1987 (9) TMI 95 - AT - Income Tax

Issues Involved:
1. Applicability of Rule 2B(2) of the Wealth-tax Rules, 1957.
2. Entitlement to exemption under Section 5(1)(xxxii) of the Wealth-tax Act, 1957.
3. Opportunity to the Valuation Officer as required by Section 23(3A)(a) of the Wealth-tax Act, 1957.
4. Deduction of tax liability arising from the Voluntary Disclosure Scheme of 1975.
5. Valuation of Kanota Bagh plot.
6. Valuation of self-occupied property under Section 7(4) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Applicability of Rule 2B(2) of the Wealth-tax Rules, 1957:
The first contention by the revenue was that the AAC erred in holding that the WTO was not justified in invoking Rule 2B(2) for determining the value of the assessee's interest in the firm M/s. Sardarmal Umraomal. The WTO had invoked Rule 2B(2) based on the high GP rates of 29.3% and 29% for the respective years, concluding that the market value of the closing stock exceeded the firm's adopted value by more than 20%. The AAC, following an earlier order, concurred with the assessee that Rule 2B(2) could not be invoked merely based on the GP rate. The Tribunal upheld the AAC's order, stating that there was no cogent material to conclude that the market value exceeded the firm's adopted value by more than 20%. The Judicial Member agreed with this view, but the Accountant Member had reservations, emphasizing that the onus to dislodge the prima facie difference between the cost price and market value fell on the assessee. Ultimately, the Third Member agreed with the Judicial Member, holding that the higher GP rate alone could not justify invoking Rule 2B(2).

2. Entitlement to Exemption under Section 5(1)(xxxii) of the Wealth-tax Act, 1957:
The revenue contended that the AAC erred in holding that the assessee was entitled to exemption under Section 5(1)(xxxii) for investment in the firm M/s. Sardarmal Umraomal. The AAC's view was consistent with several other cases where the firm was considered an industrial undertaking under the Explanation to Clause (xxxi) of Section 5(1). The Tribunal upheld the AAC's order, confirming the firm's status as an industrial undertaking.

3. Opportunity to the Valuation Officer as Required by Section 23(3A)(a) of the Wealth-tax Act, 1957:
The revenue argued that the AAC erred in not allowing the Valuation Officer an opportunity as required by Section 23(3A)(a). The Tribunal noted that the revenue failed to substantiate this objection, and the Valuation Officer had been duly notified but chose not to appear. The Tribunal upheld the AAC's decision to adopt a multiplier of 10 and allow an 18% deduction for repairs and collection charges, rejecting the Valuation Officer's contention that no repairs were allowable.

4. Deduction of Tax Liability Arising from the Voluntary Disclosure Scheme of 1975:
The revenue contended that the AAC erred in allowing a deduction of Rs. 47,125 for tax liability arising from the Voluntary Disclosure Scheme of 1975. The WTO had disallowed the claim, arguing that the taxes were paid after the valuation date. The Tribunal remanded the issue for further scrutiny, directing the WTO to consider the specific years for which the disclosure was made and whether the assessee disclosed the wealth in the relevant return.

5. Valuation of Kanota Bagh Plot:
The assessee objected to the AAC's concurrence with the WTO's valuation of the Kanota Bagh plot. The Tribunal directed the WTO to value the half share of the assessee at Rs. 70 per sq. yd. for the years under appeal, considering the rate applied in previous years and the impact of the emergency on land prices.

6. Valuation of Self-occupied Property under Section 7(4) of the Wealth-tax Act, 1957:
The assessee argued that the AAC should have adopted the same value for the self-occupied property as in the assessment year 1971-72. The Tribunal accepted this submission, directing the WTO to adopt the valuation of the self-occupied property for the assessment year 1971-72 for the years under appeal.

Conclusion:
The Tribunal dismissed the revenue's appeal for the assessment year 1975-76 and allowed the appeal for the assessment year 1976-77 for statistical purposes. The cross-objections of the assessee were partly allowed. The Third Member's decision confirmed that Rule 2B(2) could not be invoked merely based on the GP rate, and the majority view was followed in dismissing the revenue's appeals.

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