A.M. Ahmadi, J.
1. The Wealth-tax Act, 1957 (hereinafter called 'the Act'), was enacted to provide for the levy of wealth-tax and came into force with effect from April 1, 1957. The charging provision, section 3, provides for the levy of wealth-tax in respect of the net wealth of every individual, Hindu undivided family and company at the specified rates. The expression 'net wealth' is defined in section 2(m) as the amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than debts exempted by section 6, debts which are in the nature of encumbrances on any property which is not chargeable under the Act or the amount of tax, penalty or interest payable pursuant to an order passed under the Act or any other law relating to taxation. section 4 enumerates the assets to be included in computing the net wealth. Sections 5 and 6 exempt certain assets in India and outside India from being included in computing the net wealth of the taxpayer. The value of assets is to be determined in accordance with section 7, sub-section (1) whereof reads as under :
'7(1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date.'
2. The words 'subject to any rules made in this behalf' were substituted by the Wealth-tax (Amendment) Act, 1964, with effect from April 1, 1965. Sub-sections (2), (3) and (4) of section 7 are in the nature of exceptions to sub-section (1) and each one of them begins with a non obstante clause, viz., notwithstanding anything contained in sub-section(1). Sub-section (2) deals with the manner in which the assets of an assessee carrying on business in respect whereof regular accounts are maintained or a non-resident company are to be computed. We are not concerned with this sub-section but sub-sections (3) and (4) of section 7 are relevant for our purpose and may, therefore, be reproduced :
'(3) Notwithstanding anything contained in sub-section (1), where the valuation of any asset is referred by the Wealth-tax Officer to the valuation Officer under section 16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date or, in the case of an asset being a house referred to in sub-section (4), the valuation date referred to in that sub-section.
(4) Notwithstanding anything contained in sub-section (1), the value of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became the owner of the house or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later.'
3. Section 14 enjoins every person, if his assessable net wealth on the valuation date is of such an amount as to render him liable to wealth-tax, to furnish a return in the prescribed form. On receipt of the return, the Wealth-tax Officer may make a provisional assessment under section 15C or proceed to make a final assessment in accordance with section 16 of the Act. According to that section, if the Wealth-tax Officer is satisfied that the return made by the assessee is correct and complete, he may finalise the assessment accordingly; otherwise he may after giving the assessee an opportunity to produce evidence, assess the net wealth as he considers proper and determine the amount of tax payable by the assessee. Section 16A which came to be inserted by the Taxation Laws (Amendment) Act, 1972, with effect from January 1, 1973, confers jurisdiction on the Wealth-tax Officer to make a reference to the Valuation Officer if the valuation of any asset, viz., the returned value stated on the basis of the estimate made by the registered valuer is less than the fair market value or in any other case if the Wealth-tax Officer is of the opinion that the fair market value of the asset exceeds the returned value by more than such percentage or by more than such amount as may be prescribed in this behalf or that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so. Sub-section (5) of this section enjoins the Valuation Officer to estimate the value of the asset by a written order and forward a copy thereof to the Wealth-tax Officer as well as the assessee. After the Wealth-tax Officer has received the order from the Valuation Officer, sub-section (6) requires that he shall proceed to complete the assessment in conformity with the estimate of the Valuation Officer. Section 23 provides for an appeal to the Appellate Assistant Commissioner from the orders of the Wealth-tax Officer. Section 24 provides a further appeal to the Appellate Tribunal from the orders of the Appellate Assistant Commissioner. Section 25 confers power on the Commissioner to revise orders of the subordinate authorities either of his own motion or on application made to him by an assessee. An order passed by the Commissioner under this section is appealable to the Appellate Tribunal. Section 27 provides for a reference to the High Court and is in substance akin to section 256 of the Income-tax Act.
4. The rule-making power is contained in section 46. Section 46(1) is the repository of the rule-making power to be exercised for carrying out the purposes of the Act whereas sub-section (2) thereof catalogues a few specified subjects in respect whereof the powers may be exercised, one such subject being 'the manner in which the market value of any asset may be determined'. Sub-section (3) of section 46 provides that the power to make rules conferred by this section shall include the power to give retrospective effect, from a date not earlier than the date of commencement of the Act, to the rules or any of them and, unless the contrary is permitted (whether expressly or by necessary implication), no retrospective effect shall be given to any rule so as to prejudicially affect the interests of assessees. Sub-section (3) of section 46 in its present form came to be substituted by the Direct Taxes (Amendment) Act, 1974, with effect from August 18, 1974. Prior thereto, the sub-section read that the power to make rules shall on the first occasion of the exercise thereof include the power to give retrospective effect to the rules or any of them before a date not earlier than the date of commencement of the Act.
