Satinder Kumar JaIn (Huf) Vs. Wealth-tax Officer - Court Judgment

Excerpt:
1. these are two appeals by the assessee arising out of his assessments to wealth-tax for the asst. years 1979-80 and 1980-81 and the grounds that are identical in both the years are as under : 1. that the cwt(a) has erred in upholding the assessed value of residential properety at f- 1/3 hauz khas enclave, new delhi at rs. 2,89,112 after wrongly taking the act of self-occupied portion at the rent received for the let out portion as against the alv on the basis of rateable value assessed by the municipal corporation or the standard rent since rent capitalisation method has been adopted by the iac(a). 2. that the cwt(a) has erred in upholding disallowance of liabilities and loans of the assessee at rs. 66,321 and in view of the fact that all loans and liabilities are old one's and have.....

Judgment:
1. These are two appeals by the assessee arising out of his assessments to wealth-tax for the asst. years 1979-80 and 1980-81 and the grounds that are identical in both the years are as under : 1. That the CWT(A) has erred in upholding the assessed value of residential properety at F- 1/3 Hauz Khas Enclave, New Delhi at Rs. 2,89,112 after wrongly taking the Act of self-occupied portion at the rent received for the let out portion as against the ALV on the basis of rateable value assessed by the Municipal Corporation or the standard rent since rent capitalisation method has been adopted by the IAC(A).

2. That the CWT(A) has erred in upholding disallowance of liabilities and loans of the assessee at Rs. 66,321 and in view of the fact that all loans and liabilities are old one's and have been utilised in assets taxable to wealth-tax a position accepted by the department in the past, the CWT(A) has wrongly upheld this disallowance which kindly be deleted.

1. That the CWT(A) has erred in upholding the assessed value of residential property at F 1/3 Hauz Khas Enclave, New Delhi at Rs. 2,89,112 after wrongly taking the Act of self occupied portion at the rent received for the let out portion as against the ALV on the basis of rateable value assessed by the Municipal Corporation or the standard rent since rent capitalisation method has been adopted by the IAC(A).

2. That the CWT(A) has erred in upholding disallowance of liabilities and loans of the assessee at Rs. 1,90,078 and in view of the fact that all loans and liabilities are old one's and have been utilised in assets taxable to wealth-tax, a position accepted by the department in the past, the CWT(A) has wrongly upheld this disallowance which kindly be deleted.

2. We have heard the learned counsel for the assessee and the learned Departmental Representative and have perused the material brought to our notice.

3. The first contention raised in both the years is about the valuation of property No. F 1/3 Hauz Khas. The assessee declared the value of this property at Rs. 2,73,709 for asst. year 1979-80 by adopting the value determined by a registered valuer vide report dated 1-8-75 and adding to it the addition made during the year. During the hearing before the WTO, the assessee claimed that the property should be valued at Rs. 96,013. This was arrived at in accordance with Rule IBB and adopting the municipal value determined for house tax purposes as the annual letting value of the building. The WTO did apply Rule 1BB of the Wealth-tax Rules but he took the annual letting value to be the rent actually realised by the assessee in respect of the 1st floor on the valuation date. For the ground floor, that was self-occupied, the WTO adopted the same rent as that of 1st floor, i.e., Rs. 1250 P.M. though the area in the ground floor was more. The Barsati floor was also in the self occupation of the assessee and the WTO assessed a rent of Rs. 150 P.M. for the same. The WTO thus determined the monthly letting value at Rs. 2650 and after giving deductions for repairs and collection charges determined the annual letting value at Rs. 23,129 and by multiplying the same by 100/8 as provided in Rule 1BB determined the fair market value at Rs. 2,89,112. The same value was adopted for asst. year 1980-81 also.

4. It was contended before the authorities below that the annual letting value of the property should be the annual letting value as determined by the municipal authorities for house tax purposes. This contention has not been accepted.

5. For Assessment Year 1980-81, the assessee had declared the value of this property at Rs. 2,36,525 by applying Rule 1BB and himself adopting the net annual letting value at Rs. 18,922.

6. It was contended before us that the annual letting value as determined by the municipal authorities should be the basis of determining the fair market value as per Rule 1BB. Reliance is placed on a judgment of this Tribunal in WTO v. A.K. Tandon [1985] 14 ITD 300 (Delhi) (TM). In that case it has been held that for determining the fair market value of a property which is partly let out and partly self occupied, the standard rent determinable under Delhi Rent Control Act should form the basis. The learned counsel contended that this judgment holds that the municipal value should form the basis. This, in our view, is not correct. Though at page 320 of the report the Delhi Municipal Corporation Act is mentioned but that appears to be a mistake and it should be the Delhi Rent Control, Act because standard rent is not determined under the Municipal Corporation Act. In Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435, Hon'ble the Supreme Court held that where Rent Control Act applies, the standard rent determinable under the provisions of Rent Control Law would be the basis of the annual value even though standard rent is not determined. In Dewan Datilat Rai Kapoor v. NDMC [1980] 122 ITR 700, the Hon'ble Supreme Court has held that in respect of a building governed by the provisions of rent control legislation, it cannot reasonably be expected that the landlord would be receiving rent higher than the standard rent prescribed under the law. According to this ruling though the landlord may actually be receiving rent that is higher than the standard rent, yet such actual excess rent received cannot be deemed to be the rent at which a landlord may reasonably expect to let out the property. This is based on the presumption that a landlord would abide by the law.

