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TMI Blog2009 (1) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessed has unascertainable value on the date of valuation and cannot form a part of the taxable asset under section 2(e) of the Wealth tax Act. 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that while applying the provisions of rule 1BB for valuing the self-occupied property, municipal ratable value has to be adopted instead of standard rent? Held that- while applying the provisions of Rule 1BB of the Wealth tax Rules, 1957, for valuing self occupied property, the municipal rateable value with addition of statutory deductions, if any be adopted instead of standard rent, for arriving at the gross maintainable rent. - 34 of 1999. - - - Dated:- 16-1-2009 - F. I. REBELLO and R. S. MOHITE JJ. Wealth-tax Reference No. J. D. Mistry, instructed by Raj Darak, for the assessee. P. S. Sahadevan for the Commissioner. JUDGMENT The judgment of the court was delivered by 1. R. S. MOHITE J. - The three questions which have been referred under section 27 of the Wealth-tax Act, 1957, are as follows: "1. Whether on the facts and circumstances of the case, the Tri bunal was right in law in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The present assessee was one of the persons who was required to make a compulsory deposit under the said Act. While filing her wealth-tax return, she, however, contended that the amount deposited by her in such compulsory deposit did not constitute an asset within the meaning given to the expression in section 2(e) of the Wealth-tax Act as it was exempted under section 2(e)(2)(ii) of the Wealth-tax Act, 1957. Section 2(e)(2)(ii) reads as follows: "a right to any annuity (not being an annuity purchased by the assessee or purchased by any other person in pursuance of a contract with the assessee) in any case where the terms and conditions relat ing thereto preclude the commutation of any portion thereof into a lump sum grant." 5. The answer to the question therefore, turns on the question as to whether the amounts which are receivable by the assessee under section 8 of the said Act can be said to be an amount of annuity. 6. At the very outset, we may state that this court has held in the case of CWT v. Master Asutosh K. Mahadevia reported in [1995] 215 ITR 200, that deposits made in the Compulsory Deposit Scheme under the Act would form a part of the asset of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3): "In the light of the aforesaid decisions, we have to consider whether the deposit under the Compulsory Deposit Scheme is an annuity, not purchased by the assessee and is, therefore, exempt. It is not disputed that, unless exemption can be claimed as an annuity under section 2(e) (2) (ii), it would clearly be includible in the net wealth of the asses- see for the simple reason that it is a deposit in the name of the assėssee in a bank with only the restriction on the right of withdrawal thereof for two years absolutely and, thereafter, the right to withdraw one-fifth thereof for the next five years. Interest runs on the amount in deposit at more or less the higher rate of interest. It has all the attributes of a deposit in a bank because the assessee, when he makes a deposit, gets a pass book in which an entry is made as is made in the case of any other deposit in a bank. Interest is calculated on the balance due every year by the bank and credited in the pass book. The assessee has a right of withdrawing it subject to the restrictions noted earlier. An annuity is generally a fixed sum of money payable periodically and not subject to variation. An annuity cannot be related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The insertion of section 8(2) entitling a depositor not to withdraw any amount of instalment or interest which has become repayable and providing that such deposit could continue to carry interest further shows that this is not an annuity because there is no such option available in the case of an annuity. That the instalment falling due would be treated as a deposit clearly shows that it was akin to an ordinary deposit and not to an annuity." 10. We are inclined to agree with the reasoning and the view taken by the Calcutta High Court in the case of Smt. Sunanda Devi Singhania [1993] 204 ITR 842 and disagree with the view taken by the Allahabad High Court in the case of Uday Chand Jain [1997] 228 ITR 190. In our view, the reasoning of the Allahabad High Court does not take into account the fact that the amounts that would be repayable under the Compulsory Deposit Scheme would not necessarily be a fixed amount which was the require ment laid down by the apex court in the case of CWT v. P. K. Banerjee [1980] 125 1TR 641. The amount repayable every year may vary simply because interest could vary due to a change in the bank rates from year to year. That apart, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer question No. 2 in the negative, in favour of the assessee and against the Revenue. 14. As regards question No. 3, the relevant part of rule 113B (as it then stood) read as under: "(2) For the purpose of this rule, - (a) 'gross maintainable rent', in relation to a house, means - (i) the sum for which the house might reasonably be expected to let from year to year; or (ii) where the house is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in sub-clause (i), the amount so received or receivable (emphasis provided) 15. From the above, it is clear that in the case of self-occupied property, the valuation of a house for the purpose of wealth-tax is to be calculated on the basis of gross maintainable rent which is the sum for which the house might reasonably be expected to let from year to year. As far as rateable value is concerned, we note that under the various Acts that govern municipalities/municipal corporations rateable value is also calculated on the basis of reasonable rent that the property may fetch. For example, section 114 of the Maharashtra Municipal Councils, Nagar Panchayats and Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in relation to actual compensation received but the ultimate finding of this court was it could be calculated on the basis of annual municipal value. To that extent, this judgment of our court is relevant to the issue raised before us. 19. That it may be that in areas which are governed by rent control legislation the reasonable letting value cannot exceed the standard rent but if we consider the statutory definition of the term "standard rent" in rent control legislations and the mode and manner of calculating "municipal ratable value, situations can be countenanced where the standard rent of a given premises might be more or different than the sum for which a house might reasonably be expected to be let from year to year as calculated by the Local Municipal Authority for the purpose of arriving at the municipal ratable value. This possibility was noticed by this court in the case of Nirlon Syn. Fibres Che. v. Municipal Corporation reported in [2002] 104 (1) Bom LR 762 wherein in paragraph 20 this court observed as under: "It is, therefore, to be held that the authorities, while determining the rateable value under section 154 of the said Act, have to bear in mind th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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