BIMAL KISHORE PALIWAL . vs. COMMISSIONER OF WEALTH TAX

M/s. G.D. & Sons of which firm the appellants are partners,   purchased   land   and   building   in   semi­ constructed   condition   on   04.06.1965   for   a   sum   of Rs.8,00,000/­.   The   construction   was   completed   and Cinema   Theatre,   Alpana   started   running   in   the premises.   The   Alpana   Cinema   property   was   valued   by assessment   books   of   accounts.  On   pending   assessment of Wealth Tax of one of the partners, the Wealth Tax Officer made a reference for valuation of the Alpana Cinema to Department Valuation Officer, New Delhi by Reference   dated   29.04.1976. Valuation   Officer   after inspecting   the   site   submitted   its   report   dated 26.04.1977   valuing   the   property   for   assessment   year 1970­71,   1971­72,   1972­73,   1973­74   and   1974­75. Notices under Section 17 of the Wealth Tax Act, 1957 were   issued   to   the   appellants   on   30.03.1979. Assessees   got   the   property   valued   by   an   approved Valuer   adopting   income   capitalisation   method.   The 4 assessment   order   was   passed   by   the     Wealth   Tax Officer   in   March,   1983   making   assessment   for   the period   from   1970­71   to   1974­75. The   assessment   was completed as per percentage of the right of different assessees which they have in the Firm. The Assessing Officer relied on the Valuation Report submitted by the   Departmental   Valuer.   The   assessee   aggrieved   by the   assessment   order   filed   appeal   before   the Appellate  Assistant   Commissioner   of   Wealth   Tax.   The Appellate   Authority   by   its   detailed   order   dated 23.01.1986   affirmed   the   assessment   made   by   the Assessing Officer on the basis of valuation by land and building method. The income capitalisation method as was relied on by the assessee was not approved.

The aggrieved by the different assessment orders the   assessees   filed   Wealth   Tax   Appeal   before   the Income   Tax   Appellate   Tribunal   (ITAT),   Delhi   Bench, Delhi. The ITAT accepted the case of the assessee to the   effect   that   the   proper   basis   for   valuing   the Cinema   building   would   be   capitalisation   of   the income. The ITAT held that since the building could

The High Court vide its judgment and order dated 21.10.2005   answered   the   questions   in   favour   of Revenue and against the assessee. The High Court held that    Wealth   Tax   Officer   was   justified   in  adopting the   land   and   building   method.   The   High   Court   held that   yield/rent   capitalisation   method   would   not   be stood at the relevant time reads as follows:

The   normal   rule   for   valuing   an   asset   for   the purposes of   Wealth Tax Act is the estimated price which   in   the   opinion   of     Wealth   Tax   Officer,   the asset would fetch if sold in the open market. Sub­ section   (2)     begins   with  non  obstante  clause.   Sub­ clause   (a)   of  sub­section  (2)    provides  that   where the   assessee   is   carrying   on   a   business   for   which accounts are maintained by him regularly, the  Wealth Tax   Officer   may,   instead   of   determining   separately the value of each asset held by the assessee in such 11 business,  determine   the   net   value  of   the   assets   of the business as a whole having regard to the balance­ sheet of such business as on the valuation date and making such adjustment therein as may be prescribed.

Further   sub­section   (3)   again   begins   with  non obstante clause providing that where the valuation of any asset is referred under Section 16A, the value of such asset shall be estimated to be the price which, in   the   opinion   of   the   Valuation   Officer,   it   would fetch if sold in the open market.

Under Section 16A  Wealth Tax Officer can make a reference   to   Valuation   Officer   for   any   asset   for valuation. Section 16A sub­clause (1) is as follows: “16A Reference to Valuation Officer. (1) For   the   purpose   of   making   an assessment   (including   an   assessment   in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules made in Schedule III, the market value of any asset is to be taken   into   account   in   such   assessment, the   Assessing   Officer   may   refer   the valuation   of   any   asset   to   a   Valuation

Present   is   a   case   where   Assessing   Officer   has made a reference for Alpana Cinema on 29.04.1976. It has   also   come   on   the   record   that   the   order   of reference to the Valuation Officer was challenged by the assessee by filing a writ petition in Delhi High Court. The Appellate Authority in its order had noted about   the   challenge   to   the   reference   made   to   the 13 Valuation Officer by the Assessing Officer. There is nothing   on   record   that   the   Delhi   High   Court interfered with order of Assessing Officer referring the Departmental Valuer to value the Alpana Cinema.

