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Issues: Whether the valuation of a commercial godown let out on lease was correctly made on the rental capitalisation method instead of the land and building method; and whether Schedule III inserted by the Direct Tax Laws (Amendment) Act, 1989 applied retrospectively as a clarificatory provision.
Analysis: Under section 7(1) of the Wealth-tax Act, 1957, the value of an asset is to be estimated on the basis of its open market value. Rule 1BB applied only to residential buildings, so it did not govern valuation of a commercial building let out for rent. On that basis, the use of rental receipts to arrive at market value was held permissible. The Court also found that Schedule III inserted by the Direct Tax Laws (Amendment) Act, 1989 came into force only from 1 April 1989, and there was no indication that it was intended to operate retrospectively. The amendment was not shown to be merely clarificatory, and therefore could not be applied to the earlier assessment years in question.
Conclusion: The rental capitalisation method was validly applied, and the challenge based on retrospective application of Schedule III failed.
Ratio Decidendi: For wealth-tax valuation, where a commercial property is let out and no specific rule applies, its open market value may be determined on the basis of rental capitalisation, and a later inserted valuation schedule will not operate retrospectively unless the statute clearly so provides.
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