1. These five appeals by revenue and equal number of cross objections by the assessee, an HUF, are directed against two orders of the CWT(A)-IV, Ahmedabad - one dated August 16, 1983 relating to A.Ys.
1965-66 and 1966-67 and the other dated August 19, 1983 relating to A.Ys. 1967-1968, 1968-69 and 1969-70. The common question involved in all the matters and for all the years relates to the valuation of certain movable and immovable properties of the assessee-HUP as on the relevant respective valuation dates incidentally falling in all the matters on the last day of the last month of the English Calendar.
Parties being common, years involved being the same and facts being common to all the matters we hereby propose to dispose them off by this common order.
The common grounds taken by the revenue in all the appeals read as under: 2. Property at Plot No. 614-B, being residential property should be valued as per Rule 1BB ; 4. Value of shares be computed as per Rule 1D as interpreted by the Gujarat High Court in the case of CWT v, Ashok K, Parikh [1981] 129 ITR 46.
Since ground. Nos. 1 to 3 are inter-related and involve common facts they are being considered together as hereunder :- At the well-known 'Ellise Bridge' of Ahmedabad there lies the popularly called 'Panchvati Gulbai Tekra Area' falling in T.P.S. Nos. 3 & 20. This area is inhabitated by persons belonging to upper middle class and all civic amenities like schools, hospitals, offices, markets, cinemas, etc., are available to them nearby.
A.M.T.A. buses and auto rikshaws provide means of surface communication. In this 'Panchvati' area there situates a residential building popularly known as 'Ram Niwas', on the 80' or 100' wide TPS Road called Sheth Chimanlal Girdhan Dass Road We were informed at the time of hearing that this 'Ram Niwas' belongs to the brother of the Karta of the assessee-HUF and the karta as well as other members of the assessee-HUF also reside therein. Just behind 'Ram Niwas', in east situate F.P. No. 614-B, and in the east thereto F.P. No. 607-B, both belonging to the assessee-HUF. In revenue's appeals we are concerned with F.P. No. 614-B. In assessee's cross objections we shall be dealing with the valuation of F.P. No. 607-B.3. F.P. No. 614-B is a rectangular shaped property having all of its 54' wide opening on a 191 feet long & 30' wide kachha road leading to Seth Chimanlal Girdhar Dass Road in the west. This property measures 1434 sq. yds. having 338.50 feet 6' high pacca cemented compound wall.
In its northern portion, there stands a garrage-cum room type structure partly constructed in 1936 and partly in 1965. The ground floor as also the first floor cover equal area, 110.4 sq. metres each bringing the built up area to 220.80 sq. m. equal to 265 sq. yds. This structure has T.W. paralled shutters, cement plastered and white-washed finishing, c.c. and kota stone flooring, R.C.C. and c.c. tarracing, some sanitary installations and an estimated life of about 30 years more. The learned CWT(A) has held that this structure is used for storage of households of the assessee and for residence of its servants and their families.
4. For valuation purposes the assessee took both the plots, F.P. 614-B & F.P. 607, as making one plot only and including the scrap value only of the 'old ordinary structure fit for demolition' valued the said property (at 614B) at Rs. 40,000 for each of the first two years, at Rs. 50,000 for the third and at Rs. 69,000 for each of the last two years. In the opinion of the Asstt. Valuation Officer (AVO) the structure was well maintained strong enough to with stand further 30 years having been started as an office of the workshop. He, therefore, adopted land and building method of valuation and valued this property at Rs. 1,04,700, Rs. l,l1,600, Rs. 1,19,500, Rs. 1,28,000 and Rs. 1,40,300 on the relevant valuation dates of all the five years commencing from 1965-66. The assessee is in appeal against this valuation.
5. When the appeal was pending hearing before the CWT(A), the assessee raised the question of applicability of the provisions of Rule 1BB of the W.T. Rules, 1957 (The Rules) by way of additional grounds of appeal and claimed valuation of this property accordingly. The learned CWT(A) dealt with the question raised in sufficient detail, allowed the assessee to take up additional ground and finally accepted its claim in that behalf. She accordingly directed the WTO to value this property as per Rule 1BB. That part of her order makes the subject-matter of ground Nos. 1 to 3 of revenue's appeal before us.
