TaxTMI 
TaxTMI 
1985 (9) TMI 130
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....ing out the fair market value." 3. The assessee is a resident individual by status and the valuation date is 31-3-1976. The assessee is one of the partners in the firm known by name and style as Wenger & Co., Connaught Place, New Delhi. A return was filed on 31-3-1976 showing a net wealth at Rs. 4,61,700 covering both movable and immovable properties. 4. In the said return, the assessee included a sum of Rs. 4,02,952 as the value of his interest in the assets of the said firm. The said firm owned a property known as Wenger Building, A-Block, Connaught Place, New Delhi. The valuer vide his report valued the said property at Rs. 7,20,570. The assessee's share in the said property is of the order of 30 per cent. The return was filed on the basis of the approved valuer's report. 5. The learned WTO not being satisfied with the valuer's said report referred the issue of the valuation of the said property, under section 16 of the Wealth-tax Act, 1957 ('the Act') to the Departmental Valuation Officer (DVO). The said officer determined the value of the property on the relevant valuation date at Rs. 44,44,000 vide his report dated 20-3-1981. The learned WTO thereafter on the basis of the ....
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.... that the fair market value was required to be determined on the basis of the market rent. In any case, he contended that the method adopted by the DVO in his report dated 20-3-1981 had already been approved by the Hon'ble Delhi High Court in the assessee's own case Wenger & Co. v. DVO [1978] 115 ITR 648. The reliance by the learned departmental representative was also placed on certain other judicial pronouncements. 10. On behalf of the assessee, Shri G.R. Agnihotri, the learned counsel very strenuously found fault with the stand taken by the learned departmental representative and also repeated all the arguments made before the lower authorities. He very seriously contested the correctness of the report of the DVO. The reliance was placed by the learned counsel on many judicial pronouncements. 11. The argument on behalf of the contesting parties have been heard and considered and record carefully examined. The 'Wenger Building' was purchased by the firm Wenger & Co. from Dayal Singh Trust Society and Shri Mool Chand Kharaiti Ram Trust vide sale deeds dated 9-3-1962 and 28-9-1963 for Rs. 3,90,000 and Rs. 1,50,000, respectively. The total consideration, thus, comes to Rs. 5,40,0,....
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....ear to be justified to hold that the provisions of the Delhi Rent Control Act were applicable to the self-occupied portion of the property for working out the fair market value. In fact, such fair market value was required to be determined on the basis of principle adopted by the learned DVO, which principle had earlier been approved by the Hon'ble Delhi High Court in the assessee's own case. On behalf of the assessee, Shri G.R. Agnihotri, the learned counsel, very vehemently found fault with the approach and method of the DVO. We do not propose to deal with each facet pointed out by the learned counsel as the assessee will have a proper opportunity to make his comments on the method. At the present juncture, we are concerned with the limited question as to whether the provisions of the Act were relevant for working out the fair market value. Our considered answer is in the negative and against the assessee. We, therefore, hold that the learned Commissioner (Appeals) was not justified to observe as he did. Thus, the value of the property has got to be. determined according to the method adopted by the learned DVO, of course, subject to the objections raised by the learned counsel a....
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....9-1-1979 have held that the additions made by the DVO to the value of the property known as 'Scindia House', New Delhi in respect of the alleged reversionary value of land were unsustainable. The Tribunal followed the decision of the Calcutta High Court in the case of CIT v. Smt. Ashima Sinha [1979] 116 ITR 26. Respectfully following the ratio of the law laid down by the Calcutta High Court in this case, which was followed by the Tribunal, Delhi Bench 'A', in the case of Brig. Gurbax Singh referred to above. I am inclined to hold that the DVO in the instant case was not at all justified in adding to the value of the property known as Wenger's Building, the reversionary value of the land at Rs. 10,51,151." 19. It is seen that the finding is based on the decision of the Hon'ble Calcutta High Court and the Tribunal's order in the case of Brig. Gurbax Singh v. WTO [WT Appeal Nos. 980 and 981 (Delhi) of 1976-77 and 348 (Delhi) of 1977-78]. We do not find any error in the finding on this point recorded by the learned Commissioner (Appeals). The order on this point is, therefore, confirmed. 20. The ground No. 5 of the revenue's appeal is to the following effect: "Directing the WTO to a....
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....Tribunal's order in WT Appeal Nos. 159 to 164 (Delhi) of 1981, for the assessment years 1972-73 to 1974-75, is not helpful to the assessee as the ratio in the above case was not discussed in the order, maybe the case was not mentioned before the Bench. Similarly, the order in the case of L. Gulabchand Jhabakh v. WTO [1982] 1 SOT 613 (Mad.) (SB) is of no help as the ratio in the case of Nand Lal Jalan was not discussed. In the light of the preceding paragraphs, we set aside the learned Commissioner (Appeals)'s order on this point and restore the matter to his file with a direction that the issue be determined in the light of the above observations. 23. In the result, the ground No. 1 of the revenue's appeal is rejected and ground Nos. 2 to 5 are restored to the file of the learned Commissioner (Appeals). 24. Next, we take up the revenue's WT Appeal No. 412 (Delhi) of 1983 for the assessment year 1977-78. All the grounds taken by the revenue are the same as during the preceding assessment year. For the same reasons, the ground No. 1 is rejected. The point pertaining to the deletion on account of land is rejected. The issue pertaining to the exemption under section 5(1)(iv) and the ....
