Per J. Kathuria - This appeal by the assessee pertains to asstt. year 1986-87. The only issue is regarding the valuation of cold storage owned by the assessee.
2. Briefly stated the facts of the case are these. The assessee is an individual whose valuation date for assessment year 1986-87 was 31-3-1986. Amongst other things, the assessee owns a cold storage known as Punjab Cold Storage. The assessee filed this wealth-tax return for assessment year 1986-87 on net wealth of Rs. 11,97,898 which included the value of the cold storage at Rs. 12,51,926. The Assessing Officer, however, referred the matter of valuation to the Departmental Valuation Officer who determined the value at Rs. 88,08,000. The Assessing Officer accordingly added the difference of Rs. 75,56,074 (Rs. 88,08,000 - Rs. 12,51,926) to the net wealth of the assessee which was computed vide assessment order dated 28-3-1989 at Rs. 87,54,062.
3. Before the first appellate authority, the assessee challenged the valuation. The learned CWT(A) accepted the contention of the assessee that the land rate should be adopted at Rs. 60 per sq. yard against the land rate adopted at Rs. 70 per sq. yard by the Valuation Officer. The learned CWT(A) also agreed to the allowance of higher depreciation. The learned CWT(A) accordingly determined the value of the cold storage at Rs. 71,78,691 at page 4 of the impugned order as against the value of Rs. 88,08,000 determined by the Valuation Officer.
4. Dissatisfied with the relief allowed by the first appellate authority, the assessee has come up in further appeal.
5. At the outset, Shri Sudhir Sehgal, the learned Counsel for the assessee, submitted that the valuation of the cold storage for assessment years 1979-80, 1980-81, 1981-82, 1982-83 and 1983-84 was shown respectively at Rs. 10,22,753, Rs. 10,22,753, Rs. 10,40,243, Rs. 10,40,243 and Rs. 10,40,243. It was submitted that the assessments were framed under section 16(3) of the Wealth-tax Act in which the valuation shown by the assessee was accepted by the department. It was pointed out that for assessment year 1984-85, as against the value of cold storage shown by the assessee at Rs. 11,62,243, the Assessing Officer determined the value at Rs. 12,32,443 by adding an amount of Rs. 70,000 on agreed basis. It was further submitted that the position for assessment year 1985-86 was exactly the same as for assessment year 1984-85. It was, therefore, argued that looking to the past history of the case, there was no warrant for fixing the value by the Assessing Officer at Rs. 88,08,000 or by the first appellate authority at Rs. 71,78,691.
6. The learned Counsel for the assessee submitted that for the year under consideration, the value was shown at Rs. 11,62,243 as in the immediately preceding year plus a sum of Rs. 89,683 was added on account of some additions made in the cold storage. Thus, according to the learned Counsel for the assessee, the value shown by the assessee came to Rs. 12,51,926 to which a sum of Rs. 70,000 could be added at the most on the basis of agreed addition for assessment years 1984-85 and 1985-86. According to the learned Counsel for the assessee, the total value thus would come to Rs. 13,21,926. The learned Counsel for the assessee, however, submitted that even the above valuation was on the higher side if the totality of the facts and circumstances of the case was appreciated.
7. The first submission of the learned Counsel for the assessee in this regard was that the Valuation Officer while valuing the cold storage had applied both the land and building method and the profit method. It was submitted that valuation as per annexure II of the valuation report, the value was worked out at Rs. 88,08,000 as per land and building method and at Rs. 17,07,450 as per the profit method. It was submitted that the Valuation Officer was not justified in discarding the value arrived at by the profit method. It was vehemently argued that in the case of a cold storage where the use was restricted, the profit method was a preferable method for valuing such property. It was also submitted that in the case of M/s. Rai Agriculture Farm & Cold Storage, Nurpur, the Valuation Officer worked out the value of the cold storage as on 31-3-1989 at Rs. 9,20,000 on profit method. Relying on the Punjab and Haryana High Court decision in the case of Jaswant Rai v. CWT [1977] 107 ITR 477, it was submitted that it was fair and proper that the benefit of the method which is most favourable to the assessee should be allowed to him and the choice of method for determining the value of the property should be left to the assessee. It was, therefore, submitted that according to the profit method the value of the cold storage as worked out by the Departmental Valuation Officer himself would come to Rs. 17,07,450 which should have been adopted by the Assessing Officer/CWT(A) instead of higher valuation.
8. The learned Counsel for the assessee, however, filed additional grounds which read as under :- "1. That the valuation of the property in the name of M/s. Punjab Cold Storage may please be made as per Schedule III of the Wealth-tax Rules.
