Bombay High Court
Bombay Cable Co. (P) Ltd. vs Deputy Commissioner Of Wealth Tax. ... on 21 April, 1997
Equivalent citations: (1997)59TTJ(MUMBAI)294
ORDER
BY THE BENCH :
These are cross-appeals by the assessee and by the Department for the same asst. yrs., viz., 1988-89 to 1991-92 involving common issues and accordingly the appeals are grouped together and disposed of by this common order.
2. The common issues in the present appeals relate to the valuation of the freehold land, which has a total area of 18,996 sq. mts. Of this, 11,642 sq. mts. of land has been given on lease for 49 years from 7th April, 1981 allowing renewal for a further period of 49 years. On the total land, there is a factory building. The said factory building, it is not disputed, is used by the assessee for carrying on its manufacturing activity. The Directorate of Industries considered the application of the assessee that was made sometime in August, 1976, with reference to the provisions of Land Acquisition Act, 1973, especially with reference to s. 20(i) of the said Act, permitting the land to be retained by the assessee. The order that was so passed contained a particular cl. No. 4, which is reproduced below for the sake of facility :
"(4) Notwithstanding anything contained in any of the preceding clauses of this order if the said person desires to transfer the exempted land (with the buildings thereon, if any) to any other person, by way of sale, mortgage, gift, lease or otherwise, he shall apply to the State Government for prior permission for such transfer, and such application shall contain such particulars as the State Government may require; on receipt of such application the State Government may after holding such enquiry as it deem fit grant the necessary permission subject to such conditions as the State Government may deem fit to impose including a condition that the transferor shall deposit with the State Government the difference between the market price of the land so exempted under this order and the price at which it would normally have been acquired under the said Act, and in case of any land situated in any MIDC area, the difference between the premium for the lease charged by the MIDC at the time of transfer, and the premium paid by the transferor to the MIDC at the time of allotment of the land to the transferor by the MIDC and such other conditions as the State Government may deem fit to impose. The State Governments determination of the market price of the land at the time of transfer and the price at which the land normally would have been acquired under the Act, shall be final."
The approved valuer had indicated the land that was in possession of the assessee as part of the factory building, etc. at 5,894 sq. mts. The balance of 2,416 sq. mts. of land was claimed by the assessee as in the shape of nullah, used for high-tension wire, etc. The approved valuer of the assessee had considered the gross lease receipt per annum on lease of 11,642 sq. mts. at Rs. 3,75,930. He claimed 5 per cent from the gross rental towards collection charges and on the balance lease rental he capitalised the same at 12 per cent and returned the value of Rs. 29,76,125. From the balance land of 5,894 sq. mts. he deducted the area of the land under the building at 1,714 sq. mts. giving the figure of remainder building at 4,180 sq. mts. Because of the provisions contained in the Urban Land Ceiling Act, limiting the compensation payable for such excess land at Rs. 10 per sq. mt., he took the value of 4,180 sq. mts. at Rs. 10 per sq. mt. giving the figure of Rs. 41,800. The matter was referred to the Departmental Valuation Officer (DVO). The DVO took the total area of the land at 18,996 sq. mts. from which he deducted the area of the land leased out of 11,642 sq. mts., land under the factory under own occupation of 1,715 sq. mts. and the land appurtenant to existing building of 758 sq. mts. and arrived at a figure of 4,881 sq. mts. as the land that is under own occupation. The DVO added interest on deposits (Rs. 15 lakhs received from lessee) at the rate of 15 per cent and added the same as part of the gross rental value. He allowed collection charges deduction at the rate of 2 per cent. He then applied the capitalisation at 8 per cent. Insofar as the land that was under own occupation, i.e. 4,881 sq. mts. he applied the fair market rate with some multiplier thereon and determined the value of Rs. 18.50 lakhs as the value as on 30th June, 1987. He revised it upwards for the subsequent years as well. The AO faithfully adopted the figures determined by the DVO. The assessee challenged the inclusion of the interest only to the extent of quantum and the assessee wanted 12 per cent to be adopted in place of 15 per cent. The assessee also claimed that collection charges should be allowed at the rate of 5 per cent. The CWT(A) upheld the interest inclusion at the rate of 15 per cent. The DVO insisted that Schedule III permitted 15 per cent. He upheld the collection charges deduction at 2 per cent to be reasonable. However, the capitalisation rate was adopted by him at 10 per cent as against 8 per cent adopted by the DVO and 12 per cent claimed by the assessee. Insofar as the value of the excess land, which was declared by the assessee at Rs. 41,800, but adopted at the market rate by the DVO, he considered the plea of the assessee that the land is covered by the provisions of s. 20 of the Urban Land Ceiling Act, which allows the compensation at Rs. 10 only per sq. mt. He considered the plea of the assessee that certain portion of the land had to be kept vacant, but he held that the other land could be used for this purpose. He accordingly upheld the order of the DVO on this point. The plea of the assessee in appeal before us in regard to the land that was leased to the extent of 11,642 sq. mts. was limited to the consideration of interest at the rate of 12 per cent for the asst. yrs. 1988-89 and 1989-90 and thereafter at 15 per cent and deduction on account of collection charges at 5 per cent of the gross rental plus the interest on the quantum. The further plea was that the rate of capitalisation should be taken at 12 per cent. The Departments grievance is that the rate of capitalisation should have been adopted at 8 per cent.
