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

2. M/s. G.D. & Sons of which firm the appellants are partners, purchased land and building incondition on 04.06.1965 for a sum of Rs.The construction was completed and Cinema Theatre, Alpana started running in the premises. The Alpana Cinema property was valued by assessment books of accounts. On pending assessment of Wealth Tax of one of the partners, the Wealth Tax Officer made a reference for valuation of the Alpana Cinema to Department Valuation Officer, New Delhi by Reference dated 29.04.1976. Valuation Officer after inspecting the site submitted its report dated 26.04.1977 valuing the property for assessment year4 andNotices under Section 17 of the Wealth Tax Act, 1957 were issued to the appellants on 30.03.1979. Assessees got the property valued by an approved Valuer adopting income capitalisation method. The assessment order was passed by the Wealth Tax Officer in March, 1983 making assessment for the period from5. The assessment was completed as per percentage of the right of different assessees which they have in the Firm. The Assessing Officer relied on the Valuation Report submitted by the Departmental Valuer. The assessee aggrieved by the assessment order filed appeal before the Appellate Assistant Commissioner of Wealth Tax. The Appellate Authority by its detailed order dated 23.01.1986 affirmed the assessment made by the Assessing Officer on the basis of valuation by land and building method. The income capitalisation method as was relied on by the assessee was not approved.3. The aggrieved by the different assessment orders the assessees filed Wealth Tax Appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, Delhi. The ITAT accepted the case of the assessee to the effect that the proper basis for valuing the Cinema building would be capitalisation of the income. The ITAT held that since the building could be used only for film exhibition and it cannot be used for any other purpose the method of its valuation has to be necessarily different from the one normally adopted in the case of buildings which are capable of being used as commercial buildings. The Revenue aggrieved by the Tribunals order filed reference application through Department. Although, initially the same was rejected by the Tribunal, on the direction of the High Court following two questions were referred to the High Court forWhether on the facts and in the circumstances of the case theAppellate Tribunal was right in law for the purpose of Section 7(1) of the Wealth Tax Act in determining the assessees interest in the partnership firm by adopting the fair market value of the assets in question namely, the cinema building on the income mobilization basis instead of land and building method adopted by Wealth Tax Officer?2. If the answer to the above question is in the negative and against the assessee then what ought to be the correct fair market value of assets inThe High Court vide its judgment and order dated 21.10.2005 answered the questions in favour of Revenue and against the assessee. The High Court held that Wealth Tax Officer was justified in adopting the land and building method. The High Court held that yield/rent capitalisation method would not be correct method of valuation of the property in question. The High Court relied on its decision in Wealth Tax Reference 39 of 1985, Commissioner of Wealth Tax (Central) Kanpur v. Bankey Lal and others decided on the same day, i.e., 21.10.2005. The assessee aggrieved by the judgment of the High Court dated 21.10.2005 has come up in the appeal. As noted above, in all Wealth Tax References question was answered in favour of the Revenue.

Court's reasoning:
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.