Wealth tax---

---- Valuation of residential house ---Assessee owning more than one residential house---Option to choose residential house entitled to valuation under S.7(4), Indian Wealth Tax Act, 1957---Option exercised in one assessment year-- Option not irrevocable ---Assessee can exercise option in respect of a different residential house in a subsequent assessment year---Indian Wealth Tax Act, 1957, S.7(4).

The proviso to section 7(4) of the Indian Wealth Tax Act, 1957, does not lay down that the option once exercised is irrevocable in the succeeding years. What it lays down is that the option can be exercised in respect of one house only when the assessee uses more than one house for residential purposes. The words "specify in this behalf in the return of wealth" show that the option has to be exercised and the house in respect of which the option is exercised has to be specified in the return. There is no other restriction. It cannot be said that this can be specified only once and not in the return of net wealth for each assessment year. As would appear from the provision itself, the assessment for each year is self-contained and, on each valuation date, the assessee is entitled to exercise his option. If such option is exercised in respect of one building for an assessment year it can be subsequently changed in the subsequent assessment year by the assessee.

The assessee had a residential flat in Bombay and one-fourth share in a building at Calcutta. In the years earlier to 1979-80, the assessee exercised the option under section 7(4) of the Wealth Tax Act, 1957, in respect of the one-fourth share in the Calcutta property. In the assessment year 1979-80, the assessee wanted to exercise the option under section 7(4) in respect of the flat at Bombay. This was not accepted by the Wealth Tax Officer:

Held that the Tribunal was right in directing the authorities below to remit the matter to the Wealth Tax Officer for consideration as to whether the conditions mentioned in section 7(4) had been fulfilled in respect of the flat in Bombay, so that the assessee could exercise the option under section 7(4) in respect of the flat.

Sunil Mitra and R.C. Prasad for the Commissioner.

J.P. Khaitan for the Assessee.

JUDGMENT

AJIT K. SENGUPTA, J.--- In this reference under section 27(3) of the Wealth Tax Act, 1957, for the assessment year 1982-83, the following questions of law have been referred to this Court:--

"(1) Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 7(4) of the Wealth Tax Act, 1957, the Tribunal was justified in law in holding that the option under the aforesaid section was not irrevocable and could be exercised in each year for a different residential house and not only once in respect of a particular residential house?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was entitled to exercise fresh option under section 7(4) of the Wealth Tax Act, 1957, in respect of her Bombay flat for the assessment year 1982-83 even though that option was earlier exercised in respect of her Calcutta flat?"

Shortly stated, the facts are that the assessment year involved is 1982 83, the relevant valuation date being March 31, 1982. On the above valuation date, the assessee had a residential flat at Bombay, and also 1/4th share in the building at 1, Minto Park, Calcutta. In the assessment year earlier to the assessment year 1979-80, the assessee exercised option to freeze the value of her share in the building at 1, Minto Park, Calcutta under section 7(4) of the Wealth Tax Act, 1957. However, in the assessment year 1979-80, the assessee wanted to exercise the option under section 7(4) in respect of the flat at Bombay, instead of her share in the house at Minto Park, Calcutta. The Wealth Tax Officer held that the option under section 7(4) can not be changed. He, therefore, did not freeze the value of the flat at Bombay under section 7(4) of the Wealth Tax Act 1957.

The assessee challenged the above order in appeal before the Appellate Assistant Commissioner and contended that the flat at Bombay was being used as a residential house.

Therefore, the assessee was entitled to exercise her option to value the above flat under section 7(4) of the Wealth Tax Act. The Appellate Assistant Commissioner directed the Wealth Tax Officer to examine whether the assessee lived in the flat at Bombay for full 12 months preceding the valuation date and then allow option under section 7(4) of the Wealth Tax Act. The Appellate Assistant Commissioner accordingly set aside the assessment with a direction to the Wealth Tax Officer to reframe it.

The Revenue challenged the above order in appeal before the Appellate Tribunal. The appeal was dismissed with the following remarks:--

"The Departmental Representative frankly conceded that the point in issue is concluded against the Department by this Tribunal's order dated August 20, 1986, in Wealth Tax Application No.376/(Cal.) of 1985, in the assessee's own case for the assessment year 1979-80. But he submitted that the present appeal has been filed in order to keep the matter alive.

The authorised representative for the assessee contended that there was no change of option under section 7(4) of the Wealth Tax Act, 1957. We are unable to accept this submission in view of the facts stated in our order, dated August 20, 1986. We, are, however, of the opinion that this appeal has to be dismissed following our order, dated August 20, 1986."

Mr. Sunil Mitra, learned Advocate appearing for the Commissioner, has submitted that, for the assessment year 1979-80, the conclusion of the Tribunal was challenged under section 27(1) of the Wealth Tax Act, 1957. But the Tribunal declined to refer any question. Thereupon, the Revenue came under section 27(3) of the Wealth Tax Act, 1957, which was ultimately rejected by the Court. In that view of the matter, the finding given by the Tribunal has become final in respect of the option given.

Section 7(4) (excluding explanation) reads as follows:--

"Notwithstanding anything contained in subsection (1), the value of a residential purposes throughout the period of twelve months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Wealth Tax Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became the owner of the house, or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later:

Provided that, where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of this subsection shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf in the return of net wealth."

The proviso does not lay down that the option once exercised is irrevocable in the succeeding years. What it lays down is that the option can be exercised in respect of one house only when the assessee uses more than one house for residential purposes. The words "specify in this behalf in the return of net wealth" show that the option has to be exercised and the house in respect of which the option is exercised has to be specified in the return. There is no other restriction. It cannot be said that this can be specified only once and not A in the return of net wealth for each assessment year.

As would appear from the provision itself, the assessment for each year is self-contained, on each valuation date the assessee is entitled to exercise the option. It cannot be held that the option could be exercised only once. If such option is exercised in respect of one building for an assessment year, it can be subsequently changed in the subsequent assessment year by the assessee.

But, at the same time, the Tribunal was of the opinion that the option under section 7(4) of the Act can be exercised by the assessee only if the house is exclusively used by the assessee (a) for residential purpose, (b) throughout, the period of twelve