Pro rata estimation of construction investment under wealth-tax was rejected as guesswork without rational foundation.

Wealth-tax authorities could not estimate investment in an under-construction property on a pro rata basis without a rational foundation. The estimate was treated as mere guesswork because construction expenditure could not be assumed to be evenly spread over the full construction period, and the actual investment up to a given date could not be ascertained without knowing the extent of work completed by that date. Since construction was completed only in the subsequent assessment year, the basis adopted for the relevant year was rejected and the assessee's version of investment was accepted.

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Issues: Whether the wealth-tax authorities could estimate the investment in an under-construction property on a pro rata basis before completion of the construction.

Analysis: The estimate made by the Wealth-tax Officer was held to be a mere guesswork and not based on any rational foundation. It was found that the investment in construction could not be assumed to be evenly spread over the entire construction period, and the actual investment upto a particular date could not be determined without knowing the extent of construction completed by that date. As the construction was completed only in the subsequent assessment year, the basis adopted for estimating the investment in the relevant year was rejected.

Conclusion: The pro rata estimation was not justified and the assessee's version of the investment was accepted.

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