Judgment:
1. At the outset, we may point out that we have been informed by the learned counsel for both the parties that the captioned matters, which include both references as well as appeals involve a set of questions of law which are common and hence could be disposed of by a common judgment.
2. This brings us to the common questions of law which we are called upon to adjudicate in the remaining matters.
2.1 Before we do that, it be noted that the Tribunal has made out a common "statement of case" as questions of law were raised both by the assessee as well as the revenue. The questions raised at the behest of the assessee have also been referred to in the statement of case have been dealt with by us in WTR 28/1992 and WTR 29/1992. The said references were disposed of by us by orders of even date, i.e., 01.04.2011.
2.2 There is another aspect of the matter which we would also refer to at this juncture itself. This is with respect to the fact that even though the questions of law which we are presently required to adjudicate upon, at the behest of the revenue, the revenue for reasons best known, has not filed a paper book in support of its references/appeal(s) to place on record documents, which according to it would be necessary for adjudication. Why this aspect is important, would become evident shortly, as we proceed to adjudicate upon the questions culled out below.
3. The questions which we need to adjudicate upon are as follows :-
(i). Whether on the facts and circumstances of the case, the Tribunal was right in holding that the land in question has to be valued at Rs.847/- only for the purposes of Wealth Tax and not at Rs.2,77,64,000/-.
(ii). Whether on the facts and in circumstances of the case the Tribunal was right in holding that the value of the land situate in village Gadaipur which has been declared surplus under the Urban Land Ceiling Act, 1976 cannot be treated as the wealth of the assessee.
(iii). Whether the Tribunal is correct on facts and law in affirming the order of CWT(A) and thereby deleting the addition of Rs.8,08,239/- for AY 1984-85, Rs.8,82,317/- for AY 1988-89 and Rs.9,92,910/- for AY 1989-90 made in the net wealth of the assessee on account of value of construction of country club.
Question No. (i).
4. The brief facts which are relevant for adjudicating upon the said question of law are as follows :-.
4.1 The land in question is a leased property. A perusal of the order of the Income Tax Appellate Tribunal (hereinafter referred to as the „Tribunal) seems to suggest that the Assessing Officer has taken into account an area equivalent to 17138.48 sq. metres which consists of a land equivalent to 4158 sq. metres which is „contiguous and „appurtenant to the building(s) erected thereupon and an area of 12619.98 sq. metres which was declared surplus under Urban Land (Ceiling & Regulation) Act, 1976 (hereinafter, referred to as „ULCRA).
4.2 In so far as this question of law is concerned, we are required to deal with the land admeasuring 12619.98 sq. metres (hereinafter referred to as the land in issue). The said parcel of land in issue has been valued by the Assessing Officer at the rate of Rs.2200 per sq. metre, which was, the rate prescribed at the relevant point in time, by the Ministry of Works and Housing for calculation of Governments share in unearned increase.
4.3 The remaining area equivalent to 4518.5 sq. metre has been included by the Assessing Officer in valuation of the buildings constructed thereon as, this portion of land is „contiguous and „appurtenant to the building(s). While there is a certain amount of ambiguity (since the records filed before the authorities below have not been placed before us) as to whether a notification under section 10(3) of the ULCRA was issued in respect of the land in issue, there is unanimity as between the counsels who appeared for the parties that, in respect of the said land in issue, the assessee has been allowed to retain it based on the approval of the Lieutenant Governor received under section 19(1)(vi) of ULCRA.
4.4 In this background, the assessee had contended before the authorities below that the land in issue should be valued, at the premium paid by the it, which was a sum of Rs.847/-. As indicated above, the Assessing Officer disagreed and applied the Government rate of Rs.2200/- per sq. metres.
5. Before us, arguments were advanced on behalf of the revenue by Mrs. Bansal, Sr. Advocate assisted by Mr. Deepak Anand, Junior Standing Counsel whereas Mr.Syali, Sr. Advocate assisted by Ms. Husnal Syali and Mr. Rahul Sateeja, Advocates argued on behalf of the respondent.
5.1 Mrs. Bansal submitted that the land in issue, even though a leased property, was a valuable piece of property which was located at Raisina Road, New Delhi. The land in issue was transferrable albeit with the permission of the lessor. The Tribunal by virtue of the impugned judgment had given unnecessary weightage to the clauses in the lease, which according to her, had been erroneously read as creating an impediment in the transfer of rights in the land in issue. Mrs. Bansal thus contended that the land in issue had to be valued at least at the official rates prevalent in the area, if not the actual market rates.
