Law:

Section:

JUDGMENT Khanna, J.-The question that has been referred to us under section 27 of the Wealth-tax Act, 1957, is: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in taking the view that 50% of the unearned increase payable to the lessor of the land, formed part of and was not deductible out of the valuation of the property for the purposes of wealth-tax?" The assessee was assessed to wealth-tax as individual for the assessment year 1968-69. The relevant valuation date is December 31, 1967. His total wealth was computed by the Wealth-tax Officer at Rs. 8,10,165. This included, inter alia, a sum of Rs. 6 lakhs, as the value of a house on Plot No. 12, Block No. 39, Kautilya Marg, Chanakya Puri, New Delhi. The assessee had never challenged in the past the determination of the value of this property at Rs. 6 lakhs; but in the relevant assessment year the assessee returned its value at Rs. 4,52,000 on the basis of a certificate from Messrs. Anand Apte Jhabwala, architect and approved valuer of New Delhi. The value of the property was estimated at Rs. 5,82,268 from which a sum of Rs. 1,30,000 was deducted as 50% of the unearned increase in the value of land which was required under the terms of the agreement of lease, to be paid to the lessor (the President of India), at the time of the transfer of the lessee's interest. The Wealth-tax Officer did not accept the assessee's valuation. He estimated the value of the property at Rs. 8,29,560 on rental basis to which the assessee's objection was that the building being very large, it could attract only a limited number of interested tenants. The Wealth-tax Officer, however, determined the value of Rs. 6 lakhs as in the past; and rejected the claim for deduction of 50% of the unearned increase as "based merely on hypothetical presumptions". The Appellate Assistant Commissioner of Wealth-tax in appeal was of the view that the fact that the assessee might have to pay a sum of Rs. 1,30,000 to the lessor did not affect the valuation of the property under section 7 of the Wealth-tax Act. According to him, the market value was a price which a prospective buyer was prepared to give in…

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