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TMI Blog1998 (3) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... value should have been taken at the book value as per Rule 14(2)(ii) of Schedule III to the Wealth-tax Act, 1957. (4) The learned CIT(Appeals),Faridabaderred in valuing the building at Rs. 3,50,000. It should have been valued at its written down value in terms of Rule 14(2)(i) of Schedule III to the Wealth-tax Act, 1957." 3. The Revenue has raised the following grounds in their appeal:- Grounds raised in Appeal No. WTA 768/Del/92: "(1) On the facts and in the circumstances of the case the learned CWT(A) has erred in law and facts in holding that valuation report in wealth-tax case received after the completion of assessment could not be considered and the value taken could not be substituted by resorting to section 35. (2) On the facts and in the circumstances of the case the learned CWT(Appeals) has erred in law and facts in directing Assessing Officer to take their market value of land appurtenant to the factory building as on 31-3-1987 at Rs. 9,00,000 as against Rs. 27,00,000 on the basis of rent capitalisation method. (3) On the facts and in the circumstances of the case the learned CWT(Appeals) has erred in law and facts in directing Assessing Officer to take the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment has to be made in conformity with the. valuation made by Valuation Officer in view of the mandatory provisions contained in section 16A(5). That was not the case where the Valuation report was received by the Assessing Officer subsequent to the completion of the assessment. In any case, the matter relating to valuation of an asset is a debatable issue which clearly falls outside the ambit of Section 35 of the Wealth Tax Act. The CWT(Appeals) has placed reliance on the decision of the ITAT(Chandigarh) in the case of Amrinder Singh in which it was held that there was no provision in the Wealth Tax Act for making an assessment subject to rectification under section 35 in relation to substitution of the value of the asset on receipt of the valuation receipt on a subsequent date. in our view, the CIT(Appeals) has rightly arrived at the aforesaid conclusion. We do not find any Justification to interfere with the view taken by the CIT(Appeals) in relation to Ground No. 1 raised by the Revenue. 5. Ground No. 2 of assessee's appeal relates to inclusion of 3,50,000 being the value of factory building in the hands of the assessee. The Revenue has also raised a ground in relation to va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c appliances, factory building, furniture and fixtures, Plant Machinery, etc., for a total consideration of Rs. 15 lakhs. In consideration of the aforesaid sale price, the appellant-company acquired shares worth Rs. 15 lakhs of M/s. R. Narayan Dying Printing Mills Ltd. A certificate dated18-12-1989confirming these, facts was also submitted before the Assessing Officer. The Assessing Officer allowed depreciation on the cost of factory building and other assets so transferred by the assessee in their favour. He submitted that the Department for Income Tax purposes has accepted the vendees as the real owner of the factory building but for Wealth Tax purposes, the Department wants to levy tax on the appellant who has already transferred the factory building to the aforesaid company before the relevant valuation date. 6.4 The learned counsel further submitted that the judgment of the Hon'ble Supreme Court in the case of Nawab Sir Mir Osman Ah Khan does not now hold the field in view of the fact that the Hon'ble Supreme Court in a recent judgment in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625/92 Taxman 541, have held that "owner" is a person who is entitled to rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artmental Authorities. We have also gone through all the judgments cited by the learned representatives of both sides. 6.9 The Hon'ble Supreme Court in the case of Nawab Sir Mir Osman Ali Khan has held that the assessee who had received full consideration for certain immovable proper-ties from the purchasers but has not executed any registered Sale Deeds in favour of the vendees will be liable to Wealth-tax in relation to such properties. The Hon'ble Supreme Court also pointed out the necessity for the Legislatures to remove hardship and injustice because legal owners who had parted with possession after receiving full consideration but had not executed the Sale Deeds were being made to bear the tax burden without having the enjoyment of the property in question. It will be imperative to reproduce the relevant extracts from the said judgment as appearing at pages 900 and 901 hereunder:- At page 900: "The concept of reality in implementing a fiscal provision is relevant and the Legislature in the case has not significantly used the expression "owner" but used the expression "belonging to". The property in question legally, however, cannot be said to belong to the vendee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are in rightful possession of the same as against the assessee and in occupation of the property in question and, secondly, the entire consideration has been paid and, thirdly, the purchasers were entitled to resist eviction from the property by the assessee in whose favour the legal title vested because conveyance has not yet been executed by him and when the purchasers in possession had a right to call upon the assessee to execute the conveyance, it cannot (sic) be said that the property legally belonged to the assessee in terms of section 2(m) of the Act on the facts and circumstances of the case, even though the statute must be read justly and equitably and with the object of the section in view. We are conscious that if the person has the user and is in the enjoyment of the property, it is he who should be made liable for the property in question under the Act; yet the legal title is important and the Legislature might consider the suitability of an amendment if it is so inclined. This question, therefore, must be answered in favour of the Revenue and in the affirmative. The appeal