2005 (8) TMI 61 - HC - Wealth-tax

Whether, Tribunal is right in law in holding that two buildings, one known as Muff Villa and the other as Queen Villa which was used for office purpose, constituted a house belonging to the assessee and exclusively used by him for residential purpose within the meaning of section 7(4) of the Wealth-tax Act, 1957? - once the Tribunal has found on the facts, and there is no challenge to the said finding that the two buildings are contiguous, existed in one compound and within common boundaries, in the absence of any finding that either of the buildings is used for non-residential purposes, i.e., commercial purposes, no infirmity can be found in the order of the Tribunal, when it holds that both the buildings constituted a house belonging to the assessee and were exclusively used by him for residential purpose within the meaning of section 7(4)

Summary

Issues:
Interpretation of section 7(4) of the Wealth-tax Act, 1957 regarding the definition of a self-occupied house property and its exclusive residential use.

Analysis:
The case involved a dispute regarding the interpretation of section 7(4) of the Wealth-tax Act, 1957, concerning the classification of two buildings, Muff Villa and Queen Villa, as a single self-occupied house property exclusively used for residential purposes by the assessee. The assessee initially claimed the benefit of valuation for self-occupied property only for Muff Villa but later revised the claim to include both buildings. The Wealth-tax Officer rejected the revised claim, stating that the buildings were distinct and had been treated separately historically. The Commissioner of Wealth-tax (Appeals) upheld this decision based on past rejections of similar claims by the assessee.

However, the Tribunal overturned the previous decisions, considering factors such as the common compound housing both buildings, the report of the Departmental Valuation Officer suggesting unity of structure, and the historical use of such properties by princely families for residential purposes. The Tribunal found that while Muff Villa was used for residence, Queen Villa served as an office. The Tribunal concluded that both buildings constituted a single self-occupied house of the assessee under section 7(4) of the Act.

The Revenue challenged the Tribunal's decision, arguing that the buildings were separate and distinct, and the claim for both as one property was an afterthought. The Revenue contended that the use of Queen Villa for office purposes disqualified it from being considered exclusively residential, as required by section 7(4) of the Act. The Revenue also highlighted the plain language of the provision, emphasizing that any non-residential use would disqualify the property from the benefit.

The court referred to various precedents to interpret the phrase "exclusively used by him for residential purposes." It clarified that the intention to reside in the property without creating any interest in favor of another person was crucial. The court cited cases where pragmatic and reasonable interpretations were favored over strict literal readings. The consensus among High Courts was that the property should not be used for commercial purposes to generate income to qualify as exclusively residential.

Ultimately, the court upheld the Tribunal's decision, emphasizing that since both buildings were contiguous and within common boundaries, and there was no evidence of commercial use, they constituted a single self-occupied house exclusively used for residential purposes. The judgment favored the assessee, concluding that the two buildings qualified as one house under section 7(4) of the Act.

In conclusion, the court answered the question in favor of the assessee, affirming the Tribunal's decision and disposing of the reference accordingly.