1995 (6) TMI 52 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of cold storage owned by the assessee for the assessment year 1986-87.
2. Adoption of the valuation method.
3. Applicability of Schedule III of the Wealth-tax Act.
4. Retrospective effect of Schedule III.
5. Rule 8 of Schedule III.

Issue-wise Detailed Analysis:

1. Valuation of Cold Storage:
The primary issue in this appeal is the valuation of a cold storage owned by the assessee for the assessment year 1986-87. The assessee declared the value of the cold storage at Rs. 12,51,926, whereas the Departmental Valuation Officer determined the value at Rs. 88,08,000. The Assessing Officer added the difference of Rs. 75,56,074 to the net wealth of the assessee, resulting in a computed net wealth of Rs. 87,54,062.

2. Adoption of the Valuation Method:
The assessee challenged the valuation methods used. The Valuation Officer applied both the land and building method and the profit method, arriving at Rs. 88,08,000 and Rs. 17,07,450 respectively. The assessee argued that the profit method should be preferred, especially since the cold storage's use is restricted. The Punjab and Haryana High Court decision in Jaswant Rai v. CWT was cited, which supports using the method most favorable to the assessee. The Tribunal agreed that the profit method was more appropriate for valuing the cold storage and noted that the valuation should be Rs. 17,07,450.

3. Applicability of Schedule III of the Wealth-tax Act:
The assessee introduced additional grounds, requesting that the valuation be made as per Schedule III of the Wealth-tax Rules. The Tribunal admitted these grounds, recognizing that Schedule III, which came into effect from 1-4-1989, dealt with the method of valuation of properties and was procedural in nature.

4. Retrospective Effect of Schedule III:
The Tribunal considered the retrospective effect of Schedule III, referencing the Supreme Court's decision in CWT v. Sharvan Kumar Swarup & Sons, which held that rule 1BB of the Wealth-tax Rules was retrospective. By analogy, Schedule III was also deemed retrospective. The Tribunal noted that procedural provisions, like those in Schedule III, apply to pending assessments. The Tribunal directed the Assessing Officer to apply Schedule III for valuing the cold storage for the assessment year 1986-87, subject to the conditions discussed.

5. Rule 8 of Schedule III:
Rule 8 of Schedule III allows the Wealth-tax Officer to not apply the rules in certain conditions. The Tribunal kept the Assessing Officer's powers under Rule 8 open, allowing discretion if specific conditions warranted not applying Schedule III. If Schedule III is applicable, the valuation method therein should be used, provided it does not result in a valuation lower than Rs. 12,51,926 as declared by the assessee.

Conclusion:
The Tribunal concluded that the valuation of the cold storage should be determined using the profit method, resulting in a valuation of Rs. 17,07,450. Additionally, the Tribunal directed the Assessing Officer to apply Schedule III of the Wealth-tax Act retrospectively, provided Rule 8 does not preclude its application. The appeal was allowed, with the condition that the valuation should not be less than Rs. 12,51,926 as declared by the assessee.