DIRECTOR OF INCOME TAX vs. HERSH W.CHADHA

WTA/9/2006HC DelhiDLHC01077370200624 January 2018Author: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA8 pages
AI SummaryDismissed

What were the facts?

The assessee, Hersh W. Chadha, filed Wealth Tax Returns for Assessment Year 1992-93 declaring a net worth of ₹35,29,000. The Wealth Tax Officer (WTO) completed the assessment at ₹70,10,34,244. Following a set aside by the CIT(A), the WTO re-assessed on 17.9.1998. The WTO valued a flat at Palcimo, Bombay, at ₹52,48,968, significantly higher than the assessee's declared value of ₹2,65,200. The WTO considered rent receivable and added 15% on deposits accepted by the lessee from a sub-lessee. The assessee argued that the higher valuation was unjustified as only ₹2,600 was received from the lessee. The CIT(A) upheld the higher valuation. The ITAT noted the deposit was not received by the assessee but by its lessee and followed CIT Vs. Hemraj Mahabir Prasad Ltd. The second issue concerned the inclusion of a Mercedes Benz car's value in net wealth, which the ITAT directed to be deleted based on previous years' treatment and the car being funded and maintained by a foreign principal.

What did the High Court hold?

The High Court held that the opinion expressed by the Bombay High Court in Commissioner of Income Tax Vs. Akshay Textiles and Agencies Pvt. Ltd. (2008) 304 ITR 401 (Bom) was sound and required to be followed. The Court found that the emphasis placed on the expression "rent received or receivables" in explanation (2) to Rule 5 of the Wealth Tax Rules ought not to be given a wide interpretation as sought by the Revenue. Therefore, the first question of law was answered against the Revenue and in favour of the assessee. Regarding the second question concerning the Mercedes Benz car, the Court noted the CIT(A)'s observation that the car's value was not included in past years and that it was funded and maintained by the assessee's foreign principal. The ITAT had taken note of these facts and deleted a similar inclusion for a previous year. Being concurrent findings of fact and considering the circumstances, the question of law was answered in favour of the assessee and against the Revenue. The appeal was accordingly dismissed.

What were the issues?

1. Whether the Tribunal was correct in law in holding that the value of the property bearing No. E-1, Placeno Estate, Bombay, declared by the Assessee was the correct fair market value of the property as on the relevant valuation date? (Question of law) - Revenue's contention: Relied on Rules 3, 4 & 5 of the Wealth Tax Rules, particularly explanation (2) to Rule 5, arguing that "rent received or receivable" is broad enough to include all payments for the use of property, benefits, or perquisites, and sums paid in respect of obligations of the owner. Relied on CIT Vs. Hemraj Mahabir Prasad Ltd. - Assessee's contention: Contended that the impugned order of the ITAT should not be disturbed, noting that a similar regime exists in Section 23(1)(b) of the Income Tax Act for calculating annual letting value and that the ITAT relied on CIT Vs. Hemraj Mahabir Prasad Ltd. 2. Whether the Tribunal was correct in law in holding that the value of the Mercedes Benz Car could not be included in the net wealth of the Assessee? (Question of law) - Revenue's contention: Not recorded. - Assessee's contention: Not recorded. The judgment notes the ITAT's reasoning for deletion based on past years and funding by a foreign principal.

Which sections of the Income-tax Act were involved?

Section 16(3),Section 23(1)(b),Section 22

AI-generated summary — verify with the full judgment below

$~73 * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 24.01.2018 + DIRECTOR OF WEALTH TAX

..... Petitioner Through Ms. Vibhooti Malhotra, Adv.

versus

HERSH W.CHADHA

..... Respondent Through Ms. Kavita Jha and Mr. Vaibhav Kulkarni, Advs.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A.K. CHAWLA

HON'BLE MR. JUSTICE S. RAVINDRA BHAT (ORAL) %

The following questions of law were framed in the instant Wealth Tax appeal :

1.

Whether the Tribunal was correct in law in holding that the value of the property bearing No. E-l, Placeno Estate, Bombay, declared by the Assessee was the correct fair market value of the property as on the relevant valuation date?

2.

Whether the Tribunal was correct in law in holding that the value of the Mercedes Benz Car could not be included in the net wealth of the Assessee? 2. The necessary facts are that in the Wealth Tax Returns for Assessment Year 1992-93, the declared net worth was `35,29,000/-. T

The order continues below.

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