1992 (3) TMI 16 - HC - Wealth-tax

Summary

Issues: Interpretation of section 7(4) of the Wealth-tax Act, 1957 regarding the irrevocability of the option to freeze the value of residential property and the entitlement to exercise a fresh option for a different property in subsequent years.

Analysis:
The case involved a reference under section 27(3) of the Wealth-tax Act, 1957 for the assessment year 1982-83, with questions regarding the interpretation of section 7(4) of the Act. The assessee had a residential flat in Bombay and a share in a building in Calcutta. The assessee previously froze the value of the Calcutta property under section 7(4) but sought to exercise the option for the Bombay flat in a subsequent year. The Wealth-tax Officer denied the change in option, leading to an appeal by the assessee before the Appellate Assistant Commissioner. The Commissioner directed a re-examination to determine if the conditions for exercising the option were met for the Bombay flat. The Tribunal dismissed the Revenue's appeal, noting that the option could be changed in subsequent years based on the facts of each assessment year.

The Tribunal's decision was based on the interpretation of section 7(4) of the Act, which allows an assessee to freeze the value of a residential property if certain conditions are met. The Tribunal held that the option could be exercised annually for different properties based on the specific circumstances of each year. However, the Tribunal also emphasized that the property must be exclusively used for residential purposes for the preceding twelve months before the valuation date. In this case, there was no conclusive finding regarding the exclusive residential use of the Bombay flat for the required period.

The Court upheld the Tribunal's decision, affirming that the option under section 7(4) can be exercised annually based on the residential use of the property. The Court directed a reexamination by the Wealth-tax Officer to determine if the conditions for exercising the option were satisfied for the Bombay flat. The judgment emphasized that the option's exercise is not limited to a one-time choice and can be revised in subsequent assessment years. Therefore, both questions were answered in favor of the assessee, with no costs awarded.

In conclusion, the judgment clarified the interpretation of section 7(4) of the Wealth-tax Act, affirming the flexibility of exercising the option annually for different residential properties. The decision highlighted the importance of meeting the conditions of exclusive residential use for the property in question before exercising the option.