It   is   true   that   sub­section   (2)   of   Section   7 begins   with  non   obstante  clause   which   enables   the Wealth Tax Officer to determine the net value of the assets   of   the   business   as   a   whole   instead   of determining separately the value of each asset held by   the   assessee   in   such   business.   The   language   of sub­section   (2)   provides   overriding     power   to   the Wealth Tax Officer to adopt and determe the net value of the business having regard to the balance­sheet of such business. The enabling power has been given to Wealth   Tax   Officer   to   override   the   normal   rule   of valuation of the properties that is the value which it may fetch in open market, Wealth Tax Officer can adopt in a case where he may think it fit to adopt such methodology. The appellants' submission is that the   provision   of   Section   7(2)(a)   is   a   stand   alone provision   and   is   to   be   applied   in   all   cases   where

Overriding power  has been provided to override the normal method of valuation of property as given by sub­section 7(1) to arm the Wealth Tax Officer to adopt the method of valuation as given in sub­section (2)(a). The purpose and object of giving overriding power is not to fetter the discretion. The Wealth Tax Officer   is   not   obliged   to   mandatorily   adopt   the method provided in Section 7(2)(a) in all cases where assessee is carrying on a business. The language of sub­section   (2)(a)   does   not   indicate   that   the before the Court: “Whether on the facts and in the circumstances of the case, for the purpose of determining the net value of the assets of the assessee under Section 7(2) of the Wealth-tax Act, 1957 the Tribunal was right in directing that the written down value of the fixed assets of the assessee should be adopted as the value thereof, instead of their balance- sheet value?”

In   paragraph   5   while   considering   Section   7 following was observed: “5......In our opinion there is justification for this argument. Under sub-section(1) of Section 7 of the Act the Wealth-tax Officer is authorised to estimate for the purpose of determining the value of any asset, the price which it would fetch, if sold in the open market on the valuation date. But this rule in the case of a running business may often be inconvenient and may not yield a true estimate of the net value of the total assets of the business. The Legislature has, therefore, provided in sub-section(2) (a) that where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may determine the net value of the assets of the business as a whole, having regard to the balance-sheet of such business as on the valuation date and make such adjustments therein as the circumstances of the case may 16 require......” 17. made in paragraphs 6 and 7: “6......An instance of a sale which is proximate in time to the date of the notification under Section 4(1) of the Land Acquisition Act in respect of land similarly situate and with similar advantages and which is proved to be a transaction between a willing vendor and a willing purchaser would form a reliable guide for determining the market value. The value which a willing vendor might reasonably expect to receive from a willing purchaser in respect of a house generally depends upon a variety of circumstances including

That method was rightly adopted by the trial court and the High Court. The unit under acquisition is used for business purposes and has a prominent situation in the town of Calicut. There was clear evidence about the rental of the building, and the trial court proceeded to capitalize the net annual rental, having regard to the rate of return of 13 1/2 per cent from gilt-edged securities, by multiplying it by 35 times. The High Court has slightly reduced the multiple.”

The   above   observation   made   by   the   Court   was general observation not in the context of Section 7 of   the   Act.   The   method   of   valuing   the   building property   on   the   basis  of   rent  capitalisation   is   no doubt provided in various statutes especially in the cases   of   rent   fixation.   The   above   observation   does not help the appellants in the present case.

More appropriate judgment of this Court which is on the facts of the present case is the judgment in Juggilal Kamlapat Bankers and another vs. Wealth­Tax Officer, Special Circle, C­Ward, Kanpur and others, 1984 (145) ITR 485. In the above, case this Court had 18 occasion to consider and interpret the provisions of Section   7. The  Wealth   Tax   Officer   had   made   a reference   to   Valuation   Officer   for   valuing   certain buildings   belonging   to   the   appellant   Firm.   The appellant   by   means   of   writ   petition   challenged   the reference   made   by   the   Assessing   Officer   to   the Departmental Valuer for valuing the property. Two of the submissions which were made before the High Court as quoted in the judgment are as below: “......(3)the   interest   of   appellant No.2 in appellant No.1­firm had to be valued in accordance with r.2 of the W.T.Rules,   1957,   and   hence   s.16A   of the Act had no application; (4) the valuation of the concerned buildings forming   part   of   the   assets   of   the business   of   appellant   No.1­firm   had to   be   determined   in   accordance   with the   commercial   principles   under s.7(2)(a) and not under s.7(1) of the Act, and .......”

