2010 (7) TMI 446 - AT - Wealth-tax

Addition of income - The valuer has valued the property at Rs. 28, 90, 000/- as against the value disclosed by the assessee at Rs. 4, 02, 850 - The DVO has replied that the rent as shown by the assessee was a depressed figure and did not correspond to the going rates of tenanted properties in the area hence he has adopted the Rent Capitalization on the basis of Standard Rent as per the procedure - assessee primarily argued that the rent as accepted in the Income-tax proceedings should also have been made the basis for the valuation of the property for wealth-tax purposes - Decision of Diwan Daulat Rai vs. New Delhi Municipal Committee reported as (1979 -TMI - 5832 - SUPREME Court) and Shila Kaushik reported as (1981 -TMI - 5859 - SUPREME Court) the position in law is that if there had been no rent restriction law in operation then Revenue could make a fair and an objective estimate of the rent which the property might have fetched but the operation of the Rent Restriction Act makes all the difference - It was held that the position in law is that if there had been no rent restriction law in operation then Revenue could make a fair and an objective estimate of the rent which the property might have fetched but the operation of the Rent Restriction Act makes all the difference whether the DVO has the right or not to determine the valuation of the property by adopting a rent capitalisation method - In the case of Bharat Hari Singhania reported as (1994 -TMI - 40177 - SUPREME Court) the Apex Court has commented while dealing with the issue of the applicability W.T.Rules that the Rules making authority has since prescribed only one method then it is not a matter of choice and it is otiose whether it is directory or mandatory. Further commenting on the scope of powers of the DVO it was held that a Valuation Officer as much bound by the said rules of valuation as anybody else is. - Decided in favor of assessee.

Summary

Issues Involved:
1. Deletion of the addition made on account of valuation of Poonam Chambers at Mumbai.
2. Dispute over the correctness of the Departmental Valuation Officer's (DVO) method of estimating market rent.
3. Deletion of the addition on account of the value of jewelry.

Issue-Wise Detailed Analysis:

1. Deletion of the Addition Made on Account of Valuation of Poonam Chambers at Mumbai:
During the Wealth Tax proceedings, the Assessing Officer noted that the respondent-assessee owned a property known as "Poonam Chambers" in Mumbai. The matter was referred to the Valuation Cell, which valued the property at Rs. 28,90,000/- against the disclosed value of Rs. 4,02,850/-. The Assessing Officer adopted the Valuation Officer's determination without detailed examination. The assessee contended before the Learned CWT (Appeals) that the property was tenanted and governed by the Bombay Rent Control Act, which restricted rent increases. The property was rented out in 1977 at Rs. 7,500/- per month. The DVO estimated a higher market rent, which the assessee argued was hypothetical and unsupported by comparable instances. The Learned CWT (Appeals) held that the DVO's valuation was based on presumptions without evidence and directed the Assessing Officer to adopt the actual rent of Rs. 7,500/- per month for valuation purposes.

2. Dispute Over the Correctness of the DVO's Method of Estimating Market Rent:
The DVO had estimated the market rent based on "Rent Capitalization" and "Standard Rent" as per the prevailing interest rates of the Reserve Bank of India. The assessee argued that the DVO's method ignored the actual rent received and the provisions of the Rent Control Act. The Learned CWT (Appeals) agreed with the assessee, stating that the DVO's assumptions were not supported by evidence. The DVO's method was challenged for using outdated comparable investment methods and ignoring prevailing investments and returns. The Learned CWT (Appeals) emphasized that the property was assessed as "income from house property" in Income Tax proceedings, where the rent of Rs. 7,500/- per month was accepted. Consequently, the DVO's estimation of market rent was deemed incorrect.

3. Deletion of the Addition on Account of the Value of Jewelry:
The judgment does not provide detailed analysis on this issue within the provided text. However, it is mentioned that the addition on account of the value of jewelry amounting to Rs. 76,610/- was deleted by the Learned CWT (Appeals).

Conclusion:
The Tribunal examined the relevant provisions of the Wealth Tax Act and the Rent Control Act, emphasizing that the "net maintainable rent" should be based on the actual rent received, as assessed in Income Tax proceedings. The Tribunal cited several judicial precedents supporting the assessee's contention that the "standard rent" or actual rent received should be the basis for valuation. The Tribunal concluded that the DVO's method was not in accordance with the prescribed rules and upheld the findings of the Learned CWT (Appeals), dismissing the Revenue's appeals.