Law:

Section:

Section 7 of the Wealth-tax Act, 1957 - Valuation of assets - Immovable property - Assessment year 1975-76 - Assessee was allotted a plot of land and under lease agreement there were restrictions on its alienation by assessee - Further, in event of sale with permission of lessor, lessor was entitled to recover 50 per cent of unearned increase restriction against alienation as such was to be ignored but while computing value possibility of a reduced price because of those restrictions will have to be considered - Held, yes FACTS The assessee was a member of a co-operative housing society which was allotted land by the Delhi Development Authority on lease-cum-sale basis. The assessee was allotted a plot of land by the said society for which he paid Rs. 32,640 in the year 1970. As per lease agreement, the assessee was to hold the land for a minimum period of 10 years and construct a building and he could not sell or transfer the plot except with the previous consent in writing of the Development Authority. In case permission was granted, the authority was entitled to recover 50 per cent of the unearned increase in the value. For the purpose of wealth-tax assessment, the WTO first valued the plot at market price and then allowed deduction of 50 per cent which would be appropriated by the Delhi Development Authority if the plot was sold. The assessee appealed to the AAC who inter alia held that in view of the restrictive clauses in the sub-lease agreement, the WTO could not value the property at the market value and arrive at the value by adding reasonable appreciation in investment at the rate of 10 per cent every year on the original investment. On further appeal, the Tribunal considering the restrictive Clauses, directed the WTO to value the plot at Rs. 32,640, viz., the original cost paid by the assessee. On reference under section 27(1): HELD Restriction against alienation will have to be ignored for the purpose of the hypothetical sale contemplated by section 7. Once the imaginary market is reached, the market value will have to be estimated with reference to the interest of the assessee in the asset because it is that interest which constitutes his asset. In…

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