1983 PLP (Trib (PTD)

I. N. Pasha for Respondent. Dates of hearing : 12th May, 1981. MUHAMMAD MAZHAR ALI (PRESIDENT).‑In this departmental appeal, direct against the order of the learned Appellate Assistant Commissioner, objection have been taken against the reduction allowed in the value of House No. 22 S. M. R. and reduction allowed in the value of Ismail Central. Objection have also been taken against the reduction allowed in the value of jewellery .

2. The respondent is a Director in K. C. Co. Ltd. M/s. A: .S. L. and other companies. In his wealth tax assessment for the charge year 1979-1980, he declared the value of residential House No. 227 S. M. R. Kc. at Rs. 90,

000. The Wealth Tax Officer estimated its value at Rs. 3 lakh and in appeal, tile learned Appellate Assistant Commissioner reduced this again to Rs. 9,0,000 as declared. Brief facts of the case are that the plot of land, measuring 3,000 Sq. yards is sub‑divided in three portions out of which two have been constructed and the third one is still lying vacant. This house is self: occupied and hence the respondent declared its value at cost. The Wealth Tax Officer, however, did not accept the valuation of the property at cost and instead adopted its value at Rs. 3 lakh on the basis that a similar house constructed on one of the portions of the building belonging to Mr. S. M. U. A. was gifted by him to his wife and the value thereof was shown at .9 Rs. 3 lakh. The respondent's house bring similar, the Wealth Tax Officer, valued its cost also at Rs. 3 lakh but since it was a self occupied house of the learned Appellate Assistant Commissioner relying on a circular of the Central Board of Revenue, directed that the value of the House could be taken at cost as declared by the respondent. The Department has come in appeal against this decision of the learned Appellate Assistant Commissioner by contending that Wealth Tax Officer was justified in adopting its value at Rs. 3 lakh because a similar house on the same plot owned by the brother of the respondent was valued at Rs. 3 lakh when gifted by him to his wife. It is, therefore, contended that the value adopted by the Wealth Tax officer in the respondent's case was proper and should have been maintained. Mr. I. N. P. the earned counsel of the respondent contends that since it was a, self‑occupied house the Wealth Tax Officer could not adopt another method except the one laid down in the Central Board of Revenue's circular and that its value could not be based on the value adopted of a similar house of the respondent's brother for purposes of gift to the wife.

3. We have considered the facts of the case and we find that there is no dispute regarding the fact that the impugned house was under the self-occupation of the owner. The Central Board of Revenue vide their circular letter C. No. 8 (11) W T./I. T.6/79, dated 18th February, 1980, directed that w continuation of its open circular dated 21st August, 1979 :‑ "In case where an assessee does not exercise the option in respect of exemption in favour of the self‑occupied house, the value of such house will be worked at 10 times the A. L. V. of such property, if the property was ever let out. In case, the property was never let out the cost incurred on its construction, purchase or acquisition, shall be adopted as the value for the purpose of wealth‑tax." In the instant case, the property under consideration was never let out and in his wealth statements, the respondent had been showing its value at Rs. 90,000 year after year and the same was not questioned by the department. In our opinion, the instructions laid down in the Central Board of Revenue's circular are binding on the Wealth‑tax Officer insofar as, they are favourable to the tax payer and hence we uphold the value fixed by the learned Appellate Assistant Commissioner at Rs. 90,000.

4. The next objection relates to a commercial property bearing No. 6/C, B. C. A. about which it is stated that the area of the plot is 239 square yards and shops have been constructed on the ground floor but the first floor had not yet been constructed. These facts are not in dispute. The Wealth Tax Officer worked out the Gross Annual Letting Value on the actual rent of the seven shops amounting to Rs. 34,

320. The Wealth Tax Officer also noted that the respondent obtained security deposit of Rs. 3,76,500 from the tenants, which was only to be refunded at the time of vacating the premises. The Wealth Tax officer considered that bad the respondent not obtained this security deposit he would have charged a higher rent and, as such, to determine the fair Gross Annual Renting Value he made an addition of Rs. 45,180 being an amount of 12 % per annum on Rs. 3,76,

500. The total Gross Annual letting Value therefore, worked at Rs. 79,

500. The valuation for wealth tat purposes was made at 10‑times the above figure which worked at Rs. 7,95,

000. Besides the above addition, the Wealth Tax Officer also added Rs. 3,36,500 being the investment of the amount of security deposit in the construction of the first floor. The total value of the property thus worked at Rs. 11,71,

