Exclusive residential use under wealth-tax rules does not require constant physical occupation if the house is not let out.

The third proviso to Rule 3 of Schedule III to the Wealth-tax Rules, 1957 was construed to require that a house be retained exclusively for the assessee's own residential purpose and not let out or used for non-residential purposes. Actual physical occupation throughout the relevant period was held not indispensable, so long as the property remained earmarked for residential use. On that construction, the residential house qualified for the proviso and the valuation adopted on a contrary basis was unsustainable.

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Issues: Whether the benefit of the third proviso to Rule 3 of Schedule III to the Wealth-tax Rules, 1957 is available where the assessee did not physically reside in the house during the relevant period, but the property was retained exclusively for residential use and was not let out or used for non-residential purposes.

Analysis: Rule 3 lays down the rent-multiplier method for valuation of immovable property, while the third proviso excludes one house belonging to the assessee from the cost-based valuation under the second proviso if the house is exclusively used by the assessee for his own residential purposes throughout the relevant twelve months. The condition of exclusive residential use was read in a practical manner: what matters is that the house is not let out or diverted to commercial or other non-residential use. Physical occupation every day is not made a mandatory requirement, and the existence of more than one house also shows that residence in the particular house is not the sole test. Applying this construction, the property, being a residential house retained by the assessee for his own use and not let out, satisfied the proviso.

Conclusion: The valuation adopted by the Assessing Officer was not sustainable, and the assessee was entitled to the benefit of the third proviso to Rule 3.

Final Conclusion: The appeal succeeded on the merits of valuation, and the reassessment objections were left undecided as academic.

Ratio Decidendi: For the purpose of the third proviso to Rule 3 of Schedule III to the Wealth-tax Rules, 1957, exclusive residential use means retention of the house for the assessee's own residential purpose without letting it out or putting it to non-residential use, and actual physical occupation throughout the relevant period is not indispensable.

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