1. These appeals by the revenue are directed against the consolidated order of the Commissioner dated 20-2-1981 relating to the assessment years 1977-78 to 1979-80. The common issue involved in all these appeals is whether the assessee was entitled to the benefit of the provisions of Section 7(4) of the Wealth-tax Act, 1957 ('the Act'), with regard to the kothi in Sant Nagar, Civil Lines, Ludhiana, onstructed in the financial year 1973-74.
2. The assessee is a HUF. It is common ground that none of the members of HUF resides in India because the HUF has its residence in USA. It is also common ground, however, that the said kothi in Sant Nagar was not let out during any of the years under.appeal. The assessee constructed this kothi in the financial year 1973-74 and as on 31-3-1975, the departmental valuer valued it at Rs. 1,41,300. For the assessment years 1977-78, 1978-79 and 1979-80, the WTO estimated the value of this property on the respective valuation dates at Rs. 1,60,000, Rs. 1,70,000 and Rs. 1,80,000. These valuations were adopted in computing the net wealth of the assessee and exemption available to the assessee for one house or part of a house belonging to the assessee was allowed by the WTO to the extent of Rs. 1,00,000 in each year. However, this was challenged before the AAC.3. The AAC has accepted the claim of the assessee for all the years under appeal that the provisions of Section 7(4) are applicable and, therefore, the value of this residential house as on 31-3-1974, which was Rs. 1,24,400 should be taken on the valuation dates for each of the assessment years under appeal. This is a cause of grievance for the revenue. Hence these appeals.
4. We have heard the parties and we are of the opinion that the AAC erred in issuing the directions that he did for the reasons that we record infra. Section 7(4) was brought on the statute book by the Finance Act, 1976 with effect from 1-4-1976 by way of insertion. The memorandum to the Finance Act explained that the valuation of self-occupied properties had from year to year resulted in certain practical difficulties and inconveniences to taxpayers. Therefore, with a view to getting over these difficulties,, this section freezes the open market valuation of such properties at the option of the assessee either to the value on the valuation date relevant to the assessment year commencing on 1-4-1971 or the valuation date next falling the date on which he became the owner, whichever date is later. However, this concession is not available unless certain preconditions are fulfilled.
These conditions are as under : ii. This must be exclusively used by him for residential purposes through the period of 12 months immediately preceding the valuation date.
There is further clarification in the Explanation to this Sub-section that where the house has been constructed by the assessee, he shall be deemed to have become the owner thereof on the the construction of such house is complete and for purposes of getting this concession a house includes a part thereof but it should be an independent residential unit.
5. When the above position of law is applied to the case of the assessee, we find that the condition regarding the user of the house for personal residence throughout the period of 12 months immediately preceding any of the valuation dates relevant to the assessment years under appeal is not satisfied. This is so because all the members of the assessee-HUF reside in USA. It is to be noted that the Legislature has used the words in the section 'exclusively used by him for residential purposes throughout the period of 12 months immediately preceding the valuation date'. These words are in wide contrast to the provisions of Section 6(1)(b) of the 1961 Act, where an individual is said to be resident in India in any previous year if he, inter alia, maintains or causes to maintain for him a dwelling place in India. In Sub-section (4) of Section 7, the Legislature has very clearly indicated the intention that the house for which such a treatment is to be given has to be used for residential purposes exclusively by the assessee throughout the period of 12 months immediately preceding the valuation date. Such a condition has not been fulfilled in this case.
Therefore, the provisions of Section 7(4) are not applicable for any of the assessment years under appeal. Insofar as this issue is concerned, the AAC did not make a speaking order and his order is erroneous. We reverse his order.
6. Now coming to the valuation of this house, we find that for the assessment year 1975-76 for which the valuation date was 31-3-1975, the value was taken at Rs. 1,41,300 on the basis of Valuation Officer's report. As on 31-3-1977, 31-3-1978 and 31-3-1979, the value adopted by the WTO is Rs. 1,60,000, Rs. 1,70,000 and Rs. 1,80,000. In our opinion, considering the location of the property, the city in which it is located, the prevalent prices of the real estate and the value of the property earlier taken, the value on each of the valuation dates adopted by the WTO is reasonable and fair. Hence, we reverse the orders of the AAC on the valuation as well. We set aside the orders of the AAC for each of the assessment years under appeal and restore in its place that of the WTO.