2006 (8) TMI 482 - AT - Wealth-tax

Summary

Issues Involved:
1. Initiation of proceedings under section 17 of the Wealth-tax Act.
2. Estimation of the value of rented premises for wealth tax computation.
3. Calculation of property value multiplier.
4. Charging of interest under section 17B of the Wealth-tax Act.

Detailed Analysis:

1. Initiation of Proceedings under Section 17 of the Wealth-tax Act:
- The assessee raised grounds against the initiation of proceedings under section 17 of the Wealth-tax Act but did not press these grounds during the hearing. Consequently, these grounds were dismissed as not pressed.

2. Estimation of the Value of Rented Premises for Wealth Tax Computation:
- The assessee argued that the rented portion of the premises should not be included in the computation of wealth as it was partly used for business purposes and thus not an "asset" under section 2(ea) of the Wealth-tax Act.
- The Assessing Officer (AO) rejected this contention and included the value of the rented premises in the net wealth of the assessee, estimating it at Rs. 89,69,306 for the assessment year 1997-98 and Rs. 1,02,50,400 for the assessment year 1998-99.
- The AO based this valuation on multiplying the net maintainable rent by 12.5.
- The CIT(A) confirmed the AO's orders, leading to the assessee's appeal.

3. Calculation of Property Value Multiplier:
- The assessee contended that the property value should be calculated using a multiplier of 10 instead of 12.5 because the property was on leasehold land with an unexpired lease period of more than 50 years.
- The Tribunal directed the AO to verify the assessee's claim regarding the unexpired lease period and, if found correct, to use the multiplier of 10 for valuing the rented portion of the property.

4. Charging of Interest under Section 17B of the Wealth-tax Act:
- The assessee challenged the charging of interest under section 17B, arguing that interest should be calculated from the expiry of the time allowed for filing the return until the date of assessment completion.
- The Tribunal directed the AO to recalculate the interest chargeable under section 17B, considering the correct period and applicable rates during the default period.

Conclusion:
- The Tribunal upheld the inclusion of the rented portion of the property in the net wealth of the assessee for the relevant period (1-4-1997 to 31-3-1999), as the property was not used by the assessee for its business but rented out.
- The Tribunal directed the AO to verify and potentially adjust the property value multiplier based on the lease period.
- The Tribunal also instructed the AO to recalculate the interest under section 17B, considering the correct period and rates.

Result:
- The appeals filed by the assessee were allowed for statistical purposes.