1994 (2) TMI 129 - AT - Income Tax

Assessing Officer, Assessment Year, Closing Stock, Income Tax, Let Out, Market Value, Net Wealth, Real Estate Business, Wealth Tax

Summary

Issues Involved:
1. Valuation of the property situated at No. 35, Mount Road, Nandanam, Madras.
2. Whether the unsold units in Khivraj Complex-I (KC-I) and Khivraj Complex-II (KC-II) constitute the assessee's closing stock and are consequently not chargeable to wealth-tax.
3. Valuation of the Delhi property.
4. Valuation of motor car vehicles.

Issue 1: Valuation of the property situated at No. 35, Mount Road, Nandanam, Madras
The assessee initially purchased the site as an investment and disclosed it under "Investments at cost" in its balance sheet. In 1980, the assessee amended its Memorandum of Association to enter into the real estate business. Subsequently, the assessee demolished old structures, developed the property, and sold portions of it. The valuation of the property for income-tax purposes was disputed. The Assessing Officer initially valued the plot at Rs. 1,56,000 per ground, later revised to Rs. 2,40,000 per ground after the CIT (Appeals) set aside the assessment for fresh consideration. The assessee's valuation was Rs. 3 lakhs per ground. The tribunal did not provide a final resolution on this specific valuation issue in the summarized judgment.

Issue 2: Whether the unsold units in KC-I and KC-II constitute the assessee's closing stock and are consequently not chargeable to wealth-tax
The assessee claimed that the unsold units should be treated as stock-in-trade and exempt from wealth-tax. The CIT (Appeals) rejected this claim, stating that the assessee had let the unsold units on rent and declared the rental income under "income from house property." The tribunal agreed with the CIT (Appeals), noting that the units were not used for the assessee's business purposes but were let out for rental income. The tribunal referenced cases such as Commercial Properties Ltd. and Salisbury House Estate Ltd. to support its decision that the rental income should be categorized under "income from house property" and not as business income. The tribunal also rejected the assessee's argument that the 1988 amendment to section 40(3) of the Finance Act, 1983, which exempts stock-in-trade from wealth-tax, should be applied retrospectively. The tribunal concluded that the amendment is prospective and applicable only from the assessment year 1989-90 onwards.

Issue 3: Valuation of the Delhi property
At the time of hearing, the related grounds for the valuation of the Delhi property were not pressed by the assessee. Therefore, the tribunal dismissed this issue.

Issue 4: Valuation of motor car vehicles
Similarly, the related grounds for the valuation of motor car vehicles were not pressed by the assessee during the hearing. Consequently, the tribunal dismissed this issue as well.

Conclusion
The tribunal dismissed all the appeals, upholding the CIT (Appeals) decisions on the valuation of the Nandanam property and the chargeability of wealth-tax on the unsold units in KC-I and KC-II. The tribunal also dismissed the unpressed grounds related to the valuation of the Delhi property and motor car vehicles.