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....to be applicable with respect to the portion still in occupation of the tenants. However, the position with respect to portion before and after the purchase, occupied by the firm, was different. Before the purchase, the firm was the tenant. Consequent upon such purchase the firm became the owner in possession. There was nobody to realise the rent. Also there was no body to pay the rent. The monthly rent of Rs. 1,195 earlier paid by the firm to the owners, became non-existent and inconsequential after the purchase. The firm, in fact, occupied the specific portion as a free-hold owner. The provisions of the Delhi Rent Control Act are silent about the firm's relation with the self-occupied portion of the property. 13. The learned Commissioner (Appeals) in the given circumstances does not appear to be justified to hold that the provisions of the said Act were applicable to the self-occupied portion of the property for working out the fair market value. In fact, such fair market value was required to be determined on the basis of principle adopted by the learned Departmental Valution Officer, which principle had earlier been approved by the Hon'ble Delhi High Court in the assessee's ow....
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....ined is the market value but then under the Act, rules have been enacted and one particular rule which is relevant for valuation of property (though with regard to mainly residential houses) does use the expression 'gross maintainable rent'. That term again is defined in the same phraseology as 'annual value' is defined under the 1961 Act. 5. It is true that the Delhi High Court in Wenger & Co.'s case supported as correct a certain method of valuation of the DVO in this very case, but as is clear from the judgment itself, the exposition of the meaning of the term 'annual value' under the 1961 Act, as found in the decision of the Supreme Court in Amolak Ram Khosla's case, was not before the Delhi High Court. The matter considered by the Delhi High Court arose out of a writ petition and the grounds of challenge were: a. no cogent evidence or basis for fixing the fair market value of the self-occupied portion of Wenger's building was available in the report of the DVO; b. the DVO had relied on some information gathered behind the back of the assessee. The Delhi High Court found no merit in the above challenges and also held that the DVO's valuation of the self-occupied portion was....
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....nd is determined accordingly." The assessee had claimed repairs at 1/6th. This was allowed by the Commissioner (Appeals). At page 80 of the paper book, the assessee has filed a copy of the Tribunal's order in Diljit Singh [WT Appeal Nos. 11 to 13 (Delhi) of 1973-74 dated 27-9-1974]. The Tribunal has clearly held here that in wealth-tax proceedings also 1/6th repairs should be allowed. In fact this was the view of the Punjab and Haryana High Court in Dina Nath v. CED [1970] 77 ITR 193. This was an estate duty case and the Court saw absolutely no reason why, following the Indian Income-tax Act, 1922, in valuation under the Estate Duty Act, 1953 also, repairs should not be allowed at 1/6th. The matter has been referred back by my learned brother to the Commissioner (Appeals). While deciding this issue afresh the Commissioner (Appeals) will also keep the above observations in view. 9. Lastly, I come to the assessee's claim for exemption under section 5(1)(iv). Here the issue stands covered squarely in favour of the assessee by the decision of the Special Bench of the Tribunal in L. Gulabchand Jhabakh's case. I, therefore, do not think it necessary to discuss the issue in more details....
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....n view of the Supreme Court's decision in Amolak Ram Khosla v. CIT [1981] 131 ITR 589, read with rule 1BB of the Wealth-tax Rules, 1957, for disposal afresh in accordance with law? 2. Whether, the common objection of the revenue to the decision of the Commissioner (Appeals) in allowing the exemption claimed under section 5(1)(iv) of the Act in respect of the interest of the assessee-partners in the property known as 'Wenger's Building' is to be reversed as incorrect; or Whether, it is to be upheld as correct in view of the direct authority (in the assessee's favour) oil this issue found in the decision of the Special Bench of the Tribunal in L. Gulabchand Jhabakh v. WTO [1982] 1 SOT 613?" THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, President - The President of the Tribunal assigned to me the task of resolving the difference of opinion that arose between the two of my colleagues, which I shall presently state. I call it a task because it had been quite a task to get at the point of difference of opinion and also to resolve it. But once I discovered the-point of difference of opinion, let me honestly confess that I did not find much difficulty in resolving it. The point of ....
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....ent of the other income of the assessee for the self-occupied portion. The Tribunal rejected the assessee's contention that the annual value had to be determined on the basis of the standard rent, determinable on the basis of the provisions of the Delhi Rent Control Act. The Supreme Court held that the annual value of the house under self-occupation must be taken to be the standard rent determinable under the provisions of the Delhi Rent Control Act. In other words, the law enunciated by the Supreme Court was that, in respect of property under self-occupation of an assessee, the rent to be estimated for the purpose of section 22 should be the standard rent determinable under the provisions of the Delhi Rent Control Act. Let us now see what did the Delhi High Court approved in the assessee's own case for the earlier assessment year. The DVO valued the assessee's share in the property owned by the firm by applying two criterial: in respect of the property tenanted, he valued it by capitalising the rent, i.e., he adopted income method for that portion of the property and for the self-occupied portion, he estimated the value on the basis of the rates prevalent for sale of commercial fl....
