Case: Bimal Kishore Paliwal &amp; Others Vs. Commissioner of Wealth

At one point, it has also been agitated by the appellant that the land over which the Cinema building is situated could not be used for any purpose other than as Cinema Building, hence it was not proper for the Valuation Officer to consider it as an open piece of land and value it likewise. This objection if of no avail because the appellants claim beaten from the very reasoning he has given. To make the matter more than clear, it may be remarked that it is a privilege to get a licence for film exhibition on an urban land. Such land use is only conducive to raise the value and odes not in any way depreciate its value as has been wrongly assumed by the appellant." 24. Learned counsel for the appellants submits that reasons given by ITAT for holding that income capitalisation method is a more appropriate method has not been adverted to by the High Court. We have perused the order of the Tribunal. The Tribunal has observed that once it is accepted that the property is useable only as Cinema building then its method of valuation has to be necessarily different from the one normally adopted in the case of buildings which are capable of being used for other commercial purposes. The mere fact that the building is only for the use of Cinema exhibition does not in any manner diminish the marketable price. At the relevant period uses of building as running Cinema were no less valuable. The finding has been returned by the Appellate Authority that it has not been further challenged that the building was self-occupied and in possession of assessee with no encumbrances.25. It is true that the High Court in so many words had not adverted to the reasons given by the ITAT. However, the High Court has expressed opinion that Wealth Tax Officer was justified in adopting the land and building method. One of the reasons given by the High Court is that if there is loss in the business or in other words there is negative income, it cannot be possible to say that the property in question has no marketable value. Learned counsel for the appellants has submitted that in the relevant year the income was earned. 26. It is relevant to point out that the Appellate Authority in its judgment has observed that there was loss shown by assessee himself in the year 196970. In paragraph 17 sub-paragraph (iv) following has been observed by the Appellate Authority: "iv)....Even in the case of the appellant there is a returned loss of Rs. 1,16,845/- in the first assessment year i.e. 1969-70. Thus if income capitalisation method is applied in such cases where the assessee may have unfortunately suffered losses in the initial years, the valuation of an asset will workout to a negative figure. This will be certainly a situation far from reality and not in any way the intention of the legislature while directing in Section 7 of the W.T. Act for taking the fair market value of an asset." 27. The above circumstances taken by the High Court cannot be said to be irrelevant which apprehensions were duly found proved by the facts as noticed by the Appellate Authority. 28. Learned counsel for the appellants has further submitted that in the event there are more than one methods of valuation of an asset of an assessee, the method under which the valuation is in favour of assessee has to be accepted. He has relied on the judgment of this Court in The Commissioner of Income Tax, West Bengal, Calcutta v. M/s. Vegetables Products Ltd., (1973) 1 SCC 442. This Court in paragraph 6 of the judgment has laid down the following: "6.There is no doubt that the acceptance of one or the other interpretation sought to be placed on Section 271(1)(a)(i) by the parties would lead to some inconvenient result, but the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. This is a well accepted rule of construction recognised by this Court in several of its decisions. Hence all that we have to see is, what is the true effect of the language employed in Section 271(1)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty." 29. The proposition which was laid down by this Court was that if two reasonable constructions of taxing statute are possible, that construction which favours the assessee must be adopted. The above proposition cannot be read to mean that under two methods of valuation if the value which is favourable to assessee should be adopted. Here in the present case, the provisions of Section 7 are neither unambiguous nor lead to two constructions. The construction of Section 7 is clear as has already been elaborately considered by this Court in the judgment of this Court in Juggilal Kamlapat Bankers (supra).30. The Wealth Tax Officer having referred the Departmental Valuer to value the property, in consequent to which reference for valuation report having already been received on 26.07.1977 which has relied in the assessment. Objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of the view that the High Court did not commit any error in interfering with the order of ITAT.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. Present is a case where Assessing Officer has made a reference for Alpana Cinema on 29.04.1976. It has also come on the record that the order of reference to the Valuation Officer was challenged by the assessee by filing a writ petition in Delhi High Court. The Appellate Authority in its order had noted about the challenge to the reference made to the Valuation Officer by the Assessing Officer. There is nothing on record that the Delhi High Court interfered with order of Assessing Officer referring the Departmental Valuer to value the Alpana Cinema.14. It is true that(2) of Section 7 begins with non obstante clause which enables the Wealth Tax Officer to determine the net value of the assets of the business as a whole instead of determining separately the value of each asset held by the assessee in such business. The language of subsection (2) which provides overriding power to the Wealth Tax Officer to adopt and determining the net value of the business having regard to theof such business. The enabling power has been given to Wealth Tax Officer to override the normal rule of valuation of the properties that is the value which it may fetch in open market, Wealth Tax Officer can adopt in a case where he may think it fit to adopt such methodology. The appellants submission is that the provision of Section 7(2)(a) is a stand alone provision and is to be applied in all cases where assessee is carrying on a business. We do not agree with the above submission.15. Overriding power has been provided to override the normal method of valuation of property as given by subsection 7(1) to arm the Wealth Tax Officer to adopt the method of valuation as given in subsection (2)(a). The purpose and object of giving overriding power is not to fetter the discretion. The Wealth Tax Officer is not obliged to mandatorily adopt the method provided in Section 7(2)(a) in all cases where assessee is carrying on a business. The language of subsection (2)(a) does not indicate that the provisions mandate the Wealth Tax Officer to adopt the method in all cases of running business.The above observation made by the Court was general observation not in the context of Section 7 of the Act. The method of valuing the building property on the basis of rent capitalisation is no doubt provided in various statutes especially in the cases of rent fixation. The above observation does not help the appellants in the presenthave perused the order of the Tribunal. The Tribunal has observed that once it is accepted that the property is useable only as Cinema building then its method of valuation has to be necessarily different from the one normally adopted in the case of buildings which are capable of being used for other commercial purposes. The mere fact that the building is only for the use of Cinema exhibition does not in any manner diminish the marketable price. At the relevant period uses of building as running Cinema were no less valuable. The finding has been returned by the Appellate Authority that it has not been further challenged that the building wasand in possession of assessee with no encumbrances.25. It is true that the High Court in so many words had not adverted to the reasons given by the ITAT. However, the High Court has expressed opinion that Wealth Tax Officer was justified in adopting the land and building method. One of the reasons given by the High Court is that if there is loss in the business or in other words there is negative income, it cannot be possible to say that the property in question has no marketable value. Learned counsel for the appellants has submitted that in the relevant year the income was earned.The above circumstances taken by the High Court cannot be said to be irrelevant which apprehensions were duly found proved by the facts as noticed by the Appellate Authority.The proposition which was laid down by this Court was that if two reasonable constructions of taxing statute are possible, that construction which favours the assessee must be adopted. The above proposition cannot be read to mean that under two methods of valuation if the value which is favourable to assessee should be adopted. Here in the present case, the provisions of Section 7 are neither unambiguous nor lead to two constructions. The construction of Section 7 is clear as has already been elaborately considered by this Court in the judgment of this Court in Juggilal Kamlapat Bankers (supra).30. The Wealth Tax Officer having referred the Departmental Valuer to value the property, in consequent to which reference for valuation report having already been received on 26.07.1977 which has relied in the assessment. Objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of the view that the High Court did not commit any error in interfering with the order of ITAT.