1984 (2) TMI 150 - AT - Wealth-tax

Issues Involved:
1. Validity of the reopening of assessments.
2. Proper value to be adopted for the interest of assessees in the firm.
3. Deduction claimed by the assessee under section 5(1)(iv) of the Wealth-tax Act.

Detailed Analysis:

1. Validity of the Reopening of Assessments:

Grounds for Reopening:
The department argued that the reopening of the assessments was based on the valuation report received from the Valuation Officer, which provided new information indicating that the net wealth chargeable to tax had escaped assessment. The AAC had previously canceled these reassessments, asserting that the reopening was invalid because it was based on an invalid reference to the Valuation Officer.

Tribunal's Findings:
The Tribunal upheld the department's contention that the WTO did not need to provide an opportunity to the assessee before referring the matter to the Valuation Officer. However, it was found that the reopening of the assessments was indeed based on the valuation report, which was obtained through an invalid reference since no assessments were pending at that time. The Tribunal cited precedents from the Calcutta High Court and Rajasthan High Court, asserting that a valuation report obtained through an invalid reference cannot constitute valid information for reopening assessments under section 17(1)(b). Consequently, the Tribunal held that the reopening of the assessments for the years 1975-76 to 1978-79 for Viresh and Jitendra, and for 1976-77 for Sailesh, was not valid.

2. Proper Value to be Adopted for the Interest of Assessees in the Firm:

Valuation Method:
The WTO had adopted the rent capitalisation method to value the godowns owned by the firm, which resulted in a significantly higher value than the book value. The AAC had reduced this value, considering various factors such as collection charges, insurance, repairs, and the rate of interest for capitalisation.

Tribunal's Findings:
- Portions Not Let Out: The Tribunal found no justification for adopting a lower value for portions not let out and directed the WTO to value both let out and self-occupied portions equally.
- Collection Charges: The Tribunal upheld the AAC's decision to allow 6% as collection charges, considering it reasonable.
- Insurance Charges: The Tribunal agreed with the AAC's directive to ascertain and deduct actual insurance charges paid by the firm.
- Repairs and Maintenance: The Tribunal reduced the AAC's allowance from 16 2/3% to 10%, agreeing with the Valuation Officer that maintenance charges for godowns would be lower.
- Capitalisation Rate: The Tribunal upheld the AAC's decision to adopt a 12% interest rate, resulting in a multiplying factor of 8 times, instead of the Valuation Officer's 13 times.
- Depression in Value: The Tribunal confirmed the AAC's decision to allow a 25% reduction for various hazards and restrictions affecting the property value.

3. Deduction Claimed by the Assessee under Section 5(1)(iv):

Assessee's Claim:
The assessee Jitendra claimed a deduction under section 5(1)(iv) for the assessment year 1979-80, which was initially rejected by the AAC on the grounds that godowns do not qualify as a house.

Tribunal's Findings:
The Tribunal allowed the deduction, following the precedent set by the Tribunal in the case of Sailesh and the decision of the Madras Bench in L. Gulabchand Jhaback v. WTO, which recognized godowns as qualifying for the exemption under section 5(1)(iv).

Conclusion:
- WT Appeal No. 13 (Coch.) of 1982 (By assessee Jitendra): Allowed in full.
- WT Appeal Nos. 3 to 6, 8 to 11, and 15 (Coch.) of 1982 (By the department): Dismissed.
- WT Appeal Nos. 7, 12, 14, 16, 17, and 18 (Coch.) of 1982 (By the department): Allowed in part.

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