6. We heard the parties at sufficient length and went through the record as was placed before us.
7. No doubt the learned DR vehemently urged that Rule 1BB was brought on the Statute Book w.e.f. 1-4-1979 and therefore should not be deemed to apply to cases involving periods prior to that date but we agree with Mr. H.M. Talati, appearing for assessee, that in so far as we are concerned the point in issue stands concluded in assessee's favour not only by Special Bench decision in the case of Biju Palnaik v. WTO [1982] 1 SOT 623 (Delhi) but also by Gujarat High Court decision in the case of CWT v. Shri Kasturbhai Mayabhai [1987] 164 ITR 107 wherein it has been held that the said Rule being procedural in nature was mandatory in character and retrospective in effect covering the cases pertaining up to A.Y. 1965-66. We therefore find no merits in ground No. 1 and reject it.
8. Now coming to ground No. 2 we find that it is not being challenged by Revenue that the double storeyed garrage-cum-room structure is being used by assessee for the storage of its households as well as for the residence of its servants and their families. That is the finding of the CWT(A) also and that fits in the facts found by us above. It can, therefore, safely be concluded that this property is being used by the assessee wholly or mainly for residential purposes. Admittedly the aggregate area of this property is 1434 sq. yds. The built up area is 265 sq. yds. bringing the unbuilt area to 1169 sq. yds. The specified area comes to 932.1 sq. yds. The difference between the unbuilt area and the specified area comes to 236.9 sq. yds. which comes to 16.52 per cent of the aggregate area and thus assessee's case is not hit by Sub-rule (5) of Rule 1BB. This ground too is, therefore, without any substance and is hereby rejected.
9. The third ground relates to assessee's entitlement for exemption Under Section. 5(1)(iv). The relevant part of Section b(1)(iv), as it stood at the relevant times, read as under : 5(1)(iv). one house or part of a house belonging to the assessee exclusively used by him for residential purposes....
It is the established position that the property in question consists of a'house'belonging-to the assessee-HUF. Further, it has also been found that this 'house' is being used for storage of household goods and for residence of assessee's servants and their families and not for any commercial purposes. On the strength of a Calcutta High Court decision in the case of Consolidated Tea & Land Co. (India) Ltd. v. CWT [1970] 76 ITR 589 the CWT(A) has held that the user of the property fulfills the intention of Legislature. We find good substance in this view and approve of it accordingly especially keeping in view the legislative history of this provision.
10. The learned DR relying upon the order of the Ahmedabad Bench of the Tribunal dated 16-10-70 in CO. Nos. 50 & 51/Ahd/1968-69 arising out of WTA Nos. 24 & 25/AM/68-69, submitted that in the year 1964-65 this very property was not considered as S.O.P. for the benefit of Section 5(1)(iv). We find that the Tribunal had rejected assessee's claim in that respect on the ground that at that time the property consisted of open land and few sheds only. We have pointed out above that as per report of the A.V.O. a part of construction was made in 1965.
Admittedly at the relevant points of time it was a double storeyed garrage-cum-room property, being used as storage of assessee's household goods and for residence of its servants. No such facts are obtainable from the order of the Tribunal dated 16-10-70. Since facts materially differ the said order of the Tribunal does not come in our way. We hold that the assessee has rightly been declared entitled to exemption Under Section. 5(1)(iv) by the learned CWT(A) and dismiss this ground as well.
11. Incidentally, ground No. 1 in assessee's cross objection relates to the points discussed hereinabove. In view of our above conclusions assessees'apprehension of withholding applicability of the provisions of Rule 1BB to the valuation of this property becomes unrealistic and unfounded. That ground becomes infructuous and shall be deemed to have been dismissed as such.
12. Coming now to the last ground, i.e., No. 4, relating to the valuation of unquoted equity shares of certain private companies we are of the opinion that the learned CWT(A) has committed no wrong in directing the WTO to value such shares as per principles laid down by Gujarat High Court in the case of CWT v. Ashok K. Parikh [1981] 129 ITR As stated above ground No. 1, common to all the years, no more survives and shall therefore be deemed to have been rejected as being infructuous.
