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TMI Blog1989 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... istrict Valuation Officer was bad in law and illegal. 4. The CWT(A) ought to have directed the WTO: (a) the value the "Shalimar" property at Rs. 57,332 being its value computed in accordance with Rule 1BB of the wealth tax Rules, 1957. (b) in the alternative to adopt the value taken in asst. yr. 1971-72 viz. Rs. 4,90,000 as the correct value as per s. 7(4) of the Act. 2. The brief facts of the case are as under: The dispute involved in this appeal relates to the valuation of the property situated at Race Course Road, Rajkot which is claimed to be the residential house property. The total area of land in question is 3354 sq. Mts. On that land there is a bungalow, out-houses, garages garden, etc. This property was treated as a self-occupied residential property up to asst. yr. 1980-81 and the value thereof was determined as per s. 7(4) of the WT Act at Rs. 4,90,000. The valuation date pertaining to the year under appeal was 31st March, 1981. On 3rd Feb. 1981, the assessee entered into two agreements with a builder for sale of the said property for a total price of Rs. 22 lakhs. A sum of Rs. 6 lakhs was paid by the purchasers on execution of the agreement and balance of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of value determined by the CWT in his order 25th Feb., 1983 and as par the provisions of s. 7(4). However, the assessee also disclosed the fact in the statement of wealth annexed with the return that an agreement for sale of this property was made on 3rd Feb., 1981, subject to various conditions, with M/s Lokhandwala Builders of Bombay for Rs. 22 lakhs but the conveyance of the property had not yet been made. It was further stated that the assessee is still in possession of the said property which is self-occupied by him. During the proceedings before the WTO and the District Valuation Officer (DVO) under s. 16A, the assessee also made an alternative claim for valuation of the said residential property as per WT Rule 1BB. The WTO made reference to the DVO under s. 16A on 10th Jan., 1986, for asst. yr. 1981-82 to 1984-85. The DVO prepared a preliminary estimate of the value of the aforesaid property vide his notice under s. 16A(4) dated 10th March, 1986 and estimated the value as on 31st March, 1981, at Rs. 39.85 lakhs. The assessee submitted his objection to the preliminary estimate of the DVO vide his letters dated 19th March, 1987, 24th March, 1986, 25th March, 1986, and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire relevant material already existed on record and the CWT(A) should have decided the question of applicability of r. 1BB and s. 7(4) on merits to obviate further unnecessary and prolonged litigation. The Revenue contended that despite execution of an agreement for sale during the currency of the relevant account year the assessee was the owner of the house property in question as on the valuation date, namely, 31st March, 1981, and, therefore, the said residential house property ought to have been treated in similar manner as it was treated and accepted upto asst. yrs. 1980-81. He invited out attention towards judgment of Hon'ble Supreme Court in the case of Late NAWAB SIR MIR OSMAN ALI KHAN vs. CWT (1986) 57 CTR(SC) 89 : (1986) 162 ITR 888 (SC) in which it was held that the value of immovable properties were to be included in the net wealth of the assessee for the purpose of assessment to wealth-tax despite the fact that the assessee, the Nizam of Hyderabad, had received full consideration for certain immovable properties from the purchasers, as he had not executed any registered sale deed in favour of the vendees. It was held that for all legal purposes, the properties had to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 16A had been made by him. The learned counsel for the assessee contended that the aforesaid reasons given by the WTO and DVO are not valid for holding that the provisions of r. 1BB are not applicable. It was contended that according to Explanation to r. 1BB(1) at least 2/3rd of the built-up floor area should be for residential purposes. In the case of the appellant the entire built-up area is used for residential purpose. He further contended that the difference between unbuilt area and the specified area does not exceed 20% of the aggregate area as prescribed in r. 1BB(5) (ii). He invited our attention towards the report of the registered valuer dated 15th March, 1986, at page 76 of the paper book which is reproduced hereunder: "Considering the total plot area i.e. aggregate area, as 3354 sq.mts., the specified area at 70% works out to 2347.8 sq.mts. The unbuilt area is 3354 minus 507.1 equal to 2846.9 sq. mts. and hence, the excess of unbuilt area over the specified area in 2846.9 sq.mts. minus 2347.8 sq.mts. 499.1 sq. mts. which is 14.88% of the aggregate area, and consequently, this property falls within the 4 corners of r. 1BB and because of the unbuilt