1995 (1) TMI 39 - HC - Wealth-tax

Summary

Issues Involved:
1. Assessment under Section 7(4) of the Wealth-tax Act, 1957.
2. Commissioner's exercise of power under Section 25(2) of the Wealth-tax Act.
3. Tribunal's setting aside of the Commissioner's order.
4. Interpretation of "exclusively used by him for residential purposes" under Section 7(4) of the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Assessment under Section 7(4) of the Wealth-tax Act, 1957:
The assessee claimed assessment under Section 7(4) of the Wealth-tax Act, 1957, which was later repealed and substituted by the Direct Tax Laws (Amendment) Act, 1989. The provision allowed the value of the house used exclusively for residential purposes to be assessed based on the price it would fetch in the open market on a specific valuation date. The Tribunal found no difficulty in interpreting this provision and supported the assessee's stance that the house was used exclusively for residential purposes, even though the assessee was a non-resident and spent only a brief period in India.

2. Commissioner's Exercise of Power under Section 25(2) of the Wealth-tax Act:
The Commissioner exercised his power under Section 25(2) of the Act, calling for and examining the records of the proceedings. He found the order passed by the Assessing Officer to be erroneous and prejudicial to the interests of the Revenue. The Commissioner noted that the Wealth-tax Officer overlooked the fact that the assessee was a non-resident and was away from India for most of the 12 months preceding the valuation date. The Commissioner contended that the property should have been exclusively used by the assessee for residential purposes, which was not adequately considered by the Wealth-tax Officer.

3. Tribunal's Setting Aside of the Commissioner's Order:
The Tribunal set aside the Commissioner's order and restored the assessment. It held that even if the assessee was away from India for long periods, the house still belonged to him and was used exclusively for residential purposes throughout the 12 months preceding the valuation date. The Tribunal emphasized that the house was not let out on rent or used for commercial purposes, and the presence of the assessee's parents in the house did not affect its exclusive residential use. The Tribunal cited CWT v. B. M. Bhandari [1980] 123 ITR 554 (AP) and commentaries on the Estate Duty Act to support its decision.

4. Interpretation of "Exclusively Used by Him for Residential Purposes" under Section 7(4) of the Wealth-tax Act:
The court examined various judicial interpretations of terms like "residence," "domicile," and "place of abode" to understand the meaning of "exclusively used by him for residential purposes." It referred to judgments from Indian and English courts, including Vishanji D. Futani v. Mohanlal [1994] 2 LW 289, Jagir Kaur v. Jaswant Singh, AIR 1963 SC 1521, and others. The court concluded that the expression "exclusively used by him" should be interpreted pragmatically and reasonably. It held that as long as the house was kept available for the assessee's residence and not let out or used for commercial purposes, it could be considered exclusively used for residential purposes. The court rejected the Revenue's argument for a stricter interpretation, stating that the intention or animus manendi of the assessee to live in the house whenever he returned was sufficient to meet the requirement of exclusive residential use.

Conclusion:
The court found no error in the Tribunal's order and upheld its decision to restore the assessment. It emphasized the need for a pragmatic and reasonable interpretation of the term "exclusively used by him for residential purposes" and rejected the Revenue's argument for a stricter interpretation. The reference was answered accordingly, with the Assessing Officer required to redo the assessment, ensuring that any helpful information to the Revenue is not ignored.