9911796707
TMI Blog1990 (3) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... Sudarshan 35 MM. All these three cinema houses are situated on the junction of a busy commercial area RTC Cross Roads, Hyderabad. It is stated that the cinema house in question is in the nearest proximity to the various civic amenities. The assessee got it valued by a registered valuer Capt. G.D. Vaidya. A photostat copy of the report is furnished in the first paper book. The registered valuer had valued the asset (Devi 70 MM) as on 31-3-1982 at Rs. 54,50,000. According to the approved valuer's report the cinema house stands on a land measuring 1559.34 sq.mtrs, out of which 1003.53 sq.mtrs. of land is under an agreement of sale and not yet registered in the name of the assessee. It is also stated that from out of the above extent an extent of 326.33 sq.mtrs. is obtained on licence for use and land measuring 229.48 sq.mtrs. is outright purchase by the assessee. The registered valuer ascertained the value of the asset by adopting the land and building method. While arriving at the value he had taken the land value of 229.48 sq.mtrs. at the prevailing market rate of Rs. 300 per sq.mtr. He had estimated the life of the asset at 80 years. The Wealth-tax Officer did not agree with the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the theatre has been completed was relevant to the assessment year 1982-83 and so as on 31-3-1982 the fair market value would not be as much as Rs. 72 lakhs as against the actual investment value plus the fair market value of the land, which worked out to Rs. 54 lakhs as reported by the registered valuer. Very few people would come forward to purchase this property offering such a high price for purchase. Any purchaser expects minimum return on the capital invested. So the restricted market for the purchase of the property should always be appreciated. None of the objections raised by the assessee was considered by the departmental valuation officer as tenable objection and after setting aside the objections, he had determined the estimated value by adopting the income capitalisation method. He had taken the net income as on 31-3-1982 to 31-3-1985, added them up and had divided by four, which gave the average net income as per the accounts of the assessee at Rs. 7,26,684.25 per year. He had multiplied the same with ten years purchase had he arrived at the fair market value of the property based on income capitalisation method at Rs. 72.67 lakhs. For the sake of ready reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stretch of imagination i.e., cannot be regarded as high. Though the Commissioner(Appeals) admittted that the advent of video culture and increasing telecast of feature films in TV may result in the people preferring to stay indoors rather than to go out to see pictures in cinema halls, however, felt that this phenomena may likely to affect only in future but not for the assessment years under consideration. The Commissioner(Appeals) felt that the view expressed by the District Valuation Officer is quite reasonable and hence he upheld the valuation of the impugned theatre at his estimated figure of Rs. 72.76 lakhs. 4. The assessee now came up in second appeal before this Tribunal assailing that the estimated average value at Rs. 72.76 lakhs as net profit per year was on high side and while arriving at the figure the District Valuation Officer did not take into consideration several factors which should have been considered and the estimated net profit per year should have been proportionately reduced. The factors which warrant consideration of the District Valuation Officer and which ought to have been properly appreciated were all set out by the assessee in her objection dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible. So also the remuneration for running the cinema hall is a proper deduction whether provided in accounts or not. It is generally taken at 15% of gross taking (excluding entertainment tax). Admittedly the asset in question (Devi 70 MM) was run by the assessee herself and hence it is an owner run cinema house and as such remuneration for her managerial skill and labour as well as interest on her working capital are necessarily to be deducted while working out the average net profit per year. It is contended on behalf of the assessee that Sudarshan 70 MM theatre was also referred to the Valuation Cell and the value of that theatre also was determined on the average years net profit basis. A photostat copy of the District Valuation Officer's report dated 24-5-1983 in respect of Sudarshan 70 MM theatre was provided at pages 1 to 28 of the second paper book. A reference was made to the valuation of Sudarshan 70 MM theatre for wealth-tax purposes for the assessment years 1978-79, 1979-80, 1980-81, 1981-82 and 1982-83 under section 16A of the Wealth-tax Act. The construction of that cinema house was carried on from 1967 to 1970. In that report at para No. 5.4, sub-para III the Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d people are preferring to see cinemas when they are telecast in TVs rather than attending the cinema shows exhibited in cinema halls. Further the asset in question is centrally situated almost at the Chikkadpally Cross Roads which is a very very busy centre and which is likely to grow much further, in which case for purpose of widening the road at the busy junction. there is every fear that the Government or the Municipality will invoke their statutory powers and may ask to demolish the asset in question also. Further several cinema halls in the city were already converted into other types of commercial establishments. For instance Prabhat Talkies and Basant Talkies in Kachiguda area and Royal Talkies in Sultan Bazar at Hyderabad were already converted into marriage halls. This would go to show that slowly cinema is loosing its hold on the public and the cine goers become less and less in numbers, since the influence of videos and TVs. were growing in popularity of the public. The age of the cinema hall should not be taken at 70 years but it should be taken only at 30 to 40 years, since it is liable to wear and tear in a much faster phase, for it would be visited by the cine goers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the other disadvantages urged on behalf of the assessee do not warrant any further deduction from the average net profit of the year since those disadvantages urged on behalf of the assessee, in our considered opinion, would not have any bearing especially when the value is being computed on the average net profit derived over the asset. The so-called disadvantages do not have any bearing while determining the average net profit which was determined on the actual figures available with the assessee. Therefore ultimately we are of the opinion that the assessee is entitled to a deduction of Rs. 1,26,700 roundly from the gross average profit worked out for each of the five assessment years under consideration. Thus we determine the value of Devi 70 MM for the assessment years 1982-83 to 1986-87 at Rs. 6,00,000 for each year. Thus the assessee succeeds proportionately. 