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Smt. Patwant Kaur Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Amritsar
Decided On
Judge
Reported in(1983)4ITD109(Asr.)
AppellantSmt. Patwant Kaur
RespondentWealth-tax Officer
Excerpt:
.....the valuation date for each of the assessment years should be determined. in view of the rise in values year after year, even in respect of residential property the increased value will have to be shown and this would result in hardship to the assessees, inasmuch as, there is no return from the property. the property is merely used for residential purpose but in view of the law it has got to be valued on each of the valuation dates and it should be included in the wealth of the assessees. in order to give relief to the assessees, who have property meant for their own occupation, the legislature thought that the increase in the values of real properties should not affect the valuation of a residential property. with that view in mind the legislature pegged the value fixed for the.....
Judgment:
1. The assessee is the owner of a residential house located at 696, Model Town, Jullundur. Apart from the dispute regarding the valuation, the contention of the assessee before the lower authorities was that in view of the provisions of Section 7(4) of the Wealth-tax Act, 1957 ('the Act'), the value of the self-occupied property has to be restricted to the value as determined for the assessment year 1971-72.

The WTO held that since Section 7(4) came into force on 1-4-1976, it cannot apply to the assessments prior to that date and since the matter relates to the assessment years prior to the assessment year 1976-77, the benefit of Section 7(4) cannot be granted. The AAC agreed with the view taken by the ITO. The matter was then taken up before the Tribunal. On the question as to whether Section 7(4) would apply to earlier assessments, there has been a difference of opinion between the learned members. The learned Accountant Member held that it will not apply while the learned Judicial Member held otherwise. Accordingly, the following question has been referred to me for decision under Section 255(4) of the 1961 Act, by the President: Whether, the provisions of Section 7(4) of the Wealth-tax Act are applicable to the case of the assessee for the purpose of valuation of residential property at 696, Model Town, Jullundur in respect of the assessment years 1974-75 and 1975-76? 2. On behalf of the assessee, reliance is placed on the order of the Judicial Member. He reiterated the same arguments as were advanced before him and he referred to the following decisions: Smt. Kusumben D.Mahadevia v. N.C. Upadhya [1980] 124 ITR 799 (Bom.), Srichand Golecha v. WTO and WTO v. Smt. Jyotsana Baid [1982] 13 TTJ 47 (Cal.).

The learned departmental representative, Mr. Berjinder Singh, relied upon the order of the learned Accountant Member and referred to a passage in Sampath Iyenger's Commentary under Section 7(4). He further pointed out that there is no decision of the High Court which directly dealt with Section 7(4) which came into force by way of an amendment.

He has further referred to the Notes on Clauses, when the amendment by way of Section 7(4) was introduced by the Finance Act, 1976.

3. I have carefully gone through the orders of the two learned members.

It is better to reproduce Section 7(4): Notwithstanding anything contained in Sub-section (1), the value of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of 12 months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became the owner of the house or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later: The above provision has been introduced by the Finance Act, 1976, which came into effect from 1-4-1976. The Notes on Clauses mentioned that the amendment will take effect from 1-4-1976 and will accordingly apply in relation to the assessment year 1976-77 and the subsequent years. This statement is applicable to all the amendments made to the Act. Therefore, it cannot govern a provision incorporated from where we can find that it applies to an earlier assessment year. That apart, Notes on Clauses cannot also guide if the language of the provision is fairly clear and understandable. In my openion, there is an intrinsic evidence in the provision itself that the value of residential house property should be adopted at the value fixed for the assessment year 1971-72. It cannot be said that the value for the assessment year 1971-72 would be something, the value for the assessment years 1972-73 to 1975-76 would be different and the value for the assessment year 1976-77 onwards would be the same as the value fixed for the assessment year 1971-72. It is well known that due to inflation the value fixed for 1971-72 could not be the value for the subsequent year. A situation would, therefore, arise that the value for 1971-72 would be at a particular figure while the value for the subsequent years would be more and then suddenly for the assessment year 1976-77 the value will again be less. I am unable to see any logic behind this and I cannot say that the Legislature intended to create this anomaly.

From the very fact that the value fixed for the assessment year 1971-72 is pegged down so far as the residential house property is concerned, it would indicate that the same value should be adopted thereafter. It is not correct to hold that the value for the assessment year 1976-77 would be lower while the value for the earlier years would be higher especially in the state of inflationary conditions where the value of real properties has been going up and up. On a fair reading of Sub-section (4), I feel that the Legislature wanted to fix the value of the residential property at a particular value determined for the assessment year 1971-72.

