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inspecting Assistant Vs. Srikrishan Khanna - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1994)48ITD1(Delhi)
Appellantinspecting Assistant
RespondentSrikrishan Khanna
Excerpt:
1. while revenue is in appeal, assessee is in cross objection for assessment years 1973-74 and 1974-75. several common issues have been raised both in the appeals and the cross objections preferred by the assessee. therefore, these are combined together and disposed of by this order.2. one of the issues relates to the valuation of a factory building held by m/s. amritsar swadeshi woollen mills. assessee is a joint hindu family and a partner in m/s. amritsar swadeshi woollen mills. according to wto, the valuation of the factory building shown in the balance-sheet of the partnership firm at rs. 3,79,178 was a case of under-valuation. land occupied by the factory building was taken at rs. 12,334 while the value of the building was shown at rs. 3,79,178. thus the total value of the building.....
Judgment:
1. While Revenue is in appeal, assessee is in cross objection for assessment years 1973-74 and 1974-75. Several common issues have been raised both in the appeals and the cross objections preferred by the assessee. Therefore, these are combined together and disposed of by this order.

2. One of the issues relates to the valuation of a factory building held by M/s. Amritsar Swadeshi Woollen Mills. Assessee is a joint Hindu family and a partner in M/s. Amritsar Swadeshi Woollen Mills. According to WTO, the valuation of the factory building shown in the balance-sheet of the partnership firm at Rs. 3,79,178 was a case of under-valuation. Land occupied by the factory building was taken at Rs. 12,334 while the value of the building was shown at Rs. 3,79,178. Thus the total value of the building shown at Rs. 3,91,512 was considered an under-valuation by the WTO. He, therefore, referred to the Valuation Cell the valuation of the factory building of the said partnership concern. Valuation Cell placed the valuation of the land at Rs. 13,29,000. This led to an excess difference of Rs. 9,37,484 between the valuation shown in the balance sheet and the evaluation made by the Valuation Officer. He worked out the appropriate difference falling to the share of the assessee, according to profit sharing ratio and caused this amount to be added to the net wealth of the assessee. The assessee felt aggrieved by this approach of the WTO and preferred an appeal before the AAC, Amritsar. The assessee raised a ground before the AAC that the approach of WTO in measuring the interest of the assessee in the partnership assets was not correct inasmuch as he proceeded to revalue one of the assets held by the partnership and make an addition to the net wealth of the assessee on that account. In this connection, he pointed out that Section 4(1)(b) prescribed that the value of the interest of a partner in the partnership firm will be determined in the prescribed manner. Wealth-tax Rule 2(1) prescribed the manner in which it was to be determined. Therefore, it was not proper on the part of the WTO that he should have ignored the Rule 2(1) and proceeded to apply other provisions including Section 7(1) and Wealth-tax Rules 2A, 2B, 2C and 2D to determine his interest in the partnership concern. WTO had not denied that he was not a partner in M/s. Amritsar Swadeshi Woollen Mills. Therefore, it was not open to him to disregard the provision contained in Section 4(1)(b) read together with W.T. Rule 2(1) and take recourse to other provisions. AAC after an examination of the relevant provisions dismissed his plea. She said, "The objection of Shri Mehra with regard to Section 7(2) (a) is that Section 7(2) (a) applied to a person who is an assessee under the Wealth-tax Act and, therefore, it could not be invoked for determining the net wealth of the firm, which is not an assessee. Here again the learned A.R. is not viewing the matter in its proper perspective. Section 7(2)(a) clearly states that the value of any asset shall be estimated 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". She also overruled his objection to the application of Wealth-tax Rules 2A to 2E for the purpose of evaluating the property held by the firm. The assessee had raised a plea against the reference of the property held by the firm to the Valuation Officer. In his view, it was illegal and without the authority of the law that WTO had proceeded to refer the valuation of the aforesaid property held by the firm to the Valuation Officer in course of proceeding for the determination of the net wealth of the assessee. AAC turned down this plea also. She also did not accept his other plea that WTO could not pick and choose from assets held by the firm for evaluating the interest of the assessee in the firm. On facts, however, she directed the valuation of the said property to be made on the basis of yield or rental. She was moved by the Supreme Court pronouncement in the case of Arnolak Ram Khosla v. CIT [l98l] 131 ITR 589 where their Lordships upheld the valuation of the property on rental basis. She, therefore, set aside the valuation made by the WTO for these years and directed the WTO to adopt the valuation returned by the assessee at Rs. 3,91,612 because the valuation returned by the assessee was higher than what would be realized by working out on the basis of yield or rent capitalisation. She found that Amritsar Municipal Corporation had determined the value of this building at Rs. 19,300 per annum. Therefore, in her view, the valuation of the property made on the basis of rent capitalization which did not exceed the valuation returned by the assessee was to be given up in favour of the latter. Both the assessee and the revenue felt aggrieved by this finding and, therefore, while revenue is in appeal before us for these years, the assessee is in cross objection.

3. While Revenue has impugned the application of the rule laid out in Arnolak Ram Khosla's case (supra) that the evaluation of the factory building be made on the basis of rent capitalization, assessee has raised a ground in his cross objection that AAC has misdirected herself that Wealth-tax Rules 2A to 2E are applicable along with the provision laid out under Section 7(2) of the Wealth-tax Act. Before we apply ourselves to deal with their different grounds, we would rather like to address ourselves to the basic issue raised by these grounds. The basic issue which is facing us in these appeals is as to how the WTO should proceed to value the interest of the assessee in the partnership of M/s. Amritsar Swadeshi Woollen Mills, Amritsar where he was a partner.

We have no hesitation in pointing out that the determination of the interest of a partner in the partnership would be, according to the rule, prescribed in Clause (b) of Sub-section (1) of Section 4 of the Wealth-tax Act and that contained in Wealth-tax Rule 2(1). In this view of the matter both the WTO and the AAC misdirected themselves in taking recourse to the rule laid out in Section 7(2)(a) and those contained in Wealth-tax Rules 2A to 2E. Section 7(2) lays out a rule for the determination of the value of assets held by an assessee. Rules contained both in Sub-section (1) and Sub- Section (2) of Section 7 are of the nature of a general provision prescribed for the valuation of assets held by an assessee. The rule contained in aforesaid Section 4(1)(b) is, on the other hand, a provision relating to the valuation of a particular asset or interest held by a person. It is a rule well received into established principles of interpretation that where there is a dichotomy between a provision of general nature and a provision relating to a particular object or situation, the latter will take precedence. The following passage from Maxwell illustrates the rule: We are bound ... to apply a rule of construction which has been repeatedly laid down and is firmly established. It is that wherever Parliament in an earlier statute has directed its attention to an individual case and has made provision for it unambiguously, there arises a presumption that if in a subsequent statute the Legislature lays down a general principle, that general principle is not to be taken as meant to rip up what the Legislature had before provided for individually, unless an intention to do so is specially declared. A merely general rule is not enough, even though by its terms it is stated so widely that it would, taken by itself, cover special cases of the kind I have referred to.

Bearing this rule of interpretation we have no hesitation in observing that AAC misled herself into an error where she placed her reliance on general rule contained in Section 7(2) of the Wealth-tax Act and Wealth-tax Rules 2A to 2E in preference to the specific rule contained in Section 4(1)(b) and the Wealth-tax Rule 2(1). It is not necessary to repeat that unless Section 7(2) applied there will be no occasion to apply the Wealth-tax Rules 2A to 2E to make adjustments in the valuation. Therefore, the determination of a person's interest in the firm where he is a partner shall be, according to the rule laid out in aforesaid Clause (b) of Sub- Section (1) of Section 4 of the Wealth-tax Act which refers to the prescribed manner. Prescribed manner is laid out in Wealth-tax Rule 2 which provides that the 'net wealth' of the firm or the association on the valuation date shall first be determined and then the portion of the net wealth of the firm as is equal to the amount of the capital shall be allocated among the partners or Members in the appropriation in which the capital has been contributed by them while the residue of the net wealth of the firm or association shall be allocated among partners in the profit sharing ratio. There is no room for any doubt or hesitation in this view of things as to how the valuation of a partner's interest in a firm should be made. The famous author Sampath Iyengar in his famous commentary, The Three Taxes, 5th Edition on page 329 observes as under:- The net effect of the above rule is this. The capital contribution of each partner or member shall have first to be taken out of the firm and allotted to the partners or members. The balance of the net assets of the firm or association shall be distributed amongst the partners or members in accordance with the relevant stipulations, if any, in the Constitution. In the absence of any such specific provision, the assets will have to be distributed in proportion to the share of profits of the partners or members. The sum total of the aforesaid two items (capital and share in other net assets) will be the value of the capital interest to be included in the net wealth of the partner or member.

4. A doubt was expressed as to how the term 'net wealth' used in Wealth-tax Rule 2(1) should be interpreted. Was it not to be understood as conveying the concept of net wealth as defined in Clause (m) of Section 2 of the Wealth-tax Act We have closely examined the language of the aforesaid rule and, in our view, there is no warrant to import the concept of net wealth of Clause (m) in the term 'net wealth' used in the aforesaid rule. The Clause (m) itself clarifies that the concept of 'net wealth' was for the assessee under the Wealth-tax Act which implies that the concept was not for universal application and applied to them who were not the assessee under the said Act. It was for this reason Allahabad High Court in two pronouncements - CWT v. Padampat Singhania [1973] 90 ITR 418 and CWTv. Loxmipat Singhania [1974] 97 ITR 188 refused to endorse the stand of the revenue regarding the claim for deduction of huge income-tax liability outstanding for more than 12 months based on the plea of prescription regarding such liability in Clause (m) of Section 2 of the Wealth-tax Act. If their Lordships held that the prescription laid out in Section 2(m) for restricting deduction of income-tax liability of more than 12 months standing will not apply in working out the net wealth of a firm. we may safely hold that the adjustments brought about in Wealth-tax Rules 2A to 2E cannot be thought of for application for reaching a finding of net wealth of a firm which was not an assessee. We may, in this connection, reproduce a passage from the judgment of Allahabad High Court which it repeated in the case of Laxmipat Singhania (supra): The term 'net wealth' according to ordinary commercial principles means the real wealth of a man. His real wealth would be his total assets minus the debts owed by him. This is in essence the definition of net wealth as given in Section 2(m)... Clause (iii)...

is a special provision relating to liability on account of income-tax... which though a debt in the ordinary commercial sense is not to be taken into consideration while determining the net wealth of an assessee ... in the instant case the firm is not the assessee... while determining the net wealth of the firm, not for purposes for assessment, but for purpose of finding out an assessee's share in its Sub-clauses (a) and (b) of Clause (WO of Section 2(m) would not be applicable. The net wealth Under Rule 2 has to be determined in accordance with the commercial principles and when so done, all the debts owed by a firm of whatever nature and of whatever duration have to be deducted so long as the debts are legally enforceable against the firm.

5. Simply stated the rule requires that the net wealth of a firm would be its total assets minus debts. It will be in the resultant that the interest of a partner will have to be found on the basis of his capital contribution and profit sharing ratio as laid out in W.T. Rule 2(1).

Therefore, the finding of AAC that the determination of the interest of the assessee should proceed on the basis of Section 7(2) read along with Wealth-tax Rule 2A to 2E does not find any support in law. We may also in this connection refer to another aspect raised regarding the valuation of interest of a partner in the assets of the firm. The provision in Wealth-tax Rule 2(1) refers to the 'net wealth of the firm'. It may be that the WTO feels and genuinely so that the valuation of assets adopted in the balance sheet of a firm does not truly represent their fair market value. He would be fully justified in challenging the valuation of the assets. But then he must start earnestly to cause a revaluation or all assets and liabilities of the firm. It is only then WTO can find out the true net wealth of the firm.

He cannot pick out an asset and evaluation and divide the difference.

The WTO must challenge and assail the balance sheet of the firm rather than the valuation of one of the assets. It was for this reason, Supreme Court upset a finding of gift regarding goodwill in CGTv. P.Gheevarghese, Travancore Timbers & Products [1972] 83 ITR 403. Their Lordships did not assail the finding of gift. What they frowned on was the manner in which the finding of gift was arrived at as will appear from the following extract: under Section 14 of the Indian Partnership Act, subject to contract between the partners, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm or acquired by purchase or otherwise by or for the firm and includes also goodwill of the business. The departmental authorities in the present case, never treated all the assets and property of the assessee which were transferred to the partnership pertaining to his proprietary business as a gift nor has any suggestion been made before us on behalf of the revenue that the property and assets valued at Rs. 4,00,000 were the subject-matter of gift. All that the departmental authorities did and that position continued throughout was that they picked up one of the assessee's proprietary business, namely, its goodwill, and regarded that as the subject of gift having been made to the daughters who were the other partners of the firm which came into existence by virtue of the deed of partnership. This approach is wholly incomprehensible and no attempt has been made before us to justify it.