7. The next common contention in these appeals is with reference to the disallowance of claim for liability towards payment of additional income-tax and wealth-tax. The figures of the liability claimed for these assessment years are the following : Asst. year Liability claimed Disallowed by the ITO 1982-83 Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(m) will not operate. In this view, I hold that the WTO is justified in disallowing the appellant's claim for liabilities. " The question is whether the approach of the Commissioner(Appeals) in this regard is legal and justifiable and whether the disallowances made by the Wealth-tax Officer for additional taxes paid for the assessment years 1982-83 to 1986-87 are correct. Shri Parthasarathy the learned advocate for the assessee argued that the liability to pay wealth-tax accrues or arises to the assessee on the valuation date relevant to each of these assessment years. The assessee would be liable to pay the wealth-tax due on the whole of her net wealth, which means on the value of the whole of her assets minus her liabilities, of course excepting the liabilities which were mentioned specifically under section 2(m). It is not correct to argue that the liability to pay wealth-tax arises only on the passing of the assessment order. The assessment order merely quantifies the liability and does not create it. For any tax due to come under the exception mentioned in section 2(m)(iii) the tax should be determined under an assessment order and that assessed tax should remain undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) requires that the tax liability must be one which is 'payable in consequence of any order passed' under any law relating to taxation on income or profits, etc., such liability so payable under an order passed must remain 'outstanding for a period of more than 12 months on the valuation date'. . . . In our view, the expression 'outstanding' in s. 2(m)(iii)(a) and (b) will have to be construed in the background of the phrase 'amount of tax....payable in consequence of an order' and in that context it must mean remaining unpaid after the obligation to pay is incurred. " Shri Parthasarathy vehemently contended that the view of the Wealth-tax Officer that the liability arises only under the assessment order or on the date when additional wealth or additional income were surrendered is quite wrong and his view that the wealth-tax liability arises on the relevant valuation date and the liability for income-tax and gift-tax assessments arises only on the last day of the previous year is supported by another decision of the Hon'ble Supreme Court in CWT v. K.S.N. Bhatt [1984] 145 ITR 1. At pages 4 and 5 of the reported decision it is held as follows : " Whether a debt was owed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1961-62 created as a result of rectification orders passed after the valuation date was claimed as deduction while completing the assessment under the Wealth-tax Act for the assessment year 1964-65. In that connection the Hon'ble Supreme Court had to directly deal with the question whether the tax liability of earlier years which was quantified under the rectificatory orders, which was passed after the relevant valuation date was an admissible deduction or not. At page 14 of the reported decision their Lordships found as follows : " Even if the tax liabilities, of which a deduction was claimed, were created by rectification orders or by assessment orders made after the date of the wealth-tax assessment order, under appeal, the law requires the claim to deduction being considered on the same basis as if it had been made in the original wealth-tax assessment proceeding........... The rectification merely quantifies the true tax liability which had already been crystallised and become a debt on the last day of the previous year in the case of an income-tax liability, on the valuation date in the case of a walth-tax liability and on the last day of the previous year in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax. Therefore though the assessments on the basis of amnesty returns were passed only subsequent to the valuation dates, relevant to the assessments now under consideration, the true tax liabilities payable under the assessments passed after the amnesty returns were filed should be deemed to have become debts on the last day of the previous year, in the case of income-tax liability and on the relevant valuation dates in the case of wealth-tax liability for the assessment years 1978-79 to 1986-87, and the difference between the taxes already paid under the original assessment orders and the assessment orders now passed, after the amnesty returns were filed, should be held to be deductible. For instance for the assessment year 1982-83 the accumulated difference in income-tax and wealth-tax for the assessment years 1978-79 to 1982-83 should be held to be deductible from the wealth-tax for the assessment year 1982-83. So also the accumulated difference in income-tax and wealth-tax liabilities for the assessment years 1978-79 to 1983-84 should be held deductible for the assessment year 1983-84, the accumulated additional liability for the assessment years 78-79 to 1984-85, should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the liability should be determined by following the amnesty scheme. We are unable to find much difference on the legal impact of an assessment made on settlement and an assessment made under the amnesty scheme. In both the cases we are concerned with the fixation of tax liability only. That fixation of tax liability took place after the relevant valuation dates. When that fact was not at all relevant to be taken into consideration for allowing the tax liabilities, the distinction sought to be drawn by the learned departmental representative between the facts of the Rajasthan High Court and the facts on hand ultimately disappears and, so having regard to our above discussion on the subject, we hold that the lower authorities are not correct in disallowing the wealth-tax and income-tax liabilities as deductions from the wealth-tax assessments for the assessment years 1982-83 to 1986-87. The amounts, subject to verification of the correctness of the figure, by the Wealth-tax Officer, should be as follows :-- 1982-83 Rs. 3,59,539 1983-84 Rs. 4,01,739 1984-85 Rs. 7,10,086 1985-86 Rs. 4,44,839 1986-87 Rs. 4,45,969 The assessee should, therefore succeed on this point. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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