Himalaya Trading Co. vs Commissioner of Wealth-Tax

B.N. Kirpal, J.—The petitioner has filed petition u/s 27 of the Wealth- tax Act, 1957 (''the Act'') being WT Case No. 34 of 1985 seeking a direction that the following questions of law be stated and referred to this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that for the assessment years 1959-60 to 1961-62, 1963-64 and 1964-65, the property at 14, Barakhamba Road, New Delhi, being residential house and used for residence, be valued on land and building method instead of the rent capitalisation method?

Whether, the Tribunal''s conclusion to value the residential house at 14, Barakhamba Road, New Delhi, for the years mentioned in the aforesaid question on land and building method, is vitiated as based on no evidences, irrelevant evidences and surmises?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in not directing the allowance of liability towards unearned increase in respect of 14, Barakhamba Road for the assessment years mentioned in question 1 above?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in valuing the fully let out premises at 12, Prithviraj Road, New Delhi, on land and building method and in not valuing the same on rent capitalisation method?

Whether, on the facts and in the circumstances of the case, the valuation of the fully let out property at 12, Prithviraj Road, New Delhi, should have been done on rent capitalisation method and reliance on the sale of such property to the tenant subsequently is vitiated in law?

By order dated 31-5-1985 it was directed that as the aforesaid petition related to eight different assessment years, the said petition, namely, WT Case No. 34 of 1985 should be treated as eight petitions. This is how in respect of other assessment years the WTC numbers which have been given are WT Case Nos. 47-53 of 1985.

As regards question No. 1, the learned counsel for the petitioner submits that rule 1BB of the Wealth-tax Rules, 1957, is applicable and residential house should be calculated on the basis thereof. The question as to whether the said rule applies or not is a pure question of law as held by the Karnataka High Court in Commissioner of Wealth Tax, Karnataka, Bangalore Vs. Vidyavathi Kapur, and followed by this Court in WT Case No. 188 of 1983 decided on 3-3-1987.

With regard to question No. 2 we find that the Commissioner has taken into consideration rates of land prevailing in the year 1970 onwards and then has determined the rate of land for the earlier years. Moreover, the value of land to which reference has been made by the Commissioner is the value of the commercial land. Reasoning of the Commissioner has been adopted by the Tribunal. The question as to whether this basis was correct or not or was relevant is a mixed question of fact and law.

Before the Tribunal the petitioner had contended that liability towards unearned increase should be taken into consideration as value of the land. It has also been submitted that commercial charges for commercialisation should also be taken into consideration. The Tribunal has concluded that there is no evidence on record to show that there was any liability of the assessee towards unearned increase. This is a finding of fact and in this view of the matter the question proposed does not arise. It is, however, contended by the learned counsel for the petitioner that with regard to commercialisation charges question should be referred. We find that commercialisation charges would arise only with respect to the assessment year 1970-71 and onwards but question No. 3 is restricted to the assessment years 1959-60 to 1961-62, 1963-64 and 1964-65. In this view of the matter the question No. 3 does not arise for consideration.

Question Nos. 4 and 5 refer to valuation of the premises at 12, Prithviraj Road. These premises were let out to Spanish Embassy during the relevant assessment years. The premises were sold on 2-2-1973. What the department has done, and which has been upheld by the Tribunal, is that the sale value has been made the basis for working out the market value of this house for the earlier assessment years. Whether this is permissible or not is a question of law, especially in view of the decision of this Court in Commissioner of Income Tax, Delhi-II Vs. New India Construction Co., , where it has been held that if there are tenants in the property, normally the method to be adopted is the rent capitalisation.

For the aforesaid reasons we direct the Tribunal to state the case and to refer the following four questions of law to this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that for the assessment years 1959-60 to 1961-62, 1963-64 and 1964-65, the property at 14, Barakhamba Road, New Delhi, being residential house and used for residence, be valued on land and building method instead of the rent capitalisation method?

Whether, the Tribunal''s conclusion to value the residential house at 14, Barakhamba Road, New Delhi for the years mentioned in the aforesaid question on land and building method, is based on evidence and material or is vitiated as being based on no evidence or on irrelevant evidence and surmises?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in valuing the fully let out premises at 12, Prithviraj Road, New Delhi on land and building method and in not valuing the same on rent capitalisation method?

Whether on the facts and in the circumstances of the case the valuation of the fully let out property at 12, Prithviraj Road, New Delhi, should have been done on rent capitalisation method and reliance on the sale of such property to the tenant subsequently is vitiated in law?

The petition is disposed of. No order as to costs.