5. In pursuance of the rule-making power conferred by section 46, the Central Board of Revenue made rules called 'The Wealth-tax Rules, 1957' (hereinafter called 'the Rules') and brought them into force with effect from April 1, 1957. These rules have been amended from time to time. Rule 1BB came to be inserted by the Wealth-tax (Amendment) Rules, 1979, with effect from April 1, 1979. The relevant part of this rule with which we are concerned, reads as under :
'1BB. (1) For the purposes of sub-section (1) of section 7, the value of a house which is wholly or mainly used for residential purposes shall be the aggregate of the following amounts, namely : -
(a) the amount arrived at by multiplying the net maintainable rent in respect of the part of the house used for residential purposes by the fraction 100/8; and
(b) the amount arrived at by multiplying the net maintainable rent in respect of the remaining part of the house, if any, by the fraction 100/9 :
Provided that in relation to a house which is built on leasehold land, this sub-rule shall have effect as if for the fraction 100/8 in clause (a) or, as the case may be, the fraction of 100/9 in clause (b), the fractions 100/9 and 100/10, respectively, had been substituted.'
6. Sub-rule (2) of this rule defines the expressions 'gross maintainable rent', 'net maintainable rent' and 'house', the last including an independent residential unit. Sub-rule (S) of this rule, however, provides that where, having regard to the facts and circumstances of the case, the Wealth-tax Officer is of the opinion that it is not practicable to apply the provisions of the rule to such a case, he may not apply the rule with the previous approval of the Inspecting Assistant Commissioner. The controversy before us revolves round this rule, namely, whether it is substantive or merely procedural in nature.
7. Before we proceed to deal with the controversy, a few relevant facts may be noticed. The assessee owns a property in the City of Ahmedabad known as 'K. M. Residences'. The question of valuation of this estate was referred to the Valuation Officer by the Wealth-tax Officer. On receipt of the order from the Valuation Officer, under sub-section (5) of section 16A of the Act, the Wealth-tax Officer proceeded to assess the wealth-tax in conformity with the estimate of the Valuation Officer. We may, at this stage, mention that besides this residential property, there were certain other properties also which were the subject-matter of valuation but we are not concerned with them in this reference. The Wealth-tax Officer, after making the assessment on the basis of the valuation determined by the Valuation Officer, passed certain consequential orders on March 31, 1979. The assessee preferred an appeal against the order passed by the Wealth-tax Officer contending that in so far as the residential property is concerned, its valuation ought to be governed by rule 1BB of the Rules for the assessment years in question, namely, 1965-66 to 1974-75. This contention found favour with the Commissioner of Wealth-tax (Appeals). The Revenue, therefore, carried the matter in appeal to the Tribunal. The Tribunal placing reliance on the decision of the Special Bench - Delhi Bench A - in Biju Patnaik v. WTO and vice versa, Wealth-tax Applications Nos. 614 to 624 and 703 to 717 (Delhi) of 1979 decided on February 17, 1981, held that rule 1BB was applicable retrospectively and confirmed the decision of the Commissioner of Wealth-tax in appeal.
8. The Revenue, feeling aggrieved by the view expressed by the Tribunal, sought a reference under section 27(1) of the Act. The Tribunal has referred the following question of law under sub-section (1) thereof for our opinion :
'Whether, on the facts and in the circumstances of the case, rule 1BB inserted in the Wealth-tax Rules, 1957, by the Wealth-tax (Amendment) Rules, 1979, with effect from 1st April, 1979, was applicable to the assessee for the assessment years in question ?'
9. The Revenue contends that the said rule is substantive in character and must operate prospectively, more so because the Central Board has not manifested its intention to apply the rule retrospectively by making a clear provision in that behalf in the rule in exercise of power under sub-section (3) of section 46 of the Act. On the other hand, the contention on behalf of the assessee is that the sub-rule is merely procedural and must, therefore, operate retrospectively. The controversy, therefore, centres round the narrow question whether the rule is substantive or procedural in character.
10. While stating the scheme of the Act, we have pointed out that section 3 is the charging section. Under that provision, a tax (wealth-tax) in respect of the net wealth for every assessment year commencing on and from the first day of April, 1957, is chargeable from every individual, Hindu undivided family and company at the rate or rates specified in Schedule I to the Act. In computing the net wealth of an individual, the value of assets held by certain persons other than the assessee are to be included as belonging to the assessee. Section 7(1) lays down that the value of any asset, other than cash, shall be estimated to be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date. This provision makes it clear that the value of the asset for the purposes of computing the net wealth of the assessee must be estimated by working out the price it would fetch if it is put to sale in the open market. It pre-supposes that the asset has a price and there exists some market to which it can be taken for sale. That is why in Ahmed G. H. Ariff v. CWT : [1970]76ITR471(SC) , the Supreme Court, while interpreting the words 'if sold in the open market', observed that the section does not contemplate actual sale or the actual state of the market, but only enjoins that it should be assumed that there is an open market and the property can be sold in such a market and, on that basis, the value has to be found out. It was, therefore, rightly contended by counsel for the assessee that section 7 was a machinery section and this contention was sought to be buttressed by case law.
