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2006 (10) TMI 96 - HC - Wealth-taxWealth-tax - Reversionary value of the land could not be taken into consideration where the value of the property was determined by capitalizing the annual letting value as per rule 1BB (inserted from April1, 1979 in wealth tax) Tribunal was legally correct in allowing deduction of one-sixth for repairs and 6 per cent. for collection charges for working out the net annual letting value of the property
Issues:
1. Deduction of repairs and collection charges for net annual letting value. 2. Inclusion of reversionary value of land in property valuation. Issue 1: Deduction of repairs and collection charges for net annual letting value The case involved a reference under section 27(1) of the Wealth-tax Act, 1957, regarding the deduction of repairs and collection charges for working out the net annual letting value of certain properties. The Appellate Tribunal allowed deductions of one-sixth for repairs and 6% for collection charges. The Appellate Assistant Commissioner approved these deductions, citing the Calcutta High Court decision in CIT v. Smt. Ashima Sinha [1979] 116 ITR 26. The Tribunal upheld these deductions, stating that the deductions align with the Income-tax Act, 1961, and the Calcutta High Court's decision. The High Court concurred, noting that the Central Board of Direct Taxes had also issued circulars supporting these deductions. The High Court found no illegality in allowing one-sixth for repairs and 6% for collection charges, especially considering the retrospective nature of rule 1BB in the Wealth-tax Rules. Therefore, the first issue was answered in favor of the assessee and against the Revenue. Issue 2: Inclusion of reversionary value of land in property valuation Regarding the second issue of whether the reversionary value of the land should be considered when determining the value of a property by capitalizing the net annual letting value, the High Court referred to the case of CWT v. Ram Saran Kajriwal [1979] 168 ITR 485. The Court held that based on this precedent, the reversionary value of the land cannot be factored in when capitalizing the annual letting value to determine property value. Therefore, the second issue was also decided in favor of the assessee and against the Revenue. The judgment concluded without any order as to costs, settling the matter in favor of the assessee on both issues. ---
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