2004 (2) TMI 23 - HC - Income Tax

Estate Duty Act, 1953 - Valuation of property - (1) Whether, Tribunal is right in law and on facts in directing the Assistant Controller of Estate Duty to make valuation of the house property in accordance with rule 1BB of the Wealth-tax Rules? (2) Whether, the Tribunal is right in law and on facts in holding that as regards the deduction of the debt of Rs. 3,14,345 there was no encumbrance or charge on the house property in question in respect of this debt and consequently deduction in respect of this debt would be allowable from the aggregate value of the property passing on death and not only from house property as contended by the Department? Both questions are answered in affirmative and in favour of the accountable person and against the Revenue.

Summary

Issues:
1. Valuation of house property under rule 1BB of Wealth-tax Rules.
2. Deduction of debt from the aggregate value of property passing on death.

Valuation of House Property:
The case involved a dispute regarding the valuation of a house property for estate duty purposes. The deceased had constructed a house, and the accountable person valued it at Rs. 51,188, claiming exemption under section 33(1)(n) of the Estate Duty Act. However, the Assistant Controller of Estate Duty valued the property at Rs. 3,14,345, leading to a disagreement. The Controller of Estate Duty (Appeals) held that the deduction for the debt of Rs. 3,14,345 should only be allowed from the value of the house property. The Tribunal, referencing a Bombay High Court decision, directed the valuation of the house property in accordance with rule 1BB of the Wealth-tax Rules. The High Court upheld the Tribunal's decision, emphasizing the legislative mandate to adopt the valuation under the Wealth-tax Act for residential properties. Therefore, the Tribunal's direction for valuation under rule 1BB was deemed appropriate.

Deduction of Debt:
Regarding the deduction of the debt of Rs. 3,14,345, the Tribunal found no encumbrance or charge on the house property in relation to this debt. The debt was withdrawn by the deceased from a firm in which he was a partner and invested in the construction of the house. As it was not a loan creating a charge over the property, the Tribunal allowed the deduction from the aggregate value of the property passing on death. The High Court affirmed this finding, stating that it was a general debt and not linked to any specific charge on the property. Therefore, the deduction was correctly allowed from the overall property value.

In conclusion, the High Court ruled in favor of the accountable person on both issues, upholding the Tribunal's decision on the valuation of the house property under rule 1BB and affirming the allowance of the debt deduction from the aggregate property value passing on death. The reference was disposed of accordingly.