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TMI Blog1991 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect from April 1, 1979, could not be applied to the assessment year 1978-79. The Tribunal rejected this contention holding that rule 1BB was of a procedural nature and, therefore, would apply to an assessment which was pending at the time when the rule came into effect. Before proceeding further, it may be worthwhile to notice the relevant provisions of the Wealth-tax Act and the Rules as in force at the relevant time. "Section 3. Charge of wealth-tax.-Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I." "Section 7. Value of assets how to be determined.-(1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule III. (2) The value of a house belonging to the assessee and exclusively used by him for residential pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ignored ; (e) the areas within which Valuation Officers may exercise jurisdiction ; (ee) the manner in which and the conditions subject to which Valuation Officers, overseers, surveyors and assessors may exercise their powers under sub-section (1) of section 38A; (f) any other matter which has to be, or may be, prescribed for, the purposes of this Act." "Rule 1BB.-(1) For the purposes of sub-section (1) of section 7, the value of a house which is wholly or mainly used for residential purposes shall be the aggregate of the following amounts, namely : (a) the amount arrived at by multiplying the net maintainable rent in respect of the part of the house used for residential purposes by the fraction 100/8 ; and (b) the amount arrived at by multiplying the net maintainable rent in respect of the remaining part of the house, if any, by the fraction 100/9 : Provided that in relation to a house which is built on leasehold land, this sub-rule shall have effect as if for the fraction 100/8 in clause (a) or, as the case may be, the fraction 100/9 in clause (b), the fractions 100/9 and 100/10, respectively, had been substituted. Explanation.-For the purpose of this sub-rule, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the contrary, the Revenue wants to confine the applicability of rule 1BB to assessment years falling after the said rule came into force. It is submitted that the rule ultimately affects the tax liability of an assessee and, therefore, is substantive in character. It cannot have retrospective application. It will apply only to assessments pertaining to assessment years after the rule came into force. Counsel for the Revenue has relied on certain passages in the textbooks by Maxwell and G. P. Singh on Statutory Interpretation which give the principles to determine the retrospectivity of statutory provisions, besides referring to certain decisions, though strictly not on the point in issue. He has also argued that the charging section is obviously a substantive provision of the statute-section 3 in the present case. Section 7 laying down the procedure for valuation of assets is the machinery section and as such is an adjunct to the charging section and not an independent provision. The two sections are interconnected and cannot be considered independent. In fact, section 7 is part of the substantive provision. The moment section 7 is held to be part of a substantive provision, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . First in line is the judgment of a Division Bench of the Gujarat High Court reported as CWT v. Shri Kasturbhai Mayabhai [1987] 164 ITR 107. This decision contains a detailed consideration of all the points involved. It has been held that the provisions of rule 1BB dealing with the determination of the market value of a house on the valuation date is procedural in character and the provision operates retrospectively. While discussing the various aspects, it has been observed that" in order to determine the net wealth of an assessee, each asset has to be separately valued in accordance with section 7(1) of the Wealth-tax Act, 1957, read with rule 1BB. Section 7(l) is a machinery section and is subject to rules. It talks of procedure to determine value of assets. Rules are to be framed under section 46(2) of the Act which must relate to the manner in which the market value of any asset may be determined. Therefore, the rule making authority can lay down the method or mode of determining the market value of an asset. When a rule sets out the method or formula for determining the market value of any particular asset, it can only be considered to be procedural and not substantive. Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The mere statement in the notification that the rules incorporated by the Wealth-tax (Amendment) Rules, 1979, shall come into effect from April 1, 1979, is not decisive of the fact that the rules were not intended to be retrospective in nature. They had to be brought on the statute book either at once or with effect from a date decided upon by the rule-making authority but if the rule introduced by the amendment is found to be procedural in nature, it must operate retrospectively and the mere fact that it was given effect to from April 1, 1979, will not clinch the issue. Sub-section (1) of section 7 opens with the words "subject to any rules made in this behalf" which were added by the Wealth-tax (Amendment) Act, 1964, with effect from April 1, 1965. Section 46(2) empowers the Board to make rules providing for the manner in which the market value of any asset may be determined. The word "manner" used in clause (a) of sub-section (2) of section 46 would denote the mode or method to be followed for ascertaining the market value of the concerned asset. It is in exercise of this power that rule 1BB came to be inserted in the Rules by the Wealth-tax (Amendment) Rules, 1979, By th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht J. in Athlumney, In re [1898] 2 QB 547 at p. 552 : 'If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only'." On the question of statutory interpretation, the Supreme Court observed in Govinddas v. ITO [1976] 103 ITR 123 (headnote) : "It is a well-settled rule of interpretation that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only." It follows that the rule of construction depends upon the nature, of the statutory provision. If the law affects vested rights, interest and/or obligations, it is substantive. If it touches matters of procedure only, it is adjudicative. In the case of law which is substantive, the presumption is that it is not entitled to be retrospective unless such presumption is displaced by express language by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, i.e., section 3, we have been referred to CIT v. B. C Srinivas Setty [1981] 128 ITR 294 (SC). In this case, the Supreme Court has observed that the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not entitled to fall within the charging section. In view of the clear provisions of section 7 and rule 1BB, it is obvious that section 7 as well as rule 1BB are merely procedural. They are meant to be an aid to the charging section, i.e., section 3. Together, they may be an integral code. But it does not follow that, through this indirect process, what is specifically stated to be a procedural provision in the statute will become substantive. The provision which is substantive will remain substantive and what is procedural will remain procedural. The two can still harmoniously stay. As already noticed, rule 1BB has been framed in pursuance of the powers conferred by section 46 of the Act. Section 46 only caters to the manner and the procedure and as such rule 1BB cannot be anything but procedural. It is equally settled that rules can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments which are pending on the date the rule came into force. Counsel for the Revenue relied on Hukam Chand v. Union of India, AIR 1972 SC 2427. In this case, the Supreme Court points out the difference between subordinate legislation and the statute laws and observes that a subordinate law-making body is bound by the terms of its delegated or derived authority and that a court of law, as a general rule, will not give effect to the rules thus made, unless satisfied that all the conditions precedent to the validity of the rules have been fulfilled. It was also notified in the said judgment that, unlike the Sovereign Legislature which has power to enact laws with retrospective operation, the authority vested with the power of making subordinate legislation has to act within the limits of its power and cannot transgress the same. This observation, to our mind, rather supports the view that we have taken about rule 1BB in the present case. Rule 1BB has been framed in pursuance of the power conferred by the statute under section 46. Section 46(2) confers power to frame rules to deal with the manner in which the market value of any asset may be determined and the procedure regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the point. These authorities are in relation to different provisions of the Income-tax Act or the Wealth-tax Act. Therefore, we do not consider it worthwhile to discuss in detail any of these authorities. However, since they have been cited before us we will only make a mention of them. They are Thakur Gopal Singh v. CWT [1975] 99 ITR 354 (Raj); CWT v. H. H. Maharaja Mayurdhwaj Singhji [1982] 136 ITR 279 (Bom) CWT v. Balbhadradas Bangur [1984] 148 ITR 149 (Cal); Prithvi Singh v. Addl. CWT [1986] 157 ITR 193 (Raj) ; Sanghi Motors v. Union of India [1991] 187 ITR 703 (Delhi) and Escorts Ltd. v. Union of India [1991] 189 ITR 81 (Delhi). We have already referred to various decisions which support the contention advanced on behalf of the assessees and which are directly on the point and with which we are in full agreement. We, accordingly, hold that rule 1BB only lays down the procedure for valuation of assets and is as such purely procedural. It follows that it has retrospective application. It applies to all the proceedings pending on the date when the rule was brought into force. Our answer to the question posed before us is that there was no error on the part of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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