11. In Standard Mills Co. Ltd. v. CWT : [1967]63ITR470(SC) , the Supreme Court observed that 'section 7 falls in Chapter II which deals with the charge of wealth-tax and assets subject to such charge : it is intended to provide a machinery for the determination of the value of assets'. In Kusumben D. Mahadevia v. N. C. Upadhya : [1980]124ITR799(Bom) , Chandurkar J. of the Bombay High Court, observed (p. 817) : 'Section 7(1) thus being a machinery provision, the scope of the power to be exercised under the provision must be ultimately to determine the price of an asset if it is sold in the open market on the valuation date'. The same view was expressed by the Andhra Pradesh High Court in CWT v. Pachigolla Narasimha Rao : [1982]134ITR640(AP) . It was stated therein that section 7 provides. 'the mode of ascertaining the value of assets' for the purposes of the Act. The Supreme Court in CWT v. Maharaj Kumar Kamal Singh : [1984]146ITR202(SC) observed : 'Section 7 is important which provides the method how the value is to be assessed'. It would appear from these decisions that section 7 merely provides the machinery for the purpose of ascertaining the net wealth by valuing the assets. It states that the net value would have to be estimated on the basis of the price which the asset was likely to fetch on the valuation date if sold in the open market. There is, therefore, no doubt that while section 3 is the charging section, the machinery for the purpose of computing the net wealth is provided in section 7 of the Act. As observed by the Supreme Court in CIT v. B. C. Srinivasa Setty : [1981]128ITR294(SC) , the charging section and the computation section together constitute an integrated code.
12. Sub-section (1) of section 7 opens with the words 'subject to any rules made in this behalf' which were added by the Wealth-tax (Amendment) Act, 1964, with effect from April 1, 1965. Section 46(2) empowers the Board to make rules providing for the manner in which the market value of any asset may be determined. The word 'manner' used in clause (a) of sub-section (2) of section 46 would denote the mode or method to be followed for ascertaining the market value of the concerned asset. It is in exercise of this power that rule 1BB came to be inserted in the Rules by the Wealth-tax (Amendment) Rules, 1979. By this rule, the method or formula for determining the value of the asset, that is, a house which is wholly or mainly used for residential purposes, is stated. The rule, therefore, is intended to carry out the purpose and object of section 7(1) of the Act, namely, an estimate of the price of the asset if sold in the open market on the valuation date. Different methods are employed for valuing real estate. In CIT v. Vimlaben Bhagwandas Patel : [1979]118ITR134(Guj) , it was pointed out that the well-known and recognised methods for arriving at the fair market value of real estate are land and building method, contractor's method, rental or yield basis method or comparable sales method. The market value has to be estimated or worked out by employing one or more of these methods which are considered appropriate having regard to the character of the property to be evaluated. It was also pointed out by this court in the said decision that the estimation of the market value is to be worked out on the application of all the four methods and for the purposes of counter-check, it must be compared with the municipal valuation for the purposes of property tax assessment and for the purposes of levy of tax, that method which yields the minimum market value should be adopted, unless there are special facts and circumstances which would necessitate the application of one or two methods only and/or adoption of the higher valuation. We have referred to this decision for the limited purpose of pointing out that when a duty is cast by section 7(1) to estimate the fair market value on the basis of prices prevailing in the open market on the valuation date, the concerned authority will have to work out the estimate by taking recourse to the well recognised valuation methods and compare the result with the rateable value adopted by the local authority for the purpose of assessment of property tax. If the market value of the property is to be assessed in the above manner in all cases arising under the Act, there may be no doubt that it would throw a great burden on the concerned authority and would prove to be not only cumbersome but time-consuming. In the absence of rule 1BB, it was incumbent on the authority to arrive at the fair market value by employing these well-recognised methods of valuation for the purpose of working out the net wealth of the assessee to be brought to tax. The rule-making authority, therefore, appears to have introduced rule 1BB for estimating the market value of a house which is wholly or mainly used for residential purposes. Instead of going through the time-consuming process of evaluating the property by employing the different well-recognised methods one after another, the Board has provided a simple formula by the introduction of rule 1BB in the Rules. The purpose of the rule is obviously to facilitate the determination of the market value of the house on the valuation date. In effect, the said rule, therefore, provides that the fair market value of a house wholly or mainly used for the purposes of residence should be determined as per the formula provided therein regardless of the other well-recognised methods of valuation. The rule, therefore, provides an alternative method of valuation of a house which is wholly or mainly used for residential purposes.
13. The Central Board of Direct Taxes had constituted a committee for laying down proper guidelines to enable speedy disposal of cases in which questions relating to the valuation of immovable properties, etc., arose for decision. The committee submitted its report drawing up guidelines for the valuation of residential properties. Pursuant thereto, rule 1BB came to be introduced in the Rules providing a formula for the determination of the fair market value of a house used wholly or mainly for the purpose of residence. It became necessary for the Board to provide a formula for determining the market value of a house in order to speed up the disposal of cases involving questions of valuation of such an asset. By providing a uniform formula applicable to all such cases falling under rule 1BB, the Board desired to remove the uncertainties prevailing in regard to the valuation of such assets which would help reduce litigation and secure early disposal of cases. If this is the avowed purpose of the introduction of the rule, can it be said that it was not intended to apply to pending cases But, before we deal with this aspect of the case, we must consider whether this rule introduces a substantive provision or is intended to be merely procedural.