The High Court considered the submissions of the parties and by rejecting the above two submissions held following: “.......With regard to the third and fourth   contentions   the   High   Court held   that   r.2,   s.7   and   s.16A(1)(b) (ii) had to be read harmoniously and 19 r.2   did   not   exclude   the   application of ss.7 and 16A for valuing an asset of   a   partner   in   a   partnership   firm and   that   notwithstanding   the   non obstante   clause   contained   in   s.7(2) it was an enabling provision giving a discretion to the WTO either to value the assets of a business as a whole or   valuing   each   asset   thereof separately and in that behalf the WTO had the power to refer such valuation to   the   Valuation   Officer   under s.16A......”

Before this Court the appellants had raised two submissions. The second submission as noticed by this Court   itself   at   page   490   of   the   judgment   is   as follows: “......Secondly,   counsel   has   urged that   assuming   that   appellant   No.2’s interest(as   a   karta   of   his   HUF)   in appellant No.1’s firm is exigible to the   wealth­tax   under   the   Act,   the valuation   of   such   interest   being governed by s.7(2)(a) of the Act read with   r.2A   of   the   Wealth­tax   Rules, 1957, it is not open to the WTO to refer the valuation of specific house properties   belonging   to   the   firm   to the Valuation Officers under s.16A of the Act; in fact, according to him, the   valuation   of   the   assets   of   the partnership   business   of   appellant No.1 as a whole having regard to its balance­sheets   for   the   concerned years   ought   to   have   been   undertaken by   the   WTO   and   as   such   the   book values   of   the   house   properties   as appearing in the balance­sheets ought to   have   been   accepted   by   him   and,

This Court after considering the above submission as well as provisions of the Act including Section 7 of Wealth Tax Act, 1957 laid down following at page 495: “......On   a   fair   reading   of   the aforesaid   provisions   it   will   appear clear   that   the   primary   method   of determining   the   value   of   assets   for the   purposes   of   the   Act   is   the   one indicated   in   s.7(1),   inasmuch   as   it provides   that   the   value   of   any assets,   other   than   cash,   for   the purposes   of   this   Act   shall   be estimated to be its market price on the valuation date. Then comes sub­s. (2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the   WTO   may,   instead   of   determining separately   the   valuation   of   each asset   held   by   the   assessee   in   such business, determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such   adjustment   therein   as   may   be prescribed. It is true that sub­s.(2)

Further it was laid down by this Court that “this is apart from the position that the resort to Section 7(2)   itself   is   discretionary   and   optional,   the provision being an enabling one”. This Court thus has categorically laid down that resort to Section 7(2) (a) is discretionary and enabling provision to Wealth Tax   Officer   to   adopt   the   method   as   laid   down   in Section 7(2)(a) for a running business but the above enabling   power   cannot   be   held   as   obligation   or shackles   on   right  of   Assessing   Officer   to  adopt   an appropriate method. In the present case reference was made to the Departmental Valuer by Assessing  Officer under   Section   7(3).   Thus   there   is   a   conscious

Learned counsel for the appellants submits that reasons   given   by   ITAT   for   holding   that   income capitalisation   method   is   a   more   appropriate   method has not been adverted to by the High Court. We have 24 perused the order of the Tribunal. The Tribunal has observed that once it is accepted that the property is useable only as Cinema building then its method of valuation   has   to   be   necessarily   different   from   the one normally  adopted in the case of buildings which are   capable   of   being   used   for   other   commercial purposes.   The mere fact that the building is only for   the   use   of   Cinema   exhibition   does   not   in   any manner diminish the marketable price. At the relevant period   uses   of   building   as   running   Cinema   were   no less valuable. The finding has been returned by the Appellate   Authority   that   it   has   not   been   further challenged that the building was self­occupied and in possession of assessee with no encumbrances.

