2015 (8) TMI 1101 - AT - Wealth-tax

Valuation - Whether the CWT(A) is right in deleting the additions made to the taxable wealth in conformity with S.7, Schedule III, Part H of the Wealth-tax Act read with Rule 20 of the Wealth-tax Rules - Held that - Assessee has relinquished his rights in the property in question for a consideration of ₹ 2.45 crores in the previous year relevant for assessment year 2008-09, and accordingly offered the capital gains arising from the said transaction for assessment under the income-tax Act, in the return filed for that year. Based on the same, the Assessing Officer was of the view that the assessee has assets chargeable to wealth tax in the assessment years under consideration and they escaped assessment, and accordingly issued notice under S.17 of the Wealth-tax Act. The assessee has filed wealth tax returns in response to the notices under S.17 and included therein the assets in question, but adopted the value as per the circle rate fixed by the State Government Authorities for purpose of determining the stamp duty. But the Assessing Officer proceeded with the assessments adopting the amount of ₹ 2.45 crores received by the assessee in terms of settlement deed in the assessment year 2008-09. There is a prescribed rule of valuation of asset being land and building as per Wealth Tax Act. As per the said rule, the value of asset shall be taken at the valuation date by resorting to any of the modes specified in the said rule. In the instant case, the Assessing Officer has taken the received by the assessee in the year 2008-09, as the fair market value of asset for the preceding three years without any basis, which in our opinion is not correct. The Assessing Officer could have referred the issue of valuation of the property to the valuation officer under S.16A of the Act and find out the market value of the asset for each of these years separately. Without doing so, he adopted the amount received by the assessee in terms of settlement in the assessment year 2008-09, as the value of the property on the relevant valuation dates of the preceding three years, without any basis. The assessee, on the other hand, rightly adopted the circle rate of properties being the fair market value of the assets for the purpose of wealth tax assessments. - valuation taken by the assessee as per circle rates in the relevant years, deserves to be accepted - Decided in favour of assessee.

Summary

Issues:
Main issue: Whether the learned CWT(A) was right in deleting the additions made to the taxable wealth in conformity with S.7, Schedule III, Part H of the Wealth-tax Act read with Rule 20 of the Wealth-tax Rules.

Analysis:
1. Factual Background: The case involved appeals by the Revenue and cross objections by the assessee against a common order of the Commissioner of Wealth-tax(Appeals) for the assessment years 2005-06 to 2007-08 under the Wealth-tax Act, 1957. The assessee had relinquished rights in land for a consideration of Rs. 2.45 crores during the relevant period.

2. Assessing Officer's Position: The Assessing Officer believed there was an escapement of wealth chargeable to tax for the mentioned assessment years and issued notices under S.17 of the Wealth-tax Act. The Assessing Officer made additions to the taxable wealth based on the amount received by the assessee in a settlement deed.

3. Contentions of the Assessee: The assessee argued that the market value of the property in question was less than the settlement amount due to ownership disputes and legal proceedings. The assessee valued the property based on circle rates, which the Assessing Officer rejected.

4. Decision of the CWT(A): The learned CWT(A) accepted the assessee's plea and deleted the additions made by the Assessing Officer. The CWT(A) reasoned that the settlement amount received by the assessee should not automatically be considered the market value of the property for wealth tax purposes.

5. Appellate Tribunal's Analysis: The Appellate Tribunal considered the rival submissions and found merit in the assessee's argument. It noted that the settlement amount could not be equated with the market value of the property during the preceding years when ownership was under dispute. The Tribunal upheld the CWT(A)'s decision and dismissed the Revenue's appeals.

6. Conclusion: The Tribunal dismissed the appeals by the Revenue and the cross objections by the assessee. The decision highlighted the importance of determining the fair market value of assets for wealth tax purposes based on prescribed rules and actual valuation methods rather than settlement amounts in legal disputes.

7. Final Verdict: The Tribunal's decision emphasized the need for proper valuation of assets in wealth tax assessments, especially when ownership is in dispute. It underscored the significance of following established valuation rules and methods to determine the accurate taxable wealth, ultimately upholding the CWT(A)'s order in favor of the assessee.