2. That the principles concerning the valuation as laid down by the Supreme Court in the judgment in the case of CWT v. Sharvan Kumar Swarup & Sons, dated 22nd of September, 1994 may please be applied in the case of the appellant." Since these grounds raise legal issues, these were admitted after hearing the learned representatives of the parties.
9. The submission of Shri Sehgal was that Schedule III of the Wealth-tax Act though came on the statute book w.e.f. 1-4-1989, it was retrospective in effect because the Schedule dealt with the method of valuation of properties.
10. Relying on the decision of the Allahabad High Court in the case of Govind Hari Singhania v. Asstt. CWT [1992] 194 ITR 474, it was submitted that there was no substantial difference between the provisions of rule 1 BB of the Wealth-tax Rules and the provisions contained in Schedule III of the Wealth-tax Act. In this regard, our attention was invited to page 479 of the report in which their Lordships held that they were unable to see any substantial or qualitative difference between rule 1BB and rules contained in Part B of Schedule III to the Act in so far as valuation of a house occupied by the owner himself was concerned. The learned Counsel for the assessee elaborated that rule 1BB was applicable in the matter of valuation of a house which was wholly or mainly used for residential purposes whereas Schedule III to the Wealth-tax Act was applicable in respect of all immovable properties. The submission was that since the cold storage would not fall under rule 1BB, its valuation would be determined by Schedule III and since the essential features and the basic structure of rule 1BB of the Wealth-tax Rules and Schedule III of the Wealth-tax Act were the same except that Schedule III had brought certain refinements over the provisions contained in rule 1BB, the fact remained that Schedule III also deals with the method of valuation of properties and hence Schedule III was only procedural and not a substantive provision. Reliance in this regard was placed on the Tribunals decision in the case of Smt. Kusumben S. Sheth v. WTO [1991] 41 TTJ (Ahd.) 357. In that case, the question was of valuation of immovable property and the Tribunal held that rules contained in Schedule III to the Wealth-tax Act were procedural in nature and thus retrospective in effect. The Tribunal further held that such rules would be applicable to all pending matters of valuation. The Tribunal also decided that the rules in Schedule III being beneficial to the assessee, the assessee must have an option to get the valuation of his immovable property done according to those rules.
11. The learned Counsel for the assessee referred to the decision of the Punjab and Haryana High Court in the case of CWT v. Hira Lal Mehra [1994] 205 ITR 122 in which it was held that rule 1BB would apply to assessments for the period from April 1, 1979 to March 31, 1989. The learned Counsel for the assessee, however, pointed out that in its recent judgment delivered on 22-9-1994 in the case of CWT v. Sharvan Kumar Swarup & Sons [1994] 210 ITR 886, the Supreme Court had held that rule 1BB merely provides a choice amongst well-known and well-settled methods of valuation and thus the rule was essentially a rule of evidence as to the choice of one of the accepted methods of valuation in respect of certain kinds of properties with a view to achieving uniformity in valuation and avoiding disparate valuations resulting from application of different methods of valuation respecting properties of a similar nature and character. It was, therefore, submitted that in view of the decisions of the Supreme Court in the case of Sharvan Kumar Swarup & Sons (supra), the decision of the Punjab and Haryana High Court in the case of Hira Lal Mehra (supra) would no longer hold the field. It was also submitted that the ratio of the Supreme Court decision regarding rule 1BB would be applicable even in respect of Schedule III to the Wealth-tax Act.
12. Shri Sehgal also drew our attention to 211 ITR (Statutes) 9 in which the Special Leave Petition of the Revenue in the case of CWT v.Siddharth Kasturbhai was dismissed by the Supreme Court. In that case, the Gujarat High Court had rejected a reference application on the question whether as claimed by the assessee, section 7(4) of the Wealth-tax Act, 1957 was procedural and applied also to pending assessments, or as claimed by the department was substantive in nature and applied only to those assessments after 1-4-1976, the date of coming into force of the section.
13. It was, therefore, submitted that the provisions of Schedule III were substantially the same as contained in rule 1BB of the Wealth-tax Rules except that the provisions of Schedule III applied to all immovable properties whereas the provisions of rule 1BB applied only to properties used mainly for residential purposes. It was vehemently argued that since both the Schedule III and rule 1BB deal with the methods of valuation of properties, these were procedural provisions which would be applicable even to pending assessments. It was, therefore, submitted that the Assessing Officer may be directed to value the cold storage as per the provisions contained in Schedule III of the Wealth-tax Act.