It is true that the High Court in so many words had not adverted to the reasons given by the ITAT. However,   the   High   Court   has   expressed   opinion   that Wealth Tax Officer was justified in adopting the land and building method. One of the reasons given by the High Court is that if there is loss in the business or in other words there is negative income, it cannot

It is relevant to point out that the Appellate Authority in its judgment has observed that there was loss shown by assessee himself in the year 1969­70. In paragraph 17 sub­paragraph (iv) following has been observed by the Appellate Authority: "iv)....Even   in   the   case   of   the appellant   there   is   a   returned   loss of   Rs.1,16,845/­   in   the   first assessment   year   i.e.   1969­70. Thus if   income   capitalisation   method   is applied   in   such   cases   where   the assessee   may   have   unfortunately suffered   losses   in   the   initial years,   the   valuation   of   an   asset will   workout   to   a   negative   figure. This   will   be   certainly   a   situation far from reality and not in any way the   intention   of   the   legislature while directing in Section 7 of the W.T. Act for taking the fair market value of an asset.”

The above circumstances taken by the High Court cannot be said to be irrelevant which apprehensions were duly found proved by the facts as noticed by the Appellate Authority.

Learned   counsel   for   the   appellants   has   further submitted that in the event there are more than one methods of valuation of an asset of an assessee, the method   under   which   the   valuation   is   in   favour   of assessee   has   to   be   accepted.   He   has   relied   on   the judgment of this Court in The Commissioner of Income Tax,   West   Bengal,   Calcutta   vs.   M/s.   Vegetables Products   Ltd.,   (1973)   1   SCC   442. This   Court   in paragraph   6   of   the   judgment   has   laid   down   the following:

The proposition which was laid down by this Court was   that   if   two   reasonable   constructions   of   taxing statute are possible, that construction which favours the assessee must be adopted. The above proposition cannot   be   read   to   mean   that   under   two   methods   of valuation   if   the   value   which   is   favourable   to assessee should be adopted. Here in the present case, the provisions of Section 7 are neither ambiguous nor lead   to   two   constructions.   The   construction   of Section   7  is   clear   as  has  already  been   elaborately considered   by   this   Court   in   the   judgment   of   this Court in Juggilal Kamlapat Bankers (supra).

The   Wealth   Tax   Officer   having   referred   the Departmental   Valuer   to   value   the   property,   in consequent   to   which   reference   for   valuation   report having already been received on 26.07.1977 which has 28 relied in the assessment. Objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of the view that the High Court did not commit any error in interfering with the order of ITAT.

In   view   of   the   foregoing   discussions   all   the appeals are dismissed. ..........................J. ( A.K. SIKRI ) ..........................J. ( ASHOK BHUSHAN ) NEW DELHI,

M/s. G.D. & Sons of which firm the appellants are partners,   purchased   land   and   building   in   semi­ constructed   condition   on   04.06.1965   for   a   sum   of Rs.8,00,000/­.   The   construction   was   completed   and Cinema   Theatre,   Alpana   started   running   in   the premises.   The   Alpana   Cinema   property   was   valued   by assessment   books   of   accounts.  On   pending   assessment of Wealth Tax of one of the partners, the Wealth Tax Officer made a reference for valuation of the Alpana Cinema to Department Valuation Officer, New Delhi by Reference   dated   29.04.1976. Valuation   Officer   after inspecting   the   site   submitted   its   report   dated 26.04.1977   valuing   the   property   for   assessment   year 1970­71,   1971­72,   1972­73,   1973­74   and   1974­75. Notices under Section 17 of the Wealth Tax Act, 1957 were   issued   to   the   appellants   on   30.03.1979. Assessees   got   the   property   valued   by   an   approved Valuer   adopting   income   capitalisation   method.   The 32 assessment   order   was   passed   by   the     Wealth   Tax Officer   in   March,   1983   making   assessment   for   the period   from   1970­71   to   1974­75. The   assessment   was completed as per percentage of the right of different assessees which they have in the Firm. The Assessing Officer relied on the Valuation Report submitted by the   Departmental   Valuer.   The   assessee   aggrieved   by the   assessment   order   filed   appeal   before   the Appellate  Assistant   Commissioner   of   Wealth   Tax.   The Appellate   Authority   by   its   detailed   order   dated 23.01.1986   affirmed   the   assessment   made   by   the Assessing Officer on the basis of valuation by land and building method. The income capitalisation method as was relied on by the assessee was not approved.

