2013 (9) TMI 72 - HC - Wealth-tax

Self Occupied Property or commercial property Valuation u/s 7(4) of the Wealth Tax Act - AO came to the conclusion that the petitioner assesee had ceased to be in self occupation after entering into collaboration agreement with Ansal Properties & Industries Private Limited - Ownership Transferred or Not - Whether the Tribunal did not err in law in not accepting the claim of the assessee that 1/3rd share in the property continuing to be in self occupation of the assessee as returned on the valuation date in accordance with the provisions of sec. 7(4) of the W.T. Act, 1957 - Whether the Tribunal did not err in law in holding that the ownership in the property was not transferred after the execution of the collaboration agreement and the assessee was liable to the W.T. Act, 1957 - Held that - The petitioner has not placed on record or stated when, how and in what manner, the transfer was affected and when and how they had shown the capital gains on the purported transfer. Thus, the petitioner and other co-owners were the legal owners on the valuation dates. Section 7(4) of the Act was not applicable and it was also held that the petitioner had transferred possession of the property, but had not transferred the title in the property by execution of the collaboration agreement dated 2nd May, 1984 with Ansal Properties and Industries Ltd. - There was no error or mistake in the finding recorded by the tribunal that there was no transfer of title and the petitioner continued to be the 1/3rd co-owner of the property during the period in question - The petitioner had not placed on record or stated when, how and in what manner, the transfer was affected and when and how they had shown the capital gains on the purported transfer - Thus, the petitioner and other co-owners were the legal owners on the valuation dates. Reliance place on Section 7(4) of the Act had to fail as the section stipulated that the residential house should be exclusively used by the assessee for residential purpose throughout the period of 12 months immediately preceding the valuation date - The assessee himself had stated that he had surrendered and transferred actual physical possession of the property to the promoter builder - Thus, the petitioner assessee was not using the property, i.e. the asset exclusively for residential purpose - The tribunal had recorded that the construction existing on the property except for the two rooms was demolished in the year 1985 i.e. before the valuation date in the present cases, which relate to the assessment years 1987-88 to 1992-93 - Possession of substantial portion of the property had been handed over to the promoter builder, who was constructing the same during the period in question. Value as on Valuation Date - Whether the Tribunal did not err in not accepting the legal claim that the only asset left in the hands of the assessee was the interest in future in the flats when they were constructed and not the land transferred which had practically nil value as on the valuation date Held that -There was no document or paper to show and establish that he had transferred interest in the land to the promoter builder during the period when construction was in progress - No such transfer of rights had taken place - For transfer of rights in land, transfer deeds had to be executed either with the promoter builder or by the petitioner and co-owners with third parties, who after construction would have purchased the flats - Decided against the assessee.

Summary

Issues Involved:
1. Interpretation of Section 27(3) of the Wealth Tax Act, 1957 regarding property valuation under collaboration agreement.
2. Determination of ownership transfer and liability under the Wealth Tax Act, 1957 post collaboration agreement.
3. Application of Section 7(4) of the Wealth Tax Act, 1957 in property valuation.

Analysis:
1. The case involved a dispute regarding the valuation of a property under a collaboration agreement. The Income Tax Appellate Tribunal referred questions of law related to the property's valuation and ownership status post collaboration agreement.
2. The property, co-owned by three individuals, was subject to a collaboration agreement for construction of residential flats. The Assessing Officer deemed the property commercial and valued it accordingly, leading to a higher assessment.
3. The Commissioner of Income Tax and the Income Tax Appellate Tribunal affirmed the Assessing Officer's decision, stating that the property ownership had not transferred despite the collaboration agreement. The Tribunal accepted the petitioner's contention on applying residential rates for valuation.
4. The Tribunal found no evidence of title transfer in the collaboration agreement and noted that possession had transferred to the builder but ownership remained with the co-owners. The petitioner failed to demonstrate a transfer of title through any registered instrument.
5. The petitioner's claim under Section 7(4) of the Act failed as the property was not exclusively used for residential purposes. The Tribunal observed that substantial possession had been handed over to the builder for construction during the relevant period.
6. The Tribunal held that the petitioner continued as a co-owner of the property and had not transferred the title despite collaboration. The absence of documentation showing the transfer of land interest further supported this finding.
7. The judgment concluded that the property valuation and ownership issues were resolved against the petitioner, affirming the Tribunal's decision on applying residential rates. The decision did not impact the portion of the Tribunal's order regarding the application of residential rates.

This detailed analysis summarizes the legal judgment, highlighting the key issues, arguments, and conclusions made by the court regarding the valuation and ownership of the property under the Wealth Tax Act, 1957.