1993 (9) TMI 161 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of land and building for wealth-tax purposes.
2. Adoption of yield capitalization method versus land and building method.
3. Deduction for co-ownership and old technology.
4. Valuation of Town Hall property.
5. Deduction under section 5(1)(iv) for property.
6. Estate duty liability and initiation of penalty proceedings.

Issue-wise Detailed Analysis:

1. Valuation of Land and Building for Wealth-Tax Purposes:
The main issue in these appeals is the valuation of land and building housing the cold storage of the firm M/s Nand Lal Cold Storage & General Mills. The approved valuer's report was obtained for the relevant assessment years. The valuer noted several factors affecting the property value, including the lack of open land, restrictions on the sale of land by the Moradabad Development Authority, and the property being owned by multiple co-owners. The valuer used the PWD Schedule of 1979-80 for construction costs and suggested the yield capitalization method as the best valuation approach due to the property's outdated technology and specific use as a cold storage facility.

2. Adoption of Yield Capitalization Method versus Land and Building Method:
Shri K.C. Srivastava argued that the yield capitalization method should be adopted, emphasizing the property's commercial nature and the income it generates. He cited previous Tribunal decisions supporting the yield method for properties designed for specific business purposes. The Department's Valuation Officer, however, used the land and building method, adjusting land rates based on notifications and cost indices. The Tribunal concluded that the yield method was appropriate due to the property's specific use as a cold storage facility, directing the Wealth Tax Officer (WTO) to adopt this method using a multiplication factor of 12 times the net yield based on available capacity.

3. Deduction for Co-Ownership and Old Technology:
The Tribunal considered the deductions proposed by the approved valuer for co-ownership, old technology, and other factors affecting the property's value. The CIT(A) had allowed a 40% deduction based on these factors, which the Department contested. The Tribunal upheld the need for such deductions, acknowledging the property's limitations and the challenges in selling a co-owned property.

4. Valuation of Town Hall Property:
For the assessment year 1980-81, the valuation of the Town Hall property, which comprises several rented shops, was contested. The CIT(A) had capitalized the rental income to determine the property's value. The Tribunal confirmed this approach, stating that rent capitalization is the most suitable method for fully tenanted commercial properties.

5. Deduction under Section 5(1)(iv) for Property:
In the case of Shri Shanker Saran, the Tribunal addressed the deduction under section 5(1)(iv) of the Wealth-tax Act. The deduction should be allowed at the option of the assessee, regardless of whether the property is owned directly by the assessee or included due to their share in the firm.

6. Estate Duty Liability and Initiation of Penalty Proceedings:
The claims regarding estate duty liability and initiation of penalty proceedings were not pressed by the assessees. The Tribunal noted that penalty proceedings are independent and not relevant to the present appeals.

Conclusion:
The appeals filed by the assessees were allowed, and those filed by the Department were dismissed. The Tribunal directed the WTO to adopt the yield capitalization method for valuing the cold storage property and confirmed the CIT(A)'s approach for the Town Hall property valuation. The deduction under section 5(1)(iv) was to be allowed at the assessee's option.