area being more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAI HASSANALI, (1988) 68 CTR (Bom) 70 : (1988) 169 ITR 22 (Bom) and decision of ITAT, Bombay in the case of FIFTH WTO vs. F.D. STORE (1987) 29 TTJ (Bom) 55 : (1987) 22 ITD 111 (Bom). These cases dealt with penalty proceedings which required previous approval of the IAC under s. 18(3) of the WT Act and under s. 274(2) of the IT Act. He also invited our attention towards the decision of ITAT, Bangalore in the case of K.L. SWAMY (HUF) vs. WTO (1985) 22 TTJ (Bang) 443 : (1985) 12 ITD 396 (Bang) in which it was held that it cannot be said that valuation under r. 1BB is not "practicable" just because it gives a lower value than the land and building method. In view of the aforesaid facts and circumstances, the learned counsel vehemently argued that the provisions of r. 1BB are clearly applicable in this case. He further contented that once it is established that the provisions of r. 1BB are applicable, the question of making any reference to the Valuation Cell for determination of fair market value of such properties does not and cannot arise. In support of this submission he placed reliance on the recent decision of ITAT, Delhi (TM) in the case of WTO vs. MANMOHANLAL RAIS (HUF), (1990) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see continues to be the owner of the said house property as on the relevant valuation date. The house was exclusively used by the assessee for residential purposes through out the period of 12 months immediately preceding the valuation date of 31st March, 1981. The said house was valued at Rs. 4,90,000 in accordance with s. 7(4). The learned counsel placed reliance on the judgment of Hon'ble Gujarat High Court in the case of CIT vs. KASTURBHAI MAYABHAI. 3.3 Without prejudice to aforesaid contention the learned counsel contended that s. 7(4) applies atleast to that part of the property which was in possession of the assessee on the relevant valuation date. He contended that the question of the valuation according to any other method may arise only for the remaining portion of the land which was only 694.87 sq. mts. the possession of which was given by the assessee to the builder. He relied upon the judgment of Hon'ble Calcutta High Court in the case of CED vs. JYOTIRMOY RAHA (1978) 112 ITR 969 (Cal) in which the High Court had upheld the claim for deduction under s. 33(1)(N) of the ED Act in respect of portion of the property used for residential purposes. 3.4 The learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in case his main contention that the property should be valued as per r. 1BB and in the alternative as per s. 7(4) is found to be no acceptable. 4. The learned Departmental Representative vehemently supported the order passed by the CWT(A) and contended that the assessee should have no grievance against the order passed by the CWT(A) as he has already set aside the assessment with a direction to complete the assessment de nova after affording fresh opportunity to the appellant to present his case and to make his objections against the proposed valuation. He contented that r. 1BB is not at all applicable in respect of the aforesaid property. The assessee has already entered into an agreement on 3rd Feb., 1981, for transfer of the said property to M/s. Lokhandwala Developers and had also parted with possession of a part of the said property in accordance with the agreement. He submitted that the agreement has been executed for the entire property measuring 3354 sq.mts. and not with regard to only part thereof. The agreement for sale has changed the nature and character of aforesaid property and it has ceased to be a residential property from the date of execution of the said agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to r. 1BB as per working given by the assessee comes to only Rs. 57,332 as against the value determined by the WTO on the basis of DVO's report at Rs. 39.85 lakhs. Further more the built-up area is hardly 18% and the remaining part is unbuilt vacant land which cannot be treated as land appurtenant to the building. Since the entire land has been transferred and has been earmarked for development into commercial-cum-residential complex as per permission granted by the Rajkot Municipal Corporation dt. 20th Dec., 1978, the said property cannot by any stretch of imagination be treated as residential property eligible to be valued as per r. 1BB or s. 7(4). He also invited our attention towards the commentary on WT Act by Gulanikar, 1984 edition at pp. 2 48 and 2 49 which deals with valuation of residential house property as per r 1BB. The learned departmental Representative submitted that the provisions of s. 16A are clearly applicable in this case and the WTO was fully justified in adopting the value estimated by the DVO in the preliminary report. He also submitted that now final report has also been prepared by the DVO after considering the various objections submitted by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the