4. Tt may be also mentioned that the matter can be looked into from a slightly different angle. The valuation of the residential property has got to be made under the Wealth-tax Act and the fair market value as on the valuation date for each of the assessment years should be determined. In view of the rise in values year after year, even in respect of residential property the increased value will have to be shown and this would result in hardship to the assessees, inasmuch as, there is no return from the property. The property is merely used for residential purpose but in view of the law it has got to be valued on each of the valuation dates and it should be included in the wealth of the assessees. In order to give relief to the assessees, who have property meant for their own occupation, the Legislature thought that the increase in the values of real properties should not affect the valuation of a residential property. With that view in mind the Legislature pegged the value fixed for the assessment year 1971-72 for all the subsequent years. It is a sort of a beneficial legislation and in giving effect to the provision, one should not forget that such legislation should be given liberal construction. Tf that is so, it is quite reasonable to hold that the provision should be applicable for the assessment year 1971-72 and thereafter.

5. The argument that Sub-section (4) is procedural and, therefore, it is applicable to all pending proceedings or that it is substantive provision need not detail us because even if it is considered to be substantive, if there is intrinsic evidence in the provision itself that it will be applicable for the assessment year 1971-72, then it will be applied.

6. There is one more argument advanced by Mr. Berjinder Singh that if the above view is accepted, persons who have suffered assessments and whose matters are not pending anywhere, would be at a disadvantage. It may be so. When amendments are made, such situations do arise. But that does not deter us from giving effect to the statutory provision in the manner it is intended to be given effect.

7. Before concluding, I would like to mention that some of the Benches of the Tribunal have taken the above view, though for slightly different reasons and they are in WT Appeal Nos. 108 to 111 (Hyd.) of 1978-79, dated 30-8-1980 (Jaipur Bench), reported in Tax World, 1980 page 209, and WT Appeal Nos. 171 to 174 (Jp.) of 1981, dated 20-10-1981 reported in Smt. Jyotsana Baid (supra). For the foregoing reasons, I agree with the view taken by the learned Judicial Member. The matter will now go back to the Bench for disposal of the appeal in accordance with the majority opinion.

1. These are six appeals-three by the assessee and the other three by the department--directed against the order of the AAC and they relate to the assessment years 1973-74, 1974-75 and 1975-76. All the appeals are being disposed of by this common order for the sake of convenience.

2. It may be mentioned that the WTO has made a consolidated order of assessment for the assessment years 1972-73 to 1975-76 and similarly the AAC has passed a consolidated order for the above four years.

However, before us only three years' matters are in appeal. The first question to be considered is regarding the valuation to be adopted in respect of the assessee's residential house located at 696, Model Town, Jullundur. The assessee had disclosed the value of this property at Rs. 1,19,110. This was based on the valuation report obtained from a valuer. The WTO found that the land on which this property was constructed consisted of 162 marlas and the covered area was 4,505 sq.

feet. He referred to the other details of the accommodation available and pointed out that the value of the land and the construction shown by the approved valuer was very low. He pointed out that there was no basis for taking the value of the land at Rs. 400 per marla. He referred to the fact that the property was located in a very good locality in Jullundur [and the construction was of a superior quality.

He proceeded to refer to the present value of the property and on that basis held that the value of land on 31-3-1973 should have been taken at Rs. 1,250 per marla. The WTO thus arrived at the value of Rs. 1,65,750 in respect of land and determined the total cost of the building and land at Rs. 3,00,000. This has been reduced to Rs. 2,50,000 by the AAC. While doing so, he also observed that the value of the land has taken in the approved valuer's report was very low.

3. In the ground of appeal before us, it has been submitted that the value determined by the WTO and the AAC was illegal as it was based on conjectures. In the ground some instances have been given about the sales in that area. A reference has also been made to an assessment for wealth-tax purpose in respect of property bearing No. 539 in Model Town. It was also pointed out that the value of this very property has been taken at Rs. 1,00,000 in the earlier three years. Though in the grounds of appeal, the assessee has not made any mention of the provisions of Section 7(4), in the contention made before us, the learned counsel for the assessee submitted that the property ought to have been valued in accordance with Section 7(4). It was submitted that according to the provisions of Section 7(4) the value of self-occupied property has to be restricted to the value as in the assessment year 1971-72. It was contended that though the provisions of Section 7(4) came into force from 1-4-1976 the provisions should be treated as retrospective for the earlier assessment years as well. In support of this reliance was placed on an order of the Tribunal Bench Cuttack (Camp Jaipur) in the case of Srichand Golecha (supra). It was further contended that the above decision was based on a decision of the Bombay High Court in the case of Kusumben (supra).