The aggrieved by the different assessment orders the   assessees   filed   Wealth   Tax   Appeal   before   the Income   Tax   Appellate   Tribunal   (ITAT),   Delhi   Bench, Delhi. The ITAT accepted the case of the assessee to the   effect   that   the   proper   basis   for   valuing   the Cinema   building   would   be   capitalisation   of   the income. The ITAT held that since the building could

The High Court vide its judgment and order dated 21.10.2005   answered   the   questions   in   favour   of Revenue and against the assessee. The High Court held that    Wealth   Tax   Officer   was   justified   in  adopting the   land   and   building   method.   The   High   Court   held that   yield/rent   capitalisation   method   would   not   be stood at the relevant time reads as follows:

The   normal   rule   for   valuing   an   asset   for   the purposes of   Wealth Tax Act is the estimated price which   in   the   opinion   of     Wealth   Tax   Officer,   the asset would fetch if sold in the open market. Sub­ section   (2)     begins   with  non  obstante  clause.   Sub­ clause   (a)   of  sub­section  (2)    provides  that   where the   assessee   is   carrying   on   a   business   for   which accounts are maintained by him regularly, the  Wealth Tax   Officer   may,   instead   of   determining   separately the value of each asset held by the assessee in such 39 business,  determine   the   net   value  of   the   assets   of the business as a whole having regard to the balance­ sheet of such business as on the valuation date and making such adjustment therein as may be prescribed.

Further   sub­section   (3)   again   begins   with  non obstante clause providing that where the valuation of any asset is referred under Section 16A, the value of such asset shall be estimated to be the price which, in   the   opinion   of   the   Valuation   Officer,   it   would fetch if sold in the open market.

Under Section 16A  Wealth Tax Officer can make a reference   to   Valuation   Officer   for   any   asset   for valuation. Section 16A sub­clause (1) is as follows: “16A Reference to Valuation Officer. (1) For   the   purpose   of   making   an assessment   (including   an   assessment   in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules made in Schedule III, the market value of any asset is to be taken   into   account   in   such   assessment, the   Assessing   Officer   may   refer   the valuation   of   any   asset   to   a   Valuation

Present   is   a   case   where   Assessing   Officer   has made a reference for Alpana Cinema on 29.04.1976. It has   also   come   on   the   record   that   the   order   of reference to the Valuation Officer was challenged by the assessee by filing a writ petition in Delhi High Court. The Appellate Authority in its order had noted about   the   challenge   to   the   reference   made   to   the Valuation Officer by the Assessing Officer. There is nothing   on   record   that   the   Delhi   High   Court interfered with order of Assessing Officer referring the Departmental Valuer to value the Alpana Cinema.

It   is   true   that   sub­section   (2)   of   Section   7 begins   with  non   obstante  clause   which   enables   the Wealth Tax Officer to determine the net value of the assets   of   the   business   as   a   whole   instead   of determining separately the value of each asset held by   the   assessee   in   such   business.   The   language   of sub­section (2) which provides overriding   power to the Wealth Tax Officer to adopt and determining the net   value   of   the   business   having   regard   to   the balance­sheet   of   such   business.   The   enabling   power has been given to Wealth Tax Officer to override the normal   rule   of   valuation   of   the   properties   that   is the value which it may fetch in open market, Wealth Tax Officer can adopt in a case where he may think it fit   to   adopt   such   methodology.   The   appellants' submission is that the provision of Section 7(2)(a) is a stand alone provision and is to be applied in all cases where assessee is carrying on a business. We do not agree with the above submission.

Overriding power  has been provided to override the normal method of valuation of property as given by sub­section 7(1) to arm the Wealth Tax Officer to adopt the method of valuation as given in sub­section (2)(a). The purpose and object of giving overriding power is not to fetter the discretion. The Wealth Tax Officer   is   not   obliged   to   mandatorily   adopt   the method provided in Section 7(2)(a) in all cases where assessee is carrying on a business. The language of sub­section   (2)(a)   does   not   indicate   that   the before the Court: “Whether on the facts and in the circumstances of the case, for the purpose of determining the net value of the assets of the assessee under Section 7(2) of the Wealth-tax Act, 1957 the Tribunal was right in directing that the written down value of the fixed assets of the assessee should be adopted as the value thereof, instead of their balance- sheet value?”

