Law:

Section:

Section 7 of the Wealth-tax Act, 1957, read with section 11 of the Urban Land (Ceiling and Regulation) Act, 1976 - Valuation of assets - Immovable property - Assessment years 1977-78 to 1985-86 - Whether fair market value of property is to be determined as would be available if property is sold by a notional willing seller to a notional willing buyer on valuation date itself - Held, yes - Whether WTO is not only justified but also bound to take into consideration value of asset if sold in open market, with certain restriction placed by Legislature on such a sale and under these circumstances, WTO is required to find out price of asset with all prohibition contained in Ceiling Act which might bring down price in open market, as purchaser will take note of all restrictions contained under Ceiling Act but that price cannot be at any rate of maximum compensation payable under Ceiling Act - Held, yes FACTS The assessee was in possession of a palace which comprised of residential units, non-residential units and land appurtenant thereto, roads and masonry structures along the contour and the vacant land. The WTO, for the assessment years 1977-78 to 1985-86 worked out the value of the vacant land by determining what it would have fetched, if it were sold in the open market. On appeal, the Commissioner (Appeals) held that the vacant land should be valued at Rs. 2 lakhs for some of the assessment years. On revenue's appeal, the Tribunal held that the value of the vacant land should be Rs. 2 lakhs for each of the assessment year as that amount was the maximum compensation that could be possibly received by the assessee under the Ceiling Act. On reference : HELD The Wealth-tax Rules, 1957, do not provide for valuation of urban land and, therefore, the asset must be valued in the ordinary way by determining what it would fetch if it were sold in the assumed market and what willing purchaser would pay for it. Here, the willing purchaser may definitely take into consideration the peculiar factors, which might affect the price of such an asset. [Para 26] The wealth-tax is chargeable under the 1957 Act on the net wealth of the assessee as it existed on the valuation date…

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