1990 (3) TMI 103 - AT - Wealth-tax

Summary

Issues Involved: Applicability of Rule 1BB, valuation of property, determination of gross maintainable rent, standard rent under the Bombay Rent Control Act, and municipal valuation.

Detailed Analysis:

1. Applicability of Rule 1BB:
The primary issue was whether Rule 1BB of the Wealth-tax Rules, 1957, was applicable to the valuation of a property at Kamla Samir, Malabar Hill, Bombay. The Tribunal, referring to its previous order for the assessment year 1983-84, held that Rule 1BB was indeed applicable to the property. The Commissioner of Wealth-tax (CWT) had erroneously set aside the assessment orders by directing the Wealth-tax Officer (WTO) to reassess the property's valuation, considering whether Rule 1BB applied. The Tribunal found no justification for the CWT's decision, stating that common facilities in the building did not make it impracticable to apply Rule 1BB.

2. Valuation of Property:
The CWT had directed the WTO to determine the property's value independently if Rule 1BB was not applicable and to use the standard rent if Rule 1BB was applicable. The Tribunal disagreed with the CWT's view that the building could not be occupied by strangers and was meant only for family members. It emphasized that common facilities in multi-storeyed buildings are usual and do not affect the valuation of individual flats.

3. Determination of Gross Maintainable Rent:
The Tribunal reviewed the definition of 'gross maintainable rent' under Rule 1BB, which is the sum for which the house can reasonably be expected to be let from year to year or the actual annual rent received if it exceeds the expected sum. The Tribunal noted that similar definitions are found in the Bombay Municipal Corporation Act and the Income-tax Act for determining the 'rateable value' and 'annual value,' respectively.

4. Standard Rent under the Bombay Rent Control Act:
The Tribunal referred to the Supreme Court decisions in Dewan Daulat Rai Kapoor and Mrs. Sheila Kaushish, which held that the annual value under the Municipal Act/Income-tax Act should be based on the standard rent. The Tribunal concluded that the gross maintainable rent should be the value a willing tenant offers, but due to rent control restrictions, the standard rent is the maximum reasonable rent. The Tribunal found no merit in the assessee's contention that municipal value should be taken as gross maintainable rent, citing that the municipal value might not always represent an accurate assessment of reasonable rent.

5. Municipal Valuation:
The CWT had found the municipal rateable value of Rs. 1,68,080 for the entire building to be too low, representing only 1.09% of the disclosed investment. The Tribunal agreed with the CWT that the municipal value was not adequate and that the standard rent under the Bombay Rent Control Act should be considered. The Tribunal referred to various precedents and legal texts to support the adoption of a net return of 6% on land and 9% on construction costs for determining the standard rent.

Conclusion:
The Tribunal partly allowed the appeals for statistical purposes, directing the WTO to provide the assessees with an opportunity to present material justifying a lower standard rent as gross maintainable rent in fresh proceedings. This decision underscores the importance of considering standard rent under the Bombay Rent Control Act while determining the gross maintainable rent and the applicability of Rule 1BB for property valuation.