Non-resident wins wealth tax case on flat exemption in Bombay

The Appellate Tribunal ITAT CALCUTTA-B ruled in favor of the non-resident assessee in a wealth tax assessment case for the year 1991-92. The Tribunal held that the assessee's half share in a flat in Bombay qualified for exemption under the third proviso to rule 3 of Schedule III, as the flat was exclusively used for residential purposes. Contrary to the departmental authorities' decision, the Tribunal allowed the assessee's appeal, overturning the valuation method adopted and granting the benefit of the exemption, ultimately ruling in favor of the assessee.

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Issues: Valuation of non-resident assessee's share in a flat for wealth tax assessment year 1991-92.

In this case, the Appellate Tribunal ITAT CALCUTTA-B addressed the valuation of a non-resident assessee's half share in a flat in Bombay for the assessment year 1991-92. The assessee, along with her husband, purchased the flat for Rs. 56 lakhs, with her share valued at Rs. 28 lakhs. The Wealth Tax Officer (WTO) adopted the value of the assessee's share at the cost price of Rs. 28 lakhs since the assessee did not reside in the flat as a non-resident. On appeal, it was argued that the value of the flat should be accepted as returned, citing the husband's assessment where a lower value was accepted. However, the CIT(A) upheld the assessment, stating that the flat was not used for residential purposes throughout the 12 months preceding the valuation date. The CIT(A) referred to the provisions of the Wealth Tax Act and concluded that the valuation made by the Assessing Officer was correct, dismissing the appeal.

Upon further examination, the Tribunal delved into the provisions of the Wealth Tax Act regarding the valuation of immovable property. The Tribunal focused on the third proviso to rule 3 of Schedule III, which exempts properties exclusively used by the assessee for residential purposes from the cost of acquisition valuation method. The Tribunal analyzed the conditions specified in the third proviso and found that the assessee's flat in Bombay met the criteria. The Tribunal considered passport entries showing the assessee's visits to India and concluded that the flat was exclusively used by the assessee for residential purposes. The Tribunal clarified that the term "throughout" in the third proviso did not require continuous daily residence but an uninterrupted residential use without commercial purposes. Referring to legal precedents, the Tribunal determined that the flat met the conditions for exemption under the third proviso.

In light of the analysis, the Tribunal held that the assessee was entitled to the benefit of the third proviso to rule 3 of Schedule III. The Tribunal disagreed with the departmental authorities' decision and allowed the assessee's appeal, setting aside the previous decision. Ultimately, the Tribunal ruled in favor of the assessee, granting the benefit of the third proviso and overturning the valuation adopted in the assessment, thereby allowing the appeal.

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