4. The learned counsel for the assessee further contended that the WTO has increased the value of the property from Rs. 1,00,000 to Rs. 3,00,000 without discussing any specific instance of sale or the nature of construc-tio . It was contended that his statements are vague and do not indicate the basis on which he has valued the property. It was further contended that in such a case the WTO should have made a reference to the Valuation Officer if he was of the view that the value of the property was as high as taken by him. It was further contended that the property was located at a big piece of land and this fact should have been kept in view.

5. The departmental representative submitted that any provision of law should not be considered to be retrospective unless the statute makes it clear. A reference was made to the decision of the Punjab and Haryana High Court in the case of CWT v. M.R. Mahajan [1980] 126 ITR 706. The departmental representative then made a reference to the commentary by Sampat Iyengar where explaining the provisions of Section 7(4) of the Act, it has been stated that it was applicable in the years 1976-77 onwards. He referred to the material mentioned by the WTO and submitted that the basis for valuation is indicated in the order of the WTO. It was contended by the departmental representative that it was not obligatory to make a reference to the Valuation Officer. He pointed out that the report of the valuer was found defective and, therefore, could not be relied upon.

6. I have considered the facts of the case. I find that the provisions of Section 7(4) were not invoked by the assessee either before the WTO or before the AAC. In the grounds of appeal before the Tribunal it has also not been specifically taken. However, as the question has been raised by the learned counsel for the assessee I proceed to consider the question. I have to find whether the provisions of Section 7(4) were at all applicable to the assessment years 1973-74, 1974-75 and 1975-76. The provision was inserted by Section 27(3) of the Finance Act, 1976, with effect from 1-4-1976. When a law is inserted from a particular date the position is that in respect of substantive law it will have effect for the assessment years starting from April 1 of the year when the law comes into force. In respect of the purely procedural matter, however, the retrospective operation can be indicated and inferred. Now as far as Section 7 is concerned it deals with the valuation of properties for the purpose of wealth-tax. The purpose of secti6n 7 is to determine the true and legal taxable value of the chargeable assets and thus effects the quantum of wealth and wealth-tax of an assessee. The wealth-tax payable by an assessee is dependent on the value fixed on the fixed assets included in the wealth. Section 7 is, therefore, a technical provision of the statute and should be considered as substantive law. Section 7(4) introduces a concession for the assessee. The Legislature wanted self-occupied properties to be valued at the same figure as it had been for the assessment year 1971-72. The Legislature has thus given this concession with effect from 1-4-1976 and normally unless stated otherwise it would be operated for the assessment year 1976-77 onwards.

7. I may now deal with the order of the Tribunal in the case of Srichand Golecha (supra), which has been referred to above. I find that the Tribunal referred to some earlier order which was followed but they have referred to the decision of the Bombay High Court in the case of Kusumben (supra) for holding that the provisions were not substantive but were merely procedural. According to the Honourable Members, Section 7(4) did not involve any substantive manner. I find that the decision of the Bombay High Court in the case of Kusumben (supra) has no application to the question of law being procedural or substantive (sic). That was a case where rule ID of the Wealth-tax Act was to be interpeted and it was to be found whether the rules were directory and not mandatory. In this decision, there is no discussion about the provision of law being substantive or procedural and it is not very clear how that case was relied upon for deciding this issue. As no other reasoning given in that order of the Tribunal, I cannot discuss such reasons any further. However, at this stage I may make a mention of the fact that a Special Bench of the Tribunal consisting of the President, Vice President and a Judicial Member considered the question about the valuation of a residential property particularly with reference to rule IBB of the Act. That was the case of Biju Patnaik v.WTO [1981] 6 Taxman 56 (Delhi - Trib.). In that case Tribunal had the occasion to consider the application of Section 7(4). The case of the assessee related to the assessment years 1964-65 to 1974-75. The Special Bench observed that the provisions of Section 7(4) came on the statute book with effect from 1-4-1976 and the question regarding reconciling Section 7(1) with Section 7(4) did not directly arise in those appeals. The Tribunal further observed that in the case of certain interveners where assessment years after 1976 were involved this question would arise. The Bench, therefore, proceeded to consider the question of applicability of Section 7(4). One thing is, however, clear from the order of the Special Bench that the provisions of Section 7(4) were found not to be applicable to the assessments prior to 1976-77; This order of the Special Bench has obviously escaped notice of the learned members of the Tribunal who passed the order in the case of Srichand Golecha (supra), a few months after the Special Bench order had been passed.

