KISHORILAL DHANDHANIA Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) In this reference under Section 27(1) of the Wealth-tax Act, 1957, relating to the assessment years 1967-68 to 1977-78, the Tribunal has referred the following questions of law :

(2.) Out of the above six questions, questions Nos. 1, 2 & 3 are not pressed by learned counsel appearing for the assessee. We, therefore, decline to answer those questions. Shortly stated, the facts are as under :

(3.) On the relevant valuation dates for the assessment years involved as aforesaid, the assessee was the owner of a property being premises No. 4, Middleton Street, Calcutta, All these years, the property was in part let out, the rest being self-occupied. The Tribunal followed the rental method for determining the value of the property. The dispute, however, arose over the mode of rent capitalisation adopted by the Wealth-tax Officer, The first aspect that is in question is whether the Tribunal was correct in substituting the sum of Rs. 17,220, the estimated annual value of the portion leased out, for the actual lease rent received being Rs. 3,630. The substitution was upheld in pursuance of the departmental valuer's report that the owner had spent as much as Rs. 99,748 for the additions and alterations to the part of the house so let out arid the floor area of the same portion was 2,870 sq. ft. The rate of rent actually received worked out to Re. 0,11 p. per sq. ft., while the current market rate of rent in the locality, according to the Valuation Officer, should be at least Re. 0.50 p. per sq. ft., regard being had to the type of construction. Therefore, the rent charged by the owner had not been considered to be reliable, particularly because it appeared that the owner had got substantial interest in the firm which is the tenant occupying the said part. Before the Tribunal, the assessee contended that the said premises were actually let out to an existing tenant. Therefore, the rent could not be fixed by the Departmental Valuation Officer on the basis of any comparable instance. That apart, the assessee also pointed out to the Tribunal certain demerits of the house such as that the building had no lift and the floor being very high, was not attractive to any tenant in the absence of the facility of a lift. It was further urged that the income from the house property, on the basis of the rent so received, had been accepted in the income-tax assessment for all the years. Therefore, the annual letting value of the property cannot be a subject-matter of issue in the wealth-lax assessment. The assessee also cited a comparable case where a tenant in a neighbouring house, viz., 4/1, Middleton Street, had been paying rent that works out to Rs. 0.125 p. per sq. ft. A certificate was also produced purportedly issued by M/s. Rameswarlal Dedraj & Co. in proof of the assessee's comparable case. It was further argued that, once the rent capitalisation method is adopted, it could not be any more open to the taxing authorities to depart from the rent adopted as the annual letting value of the property for income-tax purposes. Reliance was placed upon a judgment of the Madras High Court in M.V.S. Kathirvelu Nadar v. Commr. of Agrl. I. T. [1968] 68 ITR 786 for the proposition that once a view has been accepted by the taxation authorities, the same should not be departed from by it.