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CWT, Agra v. Vinok Kumar Mehrotra - INCOME TAX REFERENCE No. 18 of 1984  RD-AH 1571 (6 July 2005)
WT.R. No.18 of 1984
Commissioner of Wealth-tax, Agra v. Shri Vinod Kumar Mathura.
Hon'ble R.K. Agrawal, J.
Hon'ble Rajes Kumar, J.
The Income Tax Appellate Tribunal, New Delhi has referred the following two questions of law under Section 27(1) of the Wealth Tax Act, 1957, hereinafter referred to as 'the Act' for opinion to this Court.
"1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was entitled to the exemption in terms of S.5(1)(iv) of the W.T.Act, 1957 in respect of the immovable property of the firm M/s.Raj Kamal talkies for the assessment years 1975-76 and 1976-77?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the reversionary value of the land of the cinema building owned by M/s. Raj Kamal talkies could not be added to the value worked out on yield basis for the assessment years 1975-76 and 1976-77?"
The present Reference relates to the Assessment Years 1975-76 and 1976-77.
Briefly stated the facts giving rise to the present Reference are as follows.
The respondent-assessee is an individual. The relevant valuation dates are 31.3.1975 and 31.3.1976.
The respondent-assessee is a partner in M/s. Raj Kamal Talkies. This firm was the owner of a cinema building . Before the Wealth-tax Officer, in the valuation of his interest in the said firm, the respondent-assessee claimed exemption under Section 5(1)(iv) proportionately for the value of the said immovable property of the firm to the extent of his share (40%) in the firm. This claim of exemption under Section 5(1)(iv) was disallowed by the Wealth-tax Officer. In first apepal, the Appellate Assistant Commissioner of Wealth-tax, however, held that the respondent-assessee was entitled to such exemption. He noted that for the preceding assessment year in this very case, such claim had been allowed by the Tribunal by its order dated 24.1.81(WTA Nos.114 and 115(Del) of 1980). Hence, following the said order of the Tribunal, which, he noted, was also in line with the decision of some High Courts, he directed the Wealth-tax Officer to allow relief due to the extent of Rs.1 lakh for each of the assessment years. The decisions of the High Courts mentioned by the appellate Assistant Commissioner in his order are reported in 114 ITR 532(Ker.); 119 ITR8(Ori.); 122 ITR 781 (Pat.) and 127 ITR 633 (M.P.).
The department then came up in appeal. The Tribunal, however, found itself in respectful agreement with the order of the Tribunal dated 24.1.1981 (supra) and confirmed the order of the Appellate Assistant Commissioner.
There was also another dispute that came up for the consideration of the Appellate Assistant Commissioner with regard to the valuation of the immovable property owned by Raj Kamal Talkies. The Wealth-tax Officer made a reference in this regard to the Assistant Valuation Officer of the Government, Agra. By his order under Section 16A(5), dated 26.8.1976, the Valuation Officer estimated the fair market value of the said property at Rs.8,09,500/- for the Assessment Year 1975-76. Based on this report, the Wealth-tax Officer worked out the value of the respondent-assessee's interest in the firm at Rs.4,05,902/- for the Assessment Year 1975-76 and at Rs.3,74,371/- for the Assessment Year 1976-77(For the latter year the valuation of the cinema building was enhanced by the Wealth-tax Officer to Rs.9,00,000/- on an ad hoc basis). The respondent-assessee appealed.
The Appellate Assistant Commissioner noted that the same issue had come up in appeal before him for the Assessment Years 1973-74 and 1974-75; and that after hearing the Assistant Valuation Officer he had directed the Wealth-tax Officer to compute the value of the property by his order dated 22.10.1979 after making the following charges:
i) Deduction for expenses (excluding depreciation) to be allowed as per Income-tax assessment of the relevant years;
ii) Deduction for Sinking Fund to be allowed at Rs.580/- in each of the two years.
iii) Deduction for owner's risk etc. to be allowed at 15%.
iv) Net maintainable yield to be capitalised in each of the two years at 9% rate of interest and 5% redemption(N.P. 9.127 and 9.013).
v) Land value in reversion to be taken at Rs.200/- per sq.yd. For asstt. Year 1974075".
The Appellate Assistant Commissioner further noted that the respondent-assessee had taken the matter in further appeal before the Tribunal; that the Tribunal by its order (WTA Nos.114 & 115/Del/80 dated 24.1.1981) had confirmed the directions of the Appellate Assistant Commissioner found in (i), (ii), (iii) & (iv) above; but excluded the reversionary value of land in valuing the cinema building. In these circumstances, the Appellate Assistant Commissioner, following his order for the preceding assessment years, directed the Wealth-tax Officer to estimate the value of the property for both the years in appeal as indicated by him for the Assessment Years 1973-74 and 1974-75, excluding however, reversionary value of the land. The Department then came up in appeal before the Tribunal. The Tribunal, however, rejected the contentions of the Revenue in the following words:-
"5.......However, in view of the order of the Tribunal dated 24.1.1981 in this very case for the asstt. Years 1973-74 and 1974-75 we would uphold the Appellate Assistant Commissioner's order for the two years in appeal here. The Revenue's objection(confined to exclusion of the reversionary value in the valuation) is therefore rejected."
We have heard Sri A.N. Mahajan, learned counsel for the Revenue and Sri R.S. Agrawal, learned counsel for the respondent-assessee.
So far as the first question is concerned, we find that this Court in the case of Commissioner of Income-tax v. Jai Kishan Gupta, (2003) 264 ITR 482 has held that the cinema building is not a house, and therefore, the partner's interest in the cinema building is not liable for exemption under Section 5(1)(iv) of the Act. This Court was of the view that a 'house' means a place where people live and by no stretch of imagination a cinema hall be regarded as a house. No one ever calls a cinema hall a house. Thus, the respondent-assessee was not entitled to exemption under Section 5(1)(iv) of the Act in respect of M/s. Raj Kamal Talkies, which owned a cinema hall.
So far as the second question is concerned the valuation of the cinema building owned by M/s. Raj Kamal Talkies has been worked out on yield basis, therefore, the reversionary value of the land cannot be taken into consideration in computation of the value as held by this Court in the case of Commissioner of Wealth-tax v. Ram Saran Kajriwal, (1987) 168 ITR 485.
The view taken by the Tribunal so far as the cinema building is concerned is in accordance with the decision of this court and does not suffer from any infirmity. In this view of the matter we answer the first question in the negative i.e. in favour of the Revenue and against the assessee. However, the second question is answered in affirmative i.e. in favour of the assessee and against the Revenue. The parties shall bear their own costs.
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