14. We have already pointed out earlier that section 7 read with rule 1BB provides the machinery for estimating the market value of a house used wholly or mainly for residence. If such a house is exclusively occupied by the assessee himself, section 7(4) would have relevance. Rule 1BB is, however, wider in scope in that it does not use the expression 'exclusively used by him' but merely states that the house must be wholly or mainly used for residential purposes. Under that provision, therefore, the house need not be exclusively used for residential purposes by the assessee but it would suffice if it is wholly or mainly used for the purpose of residence, may be by a third party such as a tenant. The value of such a house can be determined by employing the formula set out in rule 1BB. It must, however, be remembered that under sub-section (1) of section 7 read with section 3, the value of any asset constituting the total assets of any individual, Hindu undivided family or company has to be estimated on the price prevailing in the open market on the valuation date for the purpose of bringing it to tax. For estimating the market value of the asset, ordinarily the well-recognised methods would have to be employed one after another, but rule 1BB provides a set formula on the basis whereof the market value of a house can be worked out for the purpose of assessing the tax. It is difficult to say with confidence that the market value estimated on the basis of the formula provided by rule 1BB would, in all cases, be less than the market value worked out by employing the recognised methods of valuation. If the value worked out on the basis of rule 1BB exceeds the price which the property would fetch on the valuation date if sold in the open market, the latter must prevail, for, otherwise, that rule would override section 7(1) of the Act and would be rendered ultra vires that provision. Similarly, there may be cases where it would not be practicable to work out the value by employing the formula of rule 1BB and such cases are taken care of by sub-rule (5) of rule 1BB. It is in this background that we must now proceed to consider whether rule 1BB is substantive as contended by the Revenue or purely procedural as contended by the assessee.
15. The general rule of interpretation is that a substantive law is intended to be prospective unless a contrary intention is manifest from the language of the statute or arises by necessary implication. It is well-settled that courts will refuse to place a construction giving retrospective effect if such construction is likely to impair existing rights and/or obligations. It is, however, open to the Legislature to give retrospective effect to a law by use of express words manifesting such an intention. That apart, a statute which takes away or impairs any vested right or creates new obligations must be construed not to have been intended to apply retrospectively. But, as observed by R. S. Wright J. in Re Athlumney [1898] 2 QB 547:
'If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.'
16. But if the law deals with matters of procedure only, it is deemed to be retrospective unless such an inference is likely to lead to unjust results.
17. It is clear from what we have stated above that the rule of construction depends upon whether the law is substantive or merely procedural. If the law affects vested rights, interests and/or obligations, it is substantive. If it touches matters of procedure only, it is adjective. Adjective laws are of two types, those which relate to procedure in courts and others which lay down rules of evidence. In the case of a law which is substantive, the presumption is that it is not intended to be retrospective unless the said presumption is dislodged by express language employed by the Legislature or by necessary implication. In the case of a law which is procedural, the presumption is in favour of retrospectivity.
18. In the light of the above well-recognised rules of construction, we must now proceed to consider whether rule 1BB is substantive or merely procedural. Mr. Shelat, the learned advocate for the Revenue, submitted that section 46(3) in terms empowers the Board to give retrospective effect from a date not earlier than the date of commencement of the Act to the rules framed under section 46(2) of the Act. It further provides that no retrospective effect shall be given to any rule so as to prejudicially affect the interests of the assessee. According to Mr. Shelat, since the Legislature had expressly conferred the power to apply the rules retrospectively provided they do not adversely affect the interests of the assessee, the Board would have expressly so stated if it was its intention to apply rule 1BB retrospectively. On the contrary, submitted Mr. Shelat, the Wealth-tax (Amendment) Rules, 1979, in terms states that the rules shall come into force on the first day of April, 1979. This provision, according to him, clearly indicated that the Board did not desire to apply the rules retrospectively. As against this, learned counsel for the assessee contended that rule 1BB was introduced in order to avoid delay and streamline the process of evaluating property used for residence. He submitted that what the rule-making authority had done was to introduce the said formula which could apply uniformly to all properties used wholly or mainly for residence instead of evaluating such properties by employing the well-recognised rules of valuation. Since it was found cumbersome and time-consuming to value each and every property used for residence by employing the well-recognised methods of valuation, the Board stepped in and offered to value such property by the set formula incorporated in rule 1BB. By introducing this formula, no vested right of the assessee is sought to be taken away. It is generally assumed that the value likely to be worked out by the adoption of this formula would be the minimum of the values which would be worked out if the other well-recognised formulae are employed. It was, therefore, felt that a large number of assessees could adopt this formula for the purpose of valuation of their asset used wholly or mainly for the purpose of residence and that would facilitate early disposal of cases on a uniform pattern. It is indeed true that under section 7(1) of the Act, the assessee can claim that his asset should be estimated on the basis of the price it was likely to fetch if sold in the open market on the valuation date. This right of the assessee is not sought to be taken away by the introduction of rule 1BB. If the assessee feels that the value of the property, if sold in the open market on the valuation date would be less than the value worked out by employing the formula of rule 1BB, it would be open to him to claim that the value of his asset may be so estimated. In other words, if the fair market value estimated in accordance with section 7(1) of the Act works out to a figure below the value derived by the formula of rule 1BB, the assessee would have to be taxed on the basis of that lower value. Rule 1BB, therefore, does not introduce a formula which is likely to adversely affect the interests of the assessee. It is necessary to read the formula accordingly because it is well-settled that a rule framed by the rule-making authority under the statute must not transgress or travel beyond the scope of the main provision of the statute, but must confine itself to the scope of the power conferred by the statute which it must be assumed cannot be in excess of the main provision in the statute. The rule is that subordinate legislation cannot control or overrule the main provision of the statute for, if it so does, it will be struck down as ultra vires the Act. It must, therefore, be the endeavour of the court to so construe the rule as to contain it within the ambit of the statute and thereby avoid rendering it ultra vires the statute.
