2004 (10) TMI 46 - HC - Wealth-tax

House valuation - unbuilt vast area - Whether, Tribunal was correct in law in holding that the term house will include all the unbuilt vast area of land and whether the immunity as envisaged under section 7(4) can be given to such an unbuilt vast area of land? - It is common knowledge that in several cities there are old bungalows having large area running into several acres of land but none the less they are treated as one residential house. The vacant land which is there in the house is being used as garden, lawns, etc. There is no allegation that there is any proposal of selling the land. The land, thus, could not have been valued separately. Thus, we answer the question of law referred to us in the affirmative, i.e., in favour of the assessee

Summary

Issues:
Interpretation of the term 'house' under section 7(4) of the Wealth-tax Act, 1957.

Analysis:
The High Court of Allahabad addressed the issue of whether the term 'house' under section 7(4) of the Wealth-tax Act, 1957 includes all unbuilt vast areas of land and if such areas can be granted immunity. The case involved an assessee who owned half share in a property known as Bashir Lodge, used for residential purposes. The Commissioner of Wealth-tax argued that the term 'house' should only encompass the construction and land appurtenant to it, not the entire land surrounding the house. The Commissioner directed a fresh assessment excluding the surplus land. The Tribunal disagreed with this interpretation and canceled the Commissioner's order.

The Court noted that historically, the entire area of land and the house were considered one residential unit in previous assessments. The introduction of section 7(4) in 1976 aimed to freeze the valuation of residential houses at the option of the assessee. In this case, the assessee had chosen the valuation as of April 1, 1971. The Court observed that in many cities, old bungalows with extensive land are treated as one residential unit, with the vacant land used for gardens and lawns. Since there was no intention to sell the land separately, the Court found no reason to value the land independently. Consequently, the Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue.

In conclusion, the High Court of Allahabad interpreted the term 'house' under section 7(4) of the Wealth-tax Act, 1957 to include the entire area of land surrounding the residential property, rejecting the argument that only land appurtenant to the house should be considered. The Court emphasized the historical treatment of such properties as single residential units and upheld the Tribunal's decision in favor of the assessee.