9911796707
TMI Blog1981 (2) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... such valuation. Since there was difference of opinion, on the point raised in the appeals on the additional ground of appeal between different Benches of the Tribunal, the case was referred by the President under section 255(3) of the Income-tax Act, 1961, to the Special Bench consisting of three Members for deciding the point at issue. 2. There were five interveners who were represented by the counsel and they were duly heard on all the aspects arising out of the application of rule 1BB of the Wealth-tax Rules. The assessee was represented by Shri K.K. Jain who led the arguments. The department was ably represented by Shri S.D. Kapila, Senior Departmental Representative. 3. Before we proceed to consider the arguments advanced by the counsel on either side and to give our findings on the same it would be proper to give a few facts which would help in deciding the question at issue and also which would bring into clear focus the effect of rule 1BB which is the subject-matter of decision before us. The assessee had purchased the property at 3, Aurangzeb Road, New Delhi, which abuts on two roads. i.e., Aurangzeb Road and also on 4, Prithvi Raj Road, for a consideration of Rs. 5,69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Gazette of India on 30-3-1979, the rule was retrospective in its operation and it would, therefore, have to be applied to all pending proceedings. These rules were framed by the Central Board of Direct Taxes (CBDT) under the powers conferred upon it by section 46(2) of the Wealth-tax Act, 1957 ('the Act'). It was urged that section 3 of the Act is a charging section while section 7 of the Act is only a procedural section. By framing rule 1BB under section 7(1), the power of the WTO has been circumscribed. The WTO is bound to value all properties which fall within the ambit of rule 1BB only by application that rule and not otherwise. It was urged that when a procedural rule is framed and enacted, it applies to all the proceedings then pending and it will also apply to proceedings not only which were actually pending before the WTO but also before the Tribunal. It was urged that rule 1BB enacted a piece of beneficent legislation and it must be given effect to in all pending proceedings. 6. So far as the provisions of section 7(3) are concerned, it was urged that since rule 1BB has to be given effect to in all pending proceedings, the validity of a reference to the Valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacts a fiction for valuing a residential property and it did not matter what was the real value of a property. The mere fact that the valuation to be arrived at by supplying the said rule, would be much less than the real market value of the property, if sold in the open market, was no reason to hold that this rule was not retrospective. Even if the higher value of a property has been shown by the assessee the Tribunal should apply rule 1BB and reduce the valuation. 10. Shri. G.C. Sharma, appearing for another intervener, pointed out that rules framed under section 7(1) were delegated legislation. The WTO cannot ignore rule 1BB unless its vires is challenged. Rule 1BB being a valid piece of delegated legislation, the reference to the Valuation Officer without considering the said rule would be invalid. Alternatively, he urged that even if the reference to the Valuation Officer may be correct, his valuation without reference to rule 1BB would be wrong. He urged that invalid opinion of the Valuation Officer is not binding on the WTO even though section 7(3) makes the report of the Valuation Officer binding on the WTO. 11. Shri Sharma further urged that section 7 being a machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Valuation Officer was dated 17-2-1977 and the WTO made the assessment on 30-3-1979. On all these dates rule 1BB had not been enacted and, therefore, the reference to the Valuation Officer was a valid one. He contended that the jurisdiction to refer the case by the WTO to the Valuation Officer was not justiciable nor appealable. He further contended that under sub-rule (5) of rule 1BB, the WTO was entitled not to apply this rule to the case of the assessee in view of the facts stated in the letter of the WTO to the IAC/Commissioner for making the reference to the Valuation Officer. He pointed out that application of rule 1BB would yield absurd results and it was, therefore, impracticable to apply the said rule in the case of the assessee. He further contended that if rule 1BB was applicable to the Valuation Officer, the whole institution of the Valuation Officers in the Income-tax Department would become redundant. 15. The learned departmental representative then contended that section 7(4) of the Wealth-tax Act applies to self-occupied properties and it excludes the operation of rule 1BB to such properties. In case of properties which are self-occupied, the assessee has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that reasons must exist under section 16A to justify a reference to the Valuation Officer though the sufficiency of the said reasons could not be justiciable. If rule 1BB is applied in this case, then the very reasons for reference did not exist and, therefore, the reference itself would be invalid and the report of the Valuation Officer would not be binding on the WTO. So far as section 7(4) is concerned he urged that this section came into force with effect from 1-4-1976 in respect of self-occupied properties. The valuation of such properties was only frozen with reference to two dates but the valuation has still to be made under section 7(1) and, therefore, section 7(4) does not override section 7(1). It was urged that a person cannot contract out of the statute and the WTO must give effect to rule 1BB before valuing residential properties. This was a legal fiction for valuing the residential properties and it must be given full effect to. He urged that merely because the property, if it had been sold in the open market would have fetched much more than the valuation, which would be arrived at by application of rule 1BB, did not justify an inference that rule 1BB(5)(i) app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a rule prescribing either a rebuttable presumption or an irrebuttable presumption in that behalf would be a rule of evidence. On the other hand, if fact A is inherently not relevant in proving the existence of fact B or has no probative value in that behalf and yet a rule is made prescribing of a rebuttable or an irrebuttable presumption in that connection that rule would be a rule of substantive law and not a rule of evidence . . . ." The contention of the learned departmental representative was that since an arbitrary multiplier has been fixed under rule 1BB, this makes the rule a substantive one. We are of the opinion that this alleged arbitrary multiplier is really not arbitrary, if we look at the report of the Committee which recommended the amendment and which had given a scientific basis for this multiplier, and, therefore, the multiplier does not make the rule a substantive one. The reasons are given by the Allahabad High Court itself while dealing with rules 1C and 1D that a well accepted method of valuing unquoted equity shares and unquoted preference shares had been laid down in those rules and, therefore, those rules would be procedural in nature. In rule 1BB the mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on page 221 under the head 'Pending actions', the learned author observes as follows : "The effect of a change in the law between a decision at first instance and the hearing of an appeal from that decision was discussed by the House of Lords in Att.