1984 (2) TMI 152 - AT - Wealth-tax

Summary

Issues Involved:
1. Whether the value of the assessee's residential house should be computed in accordance with rule 1BB of the Wealth-tax Rules, which was not in existence on the relevant valuation date.
2. Whether rule 1BB, inserted with effect from 1-4-1978, was operative retrospectively.

Detailed Analysis:

Issue 1: Computation of Value According to Rule 1BB
The primary issue was whether the Appellate Tribunal was correct in law in holding that the value of the assessee's residential house should be computed in accordance with rule 1BB of the Wealth-tax Rules, which was not in existence on the relevant valuation date. The assessee had returned the value of her property at Rs. 3,49,910, which was significantly lower than the valuation made by the WTO at Rs. 8,25,450 for the assessment year 1972-73. The WTO similarly enhanced the value for subsequent years. The assessee appealed to the AAC, who directed the WTO to reassess the value de novo. The AAC later directed the WTO to apply rule 1BB for valuation, which the revenue contested, arguing that rule 1BB, effective from 1-4-1979, could not be applied retrospectively. The Tribunal upheld the AAC's direction, noting that rule 1BB, being a procedural provision, had retrospective effect and applied to pending proceedings.

Issue 2: Retrospective Operation of Rule 1BB
The second issue was whether rule 1BB, inserted with effect from 1-4-1978, was operative retrospectively. The Tribunal, after considering the Special Bench decision in Biju Patnaik v. WTO, held that rule 1BB was a procedural provision and therefore retrospective in effect, applying to all pending proceedings. The Tribunal dismissed the revenue's plea, maintaining that procedural provisions are inherently retrospective unless stated otherwise. The Tribunal further emphasized that the settled law allows procedural provisions to take effect in respect of pending proceedings for any year.

Judicial Member's View:
The Judicial Member argued that there was no doubt or misgiving that rule 1BB was a procedural provision and thus retrospective. He cited precedents from the Allahabad High Court in Madan Gopal Redhylal v. CWT and the Bombay High Court in Smt. Kusumben D. Mahadevia v. N.C. Uppadhya, which supported the view that section 7 of the Wealth-tax Act, being a machinery provision, was procedural. Consequently, rules made under section 7, including rule 1BB, were also procedural and retrospective. The Judicial Member concluded that the questions proposed by the Commissioner were self-evident and did not warrant a reference to the High Court.

Accountant Member's View:
The Accountant Member disagreed, asserting that the questions proposed by the Commissioner were fit for reference to the High Court. He highlighted that the revenue's dispute over the applicability of rule 1BB to assessment years prior to 1979-80 was based on the Supreme Court judgment in Izhar Ahmed Khan v. Union of India. He noted that similar questions had been referred to the High Court in other cases, such as Smt. Patwant Kaur v. WTO and CWT v. Hira Lal Mehra, where the Tribunal allowed references regarding the retrospective application of procedural provisions.

Third Member's Decision:
The Third Member agreed with the Accountant Member, emphasizing that the nature of rule 1BB as a procedural provision was a question of law that deserved reference. He noted that procedural provisions are generally retrospective, but the specific nature of rule 1BB warranted a High Court's opinion. He framed a comprehensive question for reference: "Whether, on the facts and in the circumstances of the case, the value of the assessee's residential house should be computed for the purposes of wealth-tax assessments for the assessment years 1972-73, 1973-74, 1974-75, and 1975-76 in accordance with rule 1BB of the Wealth-tax Rules?"

The Third Member also addressed the broader implications of rule 1BB, noting that rules made under section 7 should apply uniformly unless a specific retrospective provision exists. He concluded that the matter should be referred to the High Court for a definitive ruling on the retrospective application of rule 1BB.

Conclusion:
The Tribunal ultimately decided to refer the question of the retrospective application of rule 1BB to the High Court, acknowledging the need for a judicial determination on the procedural nature and retrospective effect of the rule. The case was remanded to the original Bench for proper disposal of the reference applications.