COMMISSIONER OF WEALTH-TAX vs. SUBHADRA VENICHAND KOTHARI

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WTR/5/1995HC GujaratGJHC24022687199508 November 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages

AI SummaryAllowed

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in law and on facts in setting aside the order of the Commissioner of Wealth-tax. The Court followed its own decision in CWT vs. Kasturbhai Mayabhai (1986) 164 ITR 107, which was confirmed by the Supreme Court in CWT vs. Sharvan Kumar Swarup & Sons (1994) 210 ITR 886. The principle established is that Section 7(4) of the Wealth-tax Act is applicable only if the assessee opts for valuation under that section. In cases where the assessee does not opt for Section 7(4) and the conditions of Rule 1BB are satisfied, Rule 1BB will be applicable. Rule 1BB aims to bring uniformity in valuation and is procedural, not substantive. The Court answered the reference in the affirmative, in favour of the assessee.

What were the facts?

The assessee, an individual, purchased a residential flat in Bombay in 1985 for Rs. 7,37,576. For the assessment year 1987-88, the assessee declared the property's value at Rs. 39,162 under Rule 1BB of the Wealth-tax Act. The Wealth-tax Officer accepted this valuation. However, the Commissioner of Wealth-tax directed the Wealth-tax Officer to substitute the property's value with the purchase price of Rs. 7,37,576. The assessee appealed to the Income-tax Appellate Tribunal, which set aside the Commissioner's order. The revenue has filed a reference application to the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in setting aside the order passed by the Commissioner of Wealth-tax, who directed the Wealth-tax Officer to substitute the value of the property at Rs. 7,37,576 (purchase value) instead of Rs. 39,162 (declared value by the assessee)? Assessee's Contention: The Tribunal was correct in setting aside the Commissioner's order. The Tribunal followed the High Court's decision in CWT vs. Kasturbhai Mayabhai (1986) 164 ITR 107, which held that Section 7(4) of the Wealth-tax Act applies only when the assessee opts for valuation under that section; otherwise, Rule 1BB is applicable if its conditions are met. Revenue's Contention: The judgment does not record specific contentions made by the revenue before the High Court, other than implied by the reference question and the fact that the revenue is the petitioner.

Which sections of the Income-tax Act were involved?

Section 7(4), Rule 1BB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 5 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF WEALTH-TAX Versus SUBHADRA VENICHAND KOTHARI -------------------------------------------------------------- Appearance: 1. WEALTH TAX REFERENCE No. 5 of 1995 MR BB NAIK with MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 08/11/2001

ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH)

In this reference at the instance of the revenue, the following question has been referred by the Income-tax Appellate Tribunal, Ahmedabad under Section 27(1) of the Wealth-tax Act, 1957 in respect of assessment year 1987-88 :-

"Whether, the Appellate Tribunal is right in law and on facts in setting aside the order passed by the Commissioner of Wealth-tax whereby he had directed the Wealth-tax Officer to substitute the value of the property at Rs.7,37,576/- i.e. the purchase value instead of Rs.39,162/- as declared by the assessee ?"

The assessee an individual purchased residential flat at Bombay in the year 1985 for Rs.7,37,576/-. The assessee declared its value at Rs.39,162/- under Rule 1BB. The Wealth-tax Officer accepted the value shown by the assessee. However, the Commissioner of Wealth-tax directed the Wealth-tax Officer to substitute the value of the property by taking the purchase price of Rs.7,37,576/-. The assessee succeeded in appeal before Wealth-tax Act applies only in a case where the assessee Swarup & Sons, (1994) 210 ITR 886 wherein the Apex Court took the view that Rule 1BB was intended to impart uniformity in valuation and to avoid vagaries and disparities resulting from application of different modes of valuation in different cases where the nature of the property is similar and further that Rule 1BB partakes of the character of a rule of evidence. It deems the market value to be the one arrived at on the application of a particular method of valuation which is also one of the recognized and accepted methods. The rule is procedural and not substantive and is applicable to all proceedings pending on April 1, 1979, when the rule came into force.

Following the aforesaid decision, our answer to the question referred for our opinion is in the affirmative i.e. in favour of the assessee and against the revenue.

The reference accordingly stands disposed of with no order as to costs.

(M.S. Shah, J.)

(D.A. Mehta, J.) sundar/-

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