TaxTMI 
TaxTMI 
1995 (1) TMI 135
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....ially taken the hotel building on monthly lease from one Major General Rao Manohar Singh in 1976 but ultimately purchased the same on 27th April, 1981, for Rs. 2,31,000. During the period between 1976 and 1982 the assessee incurred an expenditure of Rs. 1,07,725 on the alteration and modification of the said hotel building. In 1982 the assessee started new construction on the vacant land and completed the same in April, 1986. The investment made by the assessee in various years came to the following: Asst. yr. Amount . Rs. 1985-86 10,93,612 1986-87 8,56,772 1987-88 1,13,943 . 20,64,327 The previous year adopted by the assessee was April ending. 3. It appears that in the wealth-tax cases of the partn....
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....to asst. yrs. 1984-85 to 1987-88. The period of construction had been taken from 1st May, 1982 to 30th April, 1986. In conformity with the report of DVO dt. 23rd Feb., 1989, given for wealth-tax purposes, the Assessing Officer determined the cost of construction at Rs. 24,92,714 in the following manner: . Rs. Value of old building portion as on 1st Oct., 1976 2,87,094 Value of new building portion as on (sic) 22,05,620 . 24,92,714 The difference between the cost determined by the DVO at Rs. 24,92,714 and as declared by the assessee at Rs. 22,05,183 came to Rs. 2,87,531. The Assessing Officer considered this difference as unexplained investment made by the assessee during the period relevant to asst. yr. 1986-87 an....
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..... The learned CIT(A) accordingly deleted the additions in question for both the years. 7. The learned Departmental Representative vehemently urged that since the report of the DVO was based on scientific data as clarified in the CBDT instructions cited supra, the Assessing Officer was justified in determining the cost of construction of the hotel building in the two years under consideration. The learned counsel for the assessee, however, supported the order under appeal and further submitted that since the Assessing Officer had found no fault with the account of investment made by the assessee in the two years under consideration, the learned CIT(A) was fully justified in deciding the issue in conformity with the settled view of the Tri....
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.... report for the purposes of wealth-tax proceedings. For imposing wealth-tax the "valuation" of the immovable property as on the relevant valuation date is relevant and material. In proceedings under the Act the valuation of the property is not relevant if liability for earning income is to be fastened. It is well known that the concepts of "cost", "value" and "price" are not akin in their meanings and widely differ from one another in their areas of operation and application. The cost of construction of a building is not the same as may be its value on a relevant valuation date. The report of the DVO prepared for wealth-tax purposes could have hardly been beneficially used by the Assessing Officer in this case for finding out any unexplaine....
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....ance may be revised to 1/5th instead of 1/6th as made by the learned CIT(A). We direct accordingly. (4) Subsidy (common to all the years): 14. The Assessing Officer reduced the cost of the assets by the amounts of subsidy received by the assessee for asst. yrs. 1987-88 and 1988-89 for the purpose of allowing depreciation. But in appeal, the learned CIT(A), following Rajasthan High Court decision in the case of CIT vs. Ambica Electrolytic Capacitors Pvt. Ltd. (1991) 91 CTR (Raj) 49 : (1991) 191 ITR 494 (Raj) directed him not to so reduce the cost of the assets for the said purposes. 15. Heard the parties. 16. Since it is not disputed that the hotel of the assessee was constructed in a backward area of the Rajasthan State and that....