14. Ground No. 2, again common to all the years, relates to the valuation of property at F.P. No. 607/B. This property measuring 2478 sq. yds., situates in the east of F.P. No. 614-B, discussed above. As pointed out above the assessee's valuer had in fact treated this property as making a part of F.P. No. 614-B, this both making one unit for the purpose of valuation. The CWT(A) has rightly pointed out that this property makes an independent property in itself. Anyway, the treatment meted out by this property in respect of its valuation is as follows : ---------------------------------------------------------------Valuation As assessed Rate As assessed Rate As directeddate by assessee adopted by WTO Under adopted by CWT(A) 16A W.T. Act--------------------------------------------------------------31-3-65 27,500 Rs. 10 1,23,700 Rs. 45 40 per sq. yd.
per sq. yd.31-3-66 27,500 " 23 " 1,37,400 " 50 " 4531-3-67 82,440 " 40 " 1,51,100 " 55 " 5031-3-68 1,01,000 " 40 " 1,64,900 " 60 " 5531-3-69 1,01,000 " 40 " 1,78,600 " 65 " 60-------------------------------------------------------------- It was vehemently submitted by Mr. Talati that this property is admittedly very disadvantageously situated as by virtue of its situation it was neither having any direct access to even the 30 feet wide kachha road leading to the main C.G. Road in the west nor has any frontage view on the said 30 ft. wide road. Mr. Talati led us through the order of the Tribunal dated 17-5-82 in WTA Nos. 530 to 535/AM/80 A.Y. 1965-66 to 1970-71, AVO's valuation report Under Section 16(5) dated 9-3-77, and Registered Valuer's report dated 22-11-1976, all placed on the paper book, and contended that it should be appreciated that the property in question was in fact a land blocked property with no passage and no frontage, that the sales instances considered by A.V.O. were not indicative of fair market value of the property, that the objections pointed out by Registered valuer Shri K.R. Amin, were not properly considered and appreciated by the authorities concerned and that the valuation as returned by the assessee should have been adopted. It was further submitted that the sale instances pointed out by the registered valuer should have been considered as indicative of fair market value of the property in question. It was also pointed out that land rate adopted for F.P. No. 503 (situated by the side of Nagri Eye Hospital) by the Tribunal in the order cited offers good guide for valuing the property in hand. On the contrary, the land rate adopted by the CWT(A) were excessive, contended Mr. Talati. The learned DR, on the other hand, supported order under appeal.
15. After having considered the rival submissions of the parties and after having gone through the valuation reports of the Registered valuer as well as of the A.V.O. we have felt convinced that the learned CWT(A) has hardly left any material point, having any bearing on valuation of this property, for our much sympathetic consideration.
16. It need not be recalled that like assessees another property at plot No. 614-B, this property too is situated in, what way conveniently be called, one of the best well-developed localities of Ahmeda-bad city making all the necessary civic amenities and facilities easily available to it. It is no doubt true that the situation of this property renders it incapable of getting direct approach to the 80 feet wide O.G. Road, as is available to F.P. No. 614-B, but the A.V.O.reports that a 30' wide kachha road is available to this property in the west through F.P. No. 614-B that puts it on the other 30' wide kacha road leading to the main road. Loss of frontage is also there.
But we find that all these aspects have been fully taken into consideration by the learned CWT(A) and the value has been appreciably lowered down. We further find that in her detailed discussion over the valuation of this property the learned CWT(A) elaborately dealt with various contentions and objections advanced on behalf of the assessee.
The sales-instances relied upon by the parties were considered and appreciated by her. We ourselves have gone through the valuation report of the A.V.O. and find that it proceeds on good footing and meets out the objections of the Registered valuer. The sales-instances relied upon by the A.V.O. were certainly indicative of fair market value of the property in question as such sales instances not only related to the relevant periods under consideration but also they were obtained from the office of the sub-registrar. After all, sale instances are only indicative of the rate of land in a particular locality at a particular point of time. Properties not equally situated cannot be treated equally in the matter of valuation and each case shall have to be considered on its individual merits and demerits. It is the estimated value of a property which has to be considered for valuation purposes and if such valuation has been arrived at after taking into consideration all relevant facts, having bearing on valuation, and is based on well-established and sound principles of valuation, it should not be lightly disturbed and should be accepted.