7. In the case before us no evidence has been placed before us to show what is the annual letting value determined by the Municipal Corporation. In our view, the annual letting value determined by a municipal authority has no relevance. In any case where there is no evidence to show what is the annual letting value determined by the municipal body, the argument cannot proceed further. Similar is the case regarding standard rent. The assessee has placed no material before us to show what would be the standard rent of this building if determined in accordance with the provisions of Delhi Rent Control Act.

Unless it is shown that the standard rent determined according to the provisions of Delhi Rent Control Act is less than the annual letting value of the property as determined by the WTO, there would be no cause for interference. It may be pointed out that in an appeal the burden is on the appellant to show that the order under appeal is wrong.

Therefore, it was for the assessee to show what was the standard rent and that it was lower than the annual letting value adopted by the WTO.This has not been done. The Hon'ble Supreme Court has held in Dewan Daulat Rat Kapoor's case (supra) that a landlord cannot reasonably expect to receive more rent than the standard rent. The same analogy would apply conversely, i.e., it cannot be presumed that what the landlord is actually receiving is higher than the standard rent. It also cannot be presumed that the standard rent of the ground floor consisting of a larger built up area and some open land would not even be equal to the standard rent of the first floor. The assessee has not placed any material before us to show that the standard rent of this property was lower than the letting value as determined by the WTO. We cannot raise presumptions in its favour. We, therefore, uphold the value as determined by the WTO and confirmed by the IAC.8. The next ground relates to disallowance of certain liabilities.

There was a loan from the Life Insurance Corporation of India which has been disallowed as it was raised against life insurance policy, an exempted asset. This has been rightly done in view of Section 2(m)(ii).

Other liabilities are in respect of investment in house, a part of the value of which is exempt Under Section 5(1)(iv). The WTO has reduced it proportionately. This too is in accord with Section 2(m)(ii). This Tribunal has been holding that in case of an asset that is partly exempt the liability has to be disallowed proportionately. The learned counsel did not point out how it is wrong. The second ground too will, therefore, stand rejected.

1. I have very carefully gone through the order proposed by my learned Brother. However, with due respect, I do not subscribe to the various observations made by him with regard to the judgments of the Supreme Court in the cases of Mrs. Sheila Kaushish (supra) and Dewan Daulat Rai Kapoor (supra) mentioned in para 5 of the proposed order with regard to valuation of property. To my mind, it is a very simple case and fully covered by the judgment of the Tribunal in the case of A.K. Tandan (supra) wherein on a difference of opinion of the Division Bench, the Hon'ble President of the Income-tax Appellate Tribunal held that in the case of partly self-occupied and partly tenanted property, if the WTO adopted the rent capitalisation method, then the annual letting value of self-occupied portion should also be taken at the value as determined by the Municipal Corporation.

2. Since, however, the necessary particulars relating to the application of this principle have not been properly brought out by the authorities below, I am of the opinion that on this point the matter should be set aside to the file of the W.T.O. in view of the above law laid down in the case of A.K. Tandon (supra) and the W.T.O. should be directed to decide the issue de novo after affording reasonable opportunity of being heard to the assessee. Ordered accordingly.

1. In the above noted case for the reasons recorded in our separate orders, we have not been able to agree on the following points regarding the assessee's ground of appeal relating to determination of the fair market value of property No. F-l/3, Hauz Khas Enclave, New Delhi.

1. Whether on the facts and in the circumstances of the case, the fair market value of the property No. F-l/3, Hauz Khas Enclave, New Delhi as determined by the WTO should be confirmed or the matter should be restored to the Wealth-tax Officer for fresh determination? 2. Whether in the case of a property to which the provisions of Delhi Rent Control Act apply, the standard rent as determined or determinable under the said Act or the annual letting value as determined under the Delhi Municipal Corporation Act should be the basis of determining the fair market value by the rent capitalisation method.

2. We, therefore, place the case before Hon'ble the President of the Income-tax Appellate Tribunal for referring the aforesaid points for hearing by one or more of the other members of the Appellate Tribunal in accordance with Sub-section (4) of Section 255 1. These are appeals filed by Sri Satinder Kumar Jain, partner in the firm of Mahabir Prasad & Sons, relating to the wealth-tax assessment year 1979-80 & 1980-81. This assessee H.U.F. owned immovable property at R-l/3, Hauz Khas and for the purpose of Wealth-tax assessment, this property was valued at Rs. 2,73,709 as per the valuation report dated 1-8-1975. During the course of hearing, the assessee claimed that this property should be valued as per rule 1BB of the Wealth-tax Rules, according to which the value would come down to Rs. 96,013. A part of this property was let out and another part was under self-occupation.