6. In a recent appeal in the case of Smt. Nirmala Khanna [ED Appeal No.1 (Asr.) of 1981] under the Estate Duty Act, the Appellate Tribunal was faced with the question whether an addition on account of goodwill of a firm where the deceased was a partner could be sustained as a part of the interest of the deceased or not. The Appellate Tribunal relying on the authority of the aforesaid decision of Supreme Court had no hesitation in deciding against the addition. The Tribunal held that ACED if he wanted an addition to be made was not permitted to pick and choose assets. He could start in earnest in revaluing all the assets and liabilities of the firm under Section 7 and WT Rules 2A to 2E to work out the interest of the deceased but could not pick out an asset at random and cause an addition. We have no hesitation in applying the principle in the present appeal in determining the interest of a partnership in the firm. The view derives support from the provision of Wealth-tax Rule 2(1) itself which refers to and emphasises 'net wealth of the firm' not the asset or assets of the firm.

7. We may now address ourselves to the grounds raised by revenue and the assessee in this respect.

8. As regards Ground No. 1 raised by Revenue, we are to hold that on facts of the case, on a consideration of the valuation of factory building and land held by Amritsar Swadeshi Woollen Mills, Amritsar the issue does not arise at all. As we have already clarified WTO would be perfectly justified and within his competence in working out a revaluation of the assets and liabilities held by the firm in order to revaluate the net wealth of the firm with a view to apportion the same among partners to determine the interest of the partner. But he cannot proceed to bring about partial adjustments with reference to particular assets or liabilities. Taking any other view will be to frustrate the intent and purport of the provision contained in Section 4(1)(b) and the Wealth-tax Rule 2(1). WTO has to work out the interest of the assessee, in the partnership concern in accordance with the provision contained in Section 4(1)(b) and W.T. Rule 2(1). If he aims at modification he is to work out the interest of the partnership concern on the basis of complete revaluation under Section 7(2) along with Wealth-tax Rules 2A to 2E of all assets and liabilities of the firm.

But that is what has not been done by the WTO in the present appeal.

Therefore, in our view, the consideration of evaluation of the factory building alone does not arise at all. Accordingly, we dismiss the plea of revenue and its appeal on this issue.

9. We may for conveniently dealing with the issue, now take up the ground raised by the assessee in his cross objections. We would first take up Grounds 2, 3 and 5. As we have already recorded our finding in disposing the appeal of revenue on the application of Section 7(2) along with Wealth-tax Rules 2A to 2E in contradistinction to that of Section 4(1)(b) along with W.T. Rule 2(1) it is not necessary to repeat them again. We uphold the plea of the assessee that the WTO proceeded to pick and choose the assets held by the firm on facts in an unauthorised and unjustified manner. As regards the ground No. 5 raised by the assessee, we have to hold that finding of AAC regarding valuation based on an erroneous approach cannot be sustained and has to be vacated. We do so and direct the WTO to recompute the interest of the assessee in the firm Amritsar Swadeshi Woollen Mills in accordance with principles explained by us.

10. Assessee has raised a plea in Ground No. 1 that being an HUF the value of the interest in the partnership could not be assessed in its hand. We have not been able to appreciate this ground raised by assessee in his cross objection. The assessee does not deny that he was not a partner in the said mill. It was on the ground of his being a partner he had returned the interest in the said concern in his wealth-tax returns. Having returned the aforesaid interest, it does not stand to reason how can he claim that he was a joint Hindu family and, therefore, the interest he had as a partner in the partnership concern should not be assessed in his hand. In this connection, we refer to a similar controversy raised in case decided by their Lordships of Allahabad High Court in Juggilal Karnlapat Bankers v. WTO [1979] 116 ITR 646. Their Lordships observed: "It is true that Section 4(1){b) of the Act refers to the manner of ascertaining the value of the share of an individual in a partnership firm and that there is no corresponding express provision in the Act as to the manner of valuing the interest of an HUF in a partnership firm but from this circumstance, it does not follow that the interest of an HUF in a partnership firm is not a part of the net wealth of such family and liable to wealth-tax. Section 3 of the Act provides that there shall be charged a tax in respect of every individual HUF etc. As a HUF is subject to wealth-tax on its net wealth, why its interest in a partnership firm which is a property cannot be regarded as a part of its assets and to net wealth subject to levy of wealth-tax under the charging section". In this view of facts, we can only reject his plea outright.

11. Similarly, we reject his plea contained in ground of objection No.4 by which he challenged the competence of the WTO to refer to Valuation Officer the valuation of factory building and land of the partnership M/s. Amritsar Swadeshi Woollen Mills. We refer to an extract from the judgment of Allahabad High Court in the case of Juggilal Kamlapat Bankers (supra), "WTO has the power to value separately each asset of business. He has also the power under Section 16A to refer the Valuation Officer the valuation of any asset if he considers it necessary so to do having regard to the nature of the asset and other relevant circumstances". Accordingly, we dismiss the appeal filed by revenue on the issue of valuation of the factory building and land of Amritsar Swadeshi Woollen Mills, while the cross objection raised by the assessee is allowed in part.

12. We now move to a consideration of the other ground of appeal raised by revenue. According to revenue, AAC erred in allowing exemption under Section 5(1)(v) in respect of the share of the assessee in land and building belonging to the firm. AAC has dealt with this aspect in para 2 of his order. We cannot appreciate the cryptic treatment of the AAC of a claim made by the assessee. Although she has allowed the claim for exemption under Section 5(1)(v) on the basis of acceptance by the WTO in the subsequent year, she has not recorded her own reasons for allowing the claim. Revenue therefore, feels justly aggrieved. In this connection, we are to observe that we had an occasion to deal with a similar claim made by a partner for exemption under Section 5(1)(v) in respect of land and building held by his partnership firm. After a careful consideration of judicial pronouncements we chose to follow Karnataka decision in the case of CWTv. Mrs. Christine Cardoza [1978] 114 ITR 532. Following our aforesaid decision in WTA Nos. 135 and 136, we have no hesitation in upholding the finding of AAC and dismissing the contention of Revenue.

13. Another ground raised by revenue is in respect of evaluation of land of the residential building at 79, The Mall, Amritsar where the assessee resides. Finding of AAC is contained in para 3 of her order where relying on the Special Bench decision in the case of Biju Patnaik she has upheld the claim of the assessee to have the valuation made on the basis of Wealth-tax Rule 1BB. Revenue feels aggrieved by this direction of AAC to apply Wealth-tax Rule 1BB for these years. After perusing the finding and hearing the submission of parties we have no hesitation in upholding the finding of AAC as correct and in dismissing the plea of Revenue. This disposes of the appeal filed by revenue. No ground other than what was referred to in respect of evaluation of factory building and land of Amritsar Woollen Mills was raised by the assessee in his cross objection.

14. In the result, while appeals of revenue are dismissed, the cross objections of the assessee are party allowed.

15. I had the benefit of going through the order proposed by my colleague, the Judicial Member. I am unable to share his views in respect of certain points and conclusions arrived at by him though in respect of other points, I agree with him.

16. The matter agitated in both the appeals of the Revenue and the cross objections of the assessee is about the valuation of factory building belonging to the firm M/s. Amritsar Swadeshi Woollen Mills in which Shri Srikrishan Khanna is a partner representing his HUF. The two relevant valuation dates are 31-3-1973 and 31-3-1974. The AAC has disposed of the appeals of the assessee for the assessment years 1973-74 and 1974-75 by a combined order, which action is based on the detailed reasoning given by her in one of the connected cases of assessee's father, Shri Hans Raj Khanna. The AAC in her order under appeal referred to her order dated 31-8-1982 in the case of Shri Hans Raj Khanna and allowed both the appeals in part on the issue now being considered by us and directed the WTO to allow necessary relief to the assessee in the light of her directions contained in the aforementioned order. In the combined order for the two years in the case of Shri Hans Raj Khanna, she dealt with the general objections of the assessee listed below at (1) to (3), rejecting them all and I list those and other objections considered by her: (1) The firm being not an assessee under the Wealth-tax Act and for purposes of deternilning the value of the interest of a partner in the firm under Section 4(1)(b) of the Wealth-tax Act, Rule 2(1) of the Wealth-tax Rules will be applicable. That rule was not subject to the operation of Rules 2A, 2B, etc. and hence these cannot be invoked.

(2) Section 7(2)(a) applies only to a person, who is an assessee under the Wealth-tax Act and it cannot be invoked for determining the net wealth of the firm, which is not an assessee.

(3) Reference by the WTO to the Valuation Officer was bad in law and the order passed by the Valuation Officer under Section 16A(5) of the Act was illegal. As the firm was not an assessee under the Wealth-tax Act and Section 16A could not be made applicable in the case of a firm, no notice can be issued to it for the purposes of valuation of its assets.

(4) The question of valuation of land and building of the factory was considered by the AAC in para 9 of her order. The authorised representative of the assessee as per the AAC raised a legal issue that the value of property in question should be adopted keeping in view the market value of the property based on Municipal Valuation, which in turn followed the provisions of Rent Control Act and pointed out further that Gross A.L.V. of the property owned by M/s.

Amritsar Swadeshi Woollen Mills had been determined by the Amritsar Municipal Corporation at Rs. 19,500 and the value of the land and building could be worked out keeping in view that A.L.V. The AAC's attention was also invited to the Supreme Court decision in Amolak Ram Khosla's case (supra). The AAC after taking note of these submissions resolved the matter in favour of the assessee on the legal issue and did not consider it necessary to go into the technical details of the valuation. She also observed that it was seen that the valuation returned by the assessee himself was Rs. 3,91,612, which obviously was higher than that of valuation if taken on Rent Capitalisation Method. By making these observations, the AAC held that no addition was called for and she thus accepted the disclosed value of factory land and building for determining the value of assessee's share in the partnership firm.

(5) In para 11, the AAC considered the assessee's ground of appeal against the action of the WTO in not allowing exemption under Section 5(1)(iv) of the Wealth-tax Act in respect of assessee's share in the value of land and building of the factory owned by the firm. The AAC accepted the assessee's claim for exemption for both the assessment years by observing that the issue had already been decided in the assessee's favour and the claim of the assessee accepted in the succeeding years by the Assessing Officer himself.

16A. The argument challenging the valuation on the footing that it was not open to the Department to pick up just one or two items out of the total assets ignoring the other assets and the liabilities of the firm, so far as I could see, was not dealt with by the AAC and it is also borne out from assessee's cross objection No. 2 that the AAC had ignored that objection. No doubt this point was argued before the Tribunal and has been duly considered by the Judicial Member in his order.

17. After giving the above background, I will now deal with the issues considered by my brother on which I have a difference of opinion. In para 8, while dealing with Ground No. 1 in the appeal of the revenue, the Judicial Member has observed that as clarified earlier in the order: "WTO would be perfectly justified and within his competence in working out a revaluation of the assets and liabilities held by the firm in order to revaluate the net wealth of the firm with a view to apportion the same among partners to determine the interest of the partner. But he cannot proceed to bring about partial adjustments with reference to particular assets or liabilities". Towards the end of the para further it has been held that that was what had not been done by the WTO in the present appeal and, therefore, the consideration of evaluation of the factory building did not arise at all. The Judicial Member dismissed the plea of the revenue and its appeal on the issue of valuation of factory building and land held by M/s. Amritsar Swadeshi Woollen Mills. Then in para 9, while dealing with the Ground No. 5 in assessee's cross objection which was to the effect that the AAC had erred in not deciding the matter regarding valuation of land and building belonging to the firm, the following has been held: As regards the Ground No. 5 raised by the assessee, we have to hold that finding of AAC regarding valuation based on an erroneous approach cannot be sustained and has to be vacated. We do so and direct the WTO to recompute the interest of the assessee in the firm Amritsar Swadeshi Woollen Mills in accordance with principles explained by us.

In the final para as also in Para 11, the appeal of the revenue has been dismissed and the cross objection of the assessee was partly allowed. From this, it follows that the question of valuation raised by the Revenue has been dismissed but on the issue of valuation the finding of the AAC has been vacated with a direction to the WTO to re-compute the interest of the assessee in the firm M/s. Amritsar Swadeshi Woollen Mills in accordance with the principles explained in the order. These findings appeared to me to be contradictory and I cannot agree with these and will like to deal with the whole issue of valuation in the manner, which appeals to me.

18. My brother has decided first a basic issue arising in these appeals, which, according to him, was, "as to how the WTO should proceed to value the interest of the assessee in the partnership of M/s. Amritsar Swadeshi Woollen Mills, Amritsar where he was a partner".

It was accepted that interest of a partner in the partnership would be determined as per Wealth-tax Rule 2(1), which is prescribed in consequence of what is stated in Section 4(1)(b) of the Wealth-tax Act.