3. In regard to the balance land, the plea of the assessee had been that because of the provisions of Urban Land Ceiling Act being attracted and the said Act prohibiting transfer at a price higher than Rs. 10 per sq. mt., the plea was that the balance land could be taken at Rs. 10 per sq. mt. only. For this purpose the order of the concerned authority that is placed at pp. 110 to 113 of the paper-book, was referred to, especially to cl. 4 that has been reproduced earlier.
4. The DVO, to whom notice was sent, Mr. Govindarajan, appeared and placed on our records written submissions. The DVO further submitted by referring to the written arguments that he supported the valuation report of the DVO. He submitted that adoption of 15 per cent as the rate of interest was reasonable, and though the assessee did not incur any collection charges, the DVO was gracious enough to allow 2 per cent for collection charges. No further deduction is permissible. He insisted that the rate of capitalisation should be 8 per cent. In regard to the land, which is stated to be excess land, but covered by the Land Acquisition Act, he submitted that the land which are covered by nullah, high tension wires, etc. the Act provides to the extent of 25 per cent of FSI on the remaining land and thereby he insisted that the balance land has higher value. He submitted that the value adopted on the basis of actual sale consideration in the year 1983 was reasonable.
5. The rival contentions in regard to the above have been very carefully considered. It is an accepted position that the authorities governing the Land Acquisition Act has permitted the retention of the land of the assessee by noting the total area of the land at 17,536 sq. mts. and allowing exemption of 14,121 sq. mts. The exempted land is 4,692 sq. mts. taken as per statutory regulation, 9,854 sq. mts. covered by the exemption limit and another 758 sq. mts. representing excess appurtenant land. The total land area according to the DVO is 18,996 sq. mts. and there is no doubt that the land given on lease is 11,642 sq. mts. If we go by the Land Acquisition Act and cl. 4 of the order thereunder allowing exemption then 14,121 sq. mts. have to be valued by applying s. 20 of the Urban Land Ceiling Act by adopting the rate of Rs. 10 per sq. mts., the reason being that is the rate which the Government will pay to the owner on acquiring it and even if the assessee is able to obtain a price in excess of Rs. 10 per sq. mt. then such excess over Rs. 10 would also go to the Government. The assessee, however, had not insisted upon this application, but had preferred the valuation on the basis of rent capitalisation insofar as the leasehold portion is concerned. Further, in regard to the valuation it had challenged only the rate of interest and preferred that it should be adopted at 12 per cent for asst. yrs. 1988-89 and 1989-90 and at 15 per cent for asst. yrs. 1990-91 and 1991-92. It further wanted the collection charges to be allowed to it at 5 per cent while it was allowed only at 2 per cent. For the reasons mentioned earlier that the assessee if it had insisted upon adopting the value at the rate of Rs. 10 per sq. mt. it may have to be upheld, but because it was not the claim of the assessee, in the circumstances of the case, we accept the plea of the assessee in regard to adopting the rate of interest on deposits at 12 per cent for asst. yrs. 1988-89 and 1989-90 and at 15 per cent for asst. yrs. 1990-91 and 1991-92. Insofar as the collection charges are concerned, no further relief is called for. As far as the rate of capitalisation is concerned, we would accept the rate of 12 per cent sought for by the assessee for the only reason that the assessee could have insisted upon taking the value at Rs. 10 per sq. mts. Insofar as the land which is in excess, but under the occupation of the assessee, in our view, the plea of the assessee that it could be adopted at Rs. 10 per sq. mt., the maximum amount of compensation which could be realised from the Government, is a very reasonable proposition. Similar view has been taken by the Tribunal in regard to application of Rs. 10 per sq. mt. in WTA No. 132/Bom/1991, B. D. Sarang vs. 2nd WTO. The assessee has stated the area of the land under own occupation at 4180 sq. mts. while the Department claims such area to be 4,881 sq. mts. We are remanding this issue to the file of the AO for verification of the actual area under own occupation, i.e. sort out the correct figure between 4,881 sq. mts. and 4,180 sq. mts. and take the value at Rs. 10 per sq. mt.
6. In the result, the appeals of the assessee are allowed in part while that of the Department are dismissed.