6. As against this, Mr. Syali drew our attention to the impugned judgment of the Tribunal wherein reference has been made not only to the clauses of the lease which created an impediment in the transfer of the rights of the land in issue but also to the observations made in the impugned judgment with regard to the permission given by the Lieutenant Governor evidently under section 19(1)(vi) of ULCRA to the following effect: "....A further restriction has been placed by the order of the Lieutenant Governor by which the assessee has been permitted to possess the land as long as it is used for the bonafide purposes of the club. Naturally, the permission is to be the assessee club and not to any other club."
6.1. In view of the aforesaid observations, Mr. Syali contended that these being findings of fact; the view taken by the Tribunal had to be sustained.
7. Having heard the learned counsels for the parties, we are of the view that it may be relevant to briefly advert to the clauses contained in the lease as well as certain important facts which emerge from the record :-
(i). First and foremost, the assessee has acquired leasehold interest in the land in issue by virtue of a perpetual lease deed.
(ii). A certain portion of the land had already buildings erected thereon.
(iii). Under clause 4 of the lease, the assessee was required to maintain the building erected on the land in issue, in good state and, in case the assessee decided to demolish the said buildings, it had to credit the sale proceeds in favour of the lessor.
(iv). As per clause 6, the assessee could use the land in issue only for the purposes of running a club and could make no additions thereon without the approval of the lessor and that too only to make the premises „habitable as a club.
(v). Under clause 7, on determination of the lease, the assessee is required to surrender to the lessor the premises and the buildings erected thereon including the land appurtenant.
(vi). Importantly, under clause 8, the assessee cannot transfer or assign the land in issue or any part thereof without the prior sanction of the lessor in writing.
(vii). Under clause (IV) (2) it has been, inter alia, provided that if it is proved to the satisfaction of the lessor or the Chief Commissioner of Delhi (whose decision is final in that regard), that the land in issue, was not being used for the purposes of club or that the club was being improperly or inefficiently managed then, in such a case, it would be lawful for the lessor to re-enter the land in issue and, cease and determine the lease;
(viii). Similarly, under clause (IV) (3), if the land in issue or any part thereof was required for public purpose, the lessor, inter alia, could re-enter it.
7.1 Based on the aforesaid covenants, the Tribunal agreed with the assessee that the premium charged had to be the basis for valuing the rights in the land in issue. In coming to this conclusion, the Tribunal has not only given weight to the covenants which have been referred to hereinabove, by us, but also to the permission granted by the Lieutenant Governor under section 19(1)(vi) of the ULCRA.
7.2. It would be important to note at this juncture, that it was argued by Mrs. Bansal based on the following observations of the Tribunal that it was not as if the assessee was prohibited from transferring interest in the land in issue, so long as, it is used as a club. The observations of the Tribunal in this regard, on which reliance was placed, are contained in paragraph 10 of the impugned judgment, which read as follows :-
"The concerned permission to retain the excess land is at page 75 of the paper book and the permission to hold the excess land is so long as it is used for the bonafide purposes of the club.".
7.3. The aforesaid observation according to Mrs. Bansal was contrary to what had been observed in another part of the judgment of Tribunal, which was, to the effect that the permission was granted by the Lt. Governor only, vis-à-vis the assessee.
7.4 It is important to note that we had put to Mrs. Bansal that we were handicapped in appreciating this part of her submission, in as much, the full import of the permission granted by the Lieutenant Governor could only be fathomed if the document had been placed on record. We therefore put to her squarely that in these circumstances, we would necessarily have to go by the findings returned by the Tribunal on this aspect, which was, essentially a question of fact. Mrs. Bansal, on the other hand, sought to convey that the finding was perverse.
7.5 This line of argument, according to us, is not available to the revenue as no such question has been framed. In any event in the absence of document, we would go by the findings returned by the Tribunal while seeking to appreciate the scope, import and extent of the permission granted by the Lieutenant Governor.