14. The learned D.R. submitted that each year was independent and since there was no valuation report in the earlier years, the valuation had been accepted at a lower figure but in the face of the valuation report obtained by the Assessing Officer for assessment year 1986-87, a higher valuation was warranted which had been correctly confirmed by the first appellate authority. It was also submitted that the Departmental Valuation Officer had applied the well-known method of valuation namely, land and building method and that no defects in the same had been pointed out on behalf of the assessee. It was also submitted that Schedule III had come on the statute book w.e.f. 1-4-1989 and would, therefore, cover assessment years 1989-90 onwards and not assessment year 1986-87. The learned D.R. strongly supported the impugned order.
15. We have carefully considered the submissions of both the sides. It is true that the department obtained the report of the Departmental Valuation Officer for the first time in the year relevant to assessment year under consideration. There is, however, no getting away from the past history of the case in which the value as shown by the assessee was accepted by the Revenue for five years and for two years an agreed addition of Rs. 70,000 was made. The Valuation Officer himself has worked out the valuation of the cold storage by two methods, i.e., the land and building method and the profit method. It is not understood as to how he has discarded the value arrived at on profit method basis. In the case of Rai Agriculture Farm & Cold Storage, we notice that the valuation has been worked out on profit method which is also a well-recognised method. The Punjab and Haryana High Court in the case of Jaswant Rai (supra) has held that in a situation where different valuations would result from different methods of valuation, it would be fair and proper that the benefit of the method which is most favourable to the assessee should be allowed to him and the choice of the method should be left to the assessee. It is also true that in the case of cold storage building the use is very restricted unlike other immovable properties which may be put to a number of uses. We, therefore, do not subscribe to the view of the learned D.R. that the land and building method should have been adopted in this case. As per the profit method, the valuation comes only Rs. 17,07,450 against the value of Rs. 12,51,956 shown by the assessee. At the most, therefore, the value of the cold storage could have been adopted at Rs. 17,07,956.
16. We have, however, admitted the additional grounds. We are inclined to agree with the learned Counsel for the assessee that Schedule III lays down a rule of evidence and deals with the method of valuation of properties and hence is retrospective in effect. Rule 1BB of the Wealth-tax Rules has been held to be retrospective by the Supreme Court in the case of Sharvan Kumar Swarup & Sons (supra). By following the same analogy, we hold that Schedule III of the Wealth-tax Act also covers the pending assessments. In our opinion, simply because Schedule III has been made a part of the Wealth-tax Act, would not mean that the provisions contained therein would apply only to assessment years 1989-90 onwards. The Income-tax and Wealth-tax Acts are replete with examples of provisions having come into effect from a particular date but being held as procedural and covering the pending assessments. All this depends upon the nature of provisions brought on the statute book.
To give an example, provisos of section 43B of the Income-tax Act were brought on the statute book w.e.f. 1-4-1988 and 1-4-1989 but Patna, Orissa, Karnataka and Gujarat High Courts in their decisions respectively reported in Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70, CIT v. Pyarilal Kasam Manji & Co. [1992] 198 ITR 110, Chief Commissioner (Administration) v. Sanjay Sales Syndicate [1992] 197 ITR 255 and CIT v. Chandulal Venichand [1994] 209 ITR 7 held that the provisos were retrospective in effect. Since Schedule III deals with the method of valuation of properties, it is procedural in nature and retrospective in effect. The decision of the Ahmedabad Bench of the Tribunal in the case of Smt. Kusumben S. Sheth (supra) also supports the above view. We, therefore, accept the additional grounds of the assessee and direct the Assessing Officer to apply the rules of valuation contained in Schedule III of the Wealth-tax Act for valuing the cold storage of the assessee for assessment year 1986-87. This is, however, subject to one condition which is discussed hereafter.
17. Rule 8 of the said Schedule empowers the Wealth-tax Officer not to apply the rules contained in Part B of Schedule III under certain specific conditions. We keep his powers under rule 8 wide open in the present case as well. If the Assessing Officer finds that rule 8 in Part B of Schedule III does not stand in the way of applying Schedule III to the assessees case, then he shall apply the provisions of Schedule III and value of cold storage accordingly.
18. This direction is, however, subject to a rider that if the valuation thus arrived at under Schedule III works out to less than Rs. 12,51,926 as shown by the assessee himself, then the valuation shall be adopted at Rs. 12,51,926. The appeal is disposed of in the light of the above observations and shall be treated as allowed.