The Hindu : Karnataka News : Market price valuation of Bangalore Palace grounds upheld

Online edition of India's National Newspaper
Friday, Jun 17, 2005

Karnataka

Karnataka

Market price valuation of Bangalore Palace grounds upheld

Staff Reporter

BANGALORE: The Karnataka High Court has held that the valuation of vacant land on the Bangalore Palace grounds at Rs. 2 lakhs a year from 1977 was not right and upheld the valuation of the property on the basis of the market price.

A Division Bench comprising Justice H.L. Dattu and Justice A.C. Kabbin was giving its opinion on a tax reference case (TRC) relating to the wealth tax assessment relating to Srikantadatta Narasimharaja Wadiyar, former MP, between 1977-78 and 1985-86.

The Assistant Registrar, Income Tax (IT), Appeals Tribunal, had referred the matter to the High Court.

According to the records placed before the court, the erstwhile Maharaja of Mysore, Jayachamarajendra Wadiyar, who owned the 554-acre Bangalore Palace, died on September 23, 1974. At the time of his death, there was a dispute on the assessment of tax from 1967-68 to 1976-77.

After the death of his father, Mr. Srikantadatta Wadiyar applied to the Income Tax Department for settlement of the dispute over the valuation of Bangalore Palace. During 1976-77, the Settlement Commissioner (IT) valued all the buildings on the Bangalore Palace grounds and the land at Rs. 13.18 crores, of which Rs. 12.58 crores was the value of 454 acres and Rs. 60.49 the value of the buildings, including the palace.

The Commissioner of Appeals valued the Bangalore Palace property in 1981-82 at Rs. 19.96 crores. The Wealth Tax Officer then adopted similar procedures for assessing the tax from 1981 to 1984. For 1984-85, the Wealth Tax Officer valued the property at Rs. 31.73 crores.

Mr. Wadiyar appealed to the Commissioner of Appeals against the valuation of property.

The Commissioner disposed of the appeal and said there was no dispute on the valuation of structures but only of the vacant land. He also accepted Mr. Wadiyar's contention that vacant land should be valued at Rs. 2 lakhs every year from 1977 to 1981 and similarly from 1984 to 1986.

The Wealth Tax Officer then appealed to the IT Appeals Tribunal against the Commissioner's order. In 1993, the tribunal upheld the Commissioner's order on the vacant land. It said the Wealth Tax Officer was not right in assessing Mr. Wadiyar's wealth at the value equivalent to the amount that the assets would have fetched.

The Wealth Tax Officer then sought a reference from the High Court on whether the tribunal was right in holding that the vacant land on the Bangalore Palace grounds should be valued at Rs. 2 lakhs a year for wealth tax assessment.

The Bench said that for wealth tax purposes, the Wealth Tax Officer could not ignore some of the restrictive provisions of the ULC Act. It was for the officer to find out what value the assets would have fetched on the date of valuation if they were sold in the open market.

Even in the case where there is a prohibition under the ULC Act on the sale of such assets, which have yet to become the property of the Government, the valuation needs to be made on the assumption that the purchaser would be able to enjoy the property as its holder, it said.

The Bench answered the question in favour of the revenue authorities and against the assessee.

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