7.6 To be noted a part of those relevant observations have already been extracted by us in paragraph 7.2 above. We, however, consider it appropriate to extract the remaining observations of the Tribunal completely and in continuum so that the reasoning put forth by the Tribunal is easily understood.
"...The learned Departmental Representative also did not dispute that the land in question is subject to the various restrictive clauses under lease deed and a further restriction has been placed by the order of the Lieutenant Governor by which the assessee has been permitted to possess the land as long as it is used for the bonafide purposes of the club. Naturally, the permission is to the assessee club and not to any other club. Therefore, as soon as the assessee transfers the land in question to another person there would be a violation of the condition imposed by the Lieutenant Governor even though the transferee may continue to use the land for a club. Therefore, in our view, there are serious clogs on transfer and with the aforesaid restrictive clauses neither the assessee can think of transferring the land to another person nor can such another person think of buying the same. In our view, therefore, it would be reasonable to value the assessee's rights in the said land only at Rs.847/-, which is the premium paid by the assessee therefor. We, therefore, direct that the land in question will be valued at Rs.847/- only and not at Rs.2,77,64,000/-"
7.7 In our opinion, what emerges is that the assessee could use the land in issue and the buildings constructed thereon only for the purposes of a club. The permission that was granted was only qua the assessee. The permission of the Lieutenant Governor obviously could not have been one in rem since the applicant was the assessee. The provisions of section 19(1) (vi) of ULCRA as prevalent at the relevant point in time, make it clear that while, exemption from other provisions of ULCRA was available in respect of vacant land held by certain kinds of entities including a club, the exemption was not automatic. The exemption was required to be granted by the concerned State Government having regard to: the nature and scope of activities of the entity, and the extent of vacant land required bonafide for the purposes of the club and, any other relevant factors. Thus, the Tribunal was right in holding that the permission was available only to the assessee. In other words there was no automatic transfer of the permission assuming the land in issue was transferred to another even if it was a club.
7.8 The Tribunal, therefore, after taking into account the impediments on transfer of the land in issue, caused by clauses 4, 6, 7, 8 (iv)(2) and (iv)(3) of the lease came to the conclusion that the assessees rights in the land in issue had to be valued at Rs.847/-. In our view, this involves an appreciation of the evidence on record and is not a case of no evidence. In these circumstances, we find that the view taken by the Tribunal is a possible view.
7.9 There is another aspect of the matter. Clause 8 of the agreement specifically prohibits transfer of the land in issue except with the prior sanction of the lessor. The official rate which the Assessing Officer has applied in order to determine the value of the asset for the purposes of Wealth Tax, is based on a presumption that such a permission would be granted. Fair market value of an asset can be assessed by hypothetically assuming that there is a willing buyer and seller is available for an asset. The hypothesis must however end here. It could not have been further assumed that the lessor would grant permission for transfer. Therefore, in the in the circumstances which obtained in the instant case, it cannot be held that the Tribunals view that the assessees right in the land in issue should be valued at Rs.847/- is erroneous. The question of law is accordingly answered in favour of the assessee and against the revenue.
Question No.(ii).
8. The brief facts which are relevant for the adjudication of the said question are as follows :-
8.1 The assessee at the relevant point in time was the owner of another piece of land situate in Village Gadaipur near Mehrauli. The said land had been purchased for the purposes of carving out one acre plots for each of its members. For this purpose the assessee had collected a sum of Rs.27,67,085/- from its members. The total land purchased admeasured 286 bighas. Out of the said 286 bighas, land admeasuring 36 bighas 4 biswas, it appears, had been taken over under the Delhi Land Holdings (Ceiling) Act, 1966 vide notification dated 04.09.1976. It appears that even out of the remaining area, the competent authority had categorized a portion of land admeasuring 3 bighas 2 biswas as agricultural land, while the other portion measuring 4 bighas was shown as being used for the purposes of running a tubewell. Both these parcels of land which were equivalent to approximately 3200.68 sq. metres were excluded from Wealth Tax under the provisions of section 40(3)(v) of the Finance Act, 1983; being agricultural land.
8.2 Pursuant to the aforementioned adjustment, the assessee was left with only 246 bighas (i.e., 2,07,332.26 sq. metres) of land. By a notification dated 22.03.1979, issued under ULCRA, this piece of land was declared as surplus. The assessee filed an appeal against the said action, which was dismissed. Consequently, a notification under section 10(3) of ULCRA was issued on 15.10.1980. Though the said notification was published in the official Gazette the possession of the land was not taken over for reasons best known to the concerned authorities.