After discussion, it has been held by him that 'net wealth' of the firm is to be determined not by the principles contained in the Wealth-tax Act and invoking Section 7(2) of the Wealth-tax Act and Rules 2A to 2E of the Wealth-tax Rules but on the basis of commercial principles as held by the Allahabad High Court in the case of Padampat Singhania (supra). A passage from that decision at page 421 has been quoted and the view taken in Padampat Singhania's case (supra) had been applied by the Allahabad High Court in Laxmipat Singhania's case (supra). It has been also held in para 4 of the order of the Judicial Member that the words 'net wealth' should not be given the meaning as per definition in Section 2(m) of the Wealth-tax Act while dealing with Rule 2 of the Wealth-tax Rules. I cannot subscribe to these conclusions for the reasons indicated below.

19. After the two judgments of Allahabad High Court in the cases of S/Shri Padampat Singhania and Laxmipat Singhania had been delivered in February and August 1972 another matter, connected with the same Singhanla group, went before the Allahabad High Court, namely, Juggilal Kamlapat Bankers' case (supra). This authority was relied upon by the Revenue and is also followed by the Judicial Member on two other points in his order. This is ajudgment of October 1977 and the High Court dealt with almost all the points arising from the cross objections of the assessee and relating to the basic issue considered by my brother.

Shri Padampat Singhania in his capacity of Karta of his HUF was a partner in the partnership firm M/s. Juggilal Kamlapat Bankers and Another. In the wealth-tax returns for the assessment years 1967-68 to 1972-73 filed by Shri Padampat Singhania the book value of the buildings.owned by the firm had been adopted for valuing the interest of the family in the firm. The WTO felt that the value of the buildings must be higher and he referred the valuation of these buildings to the Valuation Officers under Section 16A of the Wealth-tax Act. The Valuers issued notice under Section 38A of the Wealth-tax Act to Shri Padampat, who filed a writ petition attacking the reference by the WTO to the Valuers and also the notice under Section 16A(2) issued by the valuers to him. In that writ petition following objections were raised: (1) The WTO could not refer to the Valuation Officers under Section 16A of the Wealth-tax Act, the valuation of the buildings, which did not belong to him but to the firm and that a partner cannot be said to have any interest in the properties of the firm and that the properties of the firm cannot be taken into account in computing the wealth of a partner. Section 4 of the Wealth-tax Act was referred to.

(2) Interest of a HUF in a partnership is not exigible to Wealth-tax and language of Section 4(1)(b) was referred to.

(3) When there is a specific provision, namely, Rule 2, for the valuation of the interest of a partner in a partnership firm, the general provisions contained in Sections 7 and 16A for valuation of the assets have no application for valuing such interest of a partner.

The High Court rejected all these contentions of the assessee and upheld the reference made to the Valuation Officer, and the levy of Wealth-tax, when a partner represented a HUF in respect of the value of his share in the firm and further held that Rule 2 and Sections 7 and 16A were complementary to one another in valuing the interest of a partner in a partnership firm and hence there is no question of exclusion of one provision by the other. The interconnection between Sections 7(1) and 7(2) was also considered by the High Court and it was held that Sub-section (2) is not a provision in derogation of the provisions of Sub-section (1) of Section 7 of the Act. This authority completely supports the view taken by the AAC, which is in favour of the revenue. In the instant case, the WTO has made the valuation Under Rule 2 as provided in Section 7(2)(a) of the Wealth-tax Act making such adjustments as are prescribed in Rules 2A to 2F, whichever be applicable. His action is fully justified in view of later authority of Allahabad High Court itself involving similar facts, namely, Juggilal Kamlapat Bankers' case (supra). The assessee's authorised representative referred to another decision of Allahabad High Court in Seth Satish Kumar Modi v. WTO [1983] 139 ITR 373, which took the same view as was taken in the cases of Padampat Singhania (supra) and Laxmipat Singhania (supra). It is to be pointed out that even though Satish Kumar's case was decided in October 1979 the earlier decision of Allahabad High Court in Juggilal Kamlapat Bankers' case (supra) was not cited before it. In my view the decision in Juggilal Kamlapat Bankers' case (supra) lays down the law correctly and is preferrable to other three decisions relied upon by the assessee and supports the action of AAC in rejecting objections 1 to 3 of Para 16.

20. It will be appropriate to point out that the net wealth as contemplated in Rule 2 of the Wealth-tax Rules is to be calculated as per provisions of the Wealth-tax Act. The authority exists in Rule 1A of the Wealth-tax Rules dealing with the definitions of words itself and the relevant definition is at Rule 1A(m), which reads as under: all other words and expressions used but not defined in these rules and defined in the Act, shall have the meaning respectively assigned to them in the Act.

This Clause (m) of Definitions Rules 1A was not noticed by the Allahabad High Court in the three authorities on which the assessee relied. If apart from this definition in the Rules itself some authority is required, I will refer to Madras High Court decision in the CWTv. Vosantha [1973] 87 ITR 17. The High Court held that the words 'net wealth' and 'valuation date' not having been defined in the Wealth-tax Rules, they have to be understood in the same sense as in the Wealth-tax Act both by reason of the specific rule 1A(m) of the Wealth-tax Rules, 1957, as well as by reason of the well established rule of interpretation. Again the High Court was considering this question in the context of Rule 2(1) of the Wealth-tax Rules and it was held that Rule 2(1) should, therefore, be construed only in the sense in which it has been defined in the Act and in ascertaining the net wealth as per Section 2(m) of the Wealth-tax Act, there should be aggregation of the value of all assets but excluding the agricultural lands as they have been specifically excluded from the definition of 'assets' in Section 2(e). The High Court also observed that the well established rule of interpretation is that the same expressions contained in the Act as well as in the Rules framed thereunder have to receive an identical construction. In my opinion, it is very difficult to hold that net wealth in Rule 2 has not to be computed in the manner laid down in the Wealth-tax Act and it has to be determined on ordinary commercial principles.

21. In para 5, the Judicial Member has referred to another aspect, which was raised before the Tribunal regarding the valuation of interest of a partner in the asset of the firm, namely, the WTO must challenge and as all the balance-sheet of the firm as a whole rather than pick and choose the valuation of one of the assets. In other words, picking out an asset for evaluation was held to be not permissible to the WTO and reference was made to the Supreme Court's decision under the Gift-tax Act in P. Ghee-varghese, Travancore Timbers & Products' case (supra) and an estate duty decision of Amritsar Bench of the Tribunal. In my opinion, when I have held that the valuation is to be made as per the provisions of the Wealth-tax Act and the Rules prescribed thereunder, as provided in Section 7(2)(a) of the Wealth-tax Act, the WTO can make the adjustments prescribed in the Rules and in this connection Rule 2B(2) permits the adjustments to be made in the value of an asset disclosed in the balance-sheet. In view of this statutory provision, I do not think that the authority relied upon by the Judicial Member will be of any avail. This disposes of the further aspect considered by the Judicial Member, on which also I have a difference of opinion.

22. In paras 10 and 11, the Judicial Member has taken the same view on the points considered therein as is expressed by me above and there is no question of any difference of opinion.

23. However, I have to deal with the question raised by the Revenue in its appeals about the correctness of the decision of the AAC in upholding the value of factory, land and building belonging to the firm as disclosed. I have in a preceding paragraph summed up the findings of the AAC in para 9 of her order in the case of Shri Hans Raj Khanna, which have been applied in the assessee's case. The AAC decided the issue in favour of the assessee by considering what she termed as a legal issue and without going into technical details of valuation. The legal issue, which was raised before her by the assessee's authorised representative was that the value of the property under consideration should be determined on Rent Capitalisation Method and for that purpose the municipal valuation fixed by Amritsar Municipal Corporation of Rs. 19,500 be considered and that valuation was based on the provisions of Rent Control Act. A ruling of the Supreme Court in Amolak Ram Khosla's case (supra) was cited in support of this method of determination of income from the firm's property. The AAC treated these submissions to be relating to a legal issue and was influenced by the yardstick suggested by the assessee of municipal valuation based on the provisions of the Rent Control Act and felt that the valuation taken on that basis by Rent Capitalisation Method would be even lower than the disclosed value of Rs. 3,91,612 and so she accepted the submission of assessee's authorised representative and deleted the addition made by the WTO.24. It may straightway be observed that the decision of Supreme Court cited and other decisions of Supreme Court on the same point were concerned with the specific language used in Income-tax Act or concerned Municipal Act. In those proceedings the provisions of Rent Control Act had a definite say but I am not aware of any restriction so far as the valuation of a property under Wealth-tax Act is concerned.

It is, therefore, not safe and correct to rely on the rulings under the Income-tax Act or Municipal Act for determining the yield or rental income for the purpose of making valuation of the property for levying wealth-tax. The yardstick applied by the AAC to uphold the disclosed value, therefore, was quite erroneous and in my view cannot be sustained.

25. It will be worthwhile to go into the case law, which has come from the Supreme Court in the matter of valuation of properties under different Acts. There are four important judgments, namely; (i) Special LAO v. T. Adinarayana Setty AIR 1959 SC 429, (a) State of Kerala v.P.P. Hassan Koya AIRSmt. Tribeni Devi v.Collector, Ranchi AIRCustom Cavasjee Cooper v.Union of India (1970] 40 Comp. Cas. 325 (SC). The ratio of these decisions has been summed up by the Karnataka High Court in V.C.Ramachandran v. CWT [1980] 126 ITR 157. The summary of the principles laid down by the Supreme Court in the first named three cases is as under: (i) Information available through bona fide sale deeds, executed to effect the sale of lands in the vicinity and the comparable benefits and advantages which they possess.

(ii) By capitalisation of rental value, actually received or likely to be received by taking the rent which a similar property located in the neighbourhood is fetching, by multiplying it 20 times as is usually done or at such multiple having due regard to the prevailing rate of interest on giltedged security. This method is more appropriate in the case of buildings used for business purposes.

Anumber of years' purchase of the actual or immediate by prospective profits of the lands acquired.

2. These methods, however, do not preclude the taking of any other special circumstances to arrive at an estimate of market value.

3. Even two or all of the methods may be taken into account, in arriving at a reasonable value.

The latest case of Rustom Cavasjee Cooper (supra) was dealing with the question of payment on compensation on compulsory acquisition of property under the Banking Companies Acquisition Act. It reiterated the principles laid down in the three earlier decisions at page 383 of the case report and further laid down a few more principles, which are as follows (i) The method of capitalisation of rental value with an appropriate multiplier is a satisfactory method of valuation of land and buildings, if only the land has been put to full use legally permissible and economically justifiable and the income is commercial and not a controlled return or a return depreciated on account of several circumstances, (vide p. 383) (ii) If the property is not put to full use or the return is not commercial, capitalisation of rental value pegged down statutorily by the provisions of the rent control legislation yields misleading results and cannot be considered as fair value of the property, (vide pp. 383 & 387) (iii) Vacant premises have considerably larger value than business premises which are occupied by tenants, (vide p. 387).

The High Court observed that the principles laid down by the Supreme Court in respect of ascertaining the market value of immovable properties, apply equally for the purposes of ascertaining the market value of the immovable properties as required under Section 7 of the Wealth-tax Act. Keeping in mind this observation of Karnataka High Court, it is clear that the Supreme Court has laid down that if the property is not put to full use or the return is not commercial, capitalisation of rental value pegged down statutorily by the provisions of the rent control legislation yields misleading results and cannot be considered as fair value of the property. The yardstick applied by the AAC is clearly erroneous on the basis of rule laid down by the highest Court in the land and the decision of the AAC, therefore, has to be vacated for both the assessment years. The AAC is to be directed to examine the question of valuation afresh on the basis of principles of valuation, which can be suitably applied in a situation like the one under consideration and contained in the relevant case law and I so direct her after setting aside her findings on the issue of valuation in para 9 of her combined order in the case of Shri Hans Raj Khanna, which has been followed in the assessee's case. I will also like to point out that since the firm is in occupation of its own land and factory building it is clearly in a position to give vacant possession of the premises to the buyer in the event of a sale and this consideration is relevant for enhancing the value which the property will command when sold in open market. The departmental representative also wanted to rely on a subsequent letter given by the Executive Officer, Municipal Corporation changing the house-tax valuation, which was operative from 1-4-1980. This was a new evidence sought to be produced before the Tribunal and not put to the assessee at the assessment stage. I need not consider this question as I have already set-aside the findings of the AAC on the question of valuation and restore the issue to her file for fresh disposal. The AAC should go into the question again bearing in mind my observations in this order and after hearing the assessee and the WTO. I may also point out that the assessee had also taken Ground No. 5 in its cross objections pointing out that the AAC had not decided the matter regarding valuation of land and building belonging to the firm. Once the AAC's existing finding is vacated by me, the cross objection of the assessee seeks the very same result, which is there in the case of the appeal of the Revenue. Ground No. 5 in the cross objection of the assessee, therefore, may also be treated to be allowed for statistical purposes.