17. The assessee has placed reliance on the valuation of F.P. No. 583 as adopted by the Tribunal in the case of one Sakarlal Balabhai (HUF) [WTA Nos. 530 to 535 (Ahd.) of 1980]. Admittedly the land in that case was situated at a distance of about 750 mtrs. that case was situated at a distance of about 750 mtrs. away from the present property. For the obvious dissimilarity of facts that order makes no guide for valuation in this case.
18. Keeping in view all the facts and circumstances attending on the valuation of this property we think it would meet the ends of justice if the valuation, fixed by the learned OWT(A) for various years, is reduced by Rs. 5 per sq. yd. for each of the years under consideration.
We do so and modify the order of the CWT(A) %o that extent only.
19. In the result the appeals preferred by revenue are dismissed while the appeals preferred by the assessee are partly allowed to the extent mentioned above.
1. I have perused the order of my learned Brother but find myself unable to agree with his views and consequent decision in WTA Nos. 1319 to 1323/Ahd/1983, After receiving his order I have discussed the matter with him to enable us to reach unanimity but having failed, in doing so, I have to perforce write a dissenting order.
2. The facts have been narrated in detail by my learned Brother hence I propose to mention only the relevant facts in support of my view.
3. Admittedly for the assessment year 1964-65 (immediately preceding year) the assessee's claim for exemption under Section 5(1)(iv) was rejected right up to the Tribunal. The Tribunal dealt with the matter on the following lines : For the year 1964-65, however, another ground is taken with regard to this property, viz., that it should be taken as S.O. property and that therefore it is exempt under Section 5(1)(iv). This ground is untenable, inasmuch as there is no residential house as such. The property consists of open land and few sheds. The value of the sheds as has already been stated above was taken at Rs. 3,000. Therefore this contention is rejected.
4. The property in question consists of a plot of land measuring 1434 sq. yards and the 'structure' in question is located right at the entry to the plot. It consists of a ground floor and first floor with a total plinth area of 220.80 sq. mt. (about 265sq. yards). This comes to around 18 per cent of the total area of the plot.
5. The report of the D.V.O. (page 26 of the paper book) shows that the construction took place in 1936 and some addition was effected in 1970 (36 sq. yards). In other words the property for the assessment years under appeal (1965-66 to 1G69-70) was the same as dealt with by the Tribunal in A.Y. 1964-65. Even otherwise there is no factual finding by the ITO or by the CIT (Appeals) as to any additional construction coming up from 1936 onwards up to the assessment years under consideration.
6. At this stage it would be relevant to reproduce some of the extracts from the objections raised by the assessee's approved valuer in response to the report of the D.V.O. Before I state my objections, I think, it will be useful to know the correct configuration and situation of the assessee's property under valuation as also the focus of development in which it is located in the area popularly known as 'Panchvati-Gulbai Tekra Area'. The accompanying Plan No. 1 shows the configuration of the assessee's property as also its awkioard shape with a very narrow frontage and that too on a minor 30 Ft. wide private road which has an access on the main Sheth Chimanlal Girdhardas Road as shown in the said Plan, The plot of land of this property is extensive in area and has got considerable depth also.
This land contains a small ordinary type of residential structure and that too right at entry of the entire plot as shown in the accompanying Plan No. 1. Even the small frontage of only 54' - 0" available to the extensive plot of land (Area: 4182 sq. yds.) in this case is materially blocked by the aforesaid old type of structure and, as such, creates substantial encumbrance on the entire land.
At least, in this particular case, when the ordinary type of small old structure with an out-dated design is so oriented on the plot (right at its entry) by which the small available frontage of only 54' - 0" is even substantially blocked as can be seen from the accompanying Plan No. 1, it would have been most fair and reasonable if the learned A.V.O. would have considered the value of the said small structure as value of materials on demolition or scrap value.
The small structure substantially encumbers the entire land admeasuring 4182 sq. yds. of the assessee's property. Any willing and prudent purchaser of this property would consider the worth of this structure as value of materials on demolition or scrap value in view of its condition, the peculiar orientation and its income fetching capacity. Only then, he would pay the 'market value' of the entire land of the assessee's property as an open land.