In   paragraph   5   while   considering   Section   7 following was observed: “5......In our opinion there is justification for this argument. Under sub-section(1) of Section 7 of the Act the Wealth-tax Officer is authorised to estimate for the purpose of determining the value of any asset, the price which it would fetch, if sold in the open market on the valuation date. But this rule in the case of a running business may often be inconvenient and may not yield a true estimate of the net value of the total assets of the business. The Legislature has, therefore, provided in sub-section(2) (a) that where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may determine the net value of the assets of the business as a whole, having regard to the balance-sheet of such business as on the valuation date and make such adjustments therein as the circumstances of the case may require......” 17. made in paragraphs 6 and 7: “6......An instance of a sale which is proximate in time to the date of the notification under Section 4(1) of the Land Acquisition Act in respect of land similarly situate and with similar advantages and which is proved to be a transaction between a willing

That method was rightly adopted by the trial court and the High Court. The unit under acquisition is used for business purposes and has a prominent situation in the town of Calicut. There was clear evidence about the rental of the building, and the trial court proceeded to capitalize the net annual rental, having regard to the rate of return of 13 1/2 per cent from gilt-edged securities, by multiplying it by 35 times. The High Court has slightly reduced the multiple.”

The   above   observation   made   by   the   Court   was general observation not in the context of Section 7

More appropriate judgment of this Court which is on the facts of the present case is the judgment in Juggilal Kamlapat Bankers and another vs. Wealth­Tax Officer, Special Circle, C­Ward, Kanpur and others, 1984 (145) ITR 485. In the above, case this Court had occasion to consider and interpret the provisions of Section   7. The  Wealth   Tax   Officer   had   made   a reference   to   Valuation   Officer   for   valuing   certain buildings   belonging   to   the   appellant   Firm.   The appellant   by   means   of   writ   petition   challenged   the reference   made   by   the   Assessing   Officer   to   the Departmental Valuer for valuing the property. Two of the submissions which were made before the High Court as quoted in the judgment are as below: “......(3)the   interest   of   appellant No.2 in appellant No.1­firm had to be valued in accordance with r.2 of the W.T.Rules,   1957,   and   hence   s.16A   of the Act had no application; (4) the valuation of the concerned buildings forming   part   of   the   assets   of   the business   of   appellant   No.1­firm   had to   be   determined   in   accordance   with the   commercial   principles   under s.7(2)(a) and not under s.7(1) of the Act, and .......”

The High Court considered the submissions of the parties and by rejecting the above two submissions held following: “.......With regard to the third and fourth   contentions   the   High   Court held   that   r.2,   s.7   and   s.16A(1)(b) (ii) had to be read harmoniously and r.2   did   not   exclude   the   application of ss.7 and 16A for valuing an asset of   a   partner   in   a   partnership   firm and   that   notwithstanding   the   non obstante   clause   contained   in   s.7(2) it was an enabling provision giving a discretion to the WTO either to value the assets of a business as a whole or   valuing   each   asset   thereof separately and in that behalf the WTO had the power to refer such valuation to   the   Valuation   Officer   under s.16A......”

Before this Court the appellants had raised two submissions. The second submission as noticed by this Court   itself   at   page   490   of   the   judgment   is   as follows: “......Secondly,   counsel   has   urged that   assuming   that   appellant   No.2’s

This Court after considering the above submission as well as provisions of the Act including Section 7 of Wealth Tax Act, 1957 laid down following at page 495: “......On   a   fair   reading   of   the aforesaid   provisions   it   will   appear clear   that   the   primary   method   of determining   the   value   of   assets   for the   purposes   of   the   Act   is   the   one indicated   in   s.7(1),   inasmuch   as   it provides   that   the   value   of   any assets,   other   than   cash,   for   the purposes   of   this   Act   shall   be estimated to be its market price on the valuation date. Then comes sub­s. (2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the   WTO   may,   instead   of   determining separately   the   valuation   of   each asset   held   by   the   assessee   in   such business, determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such   adjustment   therein   as   may   be prescribed. It is true that sub­s.(2) commences with a non obstante clause, but even so, the provision itself is an enabling one conferring discretion on the WTO to determine the net value of   the   assets   of   the   business   as   a whole   having   regard   to   its   balance sheets   as   on   the   valuation   date, instead   of   proceeding   under   sub­s. (1). In other words, it is optional for   the   WTO   to   resort   to   either   of the   methods   even   in   the   case   where the net value of the business carried on   by   the   assessee   is   to   be determined......”