26. The Judicial Member has considered the other grounds raised by the Revenue in its appeals in paras 12 and 13 of his order. I am in agreement with him and will only say that the provision meant to be referred in para 12 is Section 5(1)(iv) of the Wealth-tax Act and not 5(1)(v). Perhaps, it will be better to record this agreement formatlly when the final order is passed by the Tribunal after the difference between us is resolved by a Third Member.

27. In the result, both the appeals of the Revenue and the cross objections of the assessee may be treated to be partly allowed for statistical purposes.

ORDER UNDER SECTION 24(11) OF THE WEALTH-TAX ACT READ WITH SECTION 255(4) OF THE INCOME-TAX ACT As there is a difference of opinion between us in respect of the question of valuation of the land and factory building belonging to the firm M/s. Amritsar Swadeshi Woollen Mills, in which the assessee is a partner representing his HUF and in respect of which firm the value of assessee's interest is to be determined under Section 4(1)(b) of the Wealth-tax Act, we refer these two appeals of the revenue and the two cross objections of the assessee to the President of the Income-tax Appellate Tribunal for further action as provided in Section 255(4) of the Income-tax Act.

1. In these appeals there is a difference of opinion between my learned brothers who heard these appeals at Amritsar. The difference of opinion is in respect of question of valuation of the land and factory building belonging to the firm M/s. Amritsar Swadeshi Woollen Mills, Amritsar in which the assessee is a partner representing his HUF and in respect of which firm the value of assessee's interest is to be determined under Section 4(1)(b) of the Wealth-tax Act, 1957. These are the appeals filed by the revenue against the orders of the AAC. The assessee also filed two cross objections raising wherein, more or less the same point. This difference of opinion was referred to the President and the President has nominated me as a Third Member to resolve this difference of opinion.

2. The assessee Shri Siri Krishan Khanna is a partner in a firm called M/s. Amritsar Swadeshi Woollen Mills, Amritsar. For the wealth-tax assessment year 1974-75 in respect of which the valuation date was 31-3-1974, the value of his interest in the said firm M/s. Amritsar Swadeshi Woollen Mills, Amritsar was returned at Rs. 3,91,612. The Wealth-tax Officer considered this valuation to be on the low side. The matter of valuation was, therefore, referred by him to the Valuation Cell for determining the market value of the plant and machinery as on 31st March, 1974. The written down value of the machinery as per records was at Rs. 9,03.900. The Valuation Cell had put the market value of the machinery at Rs. 39,83,100. The WDV of the building was shown at Rs. 3,78,190 and the value of the land and building was shown at Rs. 12,334 as against the total value of the land and building at Rs. 8,39,524. The Valuation Cell had fixed the market value at Rs. 13,59,600. The WTO also noticed that the valuation of the closing stock and other assets were also not properly valued and some liabilities also were not properly estimated by making such adjustment in regard to these assets and liabilities and adopting the value for the plant and machinery and land and building as fixed by the Valuation Cell, he arrived at the total value of the firm's assets at Rs. 44,62,671 and the assessee's share therein was arrived at Rs. 8,03,172. To this was added, the credit balance in his capital account and his share in the development reserve all put together the total value came to Rs. 10,55,648. This was against the value of Rs. 3,91,612 returned by the assessee. Similarly, for the assessment year 1973-74 the value of the Interest of the assessee in the firm was fixed at Rs. 7,79,960.

Aggrieved by these revised valuations the assessee preferred appeals to the AAC. By the time this appeal came to be disposed of, the AAC had disposed of the appeal filed by the another partner Shri Hans Raj Khanna. In the said appeal the AAC had decided:- (a) That the firm not being an assessee under the Wealth-tax Act, for the purpose of determining the value of the interest of the partner in the firm under Section 4(1)(b) of the Wealth-tax Rule 2(1) of the Wealth-tax Rules only would be applicable and Rules 2A & 2B etc. would not be applicable.

(b) Section 7(2) of the W.T. Act applies only to a person, who is an assessee under the W.T. Act and it could not be invoked for determining the net wealth of the firm, which is not an assessee.

(c) Reference by the WTO to the Valuation Officer was bad in law and order passed by the Valuation Officer under Section 16A(5) of the Act was illegal. This finding was also given on the basis that since the firm was not an assessee under the W.T. Act, Section 16A could not be made applicable to a firm.

(d) Regarding the valuation of the land and building of the factory following the decision of the Hon'ble Supreme Court in the case of Amolak Ram Khosla (supra). She decided that the rent capitalisation method should be adopted for the valuation of these assets and if that method was adopted the value shown by the assessee worked out to be higher and therefore, the value shown by the assessee should be accepted.

(e) Accepting the assessee's claim for exemption under Section 5(1)(iv) of the Wealth-tax Act in respect of the assessee's share in the value of land and building, she directed that this value is to be exempted under Section 5(l1(iv).

3. It was following this order, the AAC in these appeals held that the same direction should be applied here also. The assessee raised a further ground: That the value of the interest in the partnership is not required to be etermined in the case of the assessee who is being assessed as HUF on the ground that the provisions of Section 4(1) of the W.T. Act are applicable only to an individual.

4. This contention, the AAC rejected, following the decision of the Hon'ble Allahabad High Court in the case of Juggilcd Kamlapat Bankers (supra).

5. Against the order of the AAC the department filed appeals before the Tribunal urging among others that the AAC was not justified in directing that the fair market value of the factory premises and building should be determined by rent capitalisation method with reference to the Municipal Valuation and ignoring the valuation made by the Valuation Cell. Objection was also taken to the grant of exemption under Section 5(1)(iv) of the W.T. Act, 1957 in respect of the assessee's share in land and building belonging to the firm.

6. When this appeal came for hearing before the Tribunal one of the questions that was debated by the revenue was the rule laid down by the Hon'ble Supreme Court in Amolak Ram Khosla's case (supra) was inapplicable and that the basis of rent capitalisation method was not appropriate, while the assessee raised the question that it was not open to the WTO to pick and choose some of the assets from the balance-sheet of the firm and then value it and include the share of the assessee in such a revaluation. The learned JM observed that in determining the interest of a partner in the partnership firm it is Section 4(1)(b) and Rule 2(1) that should apply and in that view of the matter both the WTO and the AAC misdirected themselves in taking recourse to Section 2(m) of the WT Act and Rules 2A and 2E of the WT Rules. His view was that Section 7(2) of the WT Act was in the nature of a general provision prescribed for the valuation of assets belonging to the assessee, while the Rule contained in Section 4(1)(b) was a provision made for the specific purpose of valuing the interest held by a partner in a firm. It is well established rule that a general provision should give way to a specific provision and since in this case the specific provision was made in Section 4(1)(b) for the valuation of an interest of a partner in a firm, that specific rule must have been applied instead of the general provision in Section 7(2). This was the opinion he had arrived at after making copious references to passages from Maxwell on Interpretation and Sympath Iynger, 5th Edition. Since according to him Section 7(2) did not apply, the question of application of WT Rules 2A to 2E did not arise.

Applying the specific provision made in Section 4(1)(b) he held that the value of the interest of the partnership must be arrived in the prescribed manner. The prescribed manner was provided for Rule 2 of the W.T. Rules which lays down that the net wealth of the firm must be arrived at as on the valuation date and then apportion the net wealth of the firm as attributable to each of the partners in addition to his capital. In arriving at the net wealth of the firm for the purpose of Rule 2(1), the learned JM was of the opinion that the concept of the net wealth as defined in Clause (m) of Section 2 is not to be imported.

In arriving at this conclusion the learned JM placed reliance on a judgment of the Hon'ble Allahabad High Court in the case of Laxmipat Singhania (supra). The Allahabad High Court laid down in this case that the net wealth under rule 2 has to be determined in accordance with the commercial principle and when so done all the debts owed by the firm of whatever nature, for whatever duration, have to be deducted so long as debts are legally enforceable against the firm. Rlying upon this ruling he proceeded to hold that the WTO must first determine the net wealth of the firm which meant a revaluation of all assets, and liabilities of the firm and it was not open to him to pick out an asset evaluate it and allocate the difference. According to the learned Judicial Member the WTO must challenge and assail the balance-sheet of the firm rather than the valuation of any one of the assets. In coming to this conclusion he was relying upon the observations made by the Supreme Court in the case of P. Gheevarghese, Travancore Timbers & Products (supra). In this case the department for the purpose of levy of gift-tax sought to record goodwill as subject of gift and not any other assets. The Supreme Court observed that this approach was incomprehensible and no attempt was made to justify such an approach.

It was this observation that weighed with the learned JM to come to the conclusion that the department should not be permitted to pick and choose the assets for the purposes of valuation of interest of a partner in a firm unless all the assets of the firm are also re-valued and liabilities re-assessed. On this view of the matter the learned JM did not approve of the method adopted by the department for arriving at the value of the assessee's interest in the said firm but directed the WTO to recompute the interest of the assessee in the firm in accordance with the discussion made above, namely, that all the assets of the firm should be revalued and then only the assessee's share in the revalued assets should be considered for addition and that Section 7(2) read with Rules 2A to 2E should not be applied, 7. The learned Accountant Member saw contradiction in the order passed by the learned JM, the learned AM summarised them in the following manner: From this it follows that the question of valuation raised by the revenue has been dismissed but on the issue of valuation, the finding of the learned AAC has been vacated with a direction to the WTO to recompute the interest of the assessee in the firm of M/s Amritsar Swadeshi Woollen Mills, Amritsar in accordance with the principle explained in the order. These findings appear to be contradictory and I cannot agree with these and like to deal with the whole issue of valuation in the manner which appeals to me.

8. So far, I have endeavoured to bring out the points of difference of opinion between my learned brothers I do not know how far I succeeded because the difference of opinion was couched in such a wide language as to take within it, the entire valuation of property as well as the assessment. It, therefore, became necessary before me to pinpoint the points of difference. In my opinion, the point of difference is whether the learned JM's view that in valuing the interest of a partner in a firm whether it is open to the WTO to value one of the assets and whether he should first of all determine the net wealth of the firm not by applying definition of Section 2(m) of the W.T. Act but by applying the general commercial principle and then apportion the value to the partner in accordance with their profit sharing proportions without taking recourse to Section 7(2) of the W.T. Act and the Rules 2A to 2E is right. If this is his view, I do not see any contradiction in his direction although the directions given may render them difficult in evaluation. The learned AM, on the other hand, pointed out that he would not subscribe to the various findings given by the learned JM which I have enumerated above. Neither did he agree with the view that Section 7(2) of the Act and Rules 2A to 2E of the W .T. Rules would apply, nor did he agree with the view that net wealth for the purpose of Rule 2(1) should not be taken to be the net wealth as defined in Section 2(m) of the W.T. Act and that in any case the ruling of the Allahabad High Court relied upon by the learned JM was not apposite and appropriate. He referred to the judgment of the Allahabad High Court in Juggilal Kamlapat Bankers' case (supra) where according to the learned AM all the points which the learned JM had mentioned were considered and rejected. The Allahabad High Court in this case pointed out that when a partner represented HUF in respect of the value of his share in the firm, Sub- Section (2) of Section 7 would apply, that there was interconnection between Section 7(1) and 7(2) and that Sub-section (2) was not made in derogation of Sub-section (1) and that the WTO was competent to act Under Sub-section (2) of Section 7. He is entitled to make adjustments as are prescribed in Rules 2A to 2E. Relying on this judgment of the Allahabad High Court, the learned AM pointed out that the action of the AAC was justified and should be supported. The learned AM also pointed out that when rule 2 spoke of arriving at the net wealth of the firm it took within its sweep the definition given elsewhere in the Act and for that purpose he relied upon the definition given in Rule 1A(m). Relying upon the decision of the Madras High Court in the case of Vasantha (supra), he held that net wealth definition in Section 2(m) of the W.T Act should be applied while arriving at net wealth lor the purpose of Section 2(1). He also held that rules 2A to 2E were applicable to value the interest of the partner. On the question whether the WTO could pick out an asset for the purpose of valuation, the learned AM expressed the view that it was open to the WTO to do so in view of Rule 2B(ii) which permits the adjustments to be made in the value of an asset disclosed in the balance-sheet. On the question of valuation the learned AM pointed out that the Supreme Court decision referred to by the learned AAC and approved of by the learned JM namely the one Arnolak Ram Khosla's case (supra) arose out of Income-tax Act and Municipal Act and since the language of those Acts were different from the language of Wealth-tax Act, those decisions should not be read as applying to the valuation of property for the purpose of W.T. Act. He, thus held that the yard-stick applied by the learned AAC to uphold the written down value was erroneous. He also made a reference to the principle of valuation of immovable properties as enunciated by the Supreme Court in various cases as explained by the Karnataka High Court in the case of V.C. Ramachandran's case (supra) and held that the principle of rent capitalisation method would apply only in a case where the immovable property was fully utilised or if the property was not commercial. Otherwise those methods would yield mislcading results. He was of the opinion that pegging down the values of the land and machinery by applying provisions of Rent Control Legislation without applying the tests referred to above would not yield correct results. He thus held that the AAC was not justified in accepting the disclosed value. He also thought it fit to set aside the finding of the AAC and to direct her to revalue the property after applying the law as discussed in the order.

