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High Court Of Calcutta
Dipak Kumar Sen, Shyamal Kumar Sen
MANJUSHREE BISWAS - Appellant
Versus
COMMISSIONER OF WEALTH-TAX - Respondent
Matter 1353 Of 1986
Decided On : 05/11/1987
WEALTH TAX - Valuation of residential property - Applicability of Rule 1bb of the Wealth-tax Rules, 1957 - Retrospective effect - Whether Rule 1bb is a procedural or substantive rule - Interpretation of Section 7(1) of the Wealth-tax Act, 1957.
Fact of the Case:
The assessee, Smt. Manjushree Biswas, owned one-fiftieth share in premises No. 8/1, Middleton Raw, Calcutta, which consisted of land measuring about 75 cottahs with structures covering about 17 cottahs. The Wealth-tax Officer referred the matter to the District Valuation Officer under Section 16a of the Wealth-tax Act, who estimated the value of the premises at Rs. 59,98,000. The Appellate Assistant Commissioner determined the value of the premises at Rs. 39,31,825. Both the assessee and the Revenue appealed to the Income-tax Appellate Tribunal, which reduced the value of the vacant land to Rs. 25 lakhs and estimated the value of the other unit consisting of 25 cottahs of land and structures at Rs. 6,31,825, resulting in a total value of Rs. 31,31,825. The assessee contended that Rule 1bb of the Wealth-tax Rules should have been applied in making the valuation, but the Tribunal held that it was unnecessary to examine its applicability. For the assessment years 1978-79, 1979-80, and 1980-81, the Wealth-tax Officer determined the value of the premises at Rs. 58,46,100 by adopting the valuation made in the assessment year 1977-78. The Appellate Assistant Commissioner directed the Wealth-tax Officer to apply Rule 1bb for valuation of the assessee's share in the premises. The Revenue appealed to the Tribunal, contending that Rule 1bb could not be applied as valuation had already been done by the District Valuation Officer in the earlier assessment year and that the Tribunal did not give an opportunity to the District Valuation Officer to make a representation as required under Section 23(3a) of the Wealth-tax Act. The Tribunal held that Section 23(3a) was not attracted as there was no reference under Section 16a in the relevant assessment years and that Rule 1bb was mandatory but did not apply where there was a reference to the District Valuation Officer. The Tribunal upheld the valuation of Rs. 31,31,825 determined for the assessment year 1977-78 for the subsequent assessment years.
Finding of the Court:
The court held that Rule 1bb of the Wealth-tax Rules, 1957, was a procedural rule and could be applied retrospectively. The court also held that Section 7(1) of the Wealth-tax Act, 1957, was a procedural section and the rules referred to in the section were procedural rules. The court further held that the principle of res judicata did not apply in revenue matters and that the valuation of an asset had to be made in every assessment year. Therefore, the assessee was entitled to invoke Rule 1bb for the purpose of valuation in the subsequent assessment years.
Issues: 1. Whether Rule 1bb of the Wealth-tax Rules, 1957, is a procedural or substantive rule. 2. Whether Rule 1bb can be applied retrospectively. 3. Whether the principle of res judicata applies in revenue matters.
Ratio Decidendi: 1. Rule 1bb of the Wealth-tax Rules, 1957, is a procedural rule. It lays down the procedure for valuation of a residential house and does not affect the charging of tax or rates of tax to be imposed. 2. Rule 1bb can be applied retrospectively. It is a procedural rule and, therefore, operates retrospectively in proceedings initiated under the earlier law. 3. The principle of res judicata does not apply in revenue matters. Therefore, the valuation of an asset has to be made in every assessment year and the assessee can invoke Rule 1bb for the purpose of valuation in the subsequent assessment years.
Final Decision: The court answered the questions referred in favor of the assessee. The court held that Rule 1bb of the Wealth-tax Rules, 1957, was applicable in the assessment years involved and that the Tribunal erred in not applying the same. The court directed the authorities below to determine the extent of applicability of Rule 1bb and the computation of value of the premises if the rule was applied.
( 1 ) THE material facts and proceedings leading up to this reference are, inter alia, that Smt. Manjushree Biswas, the assessee, at the material time had one-fiftieth share in premises No. 8/1, Middleton Raw, Calcutta. The said premises consist of land measuring about 75 cottahs, with structures covering about 17 cottahs. At the material time, the said premises were being used for the purpose of residence, by the assessee and her co-sharers.
( 2 ) THE assessee was assessed to wealth-tax for the assessment year 1977-78. In making the assessment, the Wealth-tax Officer referred the matter to the District Valuation Officer under Section 16a of the Wealth-tax Act, who estimated the value of the said premises at Rs. 59,98,000. On the basis of the said report of the District Valuation Officer, the value of the share of the assessee in the said premises was determined and her net wealth was computed accordingly.
( 3 ) BEING aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner who proceeded to determine the value of the said premises in two separate units, one being vacant land of about 55 cottahs and the other being land of about 20 cottahs with structures. The said units were valued separately and the total value of the said premises was estimated at Rs. 39,31,825.
( 4 ) BOTH the assessee and the Revenue came up on appeal from the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal. The Tribunal reduced the value of the vacant land held to be 50 cottahs to Rs. 25 lakhs and estimated the value of the other unit consisting of 25 cottahs of land and structures at the same figure as determined by the Appellate Assistant Commissioner, viz. , Rs. 6,31,825. The value of the said premises was, therefore, determined by the Tribunal at Rs. 31,31,825.
( 5 ) THE contention of the assessee that rule 1bb of the Wealth-tax Rules should have been applied in making the valuation was not accepted by the Tribunal which held that it was unnecessary to examine the applicability of the said rule 1bb to the facts.
( 6 ) IT is on record that the Revenue made an application under Section 27 (1) of the Wealth-tax Act, 1957, for a reference to this court from the said order of the Tribunal. The order of the Tribunal for the assessment year 1977-78, however, was sustained and has become final.
( 7 ) THE assessee was also assessed to wealth-tax for the assessment years 1978-79, 1979-80 and 1980-81, the respective valuation dates being 31st December of the calendar years 1977, 1978 and 1979. Before the Wealth-tax Officer, it was contended on behalf of the assessee that the value of the said premises should be determined in the said assessment years by the application of Rule 1bb of the Wealth-tax Rules, 1957. The Wealth-tax Officer rejected the contention of the assessee and determined the yalue of the said premises at Rs. 58,46,100 by adopting the valuation made by the Wealth-tax Officer in the assessment year 1977-78 for each of the said assessment years.
( 8 ) BEING aggrieved, the assessee preferred appeals from the said orders of assessment before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner found on a personal inspection that the said premises were surrounded by a high wall. The vacant land in the premises was found clearly meant to be an adjunct to the structures for beneficial enjoyment of the premises. He noted further that the difference between the unbuilt area and the built up area did not exceed 20% of the aggregate area and as such under Rule 1bb (5) (ii), there was no ground for excluding the operation of Rule 1bb in valuing the said premises. On the basis of a judgment of the Court of Small Causes, Calcutta, dated December 6, 1980, where the annual valuation of the said premises had been determined at Rs. 33,360, the Appellate Assistant Commissioner set aside the valuation of the said premises as made by the Wealth-tax O
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