But the approach of the learned A.V.O. for the determination of the 'fair market value' of the assessee's property is not at all under the 'Land and Building Method' and can have no justification whatsoever. Whereas on the one hand he estimates the highest and best value of the entire land, of course, much on the higher side, on the other hand, he wants to retain the small out-dated structure also for valuation even though it substantially encumbers the entire land on all score vis., condition, income fetching capacity and even the awkward orientation right at the entry of the entire land, thereby blocking even the small frontage of only 54 ft, which is available to this property.
the assessee's valuer has made the correct application of the 'Land and Building Method' in this particular case by estimating the 'market value' of the land for each of the assessment year under reference on the basis of the instances of sales of comparable lands in the locality (Refer Schedule 'A' and Plan No. 2) and adding to it the value of materials on demolition of the structure as the small out-dated structure like this is worth value of materials on demolition in view of its condition, income-fetching capacity and even the very orientation wherein the very small available frontage of only 54 Ft, is blocked by the said awkward orientation.
7. The approved valuer has also devoted 5 pages at the end of his objections entirely to the 'structure' in question (pages 78 to 82 of the paper book). The heading of this portion is as under: III : Regarding the value of the small out-dated super structure estimated by the learned Asstt. Valuation Officer : 8. The following observations of the approved valuer are also worth noting :- It is worth value of materials on demolition in view of its condition, income-fetching capacity and even its orientation right at the entry of the extensive plot of land with a very small frontage.
The reinstatement cost for this minor out-dated ordinary type of structure worked out by the learned A.V.O. for each year by adopting the respective cost index will show beyond any doubt as to how much these costs are arbitrary and exorbitant.
After completing the aforesaid mathematical exercise to get the exorbitant arbitrary estimation of the so-called reinstatement cost new of the ordinary structure like that of the assessee, the learned A.V.O. brings that structure to Ahmedabad and tries to work out the reinstatement cost by adopting some multiplier which he prefers to call the 'Cost Index' for the City of Ahmedabad.
In view of my detailed discussion and observations for the 'strange' method adopted by the learned A.V.O. even for the estimation of the reinstatement cost new of the ordinary structure of the assessee's property for each of the assessment year under reference, I am to state that not only the said estimation is exorbitant, but is arbitrary also and can have no justification so far as the ordinary structure of the assessee is concerned. In any case, so far as this property is concerned, as stated before, this ordinary out-dated structure substantially encumbers the entire land admeasuring 4182 sq. yds. and is worth value of materials on demolition. Under the circumstances, the learned A.V.O. is requested to consider all my aforesaid observations and findings for his estimation of the 'fair market value' of the assessee's very awkward-shaped property for all the 5 assessment years under reference for the sake of justice. The fair and reasonable estimation of the 'fair market value' of this particular property in view of the fundamental principles of valuation and the guidelines given by the various judicial pronouncements from time to time will be the estimation of the 'market value' of the entire land if it were open plus value of materials on demolition of the small ordinary structure. This will be the most rational and correct approach so far as this property is concerned.
9. I have tried to show by reproducing the relevant extracts that it was never the assessee's case before the D.V.O. that the structure in question was a 'house'. The endeavour all along had been to show that the structure was worth only the value of the material on demolition or in other words the 'Scrap value'.
10. It is also an accepted fact that the property was being utilised for storing extra domestic goods and for the use of the servants. The assessee at no stage made an attempt to construct a house property for personal use. The state of the property remained the same right from 1936 onwards till the years under consideration. The D.V.O. in fact inspected the property on 30-8-1976, i.e., after a period of 40 years when it revealed no change at all. We were also informed during the hearing that it ultimately changed hands as a result of a partition in the HUF.11. Another fact to be noted is that the assessee did not furnish any evidence of the 'house tax' payable on the property to the D.V.O.12. The discussion in the preceding paras clearly shows that the 'structure' on the plot in question is not a 'house'. The word 'House' has no statutory definition and has to be given a common parlance meaning. The dictionary meaning of the word is 'building for dwelling, a building in general, a dwelling place'. According to me the definition of the word 'House' or 'Part of a house' cannot cover a situation where the premises are not habitable. The concept of habitability is inherent in the word 'house'. I am further of the view that the concept of habitability cannot be stretched to the extent of suggesting that it should include a place used for storing extra items of domestic use or for the use of the assessee's servants.