9. Thus, it will be seen that both the brothers did not approve the orders of the AAC and chose to set it aside directing her to revalue the property according to varying directions gvien. While the learned JM says that the property should be valued on commercial principle without taking up any of the assets but valuing all the assets of the firm as a whole, without applying Section 7(2) of the W.T. Act and Rules 2A to 2E the learned AM directs that it is open to the WTO to value the assets in any manner even by applying Rules 2A to 2E and more particularly to principle that whether the asset is commercially utilised to the full extent or not. The principle of rent capitalisation should not be blindly applied. I had to refer to the point of difference in minute detail, because there was difference of opinion on various points and approaches.

10. If I have understood the difference of opinion between my learned brothers correctly my task is made easier by a recent decision of the Supreme Court in the case of Juggilal Kamlapat Bankers v. WTO [1984] 145 ITR 485. In this case the Supreme Court had an occasion to examine exactly a similar question that arose before us in this appeal. There also as in the present case the question was whether Section 7(1) of the W.T. Act would apply for the purpose of valuing the interest of a partner in a firm whether Sub-section (2) of Section 7 would apply.

After examining the scheme of the Act, the Supreme Court pointed out that Sub-section (2) of Section 7 is an enabling section confirming the decision upon the WTO to determine the net valuation of the assets of the business as a whole having regard to the balance-sheet as on the date of valuation. In other words, it is optional for the WTO either to adopt Sub-section (1) or (2) of Section 7. Since Rule 2B(ii) clearly provided that where the market value of the assets exceeds written down value or book value by more than 20 per cent the value of that assets for the purpose of Rule 2A shall be taken to be the market value. The Supreme Court pointed out that even where the WTO has resorted to Sub-section (2) of Section 7 the written down value or book value of specific assets as appearing in the balance-sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the WTO has to adopt the market value. Thus, the Supreme Court made it clear that Sub-section (2) of Section 7 is optional and discretionary and, therefore, it is not open to say that only Sub-section (1) of Section 7 should be applied and not Sub-section (2) of Section 7. In view of the enunciation of law on the subject by the Supreme Court, I must hold that the view expressed by the learned JM is not appropriate and correct and that the view expressed by the learned AM is acceptable. Once it is held that Sub-section (2) of Section 7 applied all the arguments advanced by the learned JM against the application of Sub-section (2) of Section 7 do cease to be relevant. Further the fact of matter is that the WTO did not pick and choose only one asset from the balance-sheet. He considered several other assets and redetermlned liabilities, and then arrived at the net wealth of the firm. There is thus a factual mis-statement in the order of the learned JM. It, therefore, follows that the value adopted by the AAC or for that the WTO by applying Sub-section (2) of Section 7 cannot be said to be incorrect. Further in view of the Madras High Court ruling relied by the learned Accountant Member in Vasantha's case (supra), it has to be held that the expression "net wealth" used in Rule 2(1) of the W.T. Rules, does mean "net wealth" as defined in Section 2(m) of the W.T. Act. That expression 'net wealth' wherever used in W.T. Act or rules made thereunder should be constructed as per the definition given in Section 2(m) of the Act and not divorced from it. The concept of levy of wealth-tax is explicitly enshrined in Section 2(m) of the W.T. Act, and that concept is of universal application. I may also add that it is difficult as far as I can see to agree with the view expressed by the learned AM that for the purpose of valuation of land and building the appropriate method is not rent capitalisation method. The observations made by the Supreme Court in the various cases cited by him no doubt applied to the facts of those cases but they do not cease to be enunciation of legal principles having general application. It is true that if the property is not commercially exploited in the sense it was under-utilised the rent capitalisation method may not yield proper result but it will be always from debatable issue as to what would be proper commercial utilisation of a particular asset. If the transactions are entered at arms length and no connivance is proved and no favours are shown, the yield from an asset must represent the commercially feasible yield and there should be no objection in capitalising it for arriving at the market value. In these cases it is not the case of either the assessee or the department that the properties are not commercially exploited in a full measure that any favours were shown in fixing the rent or that the transactions were colourable. Therefore, the yield method adopted should be approved. The AAC has examined this point at length and arrived at the conclusion that the rateable value fixed by the Municipality was apposite and that should be taken as the basis for capitalisation. I do not see why that method should be disregarded merely on the basis of suspicion. Thus, the method adopted by the AAC should not have been disregarded. Once the method adopted by the AAC is found to be Justified, and the value arrived at as per that method approximated to the market value, there is no reason why the assessment should be set aside. In view of my conclusion on the Just applicability of Sub-section (2) of Section 7 and that there was no need to set aside the assessment, I do not think, it necessary to discuss the other points raised before us.

11. With these observations the matter will now go before the regular Bench to decide this issue according to the majority. Here a question may arise as to what is the majority in regard to setting aside the assessment since both the members have thought it fit to set aside the assessment and to direct the AAC to hear the matter. Since I am of the opinion that the method adopted by the AAC is a correct method and is in accordance with the legal principles laid down, and since the difference of opinion between the members arose on the matter of valuation of land and building in its entirety, the appeal have to be decided accepting the value as disclosed by the assessee. However, it is open to the parties to argue the matter before the regular Bench, any other issue that may arise having a bearing on the valuation and not decided by those presents, and the appeal has to be decided after taking into account those arguments, as well.

1. In these appeals, the difference of opinion, arose between the Members, in respect of the valuation of land and factory building, belonging to the firm M/s. Amritsar Swadeshi Woollen Mills, in which the assessee is a partner.

1.1. The AAC held that the rent capitalisation method on the basis of rateable value fixed by the Municipality was the correct method for determining the market value of the said immovable property and for that she relied upon the decision of the Supreme Court in the case of Amolak Ram Khosla (supra).

2. Against the order of the AAC, the Department filed appeal before the Tribunal and the only ground raised therein was that the AAC has erred in holding that the fair market value of the factory premises and building, belonging to the firm (supra) is to be determined by rent capitalisation method with reference to the Municipal annual valuation at Rs. 9,500 and for that, she had erred in relying upon the decision of the Supreme Court in the case of Amolak Ram Khosla (supra]. The learned Judicial Member, Shri U.S. Dhusia, after considering the matter at length categorically dismissed the appeal of the Deptt. which is abundantly clear from his finding in para 8 of the order, wherein he has held, "We dismiss the plea of the revenue and its appeal on the issue.

2.1 However, the learned Accountant Member did not agree with the AAC on the rent capitalisation method of valuation adopted by her following the decision of the Hon'ble Supreme Court (supra) and in para 24 of his order, held that the yardstick applied by the AAC is clearly erroneous and decision of the AAC, therefore, has to be vacated. Thus, the learned A.M. allowed the appeal of the revenue on the issue. Therefore, there had been a difference of opinion between the Id. Members of the Tribunal on the conclusion on this point, the Judicial Member dismissing the appeal of the revenue and the Accountant Member allowing the appeal of the Deptt. It is pertinent to note that it is the conclusion which is subjudice and not the reasons.

3. It is also pertinent to note that under Section 24(2), which is equivalent to Section 255(4) of the Income-tax Act, 1961, in the case of difference of opinion on any point, between the Members, the duty of the Members, who heard the appeal is to state the point of difference on which they differ and thereby to Iratne the question to be settled by the Third Member, so appointed by the Hon. President of the Tribunal for the purpose. Thus, the learned Members framed the following question, which was referred to the Hon. President vide order. under Section 24(2) of the Wealth-tax Act, 1957: As there is a difference of opinion between us in respect of the question of valuation of the land and factory building belonging to the firm M/s. ASW Mills in which the assessee is a partner representing his HUF and in respect of which firm the value of the assessee's interest is to be determined under Section 4(1)(b) of the Wealth-tax Act, we refer these two appeals of the revenue and the two cross objections of the assessee to the President of the Income-tax Appellate Tribunal for further action as povided under Section 254 of (he Income-tax Art.

4. under Section 254 of the Income-tax Act [24(2) of the Wealth-tax Act] the learned Third Member can only decide the point referred to him. Reliance is placed in the case of Jon Mohammed v. CIT [1953] 23 ITR 15 (All.). The learned Third Member after due consideration and hearing the parties on all points decided the point referred to him observing as under: Therefore, the yield method adopted should be approved. The AAC has examined this point at length and arrived at the conclusion that the rateable value fixed by the Municipality was appropriate and that should be taken as the basis for capitalisation. I do not see why that method should be disregarded merely on the basis of suspicion.

Thus, the method adopted by the AAC should not have been disregarded. Once the method adopted by the AAC is found to be justified and the value arrived at as per that method approximated to the market value, there is no reason why the assessment should be set aside. In view of my conclusion on the just applicability of Sub-section (2) of Section 7 and that there was no need to set aside the assessment, I do not think it necessary to discuss the other points raised before me.

11. With these observations, the matter will now go before the regular Bench to decide the issue, according to the majority. Here a question may arise as to what is the majority in regard to setting aside the assessments, since both the Members have thought it fit to set aside the assessment and to direct the AAC to hear the matter.

Since I am of the opinion that the method adopted by the AAC is the correct method and is in accordance with the legal principles laid down and since the difference of opinion between the Members arose on the matter of valuation of land and building in its entirety, the appeals have to be decided accepting the value as disclosed by the assessee.

5. In the circumstanc es mentioned above, we hold that the only irresistible conclusion about the majority decision is that the order of the AAC is confirmed and the appeals of the Deptt. are dismissed.

5.1 In view of the various decisions of the Hon'ble Supreme Court in Amoiak Ram Khosla's case (supra), Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700, as well as the decisions of the Hon'ble Punjab and Haryana High Court in the cases of Jaswant Rai v.CWT [1977] 107 ITR 477 and CITv. Radhey Mohan [1985] 153 ITR 399, we are of the firm opinion that the method adopted by the AAC is the correct method and we find ourselves in complete agreement with the decision of the Third Member, Shri Ch. G. Krishnamurthy, the Senior Vice President, as he was then The majority decision is, thus, to the effect that the order of the AAC is upheld and Deptt. 's appeals stand dismissed.

6. It may, however, be added that there appears to have occurred some inadvertence in dealing casually and summarily, the Ground No. 5 of the cross objections of the assessee by the Ld. Judicial Member, wherein the AAC's findings are stated to have been vacated and the WTO has been directed to recompute the interest of the assessee. The appeal of the revenue having been dismissed by the Ld. J.M., the Ground No 5 of the eross-objertion of the assessee becomes meaningless and infriictuous for the purpose of majority decision. The assessee has withdrawn the said Ground No. 5 of the cross objection to remove the ambiguity, if any, vide making two applications dated 7-8-1985 for permission by the Tribunal, which we hereby allow, following with respect the decision of the Tribunal dated 31 -7-1985 in the cases of other partners in C.O.Nos. 33 to 40/ASR/ 1982 for assessment years 1973-74 and 1974-75. The DRhas not objected to it.

7. Shri Arora, learned DR in arguing these matters has not opposed the arguments of the learned Counsel for the assessee, wherein he urged that the majority decision is as we have expressed above. As Shri Arora, on the asking of the Tribunal to say his say merely stated that what is the majority decision, it is for the Bench to determine and, therefore, he has nothing to say in reply to what the learned Counsel for the assessee has stated and mentioned above.

7.1 However, Shri Mehra, the learned Counsel for the assessee has raised the contention alternatively that even if the said ground of cross objection or applications to withdraw the cross objections, is not allowed to be withdrawn, the majority decision would still remain the same and on account of non-granting of permission to withdraw the cross objections, the situation will not change, which we do not deem proper and necessary to decide in view of our above findings and conclusions.

8. In view of our above discussion and reason thereto we hold that the majority decision is that the order of the AAC is upheld and the appeals of the Deptt. are dismissed.

9. In the result, the appeals as well as the cross objections are dismissed.

10. Per Shri P.K. Mehia, Accountant Member-These two wealth-tax appeals of the revenue and the cross objections of the assessee, relating to assessment years 1973-74 and 1974-75, were fixed for hearing, as provided in Section 24(11) of the Wealth-tax Act, read with Section 255(4) of the Income-tax Act, 1961. Section 255(4) of the Act for facility of reference is quoted below: 255(4) If the members of a Bench differ in opinion on any point, the points shall be decided according to the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it.

In the event of difference of opinion between the Members of a Division Bench of the Tribunal consisting of two Members the point or points of difference is/are referred to a Third Member by the President of the Appellate Tribunal and the point or points of difference shall be decided according to the opinion of the majority. The decision embodying the majority opinion will be arrived at by the Division Bench, who initially heard the matter and would dispose of the appeal before it after considering the opinions of two differing Members and the Third Member. The matters now in hand have come up for hearing as provided in Section 255(4) of the Income-tax Act.