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....oner with the following observations: "13. The learned Commissioner (Appeals) in the given circumstance does not appear to be justified to hold that the provisions of the said Act were applicable to the self-occupied portion of the property for working out the fair market value. In fact such fair market value was required to be determined on the basis of principle adopted by the learned District Valuation Officer, which principle had earlier been approved by the Hon'ble Delhi High Court in the assessee's own case. On behalf of the assessee Shri G.R. Agnihotri, the learned counsel, very vehemently found fault with the approach and method of the District Valuation Officer. We do not propose to deal with each facet pointed out by the learned counsel as the assessee will have a proper opportunity to make his comments on the method. At the present juncture we are concerned with the limited question as to whether the provisions of the Act were relevant for working out the fair market value. Our considered answer is in the negative and against the assessee. We, therefore, hold that the learned Commissioner (Appeals) was not justified to observe as he did. Thus the value of the property h....
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....ference of opinion sought for the opinion of the Third Member conveyed by the first question. 3. I have gone through the record very carefully and after hearing the learned departmental representative and the assessee's counsel Shri G.R. Agnihotri, as I mentioned earlier, I did not find any difficulty in coming to the conclusion that while the matter is going back to the Commissioner (Appeals) for a fresh decision, there should be no fatters placed upon his discretion to value the property according to the principles applicable for the valuation of properties for wealth-tax purposes. The Supreme Court in Amolak Ram Khosla's case had in unequivocal terms laid down the principle that in arriving at the annual income for the purpose of section 22 and section 23, the standard rent determinable under the Delhi Rent Control Act should be adopted as the basis for self-occupied property even in a case where the property was partly let out and partly self-occupied. There is no escape from the application of that rule in making an assessment for the purpose of income-tax. When for the purpose of income-tax, the income from a particular property, which is partly let out and partly self-occup....
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....nd separate unit would represent the ratable value of the premises. The rent which the owner of the premises may reasonably expect to receive in respect of each distinct and separate unit cannot obviously exceed the standard rent of such unit and the assessing authorities would, therefore, have to determine the standard rent with a view to fixing the upper limit of the rent which can reasonably be expected by the owner on letting out such unit to a hypothetical tenant." It would, thus, be seen that the principle laid down in Amolak Ram Khosla's case was again reiterated by emphasising the fact that in case of a house which is partly self-occupied and partly let out each portion should be treated as separate and distinct and the standard rent for each unit should be separately fixed and aggregated so that the aggregate does not exceed the standard rent of the unit. Therefore, the principle that now emerges is that if a property is to be valued on the basis of income that the property is likely to yield, then that income cannot but be determined except in accordance with the Municipal Corporation Act. This being the rule laid down by the Supreme Court, the rent has to be determined ....
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.... had estimated the maintainable rent in the following manner: B. Self-occupied portion (Maintainable rent): Rs. Ground floor = 1,583.5 sq. ft. at the rate of Rs. 6 sq. ft. 9,501 First floor = 6,370 sq. ft. at the rate of Rs. 5 sq. ft. 31,850 Second floor = 757 sq. ft. at the rate of Rs. 4 sq. ft. 3,028 44,379 (b) say Rs. 44,379 The total monthly rent was, thus, arrived at Rs. 51,260 per month or Rs. 6,15,120 per year from which the outgoings at Rs. 1,56,502 were deducted so that the net A.L.V. was determined at Rs. 4,58,618 and adopting a multiple of 8.475 capitalised the value at Rs. 38,86,788. To that the reversioner value of the land arrived at Rs. 10,51,151 was added so that the total value of the property was arrived at Rs. 49,37,939. Allowing for the diminution in the value of the property on account of joint leasehold rights of the land at Rs. 4,93,794 the net value of the property was arrived at Rs. 44,44,000 and this value was adopted for the purpose of the wealth-tax assessment. In other words, the value arrived at by the DVO was only on the basis of the estimated maintainable rent for the self-occupied portion, which alone came to about Rs. 5,32,560 out of the tota....
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....tion adopted by the DVO was different from the valuation adopted in the earlier years. For the above reasons, I am in agreement with the view expressed by the learned Accountant Member. 4. The High Court in the assessee's case was not concerned with the valuation of the property on the basis of income method in respect of both tenanted as well as self-occupied portion. The High Court was concerned with a method of valuation where for the self-occupied portion land and building method was adopted and for tenanted portion income method was adopted and the values arrived at were added to arrive at the total value of the property. The High Court held that there was nothing wrong in that method provided the market value is correctly arrived at based upon appropriate instances of sale of some property in the vicinity. While approving this method the High Court also laid down the principle that in the absence of instances of sale, the income method must be resorted to even for the self-occupied portion. Now as I have noticed that method, if I may say so, was not scrupulously followed and a different method of estimating the value of the property even in respect of self-occupied portion o....