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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 ..... a Cinema" situate at Model Town, New Delhi. The question which was referred to the High Court for answer relates to the correct method of the valuation of the property that is Alpana Cinema for assessment under Wealth Tax Act. Reference of facts and proceedings in C.A. NO.3836 of 2011 shall be sufficient to decide all these appeals. 2. M/s. G.D. & Sons of which firm the appellants are partners, purchased land and building in semi-constructed condition on 04.06.1965 for a sum of Rs. 8,00,000/-. The construction was completed and Cinema Theatre, Alpana started running in the premises. The Alpana Cinema property was valued by assessment books of accounts. On pending assessment of Wealth Tax of one of the partners, the Wealth Tax Officer made a reference for valuation of the Alpana Cinema to Department Valuation Officer, New Delhi by Reference dated 29.04.1976. Valuation Officer after inspecting the site submitted its report dated 26.04.1977 valuing the property for assessment year 1970-71, 1971-72, 1972-73, 1973-74 and 1974-75. Notices under Section 17 of the Wealth Tax Act, 1957 were issued to the appellants on 30.03.1979. Assessees got the property valued by an approved Valuer ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land and building method. The High Court held that yield/rent capitalisation method would not be correct method of valuation of the property in question. The High Court relied on its decision in Wealth Tax Reference 39 of 1985, Commissioner of Wealth Tax (Central) Kanpur vs. Bankey Lal and others decided on the same day, i.e., 21.10.2005. The assessee aggrieved by the judgment of the High Court dated 21.10.2005 has come up in the appeal. As noted above, in all Wealth Tax References question was answered in favour of the Revenue. 5. We have heard Shri Rohit Amit Sthalekar, learned counsel for the appellants and learned counsel for the Department. 6. Shri Sthalekar, learned counsel for the appellants submits that Section 7(2)(a) of the Wealth Tax Act begins with non obstante clause which is stand alone provision prescribing the income capitalisation method for assessing value of the assets of a running business which was applied by the ITAT. He further submits that the High Court did not controvert findings of the fact returned by the Tribunal. The Tribunal being final fact finding authority, the High Court ought not to have interfered with the order of the Tribunal. Each case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee carrying on the business is a company not resident in India and a computation in accordance with clause(a) cannot be made by reason of the absence of any separate balance-sheet drawn up for the affairs of such business in India the Wealth Tax Officer may take the net value of the assets of the business in India to be that proportion of the net value of the assets of the business as a whole wherever carried on determined as aforesaid as the income arising from the business in India during the year ending with the valuation date bears to the aggregate income from the business wherever arising during that year. (3) Notwithstanding anything contained in sub-Section( 1), where the valuation of any asset is referred by the Wealth Tax Officer to the Valuation Officer 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 on the valuation date." 10. The normal rule for valuing an asset for the purposes of Wealth Tax Act is the estimated price which in the opinion of Wealth Tax Officer, the asset would fetch if sold in the open market. Sub-section (2) begins wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the challenge to the reference made to the Valuation Officer by the Assessing Officer. There is nothing on record that the Delhi High Court interfered with order of Assessing Officer referring the Departmental Valuer to value the Alpana Cinema. 14. It is true that subsection (2) of Section 7 begins with non obstante clause which enables the Wealth Tax Officer to determine the net value of the assets of the business as a whole instead of determining separately the value of each asset held by the assessee in such business. The language of subsection (2) which provides overriding power to the Wealth Tax Officer to adopt and determining the net value of the business having regard to the balancesheet of such business. The enabling power has been given to Wealth Tax Officer to override the normal rule of valuation of the properties that is the value which it may fetch in open market, Wealth Tax Officer can adopt in a case where he may think it fit to adopt such methodology. The appellants' submission is that the provision of Section 7(2)(a) is a stand alone provision and is to be applied in all cases where assessee is carrying on a business. We do not agree with the above sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vs. P.P. Hassan Koya, AIR 1968 SC 1201. The above case was a case of valuation of property in reference to Land Acquisition Act, 1894. In the aforesaid case following observation was made in paragraphs 6 and 7: "6......An instance of a sale which is proximate in time to the date of the notification under Section 4(1) of the Land Acquisition Act in respect of land similarly situate and with similar advantages and which is proved to be a transaction between a willing vendor and a willing purchaser would form a reliable guide for determining the market value. The value which a willing vendor might reasonably expect to receive from a willing purchaser in respect of a house generally depends upon a variety of circumstances including the nature of the construction, its age situation, the amenities available, its special advantages and a host of other circumstances. When the property sold is land with building, it is often difficult to secure reliable evidence of instances of sale of similar lands with buildings proximate in time to the date of the notification under Section 4. Therefore the method which is generally resorted to in determining the value of the land with buildings espe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclude the application of ss.7 and 16A for valuing an asset of a partner in a partnership firm and that notwithstanding the non obstante clause contained in s.7(2) it was an enabling provision giving a discretion to the WTO either to value the assets of a business as a whole or valuing each asset thereof separately and in that behalf the WTO had the power to refer such valuation to the Valuation Officer under s.16A......" 21. Before this Court the appellants had raised two submissions. The second submission as noticed by this Court itself at page 490 of the judgment is as follows: "......Secondly, counsel has urged that assuming that appellant No.2's interest(as a karta of his HUF) in appellant No.1's firm is exigible to the wealth-tax under the Act, the valuation of such interest being governed by s.7(2)(a) of the Act read with r.2A of the Wealth-tax Rules, 1957, it is not open to the WTO to refer the valuation of specific house properties belonging to the firm to the Valuation Officers under s.16A of the Act; in fact, according to him, the valuation of the assets of the partnership business of appellant No.1 as a whole having regard to its balance-sheets for the concerned yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Valuation report of Departmental Valuer has been received which has been relied by the Assessing Officer for assessing the assessee in the relevant year. We, thus, do not find any error in the order of the Assessing Officer in adopting the land and building method by making a reference to Departmental Valuer to value the property on the said method. The Appellate Authority has considered in paragraph 17 of the judgment the objection of assessee against the land and building method and repelled the same by the following reasons: "17.i) The other objection which has been vehemently stressed is against the valuation of Alpana Theatre by applying land and building method. In this connection, it may not be an unwarranted repetition to state that Alpana Cinema was purchased by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons given by the High Court is that if there is loss in the business or in other words there is negative income, it cannot be possible to say that the property in question has no marketable value. Learned counsel for the appellants has submitted that in the relevant year the income was earned. 26. It is relevant to point out that the Appellate Authority in its judgment has observed that there was loss shown by assessee himself in the year 196970. In paragraph 17 subparagraph (iv) following has been observed by the Appellate Authority: "iv)....Even in the case of the appellant there is a returned loss of Rs. 1,16,845/in the first assessment year i.e. 1969-70. Thus if income capitalisation method is applied in such cases where the assessee may have unfortunately suffered losses in the initial years, the valuation of an asset will workout to a negative figure. This will be certainly a situation far from reality and not in any way the intention of the legislature while directing in Section 7 of the W.T. Act for taking the fair market value of an asset." 27. The above circumstances taken by the High Court cannot be said to be irrelevant which apprehensions were duly found proved ..... X X X X Extracts X X X X X X X X Extracts X X X X
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