COMMISSIONER OF WEALTH-TAX vs. S. D. JADEJA

ORAL JUDGMENT (Per : HON'BLE MR.JUSTICE D.A.MEHTA)

The Income Tax Appellate Tribunal, Ahmedabad Bench 'A' has referred the following question under Section 27(3) of the Wealth Tax Act,1957 (the Act) at the instance of the Commissioner of Wealth Tax, Rajkot. “Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that two buildings, one known as Muff Villa and the other as Queen Villa which was used for office purpose, constituted a house belonging to the assessee and exclusively used by him for residential purpose within the meaning of section 7(4) of the W.T.Act,1957?” 2 The Assessment Years are 1976-77 and 1977-78. The relevant valuation dates are 31.3.1976 and 31.3.1977 respectively. In the return of net wealth filed on 7.2.1981 the benefit of valuation in WTR/29/1994 3/12 respect of self occupied house property was claimed by the assessee only in respect of Muff Villa, Jammnagar. During the course of assessment proceedings the said claim was revised vide letter dated 25/3/1982 and the assessee claimed that the self occupied property consisted of Muff Villa & Queen Villa together. The Wealth Tax Officer rejected the claim as an afterthought. He further held that both the house properties were quite distinct and separate and they had been treated separately all along as per the past record of the assesee. Therefore, on the basis of the Proviso to section 7(4) of the Act the Assessing Officer restricted the benefit only in respect of Muff Villa. 3 The assessee carried the matter in appeal before Commissioner of Wealth Tax (Appeals), who vide his order dated 3/12/1984 upheld the orders of the Assessing Officer on the ground that the point had also been considered in earlier years and the plea of the assessee had been rejected.

WTR/29/1994 4/12 The assessee carried the matter in Second Appeal before the Tribunal and the Tribunal vide its order dated 14/12/1989 upheld the contention of the assessee. The Tribunal has taken cognizance of the fact that the assessee comes from the princely family of the erstwhile ruler of the State of Jamnagar and hence, use of several residential units existing in a common compound and extended over vast area of land by such families as their residence cannot be viewed as an unusual mode of living. The Tribunal further held that : “It is not challenged that the two building known as Muff Villa and Queen Villa are quite contiguous and exist in one compound within common boundaries”. Referring to the report of the Departmental Valuation Officer it is stated that the same does not rule out possibility of unity of structure and construction of the two buildings. It is further held that on consideration of the report and the observations therein that both the buildings were constructed at the same time and were self occupied properties of the owner supports

WTR/29/1994 5/12 the contention of the assessee. It is further found by the Tribunal that the two buildings comprise of garages and servant quarters and while Muff Villa was used by the assessee for his residence, Queen Villa was used for office purpose. On these facts, the Tribunal has upheld the claim of the assessee that the two properties are required to be valued under section 7(4) of the Act as the said properties comprise of one self occupied house of the assessee.

WTR/29/1994 6/12 it was submitted that in the original returns of wealth claim regarding Queen Villa has not been made, but the claim was made subsequently by a letter. He therefore urged that the Tribunal had erred in law in holding that the two properties constituted one single self occupied property.

WTR/29/1994 7/12 records has not been accepted by the Tribunal. This Court held that the expression “exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date”, if construed in a narrow manner, would lead to an absurd situation expecting the assessee to remain in actual

WTR/29/1994 8/12 physical occupation throughout the year. It was further held that “Use of a house for residential purpose does not require compulsory residence in that house and it only requires that the house should be exclusively reserved and available for the residential purposes of the assessee all the time”. According to the ratio laid down in the that “exclusively used for residential purposes” WTR/29/1994 9/12 dealing with the expression “exclusively used by him for residential purposes” occurring in section 5(1)(iv) of the Act held that the expression “exclusively used by the assessee for residential purposes” must be construed pragmatically, fairly High Court held that the words “ for residential purposes” are contrasted with non-residential purposes such as commercial purposes, and further the words mean that the house is used by the WTR/29/1994 10/12 assessee solely as residence and not with a view of Revenue that the words “exclusively used” should be read as solely for residential purposes is not acceptable. The right of the property alone will play

WTR/29/1994 11/12 a prominent role and not the exclusive use. That the phrase “exclusively used” should be read to mean that the house should be used for residential purposes meaning thereby it should not be let out for rent or given on licence or used for commercial purposes. 9 The legal position is therefore settled and there is a consensus of opinion amongst various High Courts as to the meaning to be assigned to the expression “exclusively used by him for residential purposes” to mean the property should not be put to any non-residential use. In other words, the property should not be exploited to generate income therefrom. In the present case admittedly that is not even the case of the revenue, that Queen Villa which is used by the assessee for office purposes is put to any commercial use to earn income. 10 Therefore, once the Tribunal has found on facts, and there is no challenge to the said finding that the two buildings are contiguous, existed in one

WTR/29/1994 12/12 compound and within common boundaries, in absence of any finding that either of the building is used for non-residential purpose i.e commercial purpose, no infirmity can be found in the order of the Tribunal, when it holds that both the buildings constituted a house belonging to the assessee and exclusively used by him for residential purpose within meaning of section 7(4) of the Act. 10 The question is therefore answered in the affirmative i.e. in favour of the assessee and against the revenue. 11 The reference stands disposed of accordingly. (D.A.Mehta, J) (H.N.Devani, J) m.m.bhatt