11. What is emphasised by the relevant legal provision is that there should be ascertainment of the opinion of the majority. The Allahabad High Court in the case of Jan Mohammed (supra) has clarified the scope of the proceedings after the opinion of the Third Member is received and Jurisdiction of the Third Member and I quote two relevant passages - one at pp. 25-26 and the other at pp. 26-27: The Third Member could, therefore, decide only the point that had been referred to him and he could not formulate a new point for himself on which he could base his decision. It appears to us to be further clear from a reading of the Sub-section quoted above that, after the decision of the point or points referred to him by the Third Member, the case should go back to the original Tribunal because so far as we can see, the Third Member has not been given any right to decide the appeal. According to Section 5A(6) of the Income-tax Act, the appeal must be decided by the Tribunal which must consist of a Bench of not less than two Members. As we have already said, the point referred to the Third Member was whether there could be a presumption legally drawn from the materials on the record that the bus belonged to the 'appellant', and on that point the Third Member having agreed with Shri Kalbe Abbas that no such presumption could be legally drawn, the majority view was in favour of the assessee. The last part of Section 5A(7) of the Act provides that the point or points have to be decided according to the opinion of the majority of the Members of the Tribunal who had heard the case including those who had first heard it...

... The Third Member, however, can only answer the point or points that were referred to him for decision and on which there was a difference of opinion. The reason is obvious. On the new point based on Section 16(3)(a)(iii) of the Income-tax Act there is only the opinion of the Third Member. The two other members of the Tribunal had no opportunity or going into that question and, if the point had been raised before them, they might not have taken the same view as the Third Member took. The jurisdiction of the Third Member, it appears to us, is clearly defined in Section 5A(7) of the Indian Income-tax Act: and he cannot, therefore, take it upon himself to decide the appeal by either dismissing or by allowing the same.

It may be stated that the provisions of the Income-tax Act, 1922 and that of Income-tax Act, 1961 are similar. The point that emerges from the Allahabad decision is that what is emphasised is the majority opinion of the Members and not majority in terms of the final conclusion arrived at about the fate of any particular point of difference. In other words, it is not material for the purposes of ascertaining majority opinion as to whether the issue is ultimately accepted or rejected or appeal is allowed or dismissed; the majority is to be found in regard to the opinions expressed by the Members. Because of the latter position to be true, the Allahabad High Court held that in Jon Mohammed's case (supra) the Tribunal had misdirected itself. In that case, if the ultimate conclusion were the test or determining the majority two Members had decided the case against the assessee and one in favour. Bearing in mind this principle, I have tried to ascertain the majority opinion, which proved indeed to be a difficult task. I have bestowed on the issue my utmost consideration and gave lot of time to it.

12. The majority opinion is to be determined qua the points of difference of opinion. It will, therefore, be necessary to be clear about the points of difference as are reflected by the question referred to the Third Member for his opinion. The question in the very nature of it will briefly indicate the issue under difference and not all the aspects relating to the issue. The orders of the two Members differing will bring out in detail the aspects on which there may be difference on a particular issue. It is also obvious that when a difference arises on (he particular approaches to a particular issue those approaches will have to be found out from the orders of the two differing Members and the question referred has, therefore, to be read in the light of what is considered and decided by the two differing Members There is no possibility of any reference to a Third Member of any of the aspects of an issue, which has not at all been considered by the differing Members; and that is bound to be so because 6n the aspects of the issue not decided by the differing Members, there is no question of any difference of opinion. In the case in hand, the issue of valuation of land and factory belonging to the firm M/s. Amritsar Swadeshi Woollen Mills was decided by the differing Members by adopting different approaches on certain aspects, leaving out certain other aspects. Because certain other aspects were left out both the Members thought it proper to set aside the order of the AAC on the issue and restore it to his file with divergent directions. The difference of opinion, therefore, was on the directions given while setting aside the issue to the AAC/WTO and there was no difference of opinion between the Members on the point that the decision of the AAC could not be sustained and had to be set aside. Consequently, the majority of opinion is to be found in regard to the directions given while setting aside the issue to the AAC/WTO It may be clarified here that there was also difference between the Members about the authority to whom the matter should be set aside. The learned Judicial Member set aside the issue to the WTO while the Accountant Member set aside the issue to the AAC. This is another aspect decided about the issue of valuation of land and factory building.

13. The decisions of the three Members now are analysed on the basis of above principles. The revenue in its first ground of appeal had challenged the valuation of factory, land and building, as determined by the AAC. The AAC had decided that issue through her detailed order in the case of Shri Hans Raj Khanna and para 9 is relevant. The AAC in her own words resolved the matter "in favour of the assessee on the legal issue" and, therefore, did not consider it "necessary to go into technical details of the valuat ion". The assessee challenged the valuation of the AAC through five grounds taken in the cross objection.

Ground Nos. 1 and 4 have been rejected by both the Members and there was no difference of opinion. There is difference of opinion in respect of ground Nos. 2 and 3. On ground No. 5 - quoted below - there is no difference of opinion, inasmuch as, both the Members with different directions have held the approach of the AAC to be erroneous:- 5. That the learned Appellate Asstt. Commissioner of wealth-tax has erred in not deciding the matter regarding valuation of land and building belonging to the firm in which the assessee is a partner.

14. In regard to ground No. 1 of the appeal of the revenue and ground Nos. 2, 3 and 5 of the cross objection of the assessee, the opinion expressed by the learned Judicial Member is containing in paras 8 and 9 of his order, which are quoted below:- 8. As regards ground No. 1 raised by revenue, we are to hold that on facts of the case, on a consideration of the valuation of factory building and land held by Amritsar Swadeshi Woollen Mills, Amritsar, the issue does not arise at all. As we have already clarified WTO would be perfectly justified and within his competence in working out a revaluation of the assets and liabilities held by the firm in order to revaluate the net wealth of the firm with a view to apportion the same among partners to determine the interest of the partner. But he cannot proceed to bring about partial adjustment with reference to particular assets or liabilities. Taking any other view will be to frustrate the intent and purport of the provision contained in Section 4(1)(b) and the Wealth-tax Rule 2(1). WTO has to work out the interest of the assessee, in the partnership concern in accordance with the provision contained in Section 4(1)(b) and W.T. Rule 2(1). If he aims at modification he is to work out the interest of the partnership concern on the basis of complete revaluation under Section 7(2) along with Wealth-tax Rules 2(A) to 2(E) of all assets and liabilities of the firm. But that is what has not been done by the WTO in the present appeal. Therefore, in our view, the consideration of evaluation of the factory building alone does not arise at all. Accordingly, we dismiss the plea of revenue and its appeal on this issue.

9. We may for conveniently dealing with the issue, now take up the ground raised by the assessee in his cross objections. We would first take up grounds 2, 3 and 5. As we have already recorded our finding in disposing the appeal of revenue on the application of Section 7(2) along with Wealth-tax Rule 2(1) it is not necessary to repeat them again. We uphold the plea of the assessee that the WTO proceeded to pick and choose the assets held by the firm on facts in an unauthorised and unjustified manner. As regards the ground No. 5 raised by the assessee, we have to hold that finding of AAC regarding valuation based on an erroneous approach cannot be sustained and has to be vacated. We do so and direct the WTO to recompute the interest of the assessee in the firm Amritsar Swadeshi Woollen Mills in accordance with principles explained by us.

The Accountant Member did not agree with the approach of the learned Judicial Member and was of the opinion that ground No. 1 of the revenue was wrongly rejected and so were ground Nos. 2 and 3 of the assessee wrongly upheld. On ground No. 5 of the cross objection, there was agreement insofar as the findings of the AAC on the valuation issue were to be vacated but the directions for deciding the issue afresh of both the Members were different. On ground No. 1 of the revenue and ground Nos. 2 and 3 of the cross objection of the assessee, the learned Third Member has agreed with the opinion of the Accountant Member in view of Allahabad High Court decision in Juggilal Kamlapat Bankers' case (supra) applied by him being upheld by the Supreme Court in Juggilal Kamlapat Bankers' case (supra). In view of this position, the majority opinion will be that contention of the revenue cannot be rejected nor the contentions of the assessee in the cross objection accepted for the reasons given by the learned Judicial Member. The only part that remains of the order of the learned Judicial Member is that the valuation made by the AAC is to be set aside and the issue is to be decided afresh and on this both the Members are in agreement. There is, however, a disagreement between the learned Judicial Member and the Accountant Member about the forum to whom the matter be set aside.

According to the learned Judicial Member, the matter was to go back to the WTO but according to the Accountant Member the matter was to go to the AAC. The order of the learned Third Member has missed this aspect and in para 11 of the order of the Third Member there is a sentence, which reads as under:- Here a question may arise as to what is the majority in regard to setting aside the assessment, since both the members have thought it fit to set aside the assessment and to direct the AAC to hear the matter.

15. Further, the learned Third Member had decided the issue by an approach, which is neither of the Accountant Member nor of the learned Judicial Member. He has upheld the action of the AAC in accepting the value disclosed by the assessee. It is difficult to understand how this opinion can be found to be the opinion of the majority. The learned Judicial Member did not concern himself with that yardstick applied by the AAC to consider the disclosed value by the assessee to be adequate.

The Accountant Member did express his opinion but that opinion was opinion of one Member only and could not give rise to any difference of opinion between them; if at all the agreement between them was only on one aspect that the decision of the AAC was not sound. In such circumstances, when the Accountant Member and the learned Judicial Member both have not expressed opinion on the particular aspect under consideration, it is not possible for the learned Third Member to treat it as a point of difference and any opinion expressed by the Third Member cannot be taken into account for determining majority opinion.

This being so, the concerned part of the opinion of the learned Third Member will have to be ignored for arriving at the majority and I feel so.

16. The learned Third Member in para 11 of his order out of abundant caution has made an observation as under:- However, it is open to the parties to argue the matter before the regular Bench, any other issue that may arise having a bearing on the valuation and not decided by these presents. and the appeal has to be decided after taking into account those arguments, as well.

This sentence has obviously not to be read in excess of scope of Section 255(4) of the Income-tax Act and it can at best mean that even after resolving the difference if some aspect remains to be urged or argued, which was taken up by the parties but had not been decided earlier by the Bench, the same may be argued. No such aspect was canvassed by the parties and hence there was no further hearing required and the hearing was to be restricted to passing the order under Section 255(4) of the Act.

17. The assessee's authorised representative, Shri R.L. Mehra, C.A., however, came out with a proposition, to withdraw ground No. 5 of the cross objections. This, in my opinion, could not be entertained from him in the course of an hearing contemplated under Section 255(4) of the Income-tax Act as made applicable to the Wealth-tax Act. Permitting of such withdrawal at this stage, when the ground in the cross objection stands adjudicated, a difference of opinion has arisen and even the learned Third Member has taken note of that aspect will be clearly violative of the aforementioned provisions. The departmental representative invited attention to this aspect to oppose the assessee's request for withdrawal. Further this is a withdrawal for a collateral purpose, which will have the effect of modifying the order of the learned Judicial Member inasmuch as it is because of ground No.5, he decided to vacate the findings of the AAC. My learned brother here in this matter is conscious of the difficulty caused as is apparent from para 6 of his order. In my opinion, the assessee cannot be allowed to withdraw ground No. 5 now. It will amount to pulling the rug under the feet and bring about a change in factual position. I am unable to understand how ground No. 5 can be said to become meaningless and infructuous when it was aiming to seek mere relief by pointing out the position admitted by the AAC in the order of Shri Hans Raj Khanna, which is followed in this case, namely, she did not go into technical details of valuation.

18. I have indicated above what constitutes the majority opinion in my view. My perception is different from that of my learned brother and I have been unable despite thinking hard to share the view expresed by him in his proposed opinion. I may invite attention once again to the aspect that even if it is held that there is majority opinion about setting aside the order of the AAC, there will be difficulty yet to be resolved as to whom the case is to be sent back, the AAC or the WTO.The matter is to be referred to the Honourable President for taking further action.

ORDER UNDER SECTION 24(11) OF THE W.T.ACT, READ WITH SECTION 255(4) OF THE I.T. ACT In these matters, there is difference of opinion among both. Therefore, we refer these matters to the worthy President of the Appellate Tribunal for settling the difference of opinion under Section 24(11) of the Wealth-tax Act, 1957, read with Section 255 of the Income-tax Act, 1961 and hence frame the questions:- (1) Whether, on the facts of the case, the majority decision is that the method of valuation adopted by the AAC for the land and factory building in dispute is just and correct (2) What constitute majority opinion and whether it is what is expressed in the opinion of the learned Judicial Member or the learned Accountant Member 1. These appeals by the revenue and cross objections of the assessee are peculiar as differences between the learned Members have arisen twice. The second difference as to what is the majority decision has been referred to me by the Hon'ble President to Income-tax Appellate Tribunal under Section 24(11) of the Wealth-tax Act, 1957, read with Section 255(4) of the Income-tax Act. The point of difference as to what is the majority view having acquired the dominant position, the question of valuation of property on which first difference of opinion arose has gone to the back seat. As my decision is to be read conjectively with the orders of learned Members expressing different shades of opinion, I shall refer to those orders only in a nutshell to avoid repetition.