13. Before I part with the matter a few words about the decision of the Calcutta High Court in the case of Consolidated Tea & Land Co. (India) Ltd. (supra) which has been relied upon by the CIT(A) in accepting the assessee's view point. The Court was primarily concerned with Section 2(e)(ii) of the Wealth-tax Act, 1957 which reads as under : 2. (e) 'assets' includes property of every description, movable or immovable but does not include,- (ii) any building owned or occupied by a cultivator of, or receiver of rent or revenue out of, agricultural land : PROVIDED that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as a dwelling house or a store-house or an out-house; 14. We are on the other hand, concerned with the provisions of Section 5(1)(iv) which at the relevant time stood as under : One house or part of a house belonging to the assessee exclusively used by him for residential purposes.
It is apparent that the assessee does not fulfil any of the conditions laid down by Section 5(1)(iv). There is no 'house' in existence and accordingly the second condition of 'residence' must remain unfulfilled. The reliance on the Calcutta High Court decision (supra) is futile since the issue involved was entirely different and so are the provisions of Sections 5(1)(iv) and 2(e)(ii).
15. I would accordingly hold that the assessee would not be entitled to the benefit of Section b(1)(iv). As a consequence of this view the claim for valuation under Rule 1BB must also fail.
16. I accordingly set aside the orders of the CWT(A) in respect of the first two common grounds in the appeals of the Revenue and restore those of the ITO.REFERENCE UNDER SECTION 24(11) OF THE WEALTH-TAX ACT, 1957 READ WITH SECTION 255(4) OF THE INCOME-TAX ACT, 1961 1. A difference of opinion has arisen amongst the Members, who constituted the Bench. The following point of difference is referred to the Hon'ble President of the Income-tax Appellate Tribunal, under Section 24(11) of the WT Act, 1957 read with Section 255(4) of the IT Act, 1961 : Whether property at Plot No. 614-B 'Panchvati-Gulbai Tekra Area', Ahmedabad qualified for exemption under Section 5(1)(iv) as also the benefit of valuation under Rule 1BB of the WT Rules, 1957 1. In the above appeals and cross objections there was a difference of opinion and the following point of difference has been referred to me as a Third Member Under Section 24(11) of the Wealth-tax Act read with Section 255(4) of the Income-tax Act : Whether property at Plot No. 614-B 'Panchvati-Gulbai Tekra Area', Ahmedabad qualified for exemption under Section 5(1)(iv) as also the benefit of valuation under Rule 1BB of the WT Rules, 1957 2. The dispute is regarding property known as No. 614-B Panch-vati Gulbai Tekra Area, Ahmedabad. The assessee is a Hindu undivided family and up to the asst. year 1964-65 the assessment was being made on the bigger HUP which was known as Shri Rohitbhai Chinubhai. As a result of some partial partition some of the properties came to the present assessee-HUF and the dispute is only related to this particular property which was earlier a part of a much bigger property known as Ramnivas Building. Ramnivas Building is a residential property which does not belong to the present HUF though the members of the family are staying in that house which now belongs to Rohitbhai Chinubhai.
Ramnivas building is situated on plot No. 617 and the adjoining plot of land is known as No. 614 and has an area of 1434 sq. yards. As described in the order of the learned Judicial Member it was a rectangular plot of land on which there are certain constructions and the dispute is regarding that structure. The assessee had claimed that in respect of this structure he should be granted exemption Under Section 5(1)(iv) of the Wealth-tax Act and the value of this property should be determined under Rule 1BB which has been prescribed for the valuation of residential properties. The built-up area on the two floors was equal to 265 sq. yds. and it had paralleled shutters, cement plastered and kota stone floorings. There was a terrace also and there were sanitary installations and connection with sewage line. It was stated by the assessee that this structure was being used for storing the assessee's household goods as well as for the residence of its servants and their families. As it was close to the residential structure it was convenient for the assessee to use this additional space as a part of his residential house using it for goods and servants.
3. In the earlier years the value of this structure had been taken at Rs. 8,000 by the Department. In the years in question the value had been shown by the assessee at a much higher figure of Rs. 40,000 and above. Gradually the value shown increased up to Rs. 70,000 in the years under consideration. The Asstt. Valuation Officer had found the structure to be well maintained and in 1965 it was strong enough to withstand 40 years or more. The Valuation Officer had determined the value on land and building method at Rs. 1,04,700 to Rs. 1,40,300 for the different valuation dates.
