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Issues Involved:
1. Whether Rule 1BB is applicable and, if so, whether it is applicable to the entire property or only to the part that remained in the possession of the assessee as of the valuation date. 2. In the alternative, whether Section 7(4) is applicable and, if so, whether it is applicable to the entire property or only to the part that remained in the possession of the appellant as of the valuation date. 3. If Rule 1BB or Section 7(4) are not applicable to the area of 694.87 sq. mts. and some portion in the out-house handed over to the buyers before the valuation date, what should be the basis for determining the fair market value of that portion of the land. 4. If Rule 1BB or Section 7(4) are not applicable to the entire property, what should be the correct method for determining the fair market value of the property. Detailed Analysis: Issue 1: Applicability of Rule 1BB The avowed object of Rule 1BB is to offer an assessee a method of valuation of his assets which would help curtail avoidable litigation and bring about uniformity and certainty in the matter of valuation of such assets. The introduction of this rule may also obviate the need to get the asset valued by a recognized valuer or by the valuation officer of the department from time to time. The Hon'ble Gujarat High Court in the case of SHRI KASTURBAAI MAYABHAI held that in the case of a house owned and exclusively used by the assessee, the assessee has the option of valuing the asset on the two dates mentioned in Section 7(4) of the Act. The valuation officer is also bound to value a self-occupied house property in accordance with the provisions of Section 7(4). The Hon'ble Gujarat High Court further held that in the case of a self-occupied house property governed by Section 7(4), the choice would remain with the assessee to opt for the estimate of valuation as per Section 7(4) or as per Rule 1BB, whichever he considers to be beneficial for him. The ITAT, Special Bench, in the case of BIJU PATNAIK vs. WTO held that the WTO must consider the question of whether a reference under Section 16A could be validly made keeping in view Rule 1BB and only if he comes to such a conclusion that Rule 1BB is not applicable, he should make a reference to the Valuation Officer. The Special Bench further held that the Valuation Officer cannot ignore Rule 1BB for valuing the residential properties falling under that rule. The Tribunal further held that Rule 1BB would also be applicable in respect of self-occupied properties even though the assessee might have returned a higher value in accordance with Section 7(4). Issue 2: Applicability of Section 7(4) The Hon'ble Supreme Court, in the cases of (LATE NAWAB SIR MIR OSMAN ALI KHAN vs. CWT and CWT vs. BISHWANATH CHATTERJEE AND OTHERS, held that unless a conveyance deed is executed and registered, the assessee will continue to be treated as the owner of the immovable property regardless of the fact that the assessee had received full consideration for certain properties and/or parted with the possession over part of the properties agreed to be transferred. In view of these judgments, there is no doubt about the fact that the assessee will be treated as the owner of the entire immovable property regardless of the fact that he had already given possession over an area admeasuring 694.87 sq. mts., i.e., about 20% of the total area. Issue 3: Valuation of the Portion Handed Over The nature of the land measuring 694.87 sq. mts., which had already been handed over to the purchasers in accordance with the agreement dated 3rd Feb., 1981, cannot be treated as residential property, possession of which has already been handed over to the purchaser for carrying out development and construction work. In view of this fact, the value of that part of the property, possession of which has already been handed over to the purchaser (builder) before the valuation date, cannot be made according to Rule 1BB or according to the provisions of Section 7(4). The amount of Rs. 6 lakhs received by the assessee adequately covers the value of that portion of the land, the possession of which had been handed over to the builders. Considering all these facts, the WTO is directed to adopt the value of the portion of the property, the possession of which has already been handed over to the buyer before the valuation date, at Rs. 5 lakhs. Issue 4: Method of Determining Fair Market Value The remaining portion of the property, the possession of which continued to remain with the assessee, should be treated as residential house property as it was exclusively used by the assessee for residential purposes throughout the period of 12 months immediately preceding the valuation date of 31st March, 1981. This fact has not been disputed by the learned Departmental Representative. Further, the said house property has been valued in accordance with Section 7(4) at Rs. 4,90,000 up to the assessment year 1980-81. It has been held by the Hon'ble Gujarat High Court in the case of KASTURBHAI MAYABHAI that the provisions of Rule 1BB are procedural in nature and should be applied even in the case of self-occupied residential houses. It was further held that the assessee has the choice to adopt the valuation of self-occupied house property either as per Rule 1BB or as per Section 7(4), whichever may be beneficial to him. In view of the aforesaid findings given by the Hon'ble Gujarat High Court, the assessee may be entitled to opt for the valuation of the said residential house property which remained in his possession on the relevant valuation date according to Rule 1BB provided the various conditions mentioned in Rule 1BB are satisfied. Conclusion: The CWT(A) is directed to examine whether all the conditions prescribed in Rule 1BB are fully satisfied with regard to the remaining portion of the land and building which continued to remain in the possession of the assessee on the relevant valuation date. In case the various conditions prescribed in Rule 1BB are satisfied, the valuation of the said part of the property which remained in the possession of the assessee on the relevant valuation date should be made according to Rule 1BB after giving an opportunity to both sides for making their respective submissions with regard to the fulfillment of the various conditions prescribed in Rule 1BB. If the CWT(A) concludes that the provisions of Rule 1BB are not applicable due to non-fulfillment of any conditions, the valuation of the remaining portion of the property should be made according to Section 7(4) of the WT Act. The value of the entire house property according to Section 7(4) has been taken by the WTO in the assessment year 1980-81 at Rs. 4,90,000 on the basis of valuation made by the valuation cell of the income-tax department for the assessment year 1971-72. While adopting the value as per Section 7(4), the CWT(A) will have to deduct the value of that portion of land the possession of which has already been handed over before the valuation date and for which a separate value has been determined hereinbefore. The value of such portion of the land admeasuring 694.87 sq. mts. as on 1st April, 1971, as per the report of the valuation cell for the assessment year 1971-72 may be worked out and the same should be deducted from the total value of Rs. 4,90,000 adopted as per Section 7(4) in the preceding year. In view of the aforesaid discussions and the facts and circumstances as they existed during the relevant accounting year, the order passed by the CWT(A) is set aside and the matter is restored back to his file for determining the fair market value of the aforesaid property in accordance with the directions given hereinbefore. In the result, the appeal is partly allowed.
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