8.3 The Assessing Officer, in these circumstances, took the view that since the possession of the land in issue had not been taken, the assessee continued to be its owner and hence, after calculating its value for the purpose of Wealth Tax, brought it to tax.
8.4 In appeal, the Commissioner of Income Tax (Appeals) [in short, „CIT(A)] sustained the order of the Assessing Officer.
8.5 The assessee carried the issue to the Tribunal. The Tribunal reversed the decisions of the authorities below by taking the view that once a notification under section 10(3) had been issued by the concerned State Government, then the land in issue is deemed as having been acquired. The Tribunal went on to say that from the date specified in the notification, the land would vest "absolutely" in the concerned State Government free from all encumbrances. The Tribunal held; the fact that the Delhi Administration had not taken possession of the land was of little significance, since by operation of law the assessee stood divested of its ownership. A mere continuation of possession did not inhere any right, in the land in issue, in the assessee and hence, the value of land could not be included in the net wealth of the assessee. According to the Tribunal on acquisition, the only right which would accrue, in favour of the assessee, would be to seek compensation under ULCRA; though according to it even the said compensation could not be brought to tax as it was not an asset specified in section 40(3) of the Finance Act, 1983. Accordingly, the Tribunal directed the exclusion of the land valued in the sum of Rs.48,42,398/- from the net wealth of the assessee.
8.6 Before us, Mrs. Bansal submitted that this court would have to take into account a subsequent event which occurred after the Tribunal had passed the impugned judgment dated 21.10.1991. The event being: the repeal of ULCRA by Urban Land (Ceiling & Regulation) Repeal Act, 1999 ( in short, „Repeal Act). The Repeal Act was passed on 22.03.1999 w.e.f. 11.01.1999. It was contended that on account of the provisions of the Repeal Act, which did not save expressly or by implication a "vacant land" such as that of the assessee, in respect of which, only a notification under section 10(3) of ULCRA had been issued; the decision of the Tribunal would have to be reversed. Mrs. Bansals submission was that since the proceedings in respect of the same were still at large, the intervening event, that is, the passing of the Repeal Act would have to be taken into account by this court.
8.7 As against this, Mr. Syali, in the first instance, submitted that the circumstance in which the assessee was put had been specifically excepted by the Repeal Act by virtue of provisions contained in section 3(2)(a) of the Repeal Act. This submission was however given up by Mr. Syali realizing the folly of his approach. The learned counsel conceded that the assessees case did not fall within the ambit of the saving clause of the Repeal Act i.e., Section 3(2)(a) of the Repeal Act.
8.8 Mr. Syali, however, contended that this court was required to consider the situation as it obtained in the relevant assessment years spanning from 1984-1985 to 1989-1990 and in the assessment years 1991-1992 to 1992-1993. According to Mr. Syali, in each of the assessment years, what the court would have to take into consideration was, the state of the law on the valuation date. The valuation date being the last day of the previous year of the assessment year in which the wealth tax had to be assessed. Based on this, it was submitted by Mr Syali that the Repeal Act would not be applicable as it was brought into force much later; the relevant date being the valuation date obtaining in each of the assessment years. Mr. Syali contended that if the revenues contentions were to be accepted the Repeal Act would operate retrospectively. This, according to Mr. Syali, would render nugatory the acts and transactions which stood closed in the relevant assessment years. In support of his submissions Mr Syali vehemently relied upon the observations made by the Karnataka High Court in the case of Commissioner of Wealth Tax vs Sri Srikantadatta Narasimharaja Wadiyar (2005) 279 ITR 226. Specific reference was made to the following observations made in paragraph 49 of the judgment:
"in view of the repeal of the Urban Land Ceiling Act, as of now, no proceedings are pending against the assessee and other members of the family under the Ceiling Act. This decision, in our view, has no bearing for disposal of these references proceedings, since the events which have taken place subsequent to the valuation date are not required to be taken note of by this court, while considering the orders passed by the wealth tax officer, while computing the net wealth of the assessee as on the valuation date."
9. In order to appreciate the submissions made by counsel for both parties it would be helpful if the provisions of the Repeal Act are adverted to hereinbelow: The Repeal Act was passed on 22.03.1999 w.e.f. 11.01.1999.