2. The assessee, a Hindu undivided family, headed by Shri Srikrishan Khanna on the relevant valuation date, was a partner in Amritsar Swadeshi Woollen Mills and question of valuation of land and building owned by the firm arose during the course of the assessment and was referred to the Valuation Officer. A sum of Rs. 9,37,488 was added to the wealth of the assessee by the Wealth-tax Officer with the following remarks:- The W.D.V. of the building of M/s Amritsar Swadeshi Woollen Mills, Amritsar is shown at Rs. 3,79,178 and value of land shown by this firm as per Balance Sheet is Rs. 12,334. Thus total value of land & building as per Balance Sheet of the firm is Rs. 3,91,512. The case of the firm was referred to the Valuation Cell, and as per Govt.

Valuer's Report dated 23-5-1977, the market value of land and building owned by M/s. Amritsar Swadeshi Woollen Mills, as on 31-3-1973 is Rs. 13,29,000. Therefore, proportionate interest of the assessee in the value of land & building of the firm shall be increased. Total increase is Rs. 9,37,488.

3. On further appeal, the Appellate Assistant Commissioner applied her decision taken in the case of Shri Hans Raj Khanna, another co-owner, wherein she had observed as under:- The valuation of land and building was discussed by Shri R.P. Bhardwaj, Valuation Officer and Shri R.L. Mehra, C.A. and rival contentions put forth. However, the A/R raised the legal issue that the value of property in question should be adopted keeping in view the market value of the property based on Municipal Valuation which in turn followed the provisions of Rent Control Act. It was pointed out that Gross A.L.V. of the property owned by M/s. Amritsar Swadeshi Woollen Mills has been determined by the Amritsar Municipal Corporation at Rs. 19,500 and the valuation of the land and building should be worked out keeping in view the ALV of the property which is in possession of the owner. In this connection my attention was invited to the decision of the Supreme Court in the case of Amolak Ram Khosla v. CIT, Delhi-III reported in 131 ITR page 189. The matter is resolved in favour of the assessee on the legal issue.

Therefore, it is not considered necessary to go into technical details of the valuation. However, it is seen that the valuation returned by the appellant himself is at Rs. 3,91,612 which obviously is higher than that of valuation if taken on rent capitalisation method. In the light of this, no addition is called for on this account.

4. The revenue went in appeal against the order of the Appellate Assistant Commissioner on the ground that the decision of the Supreme Court relied upon the Appellate Assistant Commissioner was not applicable for the valuation of the property. The assessee filed cross objections. Both were heard together by the Appellate Tribunal but could not be disposed of on account of a difference of opinion between the Members. The learned Judicial Member Shri U.S. Dhusia was of the view that for determining the value of the interest of the partner in the partnership Clause (b) of Sub-section (1) of Section 4 of the Wealth-tax Act and rule contained in Wealth-tax Rule 2(1) was to be applied. He accordingly held that both the Wealth-tax Officer and the AAC misdirected themselves in taking recourse to Section 7(2)(a) and to Rules 2A to 2E of the Wealth-tax Rules which were not applicable in the case of the assessee. The learned Judicial Member observed that the Wealth-tax Officer is to determine net wealth of the firm under Wealth-tax Rule 2(1). If he genuinely feels that the value of assets adopted in the balance sheet of a firm does not truely represent their fair market value, he would be fully justified in challenging the valuation of the assets. But then, he must earnestly revaluate all assets and liabilities of the firm and take true wealth of the firm. He cannot pick out an asset and an evaluation and divide the difference.

The WTO must challenge and assail the balance sheet of the firm rather than value of one asset. The learned Judicial Member rejected ground No. 1 raised by the revenue for the reasons given in para 8 of his order. He also rejected ground No. 1 but accepted ground Nos. 2 and 3 of the cross objections and upheld the plea of the assessee that the WTO proceeded to pick and choose the assets held by the firm on facts in an unauthorised manner. As regards ground No. 5 raised by the assessee, learned Judicial Member held that finding of the AAC regarding valuation based on an erroneous approach, cannot be sustained and has to be vacated. He directed the Wealth-tax Officer to recompute the interest of the assessee in the firm in accordance with principle explained in the order.

5. Learned Accountant Member Shri P.K. Mehta did not share the view expressed by the learned Judicial Member in the proposed order. In his view, in dismissing the plea of the revenue raised in ground No. 1 and in simultaneously partially accepting ground No. 5 in assessee's cross objection, the learned Judicial Member gave contradictory findings which the learned Accountant Member was unable to accept. Learned Accountant Member agreed with the WTO and the AAC that value of assessee's interest was to be computed under Section 7(2)(a) of the Act after making such adjustments in the value disclosed in the balance sheet as are prescribed in Rules 2A to 2F of the W.T. Rules. On the question of correctness of decision of AAC regarding value of factory building, the learned Accountant Member observed that the decision of the Supreme Court in Amolak Ram Khosla's case (supra) and other decisions were concerned with the specific languages used in Income-tax and other Acts and, therefore, yardstick applied by the AAC was not safe and correct. He directed the AAC to re-examine the question of valuation afresh on the basis of principle of valuation which can be suitably applied in a situation like the one under consideration. Thus question of valuation of land and building was restored to the file of the AAC. In the above view of the matter, the Hon'ble Accountant Member accepted revenue's ground of appeal as also assessee's cross objection No. 5 for statistical purposes. The other cross objections of assessee were rejected. The learned Accountant Member agreed with the Judicial Member on other points.

6. The following point of difference of opinion was referred to Hon'ble President under Section 255(4) of the Income-tax Act:- As there is a difference of opinion between us in respect of the question of valuation of the land and factory building belonging to the firm M/s Amritsar Swadeshi Woollen Mills, in which the assessee is a partner representing his HUF and in respect of which firm the value of assessee's interest is to be determined under Section 4(1)(b) of the Wealth-tax Act, we refer these two appeals of the revenue and the two cross-objections of the assessee to the President of the Income-tax Appellate Tribunal for further action as provided in Section 255(4) of the Income-tax Act.

7. The President referred the matter on point of difference to Shri Ch.

G. Krishnamurthy the learned Sr. Vice-President (as he then was) who heard the parties and observed as under:- ... On the question of valuation, the learned AM pointed out that the Supreme Court decision referred to by the learned AAC and approved of by the learned JM namely the one reported in 131ITR 589 arose out of Income-tax Act and Municipal Act and since the language of those Acts were different from the language of Wealth-tax Act, those decisions should not be read as applying to the valuation of property for the purpose of W.T. Act. He, thus held that the yardstick applied by the learned AAC to uphold the written down value was erroneous. He also made a reference to the principle of valuation of immovable properties as enunciated by the Supreme Court in variows cases as explained by the Karnataka High Court in a case reported in 126 ITR 157 and held that the principle of rent capitalisation method would apply only in a case where the immovable property was fully utilised or if the property was not commercial.

Otherwise those methods would yield misleading results. He was of the opinion that pegging down the values of the land and building by applying provisions of Rent Control Legislation without applying the tests referred to above would not yield correct results. He thu s held that the AAC was not j ustified in accepting the disclosed value....

I may also add that it is difficult as far as I can see to agree with the view expressed by the learned AM that for the purpose of valuation of land and building the appropriate method is not rent capitalisation method. The observations made by the Supreme Court in the various cases cited by him no fouby applied to the facts of those cases but they do not cease to be enunciation of legal principles having general application. It is true that if the property is not commercially exploited in the sence it was underutilised the rent capitalisation method may not yield proper result but it will be always form debatable issue as to what would be proper commercial utilisation of a particular asset. If the transactions are entered at arms length and no connivance is proved and no favours are shown, the yield from an asset must represent the commercially feasible yield and there should be no objection in capitalising it for arriving at the market value. In these cases it is not the case of either the assessee or the department that the properties are not commercially exploited in a full measure that any favours were shown in fixing the rent or that the transactions were colourable. Therefore, the yield method adopted should be approved.

The AAC has examined this point at length and arrived at the conclusion that the rateable value fixed by the Municipality was apposite and that should be taken as the basis for capitalisation. I do not see why that method should be disregarded merely on the basis of suspicion. Thus, the method adopted by the AAC should not have been disregarded. Once the method adopted by the AAC is found to bejustified, and value arrived at as per that method approximated to the market value, there is no reason why the assessment should be set aside. In view of my conclusion on the just applicability of Sub-section (2) of Section 7 and that there was no need to set aside the assessment, I do not think, it necessary to dispose the other points raised before us.

11. With these observations the matter will now go before the regular Bench to decide this issue according to the majority. Here a question may arise as to what is the majority in regard to setting aside the assessment since both the Members have thought it fit to set aside the assessment and direct the AAC to hear the matter.

Since I am of the opinion that the method adopted by the AAC is a correct method and is in accordance with the legal principles laid down, and since the difference of opinion between the members arose on the matter of valuation of land and building in its entirety, the appeal have to be decided accepting the value as disclosed by the assessee.

8. The matter, after order of the Learned Third Member, was again placed before Amritsar Bench of Tribunal which at the relevant time comprised of Shri P.K. Merita, Accountant Member and Shri P.S. Dhillon, Judicial Member. The learned Judicial Member after taking into account earlier orders of Members as also that of Third Member and in the light of the question referred, came to the conclusion that majority decision was that the order of AAC was confirmed and departmental appeal was dismissed. In this connection, he observed that the conclusion of the each Member was to be considered and not reasoning given. The learned Judicial Member further referred to certain decisions in para 5.1 of the proposed order and independently observed that method adopted by AAC was the correct method and "We find ourselves in complete agreement with the decision of the Third Member". With reference to observations of Shri U.S. Dhusia in earlier proposed order on ground No. 5 of assessee's cross objections, the learned Judicial Member observed that there appears to have occurred some inadvertence in dealing casually and summarily with the aforesaid ground wherein the AAC's findings were stated to have been vacated and the WTO directed to recompute the interest of the assessee. In learned Judicial Member's view, ground No.5 of cross objections of the assessee, became meaningless and infructuous as appeal of the revenue was dismissed by the Judicial Member. He permitted the assessee to withdraw ground No. 5 of the cross objections and recorded that departmental representative had not objected to the same. Thus, according to Shri P.S. Dhillon, in view of the majority decision, and his observation, the order of the AAC was upheld and appeals of the revenue as well as cross objections of the assessee dismissed.

9. The learned Accountant Member Shri P.K. Mehta again did not agree with the view expressed by the learned Judicial Member Shri P.S.Dhillon. After quoting provisions of Section 255(4) of the Act as interpreted by Hon'ble Allahabad High Court in the case of Jon Mohammed (supra) and after taking into account observations of the learned Judicial Member and learned Accountant Member in the earlier orders, Shri Mehta observed that majority opinion cannot be that the contention of the revenue was rejected, nor the contention of the assessee in the cross objection accepted for the reasons given by learned Judicial Member. In his view, the learned Third Member had agreed with the learned Accountant Member with regard to ground No. 1 of the revenue and ground Nos. 2 and 3 of the cross objections of the assessee. On ground No. 5 of the cross objections, there was no disagreement between the two Members insofar as findings of the AAC on the valuation issue were vacated with directions for deciding the issue though both the Members gave different reasons. In his view, according to the learned Judicial Member (Shri Dhusia), the matter was to go back to the WTO but according to the Accountant Member, the matter was to go back to the AAC. The learned Third Member, according to Shri Mehta, missed this aspect. In his opinion, the learned Third Member could not uphold the action of the AAC and the same could not be held to be opinion of the majority. Both the Members had agreed that order of the AAC was not sound and thus there was no difference of opinion on this issue.

Accordingly, the view expressed by learned Third Member could not be taken into account for determining the majority opinion. In his view, therefore, opinion of Third Member on above point was to be ignored for determining the majority view. With reference to the observation of learned Third Member that it is open to the parties to argue the matter before the regular Bench, the learned Accountant Member observed that no new aspect was canvassed by the parties and hence hearing was restricted to passing of order under Section 255(4) of the Act. In his view, the assessee could not withdraw ground No. 5 of cross objections at that stage as the same would have the effect of modifying the order of Judicial Member earlier given. He ultimately concluded that even if it is held that there was a majority opinion about setting aside the order of AAC, there will be difficulty yet to resolve as to whom the case is to be sent back - to AAC or the WTO. The matter in his view was required to be referred to Hon'ble President for taking further action.