19. It follows from the above discussion that in order to determine the net wealth of an assessee, each asset has to be separately valued in accordance with section 7(1) read with the relevant rule, in this case, rule 1BB. Since section 7(1) is a machinery section and since the rule to be made under section 46(2) must relate to the manner in which the market value of any asset may be determined, it can be safely inferred that the rule-making authority can lay down the method or mode of determining the market value of each asset. When a rule sets out the method or formula for determining the market value of any particular asset, it can only be considered to be procedural and not substantive. Rule 1BB with which we are concerned also lays down the formula for determining the market value of a house used wholly or mainly for residence. Since the rule provides a formula or mechanical method of valuation, it is difficult to agree with learned counsel for the Revenue that it is substantive in character. It has not the effect of impairing any vested right or creating any new obligation. It would seem that rule 1BB was introduced to speed up disposal of pending and future cases by offering a method of valuation which the taxpayer may find beneficial and feel tempted to accept. The avowed purpose of the rule is, therefore, to offer to an assessee a method of valuation of his asset which would help to curtail avoidable litigation and bring about uniformity and certainty in the matter of valuation of such an asset. It would also obviate the need to go through the exercise of valuing the asset under each recognised method of valuation and then choosing that method which yields the minimum value. By adopting and offering the straitjacket formula engrafted in rule 1BB, the Revenue has tried to cover a large number of cases which could be disposed of in accordance therewith If the intention of the rule-making authority in introducing rule 1BB was to evolve a method of valuation which would be beneficial and, therefore, acceptable to the assessee with a view to early disposal of cases relating to the asset in question, it would be reasonable to infer that the rule-making authority desired to clear up pending cases which were in the pipeline by the aid of this rule rather than to keep the pipeline of cases prior to the date of the introduction of the rule choked and merely deal with future cases with the aid of this rule. The introduction of this rule may also obviate the need to get the asset valued by a recognised valuer from time to time. As pointed out earlier, the assessee is not obliged to accept this valuation if he thinks that the market value of his asset would be less than the value derived by the use of this formula. Similarly, in cases of the type referred to in sub-rule (5) of rule 1BB, the Revenue may refuse to abide by the said formula of the rule on the ground that it is not practicable to employ the method, for example, a house which is believed to be haunted may not fetch the value worked out on the basis of rule 1BB if sold in the open market. So also it may not be practicable to apply the formula of the rule to a house which has some special features which single it out from other assets. We are, therefore, inclined to think that rule 1BB merely indicates a method or formula for determining the value of a house used wholly or mainly for residence and can, therefore, be said to be purely procedural.
20. We may now refer to a few cases which were cited at the Bar which support the view that we are inclined to take. In CWT v. Laxmipat Singhania : [1978]111ITR272(All) , the Allahabad High Court was called upon to decide whether rules 1C and 1D introduced in the Rules by the Wealth-tax (Amendment) Rules, 1967, by a notification dated October 6, 1967, were retrospective in effect. Rules 1C and 1D lay down the method of working out the market value of unquoted preference shares and unquoted equity shares of companies other than investment companies and managing agency companies, respectively. These rules were sought to be applied retrospectively by the Revenue on the plea that they were merely procedural in nature and did not affect the substantive rights/liabilities of the assessee. The Allahabad High Court, after quoting from the decision of the Supreme Court in Izhar Ahmad Khan v. Union of India, AIR 1962 SC 1052, held that the said two rules prescribe a formula for determining the market value of the unquoted shares which was relevant and since they merely indicated the method of valuation, they could be regarded as rules of evidence or procedure and not as rules of substantive law. It, therefore, came to the conclusion that even pending assessments which related to assessment years prior to the date of coming into force of the said rules would be governed by the said rules.
