COMMISSIONER OF WEALTH TAX vs R. K. INDERJEET SINGH.

B. R. ARORA, J. :

The Tribunal, Jaipur Bench, Jaipur for the asst. yr. 1975-76 has referred under s. 27(1) of the WT Act, the following question of law for the opinion of High Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that provisions of s. 7(4) of WT Act, 1957 which were made effective w.e.f. 1st April, 1976, could be applied to asst. yr. 1975-76, treating the said provisions as having resprospective effect, being procedural ?"

The assessee, Inderjeet Singh, was assessed for the asst. yr. 1975-76 by the WTO, Jodhpur, under s. 16(3) of the Act.

The main item of wealth comprised of property known as Zalam Niwas which was assessed by the WTO at Rs. 32,44,000. The contention of the assessee before the WTO, Jodhpur was that the value of Zalam Niwas property should be taken as Rs. 5,00,000 as adopted in the asst. yr. 1971-72 as per s. 7(4) of the WT Act. This contention of the assessee was not found favour with the assessing authority. Dissatisfied with the order passed by the WTO, Jodhpur, the assessee preferred an appeal before the CWT(A), who relying upon the judgment of the Gujarat High Court rendered in Commissioner of Wealth-tax Vs. Niranjan Narottam, held that the property in question was used for residential purposes by the family members during the relevant period. The value of the property is required to be assessed both for the asst. yr. 1975-76 and 1976-77 on the value adopted for the asst. yr. 1971-72 at Rs. 5,00,000. The CWT(A), therefore, directed the WTO to adopt this value for both the assessment years at Rs. 5,00,000 as per the provision of s. 7(4) of the Act.

Aggrieved with the order passed by the CWT(A) the Revenue preferred an appeal before the Tribunal, Jaipur Bench, Jaipur. The Tribunal maintained the order passed by the CWT(A) and dismissed the appeal filed by the Revenue. The Revenue filed an application under s. 27(1) of the Act to refer the question of law for the opinion of the High Court and the Tribunal referred the abovenoted question of law for the opinion of High Court.

It is contented by the learned counsel for the Revenue that the provisions of s. 7(4) of the Act are substantive in nature and not procedural one and, therefore, no retrospective effect can be given to these provisions. Sub-s. (4) of s. 7 was inserted by the Finance Act w.e.f. 1st April, 1976, and, therefore, these provisions were not applicable so far as the asst. yr. 1975-76 is concerned. We have considered the submissions made by the learned counsel for the Revenue.

Sub-s. (4) of s. 7 of the Act which was applicable to the case of the assessee, was at the relevant time inserted by the Taxation Laws (Amendment) Act No. 66 of 1976 w.e.f. 1st April, 1976. Sec. 7 provides a procedure for the determination of the valuation of the assets. Rule 1BB of the Rules provides how the valuation of the house for the purpose of sub-s. (1) of s. 7 which is wholly or mainly used for residential purposes shall be determined. The provisions of s. 7(1) of the Act and r. 1BB of the Rules came up for consideration before the Gujarat High Court in the case of Commissioner of Wealth-tax Vs. Kasturbhai Mayabhai, . The Division Bench of Gujarat High Court held that : "Sec. 7(1) is a machinery section and since the rule to be made under s. 46(2) of the Act must relate to the manner in which the market value of any asset may be determined, 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".

The similar controversy came up for consideration before the Division Bench of Gujarat High Court in the case of CWT vs. Niranjan Narottam (supra). Relying upon the earlier judgment of Division Bench in case of CWT vs. Kasturbhai Mayabhai (supra), the Division Bench held that :

"Sub-s. (4) of s. 7 which provides for an alternative method of valuation is a procedural one and not substantive provision of law. Even if it confers upon the assessee a right to exercise an option to value his asset under either sub-s. (1) or sub-s. (4), it is not taken out of the domain of procedure or machinery. Such right is in the procedural field. The provisions of sub-s. (4) become operative retrospective in the sense that it would apply to all pending assessment proceedings."

Against the judgment of the Gujarat High Court in case of Kasturbhai Mayabhai an appeal was proferred before the Supreme Court and the Supreme Court confirmed the view taken by the Gujarat High Court. The Supreme Court in Commissioner of Wealth Tax, Meerut Vs. Sharvan Kumar Swarup and Sons, also approved the view taken by the Gujarat High Court in the case of CWT vs. Niranjan Narottam (supra).

In view of the judgment of the Gujarat High Court in the case of Niranjan Narottam which was approved by the Supreme Court in the case of CWT vs. Sharvan Kumar Swarup & Sons it is, therefore, clear that the provisions of sub-s. (4) of s. 7 are not substantive but procedural in nature and they are applicable to all the pending assessments as on 1st April, 1976, and, therefore, the valuation of the residential house adopted for the asst. yr. 1975-76 as it was taken for the asst. yr. 1971-72, in view of provisions of s. 7(4) of the Act was proper. Since, sub-s. (4) of s. 7 of the Act is procedural in nature it, therefore, applies to the pending cases also. It is stated in the Halsburys Laws of England (Fourth Edition, Vol. 44 paragraph 925) that :

"The presumption against retrospectivity does not apply to legislation concerned merely with matters of procedure or of evidence, on the contrary, provisions of that nature are to be construed as retrospective unless there is a clear indication that such was not the intention of the Parliament."

Bennion in History of Statutory Interpretation (First edition, page 4.6 paragraph 191) states as under :

"Because a change made by the legislator in procedural provisions is expected to be for the general benefit of litigants and others, it is presumed that it applies to pending as well as future proceedings."

The object of procedural provisions is to enable the justice to be done between the parties. The procedural amendments applies to all the actions pending as well as future and will operate restrospectively. Since, the provisions of sub-s. (4) of s. 7 are procedural in nature they will apply retrospectively to the pending proceedings as well as to the future proceedings. The learned Tribunal was, therefore, right in holding that the provisions of s. 7(4) of the Act which was made effective w.e.f. 1st April, 1976 could be applied to the asst. yr. 1975-76. Considering the said provision as having retrospective effect being procedural in nature, the reference is, therefore, answered in affirmative i.e. in favour of assessee and against the Revenue.