10. On the aforesaid difference of opinion, the Members referred the following two questions to Hon'ble President under Section 24(11) of the Wealth-tax Act, read with Section 255(4) of the Income-tax Act: 1. Whether, on the facts of the case, the majority decision is that the method of valuation adopted by the AAC for the land and factory building in dispute is just and correct 2. What constitutes majority opinion and whether it is what is expressed in the opinion of the learned Judicial Member or the learned Accountant Member 11. The aforesaid vaxed questions have been assigned to me by the Hon'ble President for disposal. I have heard the parties at length. The learned departmental representative supported the order of learned Accountant Member for the reasons given by him and extracted earlier.

Shri R.L. Mehra, learned Counsel for assessee submitted that majority view was the one expressed by the learned Judicial Member and conclusion was that order of the AAC has been upheld. Shri Mehra emphasised that for determining the majority view on any given point, the conclusion expressed by different Members including the 3rd Member is to be looked into and not reasons given to reach such conclusion. In this connection, Shri Mehra drew my attention to decision of Hon'ble Punjab and Haryana High Court in the case of CITv. Sobha Singh Jairam Singh (No. 1) [1990] 183 ITR 148 and of Supreme Court in the case of Ram Kumar Agarwalla & Bros. v. CIT [1967] 63 ITR 622. With reference to powers of Third Member, Shri Mehra drew my attention to the decision of Hon'ble Madras High Court in the case of JTOv. Vice-President, ITAT [1985] 155 ITR 310, wherein it has been observed that power of Third Member to whom the case is referred to is confined to giving of a decision on point on which the Members had differed and which had been formulated by them.

12. Shri Mehra further drew my attention to decision of Allahabad High Court in the case of Jan Mohammed (supra). He emphasised that Third Member can only answer the point or points that are referred to him for decision and on which there was difference of opinion. The aforesaid decisions have been carefully considered in the light of observations made by different Members and the question referred to me.

13. On consideration of provisions of Section 255(4) of the Act and the case law cited at bar, the following relevant propositions emerge:- 1. That provisions of Section 255(4) are procedural aimed to remove obstacles or deadlocks in the disposal of an appeal before the Tribunal.

2. That for determining as to what is the point or points of difference between the Members, the Third Member has to concentrate on the question or points stated and referred to him though proposed orders of Members could also be considered.

3. The Third Member is neither revisional nor appellate authority and his jurisdiction is confined only to give opinion only on point or points of difference referred to him. Any opinion expressed by the Third Member on additional point not referred to him, is merely of suggestive character not binding on the Members of the regular Bench which may adopt or ignore it.

4. That Members of regular Bench of Appellate Tribunal authorised to dispose of appeal after opinion of Third Member is available, are first required to determine the majority view on the point of difference and decide the issue in the light of the majority view.

The majority view cannot be disregarded. Subject to aforesaid limitation, the Members of the regular Benches have all powers conferred on Appellate Tribunal under the statute.

5. That in case the Members of regular Bench find that no majority view is available even after the decision of the Third Member on the point or points of difference, the Members of regular Bench have two options open, namely, (1) to send back the case to the Third Member through the Hon'ble President; (2) to consider the point of difference provided the members are competent to hear "the case".

This appears to be reasonable view if purpose of the provision relating to procedure aimed to remove deadlocks is kept in view. The second reference would be competent only when Members who heard the case are equally divided. The above factor is a conditioned precedent for referring point of difference to the Hon'ble President.

14. With the aforesaid legal quoting, I proceed to consider the orders of learned Judicial Member and the learned Accountant Member. In this connection, I may record that there is no difference that as per majority the value of the assessee's interest in firm M/ s Amritsar Swadeshi Woollen Mills was to be determined as per Section 7(2) of the Wealth-tax Act, read with Rules 2A to 2G of Wealth-tax Rules. This is what the AAC had held and her order on this point has to be taken as confirmed.

15. Having held that as per majority view the value of assessee's interest is to be determined under Section 7(2), read with rules 2A to 2G of the Wealth-tax Rules, the related question is what Is the majority view on the valuation of building in question as per above rules. It is not in dispute that adjustments in the value of land and building disclosed could be made under rule 2B of WT Rules and that provision was invoked by the Wealth-tax Officer. The AAC on the other hand accepted the value disclosed and held that no adjustments need be made. The learned Accountant Member did not agree and directed that the value of the asset be redetermined and for that purpose set aside the matter to her file. The learned Third Member on the other hand agreed with the AAC and held that no adjustments need be made and matter be not set aside. This view of Third Member, according to Shri Mehta, cannot be treated as majority view. It is, therefore, necessary to see as to what is the majority view on applicability of rule 2B of W.T.Rules. The adjustments/enhancements made by the Wealth-tax Officer were deleted by the AAC and revenue had challenged the said deletion in ground No. 1 before the Appellate Tribunal. Shri Dhusia specifically dismissed above ground and did not approve of the changes made. In fact he held that none of the Wealth-tax rules 2A to 2G was applicable. Thus the learned Third Member and Shri Dhusia held that rule 2B was not attracted in the case. The reasoning of the learned Judicial Member Shri Dhusia for rejecting ground No. 1 of the revenue may be different from the reasoning given by learned Third Member but here conclusion reached is to be seen and not the reasoning. The adjustments made by the WTO not having been approved, the decision of the AAC on valuation of building was confirmed as per the majority view. Therefore, for the aforesaid reason, I agree with the learned Judicial Member Shri Dhillon.

16. For the purpose of disposal of the matter before me, it would not be inappropriate to find out the majority decision or decisions on ground No. 5 of the cross objections. The said ground was raised by the assessee in the following terms:- That the learned Appellate Assistant Commissioner of Wealth-tax has erred in not deciding the matter regarding valuation ofland and building belonging to the firm in which the assessee is a partner.

17. Prima facie the ground as worded does not arise out of the order of the Appellate Assistant Commissioner as matter regarding valuation of land and building was clearly decided by the Appellate Assistant Commissioner. But aforesaid view being an isolated view not matching with any of the views already expressed, I do not wish to add confusion to the complicated situation and proceed to consider the views expressed by other learned Members. The learned Accountant Member in the first order accepted aforesaid ground and remitted the matter back to the AAC. The learned Third Member in view of order proposed by him, can be said to have impliedly rejected the aforesaid ground or in the alternative left the same for fresh disposal by the regular Bench. The view of learned Judicial Member Shri U.S. Dhusia on the said ground is a subject-matter of great controversy. Apparently, he accepted the said ground but this view was held by the learned Accountant Member Shri Mehta to be contradictory to the view taken by him on ground No. 1 of the revenue. When the issue was taken by the learned Third Member, he did not see any contradiction in the approach of the learned Judicial Member but all the same observed as under: If this is view, I do not see any contradiction in his direction although the directions given may render them difficulty in evaluation.

Here a more sophisticated language was used to convey that the directions given were difficult to be given effect to. This ground was again considered by the regular Bench after the decision of the learned Third Member. Shri P.S. Dhillon observed, "there appears to have occurred some inadvertence in dealing casual and summarily the ground No. 5 of the cross objections of the assessee by the learned Judicial Member". Shri Dhillon treated ground No. 5 as withdrawn and rejected.

Shri Mehta did not approve of above approach although he again mentioned about contradiction in the order of Shri Dhusia. In Shri Mehta's views the ground could not be permitted to be withdrawn.

18. Having regard to the facts and circumstances of the case and by applying the principle of reasonable construction as applicable to judicial orders and reading order of Shri Dhusia as a whole, I am of view that majority opinion is that order of the learned Judicial Member on ground No. 5 of cross objections of assessee is contradictory and could not be given effect to. This order of Judicial Member on ground No. 5 of cross objections therefore is not to be taken into account for the purposes of disposal of the appeals and cross objections.

Alternatively Shri Dhusia's decision on aforesaid ground was based on his view that net commercial value of the firm's assets was to be determined. Now when majority decision has disapproved of above approach, in view of the decision of Hon'ble Supreme Court, the ground (No.5) could not be treated as allowed. At any rate, in view of order of learned Third Member and inherent powers of regular Bench to dispose of the entire appeal, ground No. 5 has rightly been held to have been rejected. I therefore agree with Shri Dhillon that aforesaid ground be treated as rejected.

19. The learned Third Member also upheld the value of the land and building returned by the assessee as in his view the same was more than the figure worked out on yield basis. The learned Judicial Member Shri P.S. Dhillon held that majority view was that decision of AAC on above point was upheld. This is not accepted by the learned Accountant Member for the reasons already recorded. But, in my view, the view taken by learned Judicial Member is correct. It is true that apparently both the Members who originally heard the matter disagreed with the view taken by the AAC and set aside her order with one directing the case to be heard by the WTO for determining net wealth of firm under rule 2(1) of Wealth-tax Rules and the other asking the AAC to determine the value by applying suitable method. In holding that as per the majority view the decision of the AAC was upheld, Shri Dhillon considered order of the Third Member along with the order of Shri Dhusia dismissing the appeal of the revenue on ground No. 1. The learned Accountant Member on the other hand observed that in the earlier order the Judicial Member had set aside the order of the AAC and, therefore, same could not be confirmed by the Third Member. In my opinion, in arriving at above conclusion, the learned Accountant Member has not considered the question referred to the learned Third Member. As is clear from the question referred, the difference of opinion between the Members arose on all aspects relating to "the question of valuction of land and factory building" belonging to the firm ... under Section 4(1)(b) and "two appeals of the revenue and two cross objections of the assessee were referred" to the President of the Appellate Tribunal for action under Section 255(4). Thus, the difference between the members related to basic question of disposal of the appeals and cross objections. It is, therefore, difficult to conclude that on any matter relating to valuation of property, the Members had agreed and the learned Third Member had a limited scope either to agree to remit the matter to the WTO or to the AAC. As per the scheme and practice of the Tribunal, one Member proposes the order on behalf of the Bench for consideration of the second or other members. In case of a difference, the other Member proposes his own order. When difference of opinion airses, the member proposing the first order does not get any opportunity to express his view on new points raised by the descending Member except to indicate them in the questions referred, as far as possible. In the present case, there is sufficient indication that entire matter of disposal of appeals and cross objections was referred under Section 255(4) of Income-tax Act. The learned Third Member had no choice but to resolve the difference on the question of disposal of appeals and cross objections relating to valuation of property in dispute. In the light of the question referred, it was not possible to look for any minor aspect on which members agreed. The aforesaid view is supported by the decision of Hon'be Supreme Court in the case of Ram Kumar Agarwalla & Bros, (supra). The relevant facts and observations of their Lordships are extracted below: ... On the plea of the assessee that the amount of Rs. 2,00,000 received by them as consideration for agreeing to refrain from carrying on their business and was on that account not taxable as their income, and that in any event it was a non-recurring casual receipt, there was difference of opinion between the two members who constituted the Appellate Tribunal, and the appeal was referred to a Third Member who remanded the case for a finding on certain matters on which the order of the Appellate Assistant Commissioner was silent. The Appellate Assistant Commissioner then reported that the payment of Rs. 6,00,000 was not made only as an inducement to the assessee to refrain from competition in purchasing the controlling interest in the company, but it was made to remunerate the services rendered by the assessee and their associates in helping Messrs.

Mangturarn Jaipuria to acquire the controlling interest. The Tribunal agreed with the report of the Appellate Assistant Commissioner and dismissed the appeal.

Counsel for the assessee says that the two Members of the Tribunal who originally heard the appeal had concurrently held that Rs. 6 lakhs were paid to the assessees and their associates for dissuading them from competing with Messrs. Mangturarn Jaipuria and it was not open to the Third Member to ignore that finding and to arrive at a different conclusion.

Weare unable to agree with that contention. On a difference of opinion, the appeal in its entirety, and not any specific question, was referred to the Third Member.

... The Tribunal had called for a report from the Appellate Assistant Commissioner and that officer, as we have already observed, expressly recorded that the payment made to the assessees and their associates was for services rendered in acquiring the controlling interest for Messrs. Mangturam Jaipuria competing for the purchase of the shares. The Tribunal accepted the report of the Appellate Assistant Commissioner.

20. Before close, I deem it necessary to make few observations on referred question No. 1 wherein it is mentioned, "method of valuation adopted by the AAC is just and correct". However, as is clear from the original question referred to the Third Member, the difference between the Members related to "Valuation of land and building". In the earlier proposed order, neither of the Members adopted any method of valuation and difference related to question of valuation which as per orders, clearly implied value fixed on land and building and not method of valuation. The question again asks whether method adopted by the AAC is 'just and correct'. The above equitable phrase is not found in any of the orders proposed by the learned Members. These anomalies were found in the question but as Third Member, I had no power to mend or alter the referred question. After considering relevant facts and circumstances as available in the orders of learned Members, I have endeavoured to find the majority view expressed above. I agree with order proposed by the learned Judicial Member Shri Dhillon. With the aforesaid observations, the matter now be placed before the regular Bench for disposal, in accordance with law.


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