on this aspect, must, therefore, fail." 6.10 The Hon'ble Supreme Court in the case of Podar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having the absolute power of disposal of the income so received, should be held not liable to tax merely because a vestige of legal ownership or a husk of title in the long run may yet clothe another person with the power of a residual ownership when such contingency arises which is not a case even here." 6.11 Thereafter the Hon'ble Supreme Court considered the amendment introduced to section 27 of Income-tax Act, 1961 by the Finance Act, 1987, by substituting clauses (iii), (iiia) and (iiib) with effect from 1st April, 1988 and held as under:- "From the circumstances narrated above and from the Memorandum explaining the Finance Bill, 1987 [see [1987] 165 ITR (St.) 161], it is crystal clear that the amendment was intended to supply an obvious omission or to clear up doubts as to the meaning of the word 'owner' in section 22 of the Act. We do not think that in the light of the clear exposition of the position of a declaratory/clarificatory Act, it is necessary to multiply the authorities on this point. We have, therefore, no hesitation to hold that the amendment introduced by the Finance Bill, 1987, was declaratory/clarificatory in nature so far as it relates to Section 27(iii), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (iiib) of section 27 of that Act. These clauses deem the beneficial owner to be the owner for the purpose of taxation in the following situations:- (i) a member of a co-operative society or a company or any association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society or the company or the association, as the case may be. (ii) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. (iii) a person who acquires any tights, excluding any rights by way of a lease from month to month or for a period not exceeding one year, in or with respect to any building or part thereof, by virtue of any, such transaction as is referred to in clause (f) of section 269UA of the Income-tax Act. In order to bring harmony in the provisions under the Income-tax Act and Wealth-tax Act, any building or part thereof should be taxed in the hands of the beneficial owner of such building, understood under clause (iii) or clause (iiia) or clause (iiib) of section 27 of the Income-tax Act. This amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot bestow its pointed attention on the crucial words "belonging to the company" and also did not interpret the correct meaning of the these words before deciding that leasehold interest of the assessee-company for more than six years is not covered under section 40 and simply it is covered by section 2(e) of the Wealth-tax Act. It would appear that these words "belonging to the company" are not synonymous to 'to be the owner of the asset'. It is enough in order to bring the asset under Finance Act, 1983 that the asset should be belonging to the company and not necessarily the company should be the owner of it. These crucial words "belonging to the company" bear specific legal connotation." 6.16 The Tribunal in the aforesaid decision also relied upon the judgment of Hon'ble Supreme Court in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur AIR 1965 SC 1923. In the said judgment, the Hon'ble Supreme Court has held that even possession of an interest less than that of full ownership should be signified by the words "belonging to". After quoting the extracts from the said judgment of the Hon'ble Supreme Court, the Tribunal observed as under:- "Therefore, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) for determining the value of land according to the rent capitalisation method is excessive. The book value of the land ought to have been accepted by the CWT(Appeals). 7.1 The Learned Sr. D.R. submitted that the Assessing Officer has determined the value @ Rs. 200 per sq. yd. for the land covering 13,500 sq. yds. The Assessing Officer had referred the matter relating to its valuation to the Valuation Officer' under section 16A. Since the report from the Valuation Officer was not received, the Assessing Officer determined the value at Rs. 27 lakhs subject to rectification on receiving the report from the Valuation Officer. The CIT(Appeals) ought to have confirmed the said valuation. 7.2 The learned counsel for the assessee contended that the land has been given oil lease @ Rs. 6,000 per month. Therefore, the valuation has rightly been made by the CWT(Appeals) according to rental method. However, the multiplier of 12.5 times adopted by the CWT(Appeals) is excessive. He invited our attention towards the judgment of Hon'ble Gujarat High Court in CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134/1 Taxman 183, where multiplier of 8.33 times was applied. He also relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than the fair market value of land as may be determined by such rental method of valuation. The registered valuer whose report was submitted by the assessee also shows the value of the said land at Rs. 8,10,000 as on31st March, 1987. The value determined by the CWT(Appeals) at Rs. 9 lakhs is almost matching with the value determined by the registered valuer. The registered valuer has adopted the rate of Rs. 60 per sq. yd. The Assessing Officer had adopted the rate of Rs. 200 per sq. yd. Both of them have not given any basis for adopting such rate per sq. yd. The land has been given on rent. The various Courts have held that where a building or land has been given on rent, the value should be determined by the rental method. 7.5 On a careful consideration of the entire relevant facts, we are of the considered opinion that the view taken by the CIT(Appeals) directing the Assessing Officer to determine the value of the land at Rs. 9 lakhs was reasonable and justified. We do not find any justification to interfere with the view taken by the CWT(Appeals) in relation to this ground. 8. Ground No. 1 raised by the assessee in its appeal was not pressed by the learned counsel. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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