1987 (11) TMI 114 - AT - Wealth-tax

Summary

Issues: Valuation of property under Wealth-tax Act, Deduction of loans incurred for purchasing property and shares

Valuation of Property:
The appeal pertains to the valuation of a property purchased by the assessee shortly before the valuation date for assessment years 1978-79 to 1981-82. The assessee contended that the property should be valued according to rule 1BB of the Wealth-tax Rules, which was accepted by the AAC. The department argued that since the property was recently purchased, its value should be based on the purchase price, not rule 1BB. The Tribunal held that while rule 1BB is mandatory, its application in this case would be theoretical as the property was self-occupied and not leased out. The Tribunal rejected the assessee's argument that the valuation should be based on the gross maintainable rent assessed by the Municipal Corporation. The Tribunal upheld the AAC's order to value the property in accordance with rule 1BB but directed the value to be taken at the actual purchase price.

Deduction of Loans Incurred for Property and Shares:
The assessee had incurred loans for purchasing the property and shares, claiming deductions under relevant sections of the Wealth-tax Act. The WTO allowed deductions proportionate to the value of the property and shares. The assessee appealed, maintaining that the full amount of debts should be allowed as deductions. The department argued that the deductions were correctly disallowed or allowed proportionately. The Tribunal relied on a Full Bench judgment of the Madras High Court and previous instructions by the CBDT. However, the assessee cited a recent Rajasthan High Court decision that supported allowing the full amount of debt as a deduction. The Tribunal concluded that the assessee could not claim further deduction for shares but was entitled to a deduction for the house loan, albeit in a reduced amount. The excess deduction allowed for the house loan was noted, and the AAC's orders were reversed, restoring those of the WTO.

In conclusion, the appeals were allowed, with the Tribunal providing detailed reasoning for the valuation of the property and the deductions claimed by the assessee for loans incurred for property and shares under the Wealth-tax Act.