Commissioner of Wealth-tax Vs. Hira Lal Mehra - Court Judgment

A.L. Bahri, J.

1. This case relates to the assessment years 1973-74 and 1974-75. On four reference applications filed before the Income-tax Appellate Tribunal, Amritsar, by the Revenue as well as by the assessee, the following questions of law were referred to this court for adjudication:

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that Rule 1BB of the Wealth-tax Rules, would operate retrospectively so that the valuation of the assessee's building, as on March 31, 1973, and March 31, 1974, should be made in accordance with the said rule

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Wealth-tax Officer should determine afresh the desirability of referring the valuation of the asset to the Valuation Officer under Section 16A of the Wealth-tax Act, 1957, keeping in view Rule 1BB of the Wealth-tax Rules

(3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Valuation Officer cannot ignore Rule 1BB for the valuation of the residential property ?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the benefit of Rule 1BB of the Wealth-tax Rules can be availed of even by an assessee, whose case falls under Section 7(4) of the Wealth-tax Act ?'

2. For the year 1973-74, the Wealth-tax Officer, Amritsar, passed the assessment order on March 26, 1979. On the same date, such like order was passed for the year 1974-75. Property No. 13, the Mall, Amritsar, belonging to the assessee was valued at Rs. 3,76,000 as determined by the valuation cell. On appeal, the Appellate Assistant Commissioner, vide order dated November 23, 1979, reduced the value to Rs. 3,60,000. Ultimately, the matter came up before the Income-tax Appellate Tribunal, who, vide his order dated June 5, 1981, set aside the orders of the authorities below and directed the Wealth-tax Officer to consider the question of valuation of this residential property in the light of the decision of the Special Bench of the Tribunal in the case of Shri Biju Patnaik (W. T. A. Nos. 614 to 624/ (ASR) 79 [1981] Taxation 61 (6)). The Wealth-tax Officer was directed to ascertain the value of the residential property on the basis of Rule 1BB and then determine whether a reference to the Valuation Officer was caled for under Section 16A. It was further observed that the Valuation Officer also cannot ignore Rule 1BB for the valuation of the residential property. After ascertaining such value, the assessee should be given an option which might be available to him under Section 7(4) of the Wealth-tax Act.

3. In spite of service, nobody on behalf of the respondent has put in appearance. On fixation of the case, a registered notice was also sent and the assessee declined to accept the same. We have heard counsel for the Revenue.

4. The questions referred are overlapping with respect to the applicability of Rule 1BB of the Wealth-tax Rules, as inducted in 1979 to the assessments in dispute which relate to the years 1973-74 and 1974-75. This rule was framed, vide Notification No. S. O. 169(E), dated March 30, 1979 (see : [1979]117ITR51(Guj) ) (with effect from April 1, 1979). Rule 1BB was omitted by the Wealth-tax (Second Amendment) Rules, 1989, Notification No. S. O. 348(E), dated May 9, 1989 (see [1989] 177 ITR 146) with effect from April 1, 1989.

5. The general principle of interpretation of statutes is that the same would operate prospectively unless it expressly provides for its retrospective operation. Even if there is no express provision for retrospective operation, if, on perusal of the provisions of the statute, it can be implied that it was intended that a particular provision should be enforced retrospectively, the statute would be so enforced. The other principle is to be kept in view with respect to substantive laws and procedural laws. Substantive laws would ordinarily be enforced prospectively whereas procedural laws can be enforced with respect to pending cases as well. This is again subject to provisions made to the contrary. When Notification No. S. O. 169(E) was issued on March 30, 1979 (see : [1979]117ITR51(Guj) ), under Section 46 of the Wealth-tax Act by the Central Board of Direct Taxes amending the Wealth-tax (Amendment) Rules, in Rule 1(2), it was specifically mentioned that such amended rules would come into force on April 1, 1979. It was under Rule 2 of these Amendment Rules that rule 1BB was ordered to be inserted after Rule 1B, When it was specifically mentioned in Rule 1(2) of this notification that the Rules amended would come into force on April 1, 1979, there is specific intention of the rule-making authority that such rule is not to be applied to the cases prior to April 1, 1979.

6. The provision made in the rule is merely a guideline, otherwise the value of the property for the purposes of the Wealth-tax Act is to be determined in accordance with the provisions of the Act, i.e., Section 7. By Act 66 of 1976, Section 7 stood amended which was enforced at the relevant time, i.e., 1973 and 1979, when assessments in the present case were to be finalised. It is not the case that assessments framed for the two assessment years were not in accordance with the provisions of the statute then in force. Section 7(4) to which reference has been made in question No. 4 reads as under :

'(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 Assessing 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 first day of April, 1971, whichever valuation date is later :

Provided that where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of this sub-section shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf in the return of net wealth.

Explanation.--For the purposes of this sub-section-

(i) where the house has been constructed by the assessee, he shall be deemed to have become the owner thereof on the date on which the construction of such house was completed ;

(ii) 'house' includes a part of a house, being an independent residential unit.'

7. The Tribunal, while deciding the matter in appeal, was of the view that, after determination of the value and giving the benefit of Rule 1BB of the Wealth-tax Rules, a fresh option was required to be given to the assessee under Section 7(4) of the Act as reproduced above. It appears that the Tribunal was of the view that the value is fixed by applying the method provided in Rule 1BB, that the assessee was going to get some benefit and after allowing such benefit again the option was required to be given to the assessee as provided under Section 7(4) of the Act. While interpreting the statute, it is not at all material or relevant that it should be considered whether interpretation of any statute would be favourable to the assessee or the Revenue. In this context, reference may be made to the observations of this pourt in Sutlej Chit Fund and Financiers (Pvt.) Ltd. v. CIT (headnote) :

' It is for the Competent Authority to decide in a given situation as to which method would be more efficacious to determine the fair market value. The use of the method would thus entirely depend on the particular facts and circumstances of the case. The question of the use of the method which is favourable to the assessee or to the Revenue has no bearing because it is the fair market value which is to be determined and not the price which is favourable either to the assessee or to the Revenue. Consideration of a particular method being favourable to the assessee, therefore, would be wholly irrelevant and the Competent Authority is enjoined by law to adopt only that method which is most efficacious to determine the fair market value of the property sold.'

8. The mode of fixation of the value is just providing a machinery or procedure for the purpose. Since the amendment made in the rules specifically provides in Rule 1(2) as already referred to above that Rule 1BB was to come into force on April 1, 1979, the Tribunal was in error in coming to the conclusion that to the pending cases the aforesaid rule could be made applicable being procedural law. In view of Rule 1(2), Rule 1BB, even though procedural law, cannot be made applicable retrospectively to cases pending with respect to the assessment orders prior to April 1, 1979. Rule 1BB would apply to the assessments for the period April 1, 1979, to March 31, 1989, during which period the said rule remained in force.

9. For the reasons recorded above, all the four questions referred to this court are answered in the negative.