1988 (5) TMI 53 - AT - Wealth-tax

Tribunal Decision: Property Valuation, Exemption Criteria Upheld, Equity Shares Valuation

The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals. It upheld the retrospective application of Rule 1BB, valuation of ... Exemption, House Property, Valuation Issues Involved:1. Retrospective application of Rule 1BB.2. Valuation of property at Plot No. 614-B.3. Entitlement to exemption under Section 5(1)(iv).4. Valuation of unquoted equity shares.Detailed Analysis:1. Retrospective Application of Rule 1BB:The primary issue was whether Rule 1BB of the Wealth Tax Rules, 1957, was procedural and thus retrospective in its application. The Tribunal concluded that Rule 1BB was indeed procedural and mandatory in character, thereby having retrospective effect. This conclusion was supported by the special Bench decision in Biju Patnaik v. WTO and the Gujarat High Court decision in CWT v. Shri Kasturbhai Mayabhai, which held that Rule 1BB applied to cases pertaining to Assessment Years (A.Y.) up to 1965-66. Consequently, the Tribunal found no merit in the Revenue's argument against the retrospective application of Rule 1BB and rejected this ground.2. Valuation of Property at Plot No. 614-B:The Revenue contended that the property should be valued as per Rule 1BB, asserting that it was a residential property. The Tribunal found that the property, consisting of a double-storeyed garage-cum-room structure, was used by the assessee for storage of household items and residence of servants and their families. This usage qualified the property as being used 'wholly or mainly for residential purposes.' The Tribunal rejected the Revenue's argument that the property should not be valued under Rule 1BB, concluding that the property met the criteria for residential use and was not affected by sub-rule (5) of Rule 1BB.3. Entitlement to Exemption under Section 5(1)(iv):The Tribunal examined whether the property qualified for exemption under Section 5(1)(iv) of the Wealth Tax Act, which exempts 'one house or part of a house belonging to the assessee exclusively used by him for residential purposes.' The Tribunal noted that the property was used for storing household goods and housing servants, not for any commercial purposes. Citing the Calcutta High Court decision in Consolidated Tea and Land Co. (India) v. CWT, the Tribunal held that such usage fulfilled the legislative intent behind the exemption. The Tribunal dismissed the Revenue's reliance on a previous Tribunal decision from 1964-65, noting that the property then consisted of open land and sheds, whereas it now included a double-storeyed structure. Thus, the Tribunal upheld the CWT (A)'s decision to grant exemption under Section 5(1)(iv).4. Valuation of Unquoted Equity Shares:The Tribunal addressed the valuation of unquoted equity shares of certain private companies. It upheld the CWT (A)'s direction to value these shares as per the principles laid down by the Gujarat High Court in CWT v. Ashok K. Parikh. The Tribunal found no error in the CWT (A)'s approach and dismissed the Revenue's ground on this issue.Separate Judgment Analysis:Dissenting Opinion by the Accountant Member:The Accountant Member disagreed with the majority view on the application of Section 5(1)(iv) and Rule 1BB. He argued that the property did not qualify as a 'house' or 'part of a house' used for residential purposes. He emphasized that the property consisted of open land and sheds, as noted in the Tribunal's decision for A.Y. 1964-65, and there was no substantial change in the property's condition. The Accountant Member contended that the property's use for storing household goods and housing servants did not meet the criteria for a residential house. He distinguished the Calcutta High Court decision and concluded that the assessee was not entitled to exemption under Section 5(1)(iv) or the benefit of Rule 1BB. Consequently, he proposed setting aside the CWT (A)'s orders and restoring those of the ITO.Third Member's Decision:The Third Member agreed with the Judicial Member, concluding that the property qualified as a residential house used by the assessee for residential purposes, including housing servants and storing household goods. He acknowledged that the structure was habitable and served as an extension of the assessee's residential accommodation. The Third Member upheld the applicability of Rule 1BB, citing the Gujarat High Court's decision on its retrospective application. He found that the additional facts presented justified a departure from the Tribunal's earlier decision for A.Y. 1964-65. Thus, the Third Member's decision aligned with the Judicial Member, forming the majority view.Final Outcome:The appeals preferred by the Revenue were dismissed, while the appeals preferred by the assessee were partly allowed. The Tribunal upheld the retrospective application of Rule 1BB, the valuation of the property as a residential house, the exemption under Section 5(1)(iv), and the valuation of unquoted equity shares as directed by the CWT (A).