21. In a similar case which came up before the Bombay High Court in Kusumben D. Mahadevia's case : [1980]124ITR799(Bom) , Chandurkar J., speaking for the court, observed that in a company which is a running concern, the market value of a share is determined mainly on the basis of the yield method because a person who holds the shares or who wants to purchase the shares does it not with a view to bring the company into liquidation but he does it in the hope of getting return for his investment. It is only when the company is known to be at the end of its life, that is, in the process of winding up, that the market value of its shares will be determined on the break-up formula employed under rule 1D of the Rules. Referring to section 46(2) of the Act, the learned judge observed that the scope of the rule-making power is restricted so as to provide by a rule a mode in which the market value of an asset may or would be determined. This rule-making power can be exercised only for the purpose of making a rule giving discretion to the Wealth-tax Officer to apply the rule, if necessary, and compute the value according to the manner prescribed in that rule. Rule 1D of the Rules was, therefore, held to be not mandatory. It was also held that it was not possible to attribute an intention to the rule-making authority that it desired to shut out all other methods of computation of the value of the shares and restrict the scope of the inquiry under section 7(1) only to the value based on the break-up method contained in rule 1D because such a view would render rule 1D ultra vires section 7(1) of the Act. We may reproduce with advantage the relevant observations found at page 816 which read as under :
'Having thus referred to the permissible methods of valuation in the case of a company which is a going concern, we now come to the arguments relating to the validity of rule 1D. There cannot be any quarrel with the general proposition that rules made under any Act are never intended to override any specific provision of the Act itself. If the rules do so, they will be clearly in excess of the rule-making power. The rule of interpretation of subordinate legislation is that if the subordinate legislation is directly repugnant to the general purpose of the Act which authorises such legislation, it is either ultra vires altogether or, if possible, it must be so interpreted that it does not create any anomaly. At the same time, if the rules framed under a statute are in excess of the provisions of the statute or are in contravention of or inconsistent with such provisions, then those provisions must be regarded as ultra vires and cannot be given effect to. It is also a well-established rule of interpretation that when a literal construction of a statutory rule would render it ultra vires the rule-making authority, then the rule must be so construed as to be intra vires and held valid rather than construed as ultra vires and initially void.'
22. These observations are in accord with the view which we have expressed in this behalf in the earlier part of this judgment. The court, on this line of reasoning came to the conclusion that rule 1D which prescribed the break-up method for valuing unquoted equity shares was directory in nature and applied retrospectively.
23. The case directly in point is CWT v. Vidyavathi Kapur : [1984]150ITR319(KAR) . In that case, the question at issue was whether rule 1BB was procedural in nature and could be given effect to even in respect of pending matters. That case arose out of petitions made by the Revenue seeking reference under section 27 of the Act. While rejecting the petitions, the court observed as under (p. 319) :
'The dispute in respect of both the questions relates to the applicability of rule 1BB. The Tribunal has held that it is a procedural rule and, therefore, it may be given effect to even in respect of pending matters. There is no dispute and indeed it cannot be disputed that rule 1BB is procedural in nature. That being the position, we fail to see any question of law arising out of the order of the Tribunal, since it is always not disputed that the rules of procedure can be called into aid in respect of pending matters.'
24. The aforesaid three decisions lend support to the view that we are inclined to take.
25. Mr. Shelat, learned counsel for the Revenue, argued that since the rule-making authority was empowered to give retrospective effect by virtue of sub-section (3) of section 46, it would have done so if it intended rule 1BB to apply to pending cases also. Sub-section (3) of section 46 does confer power on the rule-making authority to give retrospective effect from a date not earlier than the date of commencement of the Act and the rules or any of them provided it does not prejudice the interests of the assessee. He submitted that the plain words of rule 1BB do not indicate that the rule-making authority wanted it to apply retrospectively. It is indeed true that rule 1BB is not couched in language which would ex facie indicate that the rule-making authority desired that the rule should apply retrospectively. That, however, was not necessary for the simple reason that to the rule-making authority can be attributed the knowledge that rules which are procedural in nature apply retrospectively and it is not necessary to say so in the rule itself. It would be necessary to make a specific mention that the rule is intended to apply retrospectively only if it engrafts a rule of substantive law. If the rule or rules framed are purely procedural in nature, it is not necessary for the rule-making authority to state that they should apply retrospectively. Therefore, merely because rule 1BB does not say so in so many words that it is intended to apply retrospectively, it cannot make any difference once we find that it is purely procedural in character. Mr. Shelat, however said that if rule 1BB intended to operate retrospectively, it was not necessary for the rule-making authority to state while enacting the Wealth-tax (Amendment) Rules, 1979, by which it came to be incorporated that it shall come into force with effect from April 1, 1979. It may, however, be noted that the notification amending the Wealth-tax Rules does not state that it shall come into effect from any particular assessment year. In tax matters, the law to be applied is the law in force in the relevant assessment year unless otherwise stated or implied : vide ClT v. Isthmian Steamship Lines : [1951]20ITR572(SC) . We do not think that the mere statement in the notification that the rules incorporated by the amendment shall come into effect from April 1, 1979, is decisive of the fact that the rules were not intended to be retrospective in nature. They had to be brought on the statute book either at once or with effect from a date decided upon by the rule-making authority but if the rule introduced by the amendment is found to be procedural in nature, it must operate retrospectively and the mere fact that it was given effect from April 1, 1979, will not clinch the issue.