superstructure or the appurtenant land but would also include garden, orchard, servants' quarters, tennis court etc. And other vacant land which are attached to the house for its usefull enjoyment. Reliance was also placed on the decisions reported in K.L. SWAMY (HUF) vs. WTO and MST. A.K. PADMAVATHI AMMAL vs. WTO (1988) 30 TTJ (Mad) 122. He further contended that no part of the built-up area is used for non-residential purposes even today and the entire built-up area is used for non-residential purposes even today and the entire built-up area is fully and exclusively used for residential purpose. As regards permission granted by the Municipal Corporation Rajkot it was contended that the permission has been granted mainly for construction of residential houses in the form of multi-storeyed buildings and only some part is allowed for commercial user which is found also where such complex of multistoreyed buildings are situated. Even according to the permission the major portion would be meant wholly and exclusively for residential purposes. The learned counsel submitted that with regard to eligibility of valuation of the part of the land which was handed over to the buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific finding in relation to the main points regarding applicability of r. 1BB or s. 7(4). Having held that the wholesale cancellation of the reassessment, without giving specific findings, is not proper, the following major issues require our considerations: (1) Whether r. 1BB is applicable and, if so, whether it is applicable in relation to the entire property or the same should be applied only in relation to that part of the property which remained in the possession of the assessee as on the valuation date of 31st March, 1981? (2) In the alternative, whether s. 7(4) is applicable and, if so, whether it is applicable in relation to the entire property or is applicable only in relation to that part of the property which remained in the possession of the appellant as on the aforesaid valuation date? (3) If the provisions of r. 1BB or s. 7(4) are not applicable in relation to the area of 694.87 sq. mts. and some portion in the out-house, which had already been handed over to the buyers before the valuation date, what should be the basis of determination of the fair market value of that portion of the land? (4) If the provisions of r. 1BB or s. 7(4) are not found to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of execution of the said agreement will also have to be first decided. 5.2. The Hon'ble Supreme Court, in the cases of (LATE NAWAB SIR MIROSMAN ALI KHAN vs. CWT and CWT vs. BISHWANATH CHATTERJEE AND OTHERS relied upon by the learned counsel for the assessee, had held that unless a conveyance deed is executed and registered, the assessee will continue to be treated as owner of the immovable property regardless of the fact that the assessee had received full consideration for certain properties and/or parted with the possession over part of the properties agreed to be transferred. In view of these judgments there is no doubt about the fact that the assessee will be treated as the owner of the entire immovable property regardless of the fact that he had already given possession over an area admeasuring 694.87 sq. mts., i.e. over about 20% of the total area. 5.3. However, the nature of the land measuring 694.87 sq. mts., which had already been handed over to the purchasers in accordance with the agreement dt. 3rd Feb., 1981, cannot be treated as residential property, possession of which has already been handed over to the purchaser for carrying out development and construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Gujarat High Court in the case of KASTURBHAI MAYABHAI that the provisions of r. 1BB are procedural in nature and should be applied even in case of self occupied residential houses. It was further held that the assessee has the choice to adopt valuation of self-occupied house property either as per r. 1BB or as per s. 7(4), whichever may be beneficial to him. In view of the aforesaid findings given by the Hon'ble Gujarat High Court, the assessee may be entitled to opt for valuation of the said residential house property which remained in his possession on the relevant valuation date according to r. 1BB provided the various conditions mentioned in r. 1BB are satisfied. The assessee relied upon the report of the registered valuer Ms Poonagar Bilimoria, Co. dated 18th March, 1986, to support his contention that the difference between the unbuilt area and the specified area does not exceed 20% of the aggregate area. However, in view of our finding given in the preceding paragraph that land admeasuring 694.87 sq. mts., the possession of which has already been given to the buyers, cannot be considered as residential property, the said working will undergo the consequent changes f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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