2009 (2) TMI 336 - HC - Wealth-tax

Valuation of assets under section 7(1),(4) - Residential House The residential house used by the assessee the question of valuation has been raised. In this case Rajasthan High Court held that the valuation of house having been determined by the assessment year 1971-72 is to be applied for the subsequent years and as the assessment years involved in the present matter are of subsequent years. The Tribunal was not justified in holding that rule 1BB of the Rules was applicable to work out the value of the residential property. Decision in favor of revenue against the assessee.

Summary

Issues:
Application of rule 1BB of the Wealth-tax Rules for valuation of residential property known as "Samod House" for assessment years 1975-76 to 1980-81.

Analysis:
The case involved a question referred by the Income-tax Appellate Tribunal regarding the application of rule 1BB of the Wealth-tax Rules for determining the value of a residential property known as "Samod House." The property was used for self-occupation by the assessee, and its valuation was initially determined by the Wealth-tax Officer as per the provisions of the Wealth-tax Act. The Appellate Assistant Commissioner directed the valuation to be done using rule 1BB of the Rules, which was inserted through an amendment in 1979 and treated as retrospective. The Tribunal upheld this decision, leading to a reference on the applicability of rule 1BB for the assessment years in question.

Upon reviewing the main provisions of sections 7(1) and 7(4) of the Wealth-tax Act, the Court noted that section 7(4) provides a specific method for valuing a house used for residential purposes, especially concerning properties owned before April 1, 1971. The Court emphasized that once the valuation is determined for the assessment year 1971-72, it remains unchanged for subsequent years unless challenged. Rule 1BB, introduced in 1979, outlines a method for valuing residential properties mainly used for residential purposes, emphasizing the built-up floor area for such use.

The Court concluded that the valuation of the property for the assessment year 1971-72, which was not contested, must be applied for subsequent years as per the provisions of section 7(4) of the Act. Therefore, the value of the house should be determined based on the assessment from 1971-72 for the subsequent years, upholding the decision in favor of the Revenue and against the assessee. The Court clarified that the valuation determined earlier should stand for subsequent assessment years, and the question regarding the application of rule 1BB was answered accordingly.