SRI S.N. WADIYAR (DEAD) THROUGH LR versus COMMISSIONER OF WEALTH TAX, KARNATAKA

Citation: [2015] 9 S.C.R. 1059 · Decided: 21-09-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

(2015] 9 S.C.R. 1059 
SRI S.N. WADIYAR (DEAD) THROUGH LR 
A 
v. 
COMMISSIONER OF WEALTH TAX, KARNATAKA 
(Civil Appeal Nos. 6873-~881 of2005) 
SEPTEMBER 21, 2015 
[A. K. SIKRI AND R. F. NARIMAN, JJ.] 
B 
Wealth Tax Act, 1957: ss. 7, 10 - Valuation of vacant 
land - Proceedings in respect of property in question under c 
the Ceiling Act -
Maximum compensation payable to 
assessee in respect of excess land declared under the 
Ceiling Act assessed at Rs.2 lakhs - Whether the value of 
the vacant land, appurtenant to the property, should be taken 
at Rs. 2 lakhs for the purpose of wealth tax assessment as D 
having regard to the provisions of the Urban Land Ceiling 
Act, the maximum amount of compensation payable to the 
assessee is only Rs. 2 lakhs- Held: If the property is covered 
by the Ceiling Act, it would depress the value of the property 
- Thus, value could not be more than Rs. 2 lakhs which was E 
the maximum compensation payable under the Ceiling Act 
for wealth tax assessment for the relevant assessment years 
- Urban Land Ceiling Act, 1962. 
Allowing the appeals, the Court 
F 
HELD: 1. It is clear that the valuation of the asset 
. in question has to be in the manner provided under 
Section 7 of the Act. Such a valuation has to be on the 
valuation date which has reference to the last day of the G 
previous year as defined under Section 3 of the Income 
Tax Act if an assessment was to be made under that Act 
for that year. In other words, it is 31st March immediately 
preceding the assessment year. The valuation arrived 
at as on that date of the asset is the valuation on which H 
1059 
1060 
SUPREME COURT REPORTS 
[2015] 9 S.C.R. 
A wealth tax is assessable. It is clear from the reading of 
Section 7 of the Act that the Assessing Officer has to 
keep hypothetical situation in mind, namely, ifthe asset 
in question is to be sold in the open market, what price it 
would fetch. Assessing Officer has to form an opinion 
B about the estimation of such a price that is likely to be 
received ifthe property were to be sold. There is no actual 
sale and only a hypothetical situation of a sale is to be 
contemplated by the Assessing Officer. Thus, the Tax 
Officer has to form an opinion about the estimated price 
C if the asset were .to be sold in the assumed market and 
the estimated price would be the one which an assumed 
willing purchaser would pay for it. On these reckoning, 
the asset has to be valued in the ordinary way. The High 
0 Court has accepted, and rightly so, that since the 
Property in question came within the mischief of the 
Ceiling Act it would have depressing effect insofar as 
the price which the assumed willing purchaser would 
pay for such property. [Paras 22, 24 and 25] (1074-C-F; 
E 1075-E-G] 
2. 
The combined effect of the provisions, in the 
context of instant appeals, is that the vacant land in 
excess of ceiling limit was not acquired by the State 
F Government as notification under Section 10(1) of the 
Ceiling Act had not been issued. However, the process 
had started as the assessee had filed statement in the 
prescribed form as per the provisions of Section 6(1) of 
the Ceiling Act and the Competent Authority had also 
G prepared a draft statement under Section 8 which was 
duly served upon the assessee. Fact remains that so long 
as the Act was operative, by virtue of Section 3 the 
assessee was not entitled to hold any vacant land in 
excess of the ceiling limit. Order was also passed to the 
H effect that the maximum compensation payable was Rs.2 
lakhs. [Para 29] [1081-G-H; 1082-A-B] 
SRI S.N. WADIYAR(DEAD)THROUGH LR v. COMMNR. 
1061 
OF WEALTH TAX, KARNATAKA 
3. The Assessing Officer took into consideration A 
the price which the property would have fetched on the 
valuation date, i.e. the market price, as if it was not under 
the rigors of Ceiling Act. Such estimation of the price 
which the asset would have fetched if sold in the open 
market on the valuation date(s), would clearly be wrong B 
even on the analogy/rationale given by the High Court 
as it accepted that restrictions and prohibitions under 
the Ceiling Act would have depressing effect on the value 
of the asset. Therefore, the valuation as done. by the 
Assessing Officer could not have been accepted. When C 
the asset is under the clutches of the Ceiling Act and in 
respect of the said asset/vacant land, the Competent 
Authority under the Ceiling Act had already determined 
the maximum compensation of Rs.2 lakhs th

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