2000 (6) TMI 131 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of the guest house property.
2. Applicability of Rule 3 of Schedule III of the Wealth-tax Act.
3. Justification for the Assessing Officer's reference to the Departmental Valuation Officer (DVO).
4. Application of Rule 8(a) of Schedule III.

Detailed Analysis:

1. Valuation of the Guest House Property:
The appeal concerns the valuation of a guest house owned by the assessee, a public limited company, located in Roopam Building, Worli, Bombay. The Assessing Officer (AO) assessed the property's value at Rs. 2,60,73,000, which was confirmed by the Commissioner of Wealth Tax (Appeals) [CWT(A)]. The assessee initially declared the property's value at Rs. 1,55,130 based on a registered valuer's report, which was significantly lower than the market value determined by the Departmental Valuation Officer (DVO).

2. Applicability of Rule 3 of Schedule III of the Wealth-tax Act:
The assessee argued that the valuation should be determined as per Rules 3 to 7 of Schedule III of the Wealth-tax Act, which provides a specific method for valuing immovable property. The assessee contended that Rule 3 was applicable and mandatory unless the conditions in Rule 8 were met, which they argued were not applicable in their case.

3. Justification for the Assessing Officer's Reference to the Departmental Valuation Officer (DVO):
The AO made a reference to the DVO, who valued the property at Rs. 2,60,73,000, citing that the valuation as per Rule 3 was not practicable due to significant discrepancies between the market value and the valuation based on municipal taxes. The AO noted that the property was used as a guest house, and the rateable value determined by the Municipal Authorities was only Rs. 6,573, which was not reflective of the property's actual market value. Additionally, the assessee had entered into an agreement to sell the property for Rs. 10.26 crores, indicating a much higher market value.

4. Application of Rule 8(a) of Schedule III:
The AO applied Rule 8(a) of Schedule III, which allows for an alternative valuation method if it is not practicable to apply Rule 3. The AO concluded that due to the wide variation between the market value and the valuation based on municipal taxes, and the difficulty in ascertaining the cost of improvements made by the assessee, it was not practicable to apply Rule 3. The CWT(A) upheld this decision, agreeing that the facts and circumstances justified the application of Rule 8(a).

Conclusion:
The Tribunal concluded that the AO was justified in applying Rule 8(a) and referring the valuation to the DVO. The significant discrepancy between the market value and the valuation based on municipal taxes, the difficulty in ascertaining the cost of improvements, and the agreement to sell the property for a much higher value all supported the AO's decision. The Tribunal dismissed the appeal, confirming the valuation of the property at Rs. 2,60,73,000 as determined by the DVO.