DIRECTOR OF WEALTH TAX Vs. HERSH W CHADHA

JUDGEMENT

(1.) The following questions of law were framed in the instant Wealth Tax appeal :

(2.) The necessary facts are that in the Wealth Tax Returns for Assessment Year 1992-93, the declared net worth was Rs.35,29,000/-. The assessment was completed under section 16(3) by the Wealth Tax Officer (WTO) on 22.3.1995 at a net wealth of Rs.70,10,34,244/-. The CIT(A) in the first round set aside the assessment order and directed it to be framed afresh, which the WTO did again on 17.9.1998. The Assessing Officer (AO) while concluding that the assets declared had to be assessed at a higher rate, took note of certain facts and concluded that the valuation of the flat at Palcimo, Bombay was Rs. 52,48,968/-. The assessee had declared a return value at Rs. 2,65,200/-. The WTO took into account the rent receivable at Rs. 62,145/- and also added 15% on the deposits accepted by M/s Hertz Agencies Pvt. Ltd (the lessee/tenant, hereinafter referred to as 'HAPL') from M/s BASF, the sub-lessee (hereinafter referred to as 'BASF'). The assessee contended that the higher valuation of the property was unjustified since what it received was only Rs.2,600/- from HAPL. The CIT(A) rejected the assessee's contentions and upheld the value at Rs.52,48,963/-. The ITAT, in the impugned order noticed that the deposit, upon which interest was generated, had not been in fact, received by the assessee but by HAPL, its tenant/lessee. The ITAT followed the decision in CIT Vs. Hemraj Mahabir Prasad Ltd., 2005 279 ITR 522 (Calcutta). The Calcutta High Court held- however, in the context of Section 23 of the Income Tax Act (while determining the annual letting value i.e. ALV of the property) that the adoption of the gross rent received by the assessee as lessor from the let out property for computing income from house property, as against the higher rent fetched by the lessee through sub-lease, was correct.

(3.) Ms. Vibhooti Malhotra, learned counsel relies upon Rules 3, 4 & 5 of the Wealth Tax Rules, especially, explanation (2) to Rule 5 and contended that the expression "rent received or receivable" is broad enough for the Revenue's official to include all payments for the use of the property by any nomenclature, the value of benefits or perquisites etc., obtained from a tenant or occupier. The said Rule reads as follows :