26. Mr. Shelat, counsel for the Revenue, then argued that if the court comes to the conclusion that rule 1BB is procedural and, therefore, retrospective in nature, it should be made applicable only to cases pending before the Wealth-tax Officer. At page 220 of Maxwell on the Interpretation of Statutes (Twelfth Edition), we find the following statement under the caption 'Pending actions' :
'In general, when the substantive law is altered during the pendency of an action, the rights of the parties are decided according to the law as it existed when the action was begun, unless the new statute shows a clear intention to vary such rights.... The effect of a change in the law between a decision at first instance and the hearing of an appeal from that decision was discussed by the House of Lords in Attorney-General v. Vernazza [1960] AC 965. Lord Denning said (at p. 978) that it was 'clear that in the ordinary way the Court of Appeal cannot take into account a statute which has been passed in the interval since the case was decided at first instance, because the rights of litigants are generally to be determined according to the law in force at the date of the earlier proceedings. But it is different when the statute is retrospective either because it contains clear words to that effect or because it deals with matters of procedure only, for then Parliament has shown an intention that the Act should operate on pending proceedings, and the Court of Appeal are entitled to give effect to this retrospective intent as well as a court of first instance.'
27. In Chatturam v. CIT [1947] 15 ITR 302, the court while dealing with a provision having retrospective effect held that the appeals to the Appellate Assistant Commissioner were an integral part of the machinery of assessment and, therefore, it could not be contended that the assessment proceedings were over when Regulation I of 1941 was made and the regulation could not apply to the proceedings covered by those appeals. In Bhailal Amin & Sons Ltd. v. R. P. Dalal : [1953]24ITR229(Bom) , the court while dealing with the question of assessment observed that assessment is not merely the ascertainment of the amount due or payable by the assessee, but it also means all the procedure that has to be followed for the purpose of arriving at the amount for which the assessee is liable. In that case, the matter was pending before the Huzur Adalat, the appellate authority, and the court observed that the matter pending before the Huzur Adalat was in the course of the assessment of the petitioners, and until the Huzur Adalat had given its final decision, the assessment of the petitioners would not be complete. It would appear from the above that the process of assessment does not terminate once the Wealth-tax Officer has made the assessment but it continues if the assessee challenges it in appeal.
28. In Harish Chandra Bajpai v. Triloki Singh, : [1957]1SCR370 , the observations of Lord Westbury in A. G. v. Sillem [1964] 10 H. L. Cas. 704 : 'The rules that make or guide the cursus curiae, and regulate the proceedings in a cause within the walls or limits of the court itself' were quoted with approval and it was said that the proceedings include all steps which might be taken in the prosecution or defence of the election petition, including an application for amendment.
29. In Anant Gopal Sheorey v. State of Bombay, : 1958CriLJ1429 , the proceedings arising out of a complaint tried under section 282 of the Companies Act and sections 465 and 477A of the Indian Penal Code were pending before the Special Magistrate who had commenced recording of evidence on July 4, 1955. During the pendency of the said proceedings on August 12, 1955, the Criminal Procedure Code (Amendment) Act received the assent of the President and came into force on July 2, 1956. On only 14, 1956, the appellant applied to the Magistrate claiming a right to appear and give evidence under the newly inserted section 342A of the Code. His application was dismissed by the trial Magistrate and his revision against the said order met the same fate in the High Court. In the background of these facts, the Supreme Court observed that no person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the time being by or for the court in which the case is pending and if by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode. In other words, observed the court, a change in the law of procedure operates retrospectively and, unlike the law relating to a vested right, is not prospective only. This decision does not support the argument of Mr. Shelat because in that case no question arose whether a rule of procedure which operates retrospectively can also govern a pending appeal.
30. Mr. Shelat then invited our attention to the observation made by the Full Bench of the Calcutta High Court in Ajit Kumar Palit v. State, : AIR1961Cal560 . In paragraph 22 of that judgment, the following observations appear (at p. 566) :
'The law, therefore, is not in doubt, that amended law relating to procedure operates retrospectively, but it is a very misunderstood branch of the law. It is necessary, therefore, to emphasise that it only means that pending cases although instituted under the old Act but still pending are governed by the new procedure under the amended law, but it does not mean that the part of the old procedure already applied and concluded before the amendment came into force, e.g., in this case, cognizance taken in the manner permissible under the old Act becomes bad or can be reopened under the new procedure after the amendment.'
31. These observations, in our view, merely state that the old procedure followed is not rendered illegal merely because a new procedure is introduced which has retrospective effect. It, however, clearly states that the 'amended procedure operates retrospectively and affects pending cases' but there is nothing to show that the case must be pending at the initial stage only.