For the purpose of valuation, the assessee had adopted the annual letting value as given by the Corporation for the self-occupied portion and for the let out portion, the actual rent received during the different periods was adopted. The W.T.O. did not consider this method of valuation as proper. According to him the latest rent received from the property was to be considered for valuation. He also found that for the let out portion, the rent charged was Rs. 1250 per month. He also found that the area under self-occupation was more than the area under the let out portion. On this premise he determined the a.l.v. for the self occupied portion also at Rs. 1250 p.m. He has taken the a.l.v. at Rs. 150 per month for the Barsati Floor and by this process the total a.l.v. was fixed at Rs. 2650 per month. After allowing for repairs and collection charges, the net a.l.v. was fixed at Rs. 23,129 and capitalising it at 12 1/2 times, the multiplier stipulated in Rule 1BB, value of the house was fixed at Rs. 2,89,112. This is supposed to be the value even as per Rule 1BB of the Wealth-tax Rules.

2. The assessee was aggrieved by this valuation and appealed before the C.W.T.(Appeals) who confirmed the valuation adopted by the W.T.O. Even though the order of W.T.O. suggests that the values adopted are by applying the provisions of Rule 1BB, the C.W.T. (Appeals)'s order shows that the application of Rule 1BB of the Wealth-tax Rules would not be agreed to for the reason that the proportionate property used for residential purposes and that let out was not in the ratio of 66 2/3% and 33 l/3%.Any way this is not material for the present purpose.

3. Aggrieved by the order of the C.W.T. (Appeals), a further appeal was filed before the Income-tax Appellate Tribunal. However, the learned Members who heard the appeal could not agree on the conclusion. The contention before the Tribunal was that for the purpose of determining the value, the a.l.v. as determined by the Municipal authorities should be taken as the fair market value. The learned Judicial Member pointed out that under the Municipal Law, no standard rent is fixed, as directed by the Supreme Court in Mrs. Sheila Kaushish's case (supra) and Dewan DaulatRai Kapoor's case (supra) and that the standard rent would be fixed only under the Rent Control Law. He pointed out that there was no evidence placed to show what was the a.l.v. determined by the Municipal Corporation nor there was any evidence to show the standard rent according to the Delhi Rent Control Act. It was then pointed out by him that unless it was shown that the standard rent determined according to the provisions of the Delhi Rent Control Act was less than the a.l.v. of the property as determined by the W.T.O., there would be no case for interference. Since the assessee failed to prove the standard rent of the property as being lower than the a.l.v.determined by the W.T.O., a presumption could not be raised in its favour. For this reason, he rejected the assessee's appeal and confirmed the value taken by the C.W.T. (Appeals).

4. The learned Accountant Member held that the matter was fully covered by the judgment of the Tribunal in the case of A.K. Tandon (supra). He further held that since necessary particulars relating to the application of the principle decided in the above case were not properly brought out by the authorities below, the matter should be set aside to the file of the W.T.O. and that the W.T.O. should be directed to decide the issue de novo after affording reasonable opportunity of being heard to the assessee. Thus both the Members have differed on the conclusion and the following points of difference were framed by them and were referred to me for my opinion: 1. Whether, on the facts and in the circumstances of the case, the fair market value of the property No. F. 1/3, Hauz Khas Enclave, New Delhi as determined by the W.T.O. should be confirmed or the matter should be restored to the W.T.O. for fresh determination? 2. Whether, in the case of a property to which the provisions of Delhi Rent Control Act apply, the standard rent as determined or determinable under the said Act or the annual letting value as determined under the Delhi Municipal Corpn. Act should be the basis of determining the fair market value by the rent capitalisation method.

5. I have heard the learned assessee's counsel Shri D.D. Vyas and also the learned D.R. Shri Subhash Kumar. It is pointed out and very rightly by the learned counsel for the assessee that both the Members have agreed that the relevant particulars were not on the file. Therefore, the proper course would be to set aside the matter to the file of the W.T.O. and direct him to re-determine the value of the property in the light of the directions given by the Supreme Court and also the decision of the Tribunal in the case of A.K. Tandon (supra) which according to him only an application of the principles laid down by the Supreme Court. The learned D.R. also has no objection for the adoption of this course because both the Members have pointed out very clearly that the relevant particulars were not on record as to what should be the standard rent under the Delhi Rent Control Act or the a.l.v. of the property be determined by the Municipal authorities. There is thus an agreement between the counsels before me that the matter should be sent back to the W.T:O. for fresh adjudication. After going through the record, I found that what they had contended for was not only fair and just but also correct. I, therefore, agree with the opinion expressed by the learned Accountant Member which is embodied in the first point of difference of opinion that the matter should be restored to the W.T.O. for fresh determination of the a.l.v. in the light of the directions given by the Supreme Court in the case cited by the learned Judicial Member in his order. The second point of difference of opinion became academic because that would arise only if the matter was not sent back to the W.T.O. for fresh determination.

6. The matter will now go before the regular Bench to dispose of the appeal in accordance with the opinion of majority.