8. On the above discussion, it is clear that the provision of Section 7(4) conferring on substantial taxing (sic) on the assessee could not be considered to be a procedural law. I am not dealing with any rule laying down the mode of valuation. In view of the clear language of the law and the fact that the Parliament made it effective from 1-4-1976, I hold that the benefit of Section 7(4) would not be available to the assessee for the assessment year under consideration.

9. This, however, does not mean that the assessee's case cannot be considered. The valuation made by the WTO has not been made in a satisfactory manner. He has valued the property at three times what it was in the earlier years and has not considered any instance of sale or valuation of property in that area. It is for such cases where the WTO feels that the value is much more. That provisions of Section 16A of the Act have been introduced and the WTO has to take an expert opinion before fixing the valuation. In this connection, I may also make a reference to the provisions of rule IBB of the Wealth-tax Rules which applies to the valuation of residential properties. This rule has been held to be retrospective as it was procedural though mandatory. The WTO, therefore, proceeds to consider the value having regard to the above rule and where he finds the value to be very high and the valuation by the Valuation Officer indicated he can get the property valued through the Valuation Officer. It is no use arguing that the WTO has the discretion to make a reference to the Valuation Officer and in this case he did not consider it proper. The discretion given is not an arbitrary power and has to be exercised according to the guidelines provided in this section itself. The section as well as the rule provided that where the difference is rather wide the WTO should obtain an expert opinion. This was a fit case for such consideration. I would, therefore, set aside the orders of the lower authorities on this point and direct the WTO to re-consider the question on the valuation having regard to the relevant rules and after having obtained report of the Valuation Officer in case the thinks that the valuation of the property would be higher by a substantive margin. In view of the above decision the departmental appeals have become infructuous as they have merely challenged the reduction in the valuation by the AAC.10. The next ground which is common to all the three years is regarding the valuation of the agricultural lands situated in villages of Khurla and Wadala. The WTO found that in respect of Khurla village the assessee has shown the value of 78 kanals at Rs. 1,17,800. The WTO did not accept the capitalisation method on the basis of the land revenue and found that the location of the Khurla village is near the village Wadala. He referred to the certain cases like the case of Shri Jograj Singh where the same land has been sold for more than Rs. 3,000 per kanal. He therefore, adopted the value of Khurla village land at Rs. 3,500 per kanal. In respect of the land at Wadala, he, took the value at Rs. 3,000 per kanal.

11. It has been submitted before us that the value has been stepped up without much justification and it was also pointed out that in respect of the land belonging to the husband, the value had been taken at Rs. 2,300 per kanal whereas the higher valuation has been taken for the assessee's own land. It was pointed out that the villages and the lands were adjacent. It was also submitted that the value shown by the assessee was based on the report of the approved valuer. It was further submitted that the WTO increased the value by almost 100 per cent but did not consider it necessary to refer the matter to the Valuation Officer. The departmental representative pointed out that the approved valuer's report was defective and the WTO had considered only one sale.

12. Having considered the facts, I am of the view that the WTO appears to be of the view that the value of the land had not been stated correctly by the assessee and the difference according to him was almost 100 per cent. The WTO has not considered it proper to make a reference to the Valuation Officer who might have considered some sale instances and other relevant factors. I am of the view that in such a case the valuation was not called for and it was a fit case where the matter for valuation should have been referred for expert's opinion under secrion 16A. I, therefore, direct the WTO to re-value the land after making a referernce to the Valuation Officer. This would apply to the land at Khurla as well as Wadala.

13. The last ground is regarding the valuation of the assessee's assets inherited by her husband's death. The value of such assets has been taken at Rs. 93,975 as one-fourth of Rs. 3,75,738. In this connection, a reference has been made to certain laws which according to the assessee should have been considered for deducting (sic) from the value of the assessee's share.

14. I have perused the orders of the WTO and the AAC and I find that this question has been specifically raised before the AAC and there is no discussion in his order about this matter. The reference has been made to an earlier assessment year but the facts are not mentioned. I have no material at this stage to go into the correctness of the assessee's claim. I would, therefore, consider that the AAC should dispose of the grounds taken before him after ascertaining full facts on this question. He should look into the nature of the claims made by the assessee and dispose them of and each claim should be considered separately and then should be disposed of. This matter will, therefore, go to the AAC for fresh consideration. In the result, the assessee's appeals as well as the departmental appeals shall be treated as allowed for statistical purposes.

