1991 (9) TMI 152 - AT - Wealth-tax

Issues Involved:
1. Definition of 'house' under section 7(4) of the Wealth-tax Act.
2. Satisfaction of conditions under section 7(4) for beneficial valuation.
3. Entitlement to valuation of 5/6th portion of the property under section 7(4) and 1/6th at market value.

Detailed Analysis:

1. Definition of 'House' under Section 7(4) of the Wealth-tax Act:
The primary issue revolves around whether the definition of 'house' in clause (ii) of the Explanation under section 7(4) applies to a scenario where the assessee owns the entire house, a part of which is used for business purposes. The Tribunal had to interpret if the term 'house' includes a part of a house being an independent residential unit, allowing for the beneficial valuation under section 7(4).

The Tribunal concluded that the definition indeed applies, asserting that even a part of a house, if used as an independent residential unit, qualifies for valuation under section 7(4). The emphasis was on the independent enjoyment of the house portion for residential purposes.

2. Satisfaction of Conditions under Section 7(4) for Beneficial Valuation:
The second issue was whether the assessee satisfied the conditions of section 7(4) to be entitled to the beneficial valuation. The conditions include the house belonging to the assessee, being exclusively used for residential purposes, and this use being continuous for twelve months preceding the valuation date.

The Tribunal found that the assessee met these conditions for 5/6th of the property, which was used exclusively for residential purposes. The remaining 1/6th, used for business purposes, did not meet the exclusive residential use requirement. The Tribunal emphasized that keeping business-related valuables in the house for safe custody does not negate its residential use.

3. Valuation of 5/6th Portion under Section 7(4) and 1/6th at Market Value:
The third issue was whether the assessee could have 5/6th of the property valued under section 7(4) and the remaining 1/6th at market value. The Tribunal directed that 5/6th of the property, used exclusively for residential purposes, should be valued as per section 7(4), while the 1/6th portion used for business should be valued at market value.

The Tribunal's decision was based on the interpretation that the term 'house' in section 7(4) includes a part of a house used as an independent residential unit. Thus, 5/6th of the property, fulfilling the residential use condition, should benefit from the valuation method under section 7(4).

Separate Judgments:
The Judicial Member and the Accountant Member had differing views. The Judicial Member supported the assessee's claim for beneficial valuation for 5/6th of the property under section 7(4). In contrast, the Accountant Member opined that the entire property must be used exclusively for residential purposes to qualify for section 7(4) benefits. The Third Member agreed with the Judicial Member, leading to a majority view favoring the assessee.

Conclusion:
The Tribunal allowed the appeals in part, directing the WTO to value 5/6th of the property under section 7(4) and the remaining 1/6th at market value, acknowledging the partial residential use of the property. The valuation of shares was also directed to be done strictly according to Rule 2B, wherever applicable.

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