WEALTH TAX OFFICER Vs. SHAM LAL
INCOME TAX APPELLATE TRIBUNAL
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S.K. Chander, Accountant Member -
(1.) THESE appeals by the revenue are directed against the consolidated order of the Commissioner dated 20-2-1981 relating to the assessment years 1977-78 to 1979-80. The common issue involved in all these appeals is whether the assessee was entitled to the benefit of the provisions of Section 7(4) of the Wealth-tax Act, 1957 ('the Act'), with regard to the kothi in Sant Nagar, Civil Lines, Ludhiana, onstructed in the financial year 1973-74.
(2.) The assessee is a HUF. It is common ground that none of the members of HUF resides in India because the HUF has its residence in USA. It is also common ground, however, that the said kothi in Sant Nagar was not let out during any of the years under.appeal. The assessee constructed this kothi in the financial year 1973-74 and as on 31-3-1975, the departmental valuer valued it at Rs. 1,41,300. For the assessment years 1977-78, 1978-79 and 1979-80, the WTO estimated the value of this property on the respective valuation dates at Rs. 1,60,000, Rs. 1,70,000 and Rs. 1,80,000. These valuations were adopted in computing the net wealth of the assessee and exemption available to the assessee for one house or part of a house belonging to the assessee was allowed by the WTO to the extent of Rs. 1,00,000 in each year. However, this was challenged before the AAC.
The AAC has accepted the claim of the assessee for all the years under appeal that the provisions of Section 7(4) are applicable and, therefore, the value of this residential house as on 31-3-1974, which was Rs. 1,24,400 should be taken on the valuation dates for each of the assessment years under appeal. This is a cause of grievance for the revenue. Hence these appeals.
(3.) WE have heard the parties and we are of the opinion that the AAC erred in issuing the directions that he did for the reasons that we record infra. Section 7(4) was brought on the statute book by the Finance Act, 1976 with effect from 1-4-1976 by way of insertion. The memorandum to the Finance Act explained that the valuation of self-occupied properties had from year to year resulted in certain practical difficulties and inconveniences to taxpayers. Therefore, with a view to getting over these difficulties,, this section freezes the open market valuation of such properties at the option of the assessee either to the value on the valuation date relevant to the assessment year commencing on 1-4-1971 or the valuation date next falling the date on which he became the owner, whichever date is later. However, this concession is not available unless certain preconditions are fulfilled. These conditions are as under :
i. The house must belong to the assessee ; and
ii. This must be exclusively used by him for residential purposes through the period of 12 months immediately preceding the valuation date.
There is further clarification in the Explanation to this Sub-section that where the house has been constructed by the assessee, he shall be deemed to have become the owner thereof on the the construction of such house is complete and for purposes of getting this concession a house includes a part thereof but it should be an independent residential unit.;
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