Wealth-tax valuation of let-out property: full municipal rateable value governs gross maintainable rent, without bifurcation of occupants.

For valuation of a let-out immovable property under Schedule III to the Wealth-tax Act, the gross maintainable rent must be taken from the higher of actual rent or the municipal annual value, and that municipal rateable value cannot be bifurcated between lawful and unlawful occupants. Rule 3 requires net maintainable rent valuation, while Rule 4 allows only the specified deductions. The income-tax concept of annual value under section 23 of the Income-tax Act does not control wealth-tax valuation. The full municipal rateable value was therefore adopted as the gross maintainable rent, and the contrary bifurcation was impermissible.

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Issues: Whether, for valuation of a let-out property under Schedule III to the Wealth-tax Act, 1957, the gross maintainable rent had to be taken at the full municipal rateable value fixed by the local authority without bifurcating it between lawful and unlawful occupants, and whether the income-tax approach to annual value could be applied.

Analysis: Under section 3 read with section 2(m) of the Wealth-tax Act, 1957, the charge is on net wealth as computed in accordance with the Act. Rule 3 of Schedule III requires valuation of an immovable property by reference to net maintainable rent. Rule 4 requires deduction of municipal taxes and 15% of the gross maintainable rent. Rule 5(i) provides that, where the property is let, the gross maintainable rent is the higher of the actual rent received or receivable and the annual value assessed by the local authority for property tax purposes. The municipal rateable value fixed for the property was the relevant benchmark, and the Tribunal held that the rateable value could not be split into portions attributable to lawful and unlawful occupiers for purposes of Rule 5(i). The Tribunal also held that the yardstick used for income from house property under section 23 of the Income-tax Act, 1961 could not control valuation under the Wealth-tax Act.

Conclusion: The full municipal rateable value had to be adopted as the gross maintainable rent, and the bifurcation adopted by the first appellate authority was impermissible. The valuation was to be recomputed accordingly, and the Revenue's appeal succeeded to that extent.

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