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TMI Blog2017 (10) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. The language of subsection (2)(a) does not indicate that the provisions mandate the Wealth Tax Officer to adopt the method in all cases of running business Resort to Section 7(2) (a) is discretionary and enabling provision to Wealth Tax Officer to adopt the method as laid down in Section 7(2)(a) for a running business but the above enabling power cannot be held as obligation or shackles on right of Assessing Officer to adopt an appropriate method. In the present case reference was made to the Departmental Valuer by Assessing Officer under Section 7(3). Thus there is a conscious decision of the Assessing Officer to obtain the report from the Departmental Valuer. The above conscious decision itself contains the decision of Assessing Officer not to resort to Section 7(2)(a). The Wealth Tax Officer having referred the Departmental Valuer to value the property, in consequent to which reference for valuation report having already been received on 26.07.1977 which has relied in the assessment. Objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 1970-71 to 1974-75. The assessment was completed as per percentage of the right of different assessees which they have in the Firm. The Assessing Officer relied on the Valuation Report submitted by the Departmental Valuer. The assessee aggrieved by the assessment order filed appeal before the Appellate Assistant Commissioner of Wealth Tax. The Appellate Authority by its detailed order dated 23.01.1986 affirmed the assessment made by the Assessing Officer on the basis of valuation by land and building method. The income capitalisation method as was relied on by the assessee was not approved. 3. The aggrieved by the different assessment orders the assessees filed Wealth Tax Appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, Delhi. The ITAT accepted the case of the assessee to the effect that the proper basis for valuing the Cinema building would be capitalisation of the income. The ITAT held that since the building could be used only for film exhibition and it cannot be used for any other purpose the method of its valuation has to be necessarily different from the one normally adopted in the case of buildings which are capable of being used as commercial build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the ITAT, the High Court erred in interfering with the said judgment. It is further submitted by the learned counsel for the appellant that in case there are more than one method of valuing the property, the valuation which is in favour of the assessee has to be adopted which is a well settled rule of statutory interpretation. 7. Learned counsel for the Department refuting the submission of the learned counsel for the appellants contends that Wealth Tax Officer has rightly followed land and building method for assessing the property. He submits that the provision of Section 7(1)(a) is an enabling provision which gives discretion to the Wealth Tax Officer to apply the income capitalisation method in case of running business, if he so decides. It is submitted that it is not mandatory for the Wealth Tax Officer to apply income capitalisation method in all cases. It is submitted that Cinema building was in the ownership and possession of the assessee which without being any encumbrances could have easily obtained the best price in the open market and in such cases the land and building method is appropriate method to be adopted for valuing the property. 8. Learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is carrying on a business for which accounts are maintained by him regularly, the Wealth Tax Officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustment therein as may be prescribed. 11. Further subsection (3) again begins with non obstante clause providing that where the valuation of any asset is referred under Section 16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market. 12. Under Section 16A Wealth Tax Officer can make a reference to Valuation Officer for any asset for valuation. Section 16A sub-clause (1) is as follows: 16A Reference to Valuation Officer. ( 1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been provided to override the normal method of valuation of property as given by subsection 7(1) to arm the Wealth Tax Officer to adopt the method of valuation as given in subsection (2)(a). The purpose and object of giving overriding power is not to fetter the discretion. The Wealth Tax Officer is not obliged to mandatorily adopt the method provided in Section 7(2)(a) in all cases where assessee is carrying on a business. The language of subsection (2)(a) does not indicate that the provisions mandate the Wealth Tax Officer to adopt the method in all cases of running business. Section 7 of the Act has also come for interpretation before this Court in large number of cases. It is useful to refer to some of the cases. In Commissioner of Wealth Tax, Calcutta vs. Tungabadra Industries Ltd., Calcutta, 1969 (2) SCC 528, this Court had occasion to consider Section 7 of the Act. In the aforesaid case the following question came for consideration before the Court: Whether on the facts and in the circumstances of the case, for the purpose of determining the net value of the assets of the assessee under Section 7(2) of the Wealth-tax Act, 1957 the Tribunal was right in directing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y those used for business purposes, is the method of capitalization of return actually received or which might reasonably be received from the land and the buildings. 7. That method was rightly adopted by the trial court and the High Court. The unit under acquisition is used for business purposes and has a prominent situation in the town of Calicut. There was clear evidence about the rental of the building, and the trial court proceeded to capitalize the net annual rental, having regard to the rate of return of 13 1/2 per cent from gilt-edged securities, by multiplying it by 35 times. The High Court has slightly reduced the multiple. 18. The above observation made by the Court was general observation not in the context of Section 7 of the Act. The method of valuing the building property on the basis of rent capitalisation is no doubt provided in various statutes especially in the cases of rent fixation. The above observation does not help the appellants in the present case. 19. More appropriate judgment of this Court which is on the facts of the present case is the judgment in Juggilal Kamlapat Bankers and another vs. Wealth-Tax Officer, Special Circle, C-W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce-sheets for the concerned years ought to have been undertaken by the WTO and as such the book values of the house properties as appearing in the balance-sheets ought to have been accepted by him and, therefore, the reference made by the WTO to Valuation Officers as well as the notices issued by the latter, being incompetent and unjustified in law, are liable to be quashed. For the reasons which we shall presently indicate neither of the contentions has any substance and both are liable to be rejected...... 22. This Court after considering the above submission as well as provisions of the Act including Section 7 of Wealth Tax Act, 1957 laid down following at page 495: ...... On a fair reading of the aforesaid provisions it will appear clear that the primary method of determining the value of assets for the purposes of the Act is the one indicated in s.7(1), inasmuch as it provides that the value of any assets, other than cash, for the purposes of this Act shall be estimated to be its market price on the valuation date. Then comes subs. (2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the WTO may, instead of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state that Alpana Cinema was purchased by the firm M/S G.D. Sons in semi finished condition from M/s Gill and Bros. Asaf Ali Road, New Delhi and thereafter it has been uninterruptedly used by the firm for film exhibition. What has, therefore, to be appreciated is that the property in question has been used by the owners without any adverse riders which enjoin a property if it is let out. It has thus to be taken into account that the firm owning this theatre had no encumbrances in case it decided to dispose it off at any moment. This factor is of great consequence while arriving at fair Market value. At one point, it has also been agitated by the appellant that the land over which the Cinema building is situated could not be used for any purpose other than as Cinema Building, hence it was not proper for the Valuation Officer to consider it as an open piece of land and value it likewise. This objection if of no avail because the appellant's claim beaten from the very reasoning he has given. To make the matter more than clear, it may be remarked that it is a privilege to get a licence for film exhibition on an urban land. Such land use is only conducive to raise the value a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said to be irrelevant which apprehensions were duly found proved by the facts as noticed by the Appellate Authority. 28. Learned counsel for the appellants has further submitted that in the event there are more than one methods of valuation of an asset of an assessee, the method under which the valuation is in favour of assessee has to be accepted. He has relied on the judgment of this Court in The Commissioner of Income Tax, West Bengal, Calcutta vs. M/s. Vegetables Products Ltd., (1973) 1 SCC 442. This Court in paragraph 6 of the judgment has laid down the following: 6. There is no doubt that the acceptance of one or the other interpretation sought to be placed on Section 271(1)(a)(i) by the parties would lead to some inconvenient result, but the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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