9.1 Sub-section 1(2) of the Repeal Act stipulates that, in the first instance, the provisions of the Act would apply to the whole of the states of Haryana and Punjab and to all Union Territories. The Act is also mandated to apply all other states which adopt the Act by resolutions passed in that behalf under clause (2) of Article 252 of the Constitution of India. It is not disputed before us that the provisions of the Repeal Act did not apply to Delhi at the relevant point in time.
9.2 Continuing with the narrative, Section 2 of the Repeal Act repeals ULCRA. The transactions which are saved are referred to in section 3 of the Repeal Act.
9.3 Section 3 opens with the words that the repeal of the principal act shall not affect (a) where vesting of any vacant land pursuant to a notification issued under Section 10(3) of the ULCRA and its possession has been taken over by the State Government or any other person duly authorized in that behalf by the State Government or by the competent authority; (b) the Repeal Act would not affect the validity of any order passed under Section 20(1) of the ULCRA or any action taken thereunder granting exemption notwithstanding judgment of any court to the contrary; and (c) the Repeal Act would not affect payment made to the State Government pursuant to exemption granted under Section 20(1) of the SICA.
9.4 Sub-Section (2) of Section 3 envisages a slightly different set of circumstances. The provision even though it appears under the title „saving encompasses a slightly different situation. A reading of the provision seems to suggest that, it mandates that, even where notification has been issued under Section 10(3) of the Act but possession has not been taken over by the State Government (or by any other person duly authorized by the State Government in that behalf or even by the competent authority) and that despite this circumstance, the State Government has paid money in respect of such land, then the said land shall not be restored unless amount paid by the State Government is refunded. The provision, therefore, seems to suggest that where a notification under Section 10(3) of the ULCRA had been issued but the possession had not been taken over, the Repeal Act would get attracted. However, where the State had paid a whole or part of the amount even though no possession of the land was taken, the restoration of the ownership of the land to the erstwhile owner shall be subject to refund of money to the State Government. This would necessarily mean that the two provisions can only be reconciled if the expression „such land shall not be restored is read to mean restoration of the ownership and not possession as obviously a sub-clause (a) and (b) of the sub-Section (2) of Section 3 pertain to a situation where a notification under Section 10(3) has been issued but possession of the land has not been taken over. Therefore, if regard is had to the provisions of Sections 3(1)(a) and 3(2)(a) and (b) of the Repeal Act then the State Government shall stand divested of its ownership in the vacant land on the Repeal Act coming into force where, only a notification under Section 10(3) has been issued but possession has not been taken over.
9.5 Section 4 of the Repeal Act speaks of abatement of proceedings relating to any order made or purported to be made under ULCRA before the commencement of the Repeal Act which are pending before any court or Tribunal or authority. The proviso to Section 4 however makes it clear that the main provision of Section 4 qua abatement of proceedings, shall not apply to proceedings relating to Sections 11, 12, 13 and 14 of ULCRA with regard to land of which possession has already been taken.
9.6 Section 5 pertains to repeal and saving of the Urban Land (Ceiling & Regulation) Repeal Ordinance, 1999. This is a provision which repeals the ordinance which was a precursor to the Repeal Act, and thereby, saves the anything done or any action taken under the said ordinance, as if it had been done or action had been taken under the provisions of the Repeal Act. At this stage for the sake of convenience we wish to extract the provisions of Section 3 of the Repeal Act since it provides a clue as to what the Repeal Act intended to save.
"3. (1) The repeal of the principal Act shall not affect
(a) The vesting of any vacant land under sub-section (3) of section 10, possession of which has been taken over by the State Government or any person duly authorized by the State Government in this behalf or by the competent authority.
(b) The validity of any order granting exemption under sub-section (1) of section 20 or any action taken thereunder, notwithstanding any judgment of any court to the contrary.
(c) Any payment made to the State Government as a condition for granting exemption under sub-section (1) of section 20.
(2) Where
(a) any land is deemed to have vested in the State Government under sub- section (3) of section 10 of the principal Act but possession of which has not been taken over by the State Government or any person duly authorized by the State Government in this behalf or by the competent authority; and (b) any amount has been paid by the State Government with respect to such land,
Then, such land shall not be restored unless the amount paid, if any, has been refunded to the State Government."
