1989 (4) TMI 133 - AT - Wealth-tax

Issues Involved:

1. Exclusion of sale proceeds of agricultural land from the wealth of the assessee-HUF.
2. Valuation of property as per Rule 1BB for the assessment year 1978-79.
3. Admissibility of additional grounds raised by the assessee regarding valuation of property.
4. Deduction of certain liabilities from the aggregate value of assets.

Detailed Analysis:

1. Exclusion of Sale Proceeds of Agricultural Land from the Wealth of the Assessee-HUF:

The primary issue was whether the sale proceeds of agricultural land amounting to Rs. 5,29,375 should be excluded from the wealth of the assessee-HUF. The property, situated at Sarai Khoja near Faridabad, was partitioned among family members, and the sale proceeds were distributed accordingly. The assessee argued that this partition evidenced the division of the original asset, and thus, the sale proceeds should not be included in the total wealth of the family. The learned AAC accepted this plea, noting that the partition was not hit by Section 20 of the WT Act, 1957, as it dealt with complete partitions, not partial ones. The Tribunal upheld the AAC's decision, stating that the partitioned asset ceased to be family property and became individual property of the coparceners. Therefore, the departmental appeals on this ground were rejected.

2. Valuation of Property as per Rule 1BB for the Assessment Year 1978-79:

For the assessment year 1978-79, the issue was whether Rule 1BB, which came into force on 1st April 1979, should be applied retrospectively. The assessee valued the property at Rs. 5,50,624, but the WTO valued it at Rs. 7,45,640, based on the previous year's valuation. The AAC held that Rule 1BB was retrospective and should apply to the assessment year 1978-79. The Tribunal noted that the Delhi High Court in SHARBATI DEVI JHALLANI vs. CWT & ORS. had pointed out that the WTO should refer the valuation to the Valuation Officer if the value exceeded the returned value by more than 33-1/3 percent. Therefore, the Tribunal modified the AAC's direction, instructing the WTO to refer the matter to the Valuation Officer for valuation in accordance with the law.

3. Admissibility of Additional Grounds Raised by the Assessee Regarding Valuation of Property:

The assessee raised an additional ground regarding the valuation of property at Panchsheel Marg under Rule 1BB, which the AAC neither admitted nor rejected. The Tribunal found this action incorrect, stating that the AAC should have expressed an opinion on whether to admit the additional ground. The matter was restored to the AAC to consider the admissibility of the additional ground and adjudicate upon it if admitted.

4. Deduction of Certain Liabilities from the Aggregate Value of Assets:

The assessee incurred liabilities amounting to Rs. 8,100 (Landsherg India Pvt. Ltd.), Rs. 3,231 (Expenses payable), and Rs. 4,472 (Interest payable). The ITO did not deduct these liabilities, arguing they related to a discontinued business. The AAC confirmed this disallowance. However, the Tribunal found merit in the assessee's submission that liabilities should be allowed under Section 2(m) of the WT Act, 1957, irrespective of whether they pertain to a closed business. The matter was sent back to the AAC to determine if the debts were incurred and allow them if in accordance with the law.

Separate Judgments:

M.C. Agarwal, J.M.:

Agarwal agreed with the majority view on WTA Nos. 457/Del/85, 648/Del/84, and 750/Del/84. However, he differed on WTA No. 456/Del/85 regarding the valuation of house property at Panchsheel Marg. He supported the application of Rule 1BB, stating that it was binding on the WTO and applicable to all pending assessments. He disagreed with the view that the Valuation Officer should not be bound by Rule 1BB, emphasizing that the rule was intended to provide a uniform method for valuing residential properties.

Ch. G. Krishnamurthy, President:

Krishnamurthy addressed the difference of opinion between the members. He concluded that the ratio of the Delhi High Court's judgment in SHARBATI DEVI JHALANI's case did not apply to Rule 1BB. He agreed with the Judicial Member that the AAC's direction to value the property as per Rule 1BB was correct. He emphasized that Rule 1BB provided a specific method for valuing residential properties, which should be binding on the WTO and the Valuation Officer. He thus supported the conclusion that the valuation should be done according to Rule 1BB.

Conclusion:

The Tribunal upheld the exclusion of sale proceeds of agricultural land from the wealth of the assessee-HUF and directed the WTO to refer the valuation of the property for the assessment year 1978-79 to the Valuation Officer. The matter regarding the admissibility of additional grounds and the deduction of liabilities was restored to the AAC for reconsideration. The Tribunal's decision emphasized the binding nature of Rule 1BB for valuing residential properties.

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