32. In Indraj Singh v. Savitri AIR 1966 SC 234, it was observed that procedural law is generally retrospective. But where by the enforcement of such an amendment, the validity of a judicial order validly passed, is affected, it cannot be given retrospective effect. These observations were explained by pointing out that if in a suit a decree is obtained and certain rights have vested in a decreeholder, it would be unfair to disturb that right and direct the suitor to begin afresh from the trial stage. In our view, the observations on which reliance is placed, therefore, deal with the peculiar facts of that case in which certain rights had crystallised under the decree and the plea was that since the procedure was amended retrospectively, the decree should be set at naught and the entire trial should commence afresh. It would depend on the nature of the change brought about by the amendment and if the new procedure could be applied without the need to set at naught the entire proceedings, there could be no objection to applying the same.
33. Counsel for the Revenue next contended that section 16A empowers the Wealth-tax Officer to make a reference to the Valuation Officer if in his opinion the returned value is less than the market value of the asset in question. According to him, if rule 1BB were to operate retrospectively, it would render sections 7(3) and 7(4) as well as section 16A(6) redundant. Under section 7(4), the assessee has the option of valuing the property on (i) the valuation date following the date on which he became the owner; or (ii) on the valuation date relevant to the assessment year commencing on April 1, 1971, whichever is later. He pointed out that once a reference is made to the Valuation Officer under section 16A(1), the Valuation Officer is required to follow the procedure set out in the subsequenta sub-sections and after his order is received, the law expects the Wealth-tax Officer to complete the assessment in conformity with the estimate of the Valuation Officer. Mr. Shelat, therefore, urged that it would not be possible to apply rule 1BB retrospectively having regard to the scheme of these provisions.
34. It is indeed true that sub-sections (3) and (4) of section 7 which begin with a non obstante clause have overriding effect on sub-section (1) of section 7 read with rule 1BB. Once a reference is made to the Valuation Officer, the asset has to be valued in accordance with section 7(3) or 7(4), as the case may be. Sub-section (3) of section 7, however, reiterates the principle of sub-section (1), namely, the value of the asset shall be estimated to be the price which it would fetch if sold in the open market on the valuation date. In the case of a house owned and exclusively used by the assessee, the assessee has been given the option of valuing the asset on the two dates mentioned in section 7(4) of the Act; but while valuing the asset under section 7(3) or section 7(4) read with sections 16A(1) and 16A(5), the Valuation Officer must have regard to the well-recognised method of valuation adverted to earlier. Rule 1BB merely introduced one such method - the rental or yield method - with suitable modifications so that it can govern practically all cases of assets used wholly or mainly for residence. It would, therefore, not be inconsistent with the scheme of the Act if we hold that the Valuation Officer would have to estimate the value in conformity with rule 1BB in cases which are pending before him. In the case of an asset governed by section 7(4), the choice would remain with the assessee to opt for that estimate which he considers beneficial.
35. The position in regard to cases falling within the purview of section 16A(6) would, however, stand on a different footing. These cases fall in two classes : (i) cases in which the Valuation Officer has made his order and has conveyed the same to the Wealth-tax Officer; and (ii) cases in which the Wealth-tax Officer has completed the assessment in conformity with the order of the Valuation Officer. In the former class of cases, if the estimate of the value exceeds the value that may be worked out on the application of rule 1BB, the Wealth-tax Officer may refer back the matter to the Valuation Officer, if need be; in the latter class of eases, if the assessment is the subject-matter of challenge in appeal, the appellate authority may substitute the value under rule 1BB before finalising the assessment. That is so because as pointed out by the Supreme Court in Srinivasa Setty's case : [1981]128ITR294(SC) , the charging section and the computation provisions together provide an integrated code. The process of assessment begins but does not end with the assessment order made by the Wealth-tax Officer for it is subject to appeal and on the decision of the appeal, the original order merges in the appellate order.
36. In Karsandas Bhagwandas Patel's case : [1975]98ITR255(Guj) , it was observed that the order of assessment made by the Income-tax Officer merges in the order of the Appellate Assistant Commissioner only in so far as it relates to items considered and decided by the latter. The following observations made by the court at page 261 are apposite and may be reproduced with advantage :
'It is now well-settled as a result of several decisions of this court as well as the Supreme Court that if an assessee does not choose to appeal, the order of assessment becomes final, subject to any power of revision which the Commissioner may have under section 33B but once an appeal is preferred by the assessee, the assessment is opened up and the Appellate Assistant Commissioner can examine all aspects of the assessment, not only those which are complained of by the assessee but also those in regard to which the assessee is satisfied and has not preferred an appeal.'
37. It is, therefore, clear that under the scheme of the Act, the original assessment order can be modified, varied or substituted at the appellate stage to make it consistent with rule IBB. We, therefore, do not see any insurmountable difficulty in applying rule 1BB retrospectively. The interpretation which we have put would harmonise the various provisions of the Act and would bring about a uniform extension of the benefit of rule 1BB to all the assessees. We are, therefore, of the opinion that the benefit of rule IBB must relate back to the date on which section 7(1) was made subject to the Rules.
38. We answer the question posed for our opinion in the affirmative accordingly. The reference is disposed of accordingly with no order as to costs.