9.7 As indicated by us hereinabove in our view, as correctly conceded by Mr Syali the land in issue would not fall within the four corners of Section 3 of the Repeal Act. In the instant case it is not disputed that even though a notification under Section 10(3) of the ULCRA had been issued, the concerned State had neither taken over the possession nor paid any money to the assessee - though as discussed hereinabove if money had been paid it would have only delayed the restoration of the ownership of land from the State Government to the erstwhile owner till the money received by the erstwhile owner was refunded to the State Government. The issue really is what would be the effect of the repeal and the date from which it would operate. The general principle is that with the passing of the Repeal Act the existing statute stands effaced, revoked or abrogated. The instant case is one of express repeal. The effect of repeal would be that all those rights and actions which are inchoate or all those causes of action which may have arisen under the repealed statute would stand obliterated (See Keshavan vs State of Bombay AIR 1951 SC 128 at page 131 and 132). The only exception to this would be past and closed transactions. In the instant case it is obvious that on the date of repeal, the assessment of wealth tax for the assessment years in issue, is still at large. Mr Syalis submission that with the close of the assessment year the transactions for those relevant years stood completed, cannot be accepted. The captioned appeals and references exemplify this fact.
9.8 The other submission of Mr Syali which is that if, one were to accept the contention of the revenue then it would amount to the Repeal Act operating retrospectively, is, in our view, flawed. The reason being that; it is not as if the Act operates retrospectively, it only obliterates all such inchoate rights and/or actions from the date of the Repeal Act coming into force except whose which are saved or transactions which are closed. In the view we have taken, it is quite clear that the Repeal Act did not save the transaction of the kind which involved the land in issue, i.e., in respect of land where only a notification under Section 10(3) had been issued.
9.9 Therefore, the Repeal Act quite clearly intended that the State Government would stand divested of its right in land in issue from the date of the Repeal Act coming into force. It cannot also be doubted that the assessment for the relevant assessment years are still at large. Therefore, if one were to take the circumstance of the State Government being divested of its ownership with the passing of the Repeal Act then, automatically the land in issue, would have to be included in assessment of the wealth of the assessee. The only reason the Tribunal had concluded that the land in issue was not amenable to tax was that with the passing of the notification under Section 10(3) of the ULCRA it ceased to be the assessees asset. That situation having been reversed, in our view the logical sequitur would be that Tribunals judgment on this aspect would have to be set aside. Accordingly, the question raised before us has to be answered in favour of the revenue and against the assessee.
10. We may only observe at this juncture that the judgment of the Karnataka High Court in the case of Sri Srikantadatta (supra) is not pari materia as it did not deal with the facts in issue, in the instant case. In that case, the Division bench of the Karnataka High Court had been called upon to adjudicate upon the following question of law:
"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the value of the vacant land, in Bangalore Palace, belonging to the assessee should be taken at Rs 2,00,000/- for the purpose of the wealth-tax assessment for the years in question?"
10.1 The Court after referring to several Supreme Court and High Court judgments observed that under Section 7(1) of the Wealth Tax Act, 1957 to arrive at the fair market value of an asset, on the date of valuation, it would not only have to be assumed notionally that there was a willing seller and a willing buyer but also that the prohibitions contained in the Ceiling Act would require to be factored in. It is pertinent to note that, in the said case, notifications under Section 10(1) and 10(3) had not been issued. The court was only called upon to adjudicate as to whether the Tribunal had applied correct principles in valuing the land in question. In the ultimate analysis, the court came to the conclusion that the Tribunal had erred and, therefore, proceeded to answer the question against the assessee. As indicated above, the said case, in our view, has no application to the facts obtaining in the instant case.
Question No. (iii)
11. This brings us to question no. (iii). In so far as this question is concerned Mr Syali has fairly conceded before us that the answer to this question would depend upon the view the court takes qua question no. (ii). In other words if the court were to answer question no. (ii) in favour of the revenue then the building constructed on the land would have to be valued and brought to tax. Since we have answered question no. (ii) in favour of the revenue, question no. (iii) will have to be answered accordingly. Thus question no. (iii) is answered in favour of the revenue and against the assessee.
12. The captioned references and appeals are disposed of accordingly.