1. There are two issues in these appeals, filed by the assessee for the assessment years 1973-74, 1974-75 and 1975-76. One of the issues relates to the valuation of a property at 696, Model Town, Jullundur.

The assessee had returned a value of this property at Rs. 1,19,101 on the face of the valuation made by the approved valuer. The WTO, applying the land and building method, determined the value at Rs. 3,00,000. The AAC reduced this valuation to Rs. 2,50,000. The assessee, in appeal, before us, contended that the value of this property must be determined under Section 7(4). It has been held by my learned brother that Section 7(4) being substantive provision, is not applicable for determining the value of the building for the years in ssue. It came into effect on 1-4-1976 and, therefore, did not have any retrospective effect. The aforesaid view of my learned brother that, being a technical provision, it should be considered as a substantive provision, is based on the fact that the Special Bench did not deem it right to apply this provision for determining the value for the years earlier than the year, in which it was brought into effect. According to me, this view does not coincide with the view of the Allahabad High Court or with that of ths Bombay High Court. Iyengar, in his treatise, The Three New Taxes has observed about the Allahabad High Court view in the case of Madan Gopal Radheylal v. CWT [1968] 68 ITR 735, as under: The learned judges who decided the Allahabad case, appear, with respect, to have construed the section as it indicates two rules of procedure either of which officer may adopt according to his choice.

Same view that the provision contained in Section 7(4) is a provision relating to the procedure, has been shared by the Andhra Pradesh High Court in the case of CWT v. Trustees of H.E.H. The Nizam's Sahebzadi Anwar Begum Trust [1981] 129 ITR 796 where it was observed that "Section 7 of the Act is an imaginary provision, which requires the WTO to assume that there is an open market and property can be sold in such a market and it is, on that basis, that the value of the asset has to be determined for the purpose of computation of the net wealth of the assessee". There is no doubt, therefore, that Section 7 is a procedural provision. Its intent being the measurement of the net wealth of a person, for whom the substantive provision, contained in Sections 3, 4, 5 and 6 of the Act provided liability for the wealth-tax or immunity therefrom. If Section 7 is a procedural provision, Sub-section (4) forming part of it cannot be looked upon as a substantive provision on the ground that it is a technical provision. The Rule 1BB has been considered by the Special Bench as a procedural provision which had been applied in respect of the determination of the wealth for earlier years in the case of Biju Patnaik (supra). If rule IBB of the Wealth-tax Rules is a procedural provision, as appears from their finding that it can be applied to earlier years, it cannot be justly held that the provision of law contained in Section 4 is not a procedural provision. Both the provisions have the same aim and purpose. They enable the WTO to measure the net wealth held by a person. Having considered in this light, we cannot hold that the provision in Section 7(4) is not a procedural provision.

2. Maxwell, in his famous treatise op Interpretation of Statutes, has on page 222 observed that "the presumption against the retrospective construction has no application to enactments which effected only the procedural and practice of the courts. No person has a vested right in any course of procedure". Even where the presumption against retrospectivity is applied in respect of a substantive provision, the Court must be satisfied that the statute is, in fact, retrospective.

Maxwell, on page 216, has quoted Crais on Statute Law Statute is retrospective, 'which takes away or impairs any vested right acquired under the existing laws, or quotes a new obligation, or imposes a new duty, or attaches a new disability in respect to transactions or considerations already past". Applying these tests, I am of the view that the provision contained in Section 7(4) does not impair any vested right acquired under the existing laws, nor creates a new application or imposes a new duty or attaches any new disability on any one. In fact, the provision grants concession to the taxpayers. Therefore, applying the tests provided by Crais, Sub-section (4) of the Act cannot be considered to be a provision lacking retrospectivity, even when it is considered as a technical or a substantive provision. In this view of the matter, I would hold that the assessee was entitled to claim that the value adopted for the assessment year 1971-72 was also to be adopted for the years in issue.

3. As for the statement of the fact as also the finding on the second issue, raised in appeal, I am in full agreement with my learned brother.

1. We having differed in opinion on the following point in the above appeals, we proceed to state the point on which we differ so that the President may get the point decided by one or more of the other members of the Tribunal.

Whether the provisions of Section 7(4) of the Wealth-tax Act are applicable to the case of the assessee for the purpose of valuation of residential property at 696, Model Town, Jullundur in respect of the assessment years 1973-74, 1974-75 and 1975-76 ?


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