500. The respondent's half share thus worked at Rs. 5,85,750.

5. The respondent had shown the value of the property at cost basis at Rs: 1.,11,500 which was assessed at Rs.5,58,

750. In appeal the learned A. A. C. observed that overall value of the property determined by the Wealth Tax Officer was excessive. The learned A. A. C. observed that the value of the ground floor could be adopted at Rs. 5 lakh and that of the first floor, which was under construction, at Rs. 1 lakh only, the total being Rs. 6 lakh so that the respondent's share would only at Rs. 3 lakh as against Rs. 5,85,750 determined by the Wealth Tax Officer. The Department's grievance is that the Wealth Tax Officer gave a definite basis for working out the value of the ground floor as well as the first floor whereas the learned A. A. C. gave no basis for reducing the values of the ground and first Boors. The learned D. R. contents that the valuation made by the learned A. A. C. was thus arbitrary and could not be sustained. The learned counsel, on the other hand, contends that the provisions of law nowhere contemplate the addition of interest etc. on security deposits obtained from the tenants. He submits that in the absence of specific provisions, such an addition was not justified. The learned counsel further contends that in any case, the addition made at the rate of 12 % was excessive because, according to him the prevailing bank rate was only‑10%.

6. We have heard the arguments of both the sides and we do not agree with the contention of the learned counsel that for purposes of valuing the property, no additions, etc. could be made on account of security deposit obtained by the respondent. The reasons given by the Wealth Tax Officer that if no security deposit had been obtained, the respondent could have certainly charged a higher rent. It is a matter of common knowledge that in some cases, the landlords collect substantial amounts by way of deposits and let out the properties on very low rates because the loss in rent is more than made up from the income which could be obtained from the deposits. The Wealth Tax Officer had in fact to determine a Gross Annual Letting Value and for that purpose, besides the location, size etc, he could take into consideration other factors also to determine the Annual Letting Value. In our opinion, the fact of obtaining security deposit was a relevant factor which could also be considered for determining the Gross Annual Rental Value of the property because the deposit made by the tenant in addition the agreed rent, does continue to yield an extra benefit to the landlord over an above the amount of rent received. In this view of the matter, we hold that the addition made by the Wealth Tax Officer on account of security deposit, was justified but as stated by the learned counsel that the bank rate was 10 % which was not disputed before us, we direct that the amounts should be, calculated at the rate of 10% instead of 12%. So far as the investment security deposit on construction of first Door is concerned, we do not agree with the valuation given by the learned Appellate Assistant Commissioner, because if the entire amount of security deposit was in fact invested in the first floor, then its value could not be less than Rs. 3,76,500 as adopted by the Wealth Tax Officer. The valuation determined by the learned A. A. C. at Rs. 1 lakh was certainly arbitrary and without any basis. The learned counsel also took the plea that the department was not justified in adding the value of security deposit as well as the interest for working out to Gross Annual Rental Value of the ground floor because it amounted to sort of taking into consideration the same asset twice. We do not find any force in this argument because in the ground floor the receipt of security deposit did justify the enhancement in the Gross Annual Rental Value. On the other hand, the investment on construction of first floor, which was quite independent of the determination of Gross Annual Rental Value and thus, there is no question of the respondent being hit twice by the same amount. We have thus no alternative except to uphold the valuation of the ground floor made by the Wealth Tax Officer. The liability of refundable deposit will no doubt appear as liability against this asset.

7. The next grievance of the respondent concerns the adoption of Rs. 93,000 by the learned A. A. C. of the value of jewellery, which was declared by the respondent at Rs. 19,350 and estimated by the Wealth Tax Officer at Rs. 1,48,

830. The facts are that the value of jewellery was being declared by the respondent at Rs. 19,350 since as early as 1963‑

64. By reducing the value at the rate of 25 % for taking charges etc. the value of! gold was thus estimated at Rs. 14,

513. The Wealth Tax Officer noted that the price of gold at the time of valuation were Rs. 1,230 per Tola and hence he determined the value of the quantity of gold shown at Rs. 1,48,830 and after deducting the declared value, adopted its value at Rs. 1,29,480 for purposes of wealth tax, We have heard the learned counsel and the D. R. and we find that they have not been able to rebut the method of valuation adopted by the Wealth Tax Officer. In our opinion, the method adopted by him appears to be quite fair and hence we vacate the order of the learned A. A. C. and restore that of the Wealth tax Officer in respect of this item.

8. In the result, the appeal is disposed of as indicated above. Order accordingly.