1982 (6) TMI 88 - AT - Wealth-tax

Summary

Issues Involved:
1. Computation of net maintainable rent and deduction of Municipal Tax.
2. Deduction on account of joint nature of the property.
3. Appropriate multiple for computing market value of the property.
4. Deduction for liabilities under Section 2(m) of the WT Act.
5. Deduction for immediate extensive repairs.
6. Exemption from liability for additional wealth-tax on urban assets.
7. General tax liabilities as debts owed under Section 2(M) of the WT Act.
8. Additional ground regarding the determination of gross maintainable rent based on municipal assessment.

Detailed Analysis:

1. Computation of Net Maintainable Rent and Deduction of Municipal Tax:
The first ground concerns the amount of Municipal Tax to be deducted in computing the net maintainable rent for determining the market value of the property. The authorities below allowed only the taxes actually paid by the assessee, following a previous decision in Dhaniram Rampuria. The AAC reasoned that the tax paid is less than what the Municipality is entitled to charge, and any prudent purchaser would consider the tax based on the fair rental assessment. The Tribunal previously held in Smt. Sunder Devi Rampuria's case that deduction should be based on tax leviable according to law, as prospective buyers would compute net annual rent after deducting payable taxes. The Tribunal accepted the assessee's ground of appeal, directing that deduction should be allowed as per the tax payable on the rent actually received during the relevant years.

2. Deduction on Account of Joint Nature of the Property:
The second ground relates to the deduction for the joint nature of the property. The Tribunal had previously opined that no precedent allows a deduction of more than 10% for joint ownership, with a maximum deduction of 10% and sometimes only 5%. The Tribunal noted that an assessee has the option of partitioning the property, and any deduction allowed by the department does not mean any amount can be claimed. The Tribunal decided not to interfere in this matter.

3. Appropriate Multiple for Computing Market Value of the Property:
The third ground pertains to the multiple to be adopted for computing the market value of the property. The assessee argued for an 8 1/2 or 10 times multiple, but the Tribunal disagreed, noting that in similar cases, a multiple of 12 was applied. The Tribunal referenced previous judgments and concluded that the lower rent due to old tenants and building conditions already results in a lower market value, thus justifying the multiple of 12.

4. Deduction for Liabilities under Section 2(m) of the WT Act:
The fourth ground is a new contention that the estimated value of the property involves some capital gain liability, which should be deducted under Section 2(m) of the WT Act. The Tribunal noted that no such deduction has ever been allowed and referenced the Allahabad High Court's decision in Bharat Harti Singhania vs. CWT, Kanpur, which negated such a contention. The Tribunal found no force in this ground.

5. Deduction for Immediate Extensive Repairs:
The fifth ground claims that the building's poor condition necessitates immediate repairs, and this liability should be deducted from the capitalized value. The Tribunal had previously opined that the bad condition of a building is reflected by the low rent it derives, resulting in a lower market value. The Tribunal found no further ground for taking a lesser value and rejected this ground.

6. Exemption from Liability for Additional Wealth-Tax on Urban Assets:
The sixth ground argues that the building is held as a business and is exempt from additional wealth-tax on urban assets. The Tribunal noted that the assessee is an HUF and does not engage in constructing and letting out properties as a business. The AAC found that the building was let out and not used for business purposes. The Tribunal upheld this finding, rejecting the ground.

7. General Tax Liabilities as Debts Owed under Section 2(M) of the WT Act:
The seventh ground is a general claim that tax liabilities should be considered debts owed under Section 2(M) of the WT Act. The Tribunal noted that such liabilities, if not contested in appeal and not outstanding for more than 12 months on the valuation date, would be allowable. The WTO was directed to give corresponding deductions if necessary.

8. Additional Ground Regarding Determination of Gross Maintainable Rent Based on Municipal Assessment:
An additional argument was raised, referencing the Supreme Court's decision in Mrs. Sheila Kaushish vs. CIT, suggesting that the gross maintainable rent should be based on the municipal assessment. The Tribunal, referencing the Supreme Court's decision in Addl. CIT, Gujarat vs. Gujargravures P. Ltd., found that not every legal ground can be raised for the first time before the Tribunal. The Tribunal also found no merit in this ground, noting that the market value should consider the rent the property could fetch in the market, not the municipal assessment. The ground was rejected for both want of maintainability and on merits.

Conclusion:
All appeals were dismissed except for the relief granted under the first ground regarding the deduction of Municipal Tax.