Further it was laid down by this Court that “this is apart from the position that the resort to Section 7(2)   itself   is   discretionary   and   optional,   the provision being an enabling one”. This Court thus has categorically laid down that resort to Section 7(2) (a) is discretionary and enabling provision to Wealth Tax   Officer   to   adopt   the   method   as   laid   down   in Section 7(2)(a) for a running business but the above enabling   power   cannot   be   held   as   obligation   or shackles   on   right  of   Assessing   Officer   to  adopt   an appropriate method. In the present case reference was made to the Departmental Valuer by Assessing  Officer under   Section   7(3).   Thus   there   is   a   conscious decision   of   the   Assessing   Officer   to   obtain   the report   from   the   Departmental   Valuer.   The   above conscious   decision   itself   contains   the   decision   of Assessing Officer not to resort to Section 7(2)(a). The Valuation report of Departmental Valuer has been received   which   has   been   relied   by   the   Assessing Officer   for   assessing   the   assessee   in   the   relevant year. We, thus, do not find any error in the order of the   Assessing   Officer   in   adopting   the   land   and building method by making a reference to Departmental Valuer to value the property on the said method. The Appellate Authority has considered in paragraph 17 of the   judgment   the   objection   of   assessee   against   the land and building method and repelled the same by the following reasons: "17.i) The   other   objection   which has   been   vehemently   stressed   is against   the   valuation   of   Alpana Theatre   by   applying   land   and building method. In this connection, it   may   not   be   an   unwarranted repetition   to   state   that   Alpana Cinema was purchased by the firm M/S G.D.   &   Sons   in   semi   finished condition   from   M/s   Gill   and   Bros. Asaf   Ali   Road,   New   Delhi   and thereafter

Learned counsel for the appellants submits that reasons   given   by   ITAT   for   holding   that   income capitalisation   method   is   a   more   appropriate   method has not been adverted to by the High Court. We have perused the order of the Tribunal. The Tribunal has observed that once it is accepted that the property is useable only as Cinema building then its method of valuation   has   to   be   necessarily   different   from   the one normally  adopted in the case of buildings which are   capable   of   being   used   for   other   commercial purposes.   The mere fact that the building is only for   the   use   of   Cinema   exhibition   does   not   in   any manner diminish the marketable price. At the relevant period   uses   of   building   as   running   Cinema   were   no less valuable. The finding has been returned by the Appellate   Authority   that   it   has   not   been   further challenged that the building was self­occupied and in possession of assessee with no encumbrances.

It is true that the High Court in so many words had not adverted to the reasons given by the ITAT. However,   the   High   Court   has   expressed   opinion   that Wealth Tax Officer was justified in adopting the land and building method. One of the reasons given by the High Court is that if there is loss in the business or in other words there is negative income, it cannot be possible to say that the property in question has no   marketable   value.   Learned   counsel   for   the appellants   has   submitted   that   in   the   relevant   year the income was earned.

It is relevant to point out that the Appellate Authority in its judgment has observed that there was loss shown by assessee himself in the year 1969­70. In paragraph 17 sub­paragraph (iv) following has been observed by the Appellate Authority: "iv)....Even   in   the   case   of   the appellant   there   is   a   returned   loss of   Rs.1,16,845/­   in   the   first assessment   year   i.e.   1969­70. Thus

The above circumstances taken by the High Court cannot be said to be irrelevant which apprehensions were duly found proved by the facts as noticed by the Appellate Authority.

Learned   counsel   for   the   appellants   has   further submitted that in the event there are more than one methods of valuation of an asset of an assessee, the method   under   which   the   valuation   is   in   favour   of assessee   has   to   be   accepted.   He   has   relied   on   the judgment of this Court in The Commissioner of Income Tax,   West   Bengal,   Calcutta   vs.   M/s.   Vegetables Products   Ltd.,   (1973)   1   SCC   442. This   Court   in paragraph   6   of   the   judgment   has   laid   down   the following:

The proposition which was laid down by this Court was   that   if   two   reasonable   constructions   of   taxing statute are possible, that construction which favours the assessee must be adopted. The above proposition

The   Wealth   Tax   Officer   having   referred   the Departmental   Valuer   to   value   the   property,   in consequent   to   which   reference   for   valuation   report having already been received on 26.07.1977 which has relied in the assessment. Objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of the view that the High Court did not commit any error in interfering with the order of ITAT.

In   view   of   the   foregoing   discussions   all   the appeals are dismissed.