and circumstances observed that the assessee in those cases had no intention to bring the land under cultivation at any time after 1965-66 and certainly not after they entered into an agreement to sell the land to the housing cooperative society. In the present case also, the user of the land for agricultural purposes obviously came to an end when the assessee entered into an agreement for sale of land in question to BDA on 5th March, 1984, and certainly before the assessee handed over the possession of the said land to BDA on 21st March, 1984. The mere fact that the land was put to cultivation for the Crop Year 1391 which covers a major part of the accounting year will not, in any manner, help the assessee as few days prior to the relevant valuation date the assessee had abandoned its intention to use the land for agricultural purpose and had in fact handed over the possession to BDA in accordance with the agreement executed with them. We, therefore, hold that the land at S. No. 239 cannot be treated as agricultural land for asst. yr. 1984-85.
19. The learned counsel for the assessee had himself conceded in favour of the Revenue so far as the nature of the land at S. No. 239 as well as in respect of land at S. No. 99 for both the years under consideration and had submitted that the same land may be treated as urban land as held by the CWT(A). We accordingly approve the view taken by the CWT(A) holding that the land at S. Nos. 239 and 99 cannot be regarded as agricultural land for both the years under consideration.
20. Now, we will consider the question relating to the valuation of the aforesaid two lands for both the years under consideration.
21. We will first deal with the valuation of land at S. No. 239. Since the assessee had already entered into an agreement for sale of the aforesaid land on 5th March, 1984 and had also handed over the possession thereof to the BDA on 21st March, 1984, the assessee became entitled to receive the sale consideration as agreed in the aforesaid agreement executed with BDA. The BDA had agreed to pay sale price of the said land @ Rs. 39.52 per sq. mt. and over and above that the assessee was also entitled to receive 15% solatium. It is well settled law that the subsequent events can be taken into consideration for determination of true and correct facts. By the time the assessing authorities and the CWT(A) passed their respective orders, it became final that the assessee was entitled to receive a total sum of Rs. 24,42,335 in respect of sale value of plot bearing No. 239 from BDA. In fact, an advance payment of Rs. 10 lakhs had already been received on 9th Oct., 1984, i.e., after about 6 months from the relevant valuation date. The balance payment was received after the order of acquisition made by the Land Acquisition Officer in the month of October. In view of these developments which took place in asst. yr. 1984-85 coupled by the payments received partly in asst. yr. 1985-86 and balance in October, 1986 there is no justification in accepting the assessees request that the value of land at S. No. 239 should be taken at the amount of compensation prescribed in the provisions of ULC Act or as per the valuation of this land determined by the Tribunal in assessees own case for asst. yr. 1980-81. In principle, we agree with the approach of the learned CWT(A) in directing the WTO to determine the fair market value of the land at S. No. 239 in accordance with the final sale value received by the assessee from BDA. We, however, find merit in the assessees contention that there was an element of uncertainty about the period as to when the amount will in fact be received from BDA as on the relevant valuation dates, which would entitle the assessee to grant of reasonable deduction on account of discounting of the value which was receivable by the assessee in respect of sale of the said land to BDA. We, therefore, hold that while determining the value of this land as on the valuation date relating to asst. yrs. 1984-85 and 1985-86, the WTO should grant a deduction calculated @ 18% p. a. from the final sale value for computing the value of said asset on the relevant valuation dates upto the dates on which the sale consideration was actually received.
22. However, as regards the value of land at S. No. 99 is concerned, it is an undisputed fact that the land in question, although originally agreed to be purchased by BDA in accordance with the agreement dt. 5th March, 1984, was ultimately not purchased/required by BDA. The land in question still continues to be owned by the assessee. The matter relating to grant of exemption under ULC Act is also stated to be still pending. The learned Senior Departmental Representative had submitted that the value adopted by the CIT(A) on the basis of rate offered by BDA is justified, cannot be accepted in the present case, in view of the fact that the Tribunal in assessees own case had determined the value of the entire surplus land covered by the land situated at S. No. 239 and 99 at Rs. 1,75,000 in asst. yr. 1980-81. While determining the said value, the Tribunal had duly taken into consideration the impact of ULC Act and had also taken note of the various agreements executed with BDA in the year 1984. After considering all the submissions, the Tribunal had determined the total value of the entire surplus land at Rs. 1,75,000. The facts so far as land at S. No. 99 are concerned continues to remain the same. The land at S. No. 99 had not been taken over by the BDA. For the sake of consistency, it would, therefore, be necessary to follow the earlier order of the Tribunal in assessees own case so far as it relates to valuation of land at S. No. 99 is concerned. We, therefore, direct the WTO to determine the proportionate value of land at S. No. 99 in accordance with the valuation confirmed by the Tribunal in assessees own case for asst. yr. 1980-81.
23. We also confirm the finding given by the CIT(A) directing the WTO to verify the correct amount of sale consideration paid by the BDA to the assessee in respect of sale value of land at S. No. 239 and for reconciling the reasons for difference between the amounts of Rs. 38,59,083 mentioned in letter dt. 5th Dec., 1985, and the amount of Rs. 32,77,981 computed at the rates mentioned in the sale agreement. The WTO should carry out necessary verification and then redetermine the value of the aforesaid two assets in question in the light of the aforesaid directions.
24. In the result, both the appeals are partly allowed.