-Gen. v. Vernazza [1960] AC 965. Lord Denning said that it was 'clear that in the ordinary way the Court of Appeal cannot take into account a statute which has been passed in the interval since the case was decided at first instance, because the rights of litigants are generally to be determined according to the law in force at the date of the earlier proceedings. But it is different when the statute is retrospective either because it contains clear words to that effect or because it deals with matters of procedure only, for then Parliament has shown an intention that the Act should operate on pending proceedings, and the Court of Appeal are entitled to give effect to this retrospective intent as well as a court of first instance' . . . ." It is, therefore, clear that a rule of procedure is retrospective in operation and applies to all pending proceedings. Rule 1BB is clearly a rule of procedure in the same manner in which rules 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective in operation by applying the principles of law of interpretation of statutes. 24. The jurisdiction of the WTO to make a reference to the Valuation Officer is not an arbitrary one but is based on the opinion that the value so returned by the assessee on the basis of the estimate made by the registered valuer is less than its fair market value [section 16A(1)(a)]. In arriving at that opinion the WTO is not entitled to ignore rule 1BB from consideration. This is so because for purposes of section 7(1) that rule lays down how the fair market value of residential properties is to be arrived at. Only if he considers that the valuation arrived at by the registered valuer is less than a fair market value by applying rule 1BB, would the WTO be entitled to refer the question of valuation to the Valuation Officer. The same would be the position in considering the reference under sub-clause (b) of section 17A(1). The department itself has done quite a bit of exercise to point out the effect of rule 1BB. A case study was filed before us on pages 3-4 of the paper book, which shall form Annexure 'A' to this order, according to which the valuation of a house on the basis of actual investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a lower value being arrived at by applying rule 1BB is concerned, we agree with the learned counsel for the assessee and the interveners that an assessee has no right to contract out of the statute and he cannot offer to be assessed on a higher valuation than arrived at by applying rule 1BB insofar as it is an admitted fact that it is a self-occupied property. The assessee had returned the valuation on the basis of the report of a registered valuer who had estimated the value at certain figures for different years. There is a positive concession given in respect of valuation of a residential property including self-occupied property by rule 1BB and if by taking advantage of that concession the assessee is entitled to value his self-occupied property at lesser figure than arrived at by the registered valuer, he cannot be denied that benefit. 26. So far as the binding nature of rule 1BB on the Valuation Officer is concerned, we may point out that the Committee which had been formed by the Central Board of Direct Taxes for laying down proper guidelines in the shape of rules in order to eliminate/reduce the uncertainty that prevails regarding the valuation of immovable properties w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1BB had not been enacted. Valuation of self-occupied properties was, therefore, sought to be frozen in order to benefit the owners of the self-occupied properties. We may reproduce section 7(4) for the sake of clarity : "Notwithstanding any thing contained in sub-section (1), the value of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became the owner of the house or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later :" According to the department, the option regarding the valuation is only between two dates which is available to the assessee, i.e., the valuation date next after the date on which the assessee became the owner of the house and the valuation date relevant to the assessment year commencing on 1-4-1971, whichever is later. The contention of the department, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, hold that even after 1-4-1976 when section 7(4) came on the statute book, the assessee has an option either to value the property so far as self-occupied property is concerned, by application of section 7(4) or by application of rule 1BB, whichever is more beneficial to the assessee. 29. We may point out that we have proceeded to dispose of the additional ground of appeal on the basis that the said ground has been admitted by the Division Bench. There is a note to that effect on the ground of appeal by that Bench dated 3-11-1980. Even if there had not been such a note and the matter had to be decided, we have no doubt that the said additional ground would have been admitted by us because where retrospective legislation has to be given effect to, the rule laid down by the Gujarat High Court in the case of CIT v. Karamchand Premchand (P.) Ltd. [1969] 74 ITR 254 cannot apply because the assessee could not have taken the plea regarding the applicability of rule 1BB before the WTO and the Commissioner (Appeals) as the said rule had not been enacted till then. In case of retrospective legislation being enacted subsequent to the order of the WTO or the AAC or the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n at Rs. 2,132 to the AAC, the same valuation should be adopted in reassessment also. We, therefore, uphold the order of the Commissioner (Appeals) for the assessment year 1963-64 and dismiss the departmental appeals. 33. In the assessment years 1964-65 to 1974-75, besides the valuation of property at 3, Aurangzeb Road, the department also contested the deletion of the value of the assets of Kalinga Foundation Trust and Kalinga Tubes Ltd. which were deleted by the Commissioner (Appeals) following the decision of the Cuttack Bench of the Tribunal which has been upheld by the Orissa High Court. Respectfully following the earlier orders of the Tribunal which have been approved by the High Court, we dismiss the departmental appeals on this point and uphold the orders of the Commissioner (Appeals). 34. So far as the assessment years 1965-66 to 1974-75 are concerned on the point regarding the valuation of the property at 3, Aurangzeb Road, the orders of the Commissioner (Appeals) and the WTO are set aside for a fresh valuation to be made by applying rule 1BB. We may point out that it was urged on behalf of the department that 50 per cent of the unearned increase could not be deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
