Residential House Allotment to Employees as Assets under Wealth-tax Act

The Tribunal held that residential houses allotted to employees, officers, or whole-time directors are considered 'Assets' under the Wealth-tax Act if the gross annual salary condition is met. It clarified that the exemption based on salary applies to all such individuals. Additionally, the Tribunal ruled that residential houses acquired after a specified date must be valued based on cost of acquisition, rejecting the argument that this rule does not apply to corporate assesses. Consequently, the Tribunal dismissed the appeals of the assessee regarding the valuation and classification of residential houses under the Wealth-tax Act.

---

---

Issues involved:
The judgment involves the issue of whether residential houses belonging to the assessee and allotted to its employees are considered as 'Assets' under section 2(ea) of the Wealth-tax Act, 1957, and the valuation of residential houses allotted to employees based on their cost of acquisition.

Issue 1 - Residential houses as 'Assets' under Wealth-tax Act:
The assessee contended that the exemption based on gross annual salary less than five lakh rupees applies only to a Director in whole-time employment, not to employees or officers. However, the Tribunal disagreed, stating that the provision applies equally to employees, officers, and directors. The Tribunal emphasized that residential flats vacant on valuation dates, meant for employees, officers, or whole-time directors, are covered by the exemption if the gross annual salary condition is met. The Tribunal held that such residential flats are exclusively meant for employees and, if the salary exceeds five lakh rupees, they are not entitled to the exemption.

Issue 2 - Valuation of residential houses based on cost of acquisition:
The assessee argued that the Second Proviso to Rule 3 of Schedule III of the Wealth-tax Act, which mandates valuation based on cost of acquisition for properties acquired after 31-3-1974, does not apply to corporate assesses. However, the Tribunal found that the Second Proviso clearly states that properties acquired or constructed after the specified date must be valued based on cost of acquisition or construction. As the assessee failed to demonstrate falling within any exceptions to this rule, the Tribunal upheld the valuation of residential units allotted to employees based on their cost of acquisition.

In conclusion, the Tribunal dismissed the appeals of the assessee concerning the valuation of residential houses allotted to employees and the classification of such houses as 'Assets' under the Wealth-tax Act.

---