2007 (7) TMI 158 - HC - Wealth-tax

Wealth tax - Valuation under wealth tax applicability of rule 8 or 20 it is for the AO to apply first the rules 3, 4 and 5 and if he feels that same is not practicable to apply, he is at liberty to invoke rule 8 or 20 and determine the value of assets in accordance with Schedule-III of the WT Act.

Summary

Issues:
Appeal under Section 27A of the Wealth-tax Act, 1957 against the order of the Income Tax Appellate Tribunal, Chennai Bench "B" regarding the valuation of immovable property between sister concerns.

Analysis:
The judgment pertains to appeals filed by the Revenue against the order of the Income Tax Appellate Tribunal, Chennai Bench "B", concerning the valuation of immovable property under the Wealth-tax Act. The primary issue raised was whether the Tribunal was correct in directing the assessing officer to apply specific rules (Rules 3, 4, and 5 of Schedule III) when the transaction of lease is between sister concerns, without giving the assessing officer the option of applying Rules 8 and 20, even if found relevant.

The facts of the case revolve around a Private Limited Company engaged in land transactions. The company contended that it was not subject to wealth-tax, but the Assessing Officer included the value of land owned by the company in its net wealth. The Commissioner of Wealth-tax (Appeals) granted exemption, which was overturned by the Tribunal, directing the assessing officer to value the property using Rules 3, 4, and 5 of Schedule III of the Wealth-tax Act.

The Revenue's argument was that the Tribunal's direction limited the assessing officer's discretion by specifying only Rules 3, 4, and 5 for valuation. However, the Tribunal's order emphasized the mandatory nature of Schedule III rules for property valuation, citing relevant legal precedents.

The judgment clarified that if Rules 3, 4, and 5 are not practicable, the assessing officer can apply Rule 8 or Rule 20 for valuation. It highlighted that the assessing officer must first consider Rules 3, 4, and 5, and if impractical, may resort to Rule 8 or Rule 20 for determining the property value, in accordance with Schedule III of the Wealth-tax Act.

In conclusion, the High Court dismissed the Revenue's apprehension, stating that the assessing officer has the flexibility to apply relevant rules for property valuation, including Rules 8 and 20 if necessary. The judgment emphasized the importance of following the provisions of Schedule III for determining the value of assets under the Wealth-tax Act, ensuring a comprehensive and lawful assessment process.