4. The CWT (Appeals) had accepted the plea of the assessee that the property in question should be valued under Rule 1BB as it was being used for residential purposes by the assessee. He also held that exemption Under Section (5l)(iv) was allowable in respect of this property.
5. When the matter came before the Bench the learned Judicial Member held that the property in question was a residential property of the assessee though it was not being used for his own residence and the residence of his family members. According to him, the use by servants as well as storing place for household goods was also used as residential house.
6. The learned Judicial Member further referred to the order of the Tribunal in the case of Biju Patnaik (supra) and also the decision of the Gujarat High Court in the case of Shri Kasturbhai Mayabhai (supra) and held that Rule 1BB being procedural was restrospective and was applicable for the years under consideration. The learned Judicial Member further held that considering the facts now available it could not be taken as godown or a mere shed but an expansion for the residential accommodation of the assessee. The actual residential house did not belong to the assessee though the members were staying in it till the construction of a house for this HUF. The learned Judicial Member also found that the provisions of Sub-rule (v) of Rule 1BB was satisfied and did not exclude the operation of that Rule. In respect of the application of exemption Under Section. 5(1)(iv) of the WT Act he referred to the requirement at the relevant time and held that on the facts it should be held that the house belonged to the assessee and was being used by him for residential purposes. According to him, the use by the servants and for storing household goods was used as a residential house of the assessee. He referred to the decision of the Calcutta High Court in the case of Consolidated Tea & Land Co. (India) Ltd. (supra) and held that this structure should be treated as a house.
Referring to the earlier years' order of the Tribunal, the Judicial Member observed that there appeared to be some constructions in 1965 which had changed the position. For this year it was a double storeyed building having a garrage and he used as the residence of the servants and their families and also for keeping the additional household goods of the assessee. These were additional facts as a result of which he justified the departure from the earlier years' orders. He therefore, held that exemption Under Section. 5(1)(iv) was allowable.
7. The learned Accountant Member, however, referred to the order of the Tribunal in the earlier year where the claim of the assessee Under Section. 5(1)(iv) had been rejected on the ground that there was no house as such but only a few sheds. He also referred to the fact that there was no change in the property and the additions which were made was only in 1970 which was after the years under consideration. He also made reference to the report of the Valuation Officer where he had pleaded for valuing the property on the basis of its scrap value. After rebutting the arguments given in the Valuation Officer's report, he observed that this was an outdated structure which encompassed the entire land and the assessee has been claiming that it should be valued on its scrap value. He referred to the fact that the property was being used for storing domestic goods and for the goods of the servants and according to him, this could not be equated with a house property used for personal purposes. He therefore, held that the structure could not be considered to be a house which lays a residential house and was not habitable as assessee's residence. He distinguished the case from the decision of the Calcutta High Court relied upon in the order of the learned Judicial Member and further held that the conditions Under Section. 5(1)(iv) were not fulfilled as there was no house and the condition of residence was also not fulfilled. The claim of the assessee was therefore, rejected by him for both the purposes.
8. The Departmental Representative has strongly relied on the arguments given in the order of the learned Accountant Member. He submitted that there was no change from the asstt. year 1964-65 when the Tribunal had rejected the plea of the assessee Under Section. 5(1)(iv). It was also submitted that there was no construction or addition in the year 1965 and the only construction was in 1936 and there had been no material change after that. It was further submitted that the reliance on the decision of Calcutta High Court in Consolidated Tea & Land Co. (India) Ltd.'s case (supra) was not appropriate as that decision had been given for deciding a different issue and It was given in a different context.
He further contended that admittedly the assessee was not residing in this house and there was no question of it being an out-house of the assessee's residential house as there was no residential house as a part of the assessee's wealth. He contended that the requirement of Section 5(1)(iv) was that it should be used by the assessee. or members of his family as his residence and the user of such accommodation for the servants or for household goods could not satisfy the conditions of the section. He submitted that such a structure could not be contemplated as a 'house' within the meaning of Section 5(1)(iv) Consequently, the question of valuation of such property by applying Rule 1BB could not arise. He submitted that it was not a house and in no case a residential house. He also relied on the stand of the Department that Rule 1BB was not retrospective in operation and applied only after it was brought on the statute book and not for the period prior to it.
9. The learned counsel for the assessee, on the other hand, drew my attention to the nature of the construction and pointed out that a plinth area of the house on the first and second floor was 220 sq.
metres which was sufficient for the purpose of being used as a residential house of the assessee. It is true that the assessee or the members of his family were not staying in this structure but it was being used for his servants and for storing his household goods. He admitted that the property was constructed in 1936 but the full facts had not been brought out before the Tribunal in the earlier year. In 1965 its expected future life was more than 40 yeara and, therefore, it was in a fairly good condition for being used as a residence. He also submitted that where a house is used for the residence of the servants or for keeping the household goods is also a residential house and nothing else. Relying on the order of the Judicial Member he pointed out that it was a double-storeyed structure with thick walls with sanitary fittings and sewage connection and it was not in dispute that the servants of the assessee were staying in it. This structure was not being used for any other purpose for receiving any income or rent and as the assessee himself and his family was staying in the adjoining house though not actually belonging to the assessee-HUF, the structure served the purpose of apart of his residential house by accommodating the servants and the household goods. He submitted that the assessee-HUF had not claimed any benefit for any other residential house and this was the only house in respect of which the exemption was being claimed. He further submitted that Rule 1BB was applicable to residential houses and the valuation of this property should be made under the Rule as the Gujarat High Court has held in Shri Kasturbhai Mayabhai's case (supra) that the operation of this Rule was retrospective as it was procedural.
10. I have considered the rival submissions and perused the orders of the learned Members. There is no statutory definition of the word 'house' and I have to consider it within its common meaning. If a structure is habitable by human beings and is meant for such habitation it can be considered as a house and if human beings actually stay there or can stay there it can be considered as a residential house. As already stated the construction was on two floors having certain rooms some of which were used for keeping household goods and other than for the residence of the servants and their family as they could not be accommodated in the main house where the assessee's family was staying.
The asseesee has not claimed exemption Under Section. B(1)(iv) in respect of any other house. It has not been disputed that the structure has been used for the habitation of the servants and it is being used as an expansion of the residential house. In such circumstances, the plea of the assessee that it should be treated as a house and as a residential house which was being used by the assessee for the purpose of his residential house can be accepted. It is not necessary that the assessee himself should stay there. In the circumstances of the case, they were staying in the bigger house and this was an adjoining out-house used by the assessee for his domestic purposes where his servants were staying. Having regard to the circumstances, I am inclined to agree with the learned Judicial Member. The earlier year's order of the Tribunal is certainly against the assessee but it appears that full facts had not been brought out in that year and it had not been mentioned that it was being used as a residential house of the servants and for keeping the household goods. It may be mentioned that in the earlier year the value of the structure was taken at Rs. 8,000 whereas in this year the value has been shown at much more and at the instance of the Departmental Valuation Officer the Wealth-tax Officer had determined the value at more than Rs. 1 lakh. In respect of such a structure which had the necessary sanitary fittings and other facilities for residence there may not be any objection for treating it as a house. I am also of the view that user for one's own servants for their residence can be treated as user for residential purposes as well-to-do people do keep servants in their houses. It is admitted that the house has not been let out and the assessee was not obtaining any other income out of this house. If the house had been used for people other than domestic servants or for storing goods other than the household goods an argument could be raised that it was not in the nature of a residential house. In the present case, however, the position has not been disputed by the revenue. The requirement of Section 5(1)(iv) should be interpreted pragmatically, fairly and reasonably and from that point of view, I would agree with the learned Judicial Member.
11. As regards the application of Rule 1BB it has already been held by the Gujarat High Court that the Rule was retrospective in operation and was procedural in nature. Whether the Rule itself could apply having regard to the provisions of Sub-rule (5) has been considered in the order of the learned Judicial Member and nothing has been shown by the revenue to show that it was not correct. Thus, the Department can proceed to value this property having regard to all the provisions of Rule 1BB whichever may be applicable to this case. The departure from the earlier years order of the Tribunal is only in view of the additional facts which have come out on record and after appreciation of those facts. Had these facts been brought out in the earlier years the result might have been different. Now, this matter will go back to the Bench to pass an order in accordance with the view of the majority.