The Supreme Court has held that the legal heirs of Jayachamarajendra Wadiyar would be levied wealth tax on the land falling under the ceiling limit only on Rs 2 lakh, the price fixed as compensation by the authorities.
The land in question would not be valued as per the market price.
The Wadiyars, former rulers of the then princely state of Mysore, possessed 554 acres of land comprising residential units, non-residential units and land appurtenant thereto, roads and masonry structures along the contour and vacant land. The dispute was over the wealth tax to be charged on vacant land measuring 11,66,377.34 sq metre around the Bengaluru palace.
Giving its ruling on the vexed issue, a bench of Justices A K Sikri and R F Nariman, however, held that the remaining land, which were beyond scope of the Ceiling Act, would be valued as per the market price for the purpose of assessing wealth tax.
“The compensation of Rs 2 lakh is in respect of only the excess land which is covered by the Ceiling Act. The total vacant land for the purpose of Wealth Tax Act is not only excess land but other part of the land which would have remained with the assessee in any case,” the bench held.
“Therefore, the valuation of the excess land, which is the subject matter of Ceiling Act, would be Rs 2 lakh. To that market value of the remaining land will have to be added for the purpose of arriving at the valuation for payment of Wealth Tax,” the bench said.
The apex court's verdict has come as great relief to the Wadiyars, who challenged assessment of valuation of land as per the market price for charging wealth tax for the assessment years 1977-1978 to 1985-1986.
The court accepted the plea of appellants that once it is accepted that the property is covered by the Ceiling Act, the value of the property would get depressed so it could not be more than Rs 2 lakh, the maximum compensation payable under the Ceiling Act.
“The assessing officer took into consideration 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,” the bench said.
Jayachamarajendra Wadiyar, the former ruler of the then princely state of Mysore, died on September 23, 1974. However, disputes arose with regard to the wealth tax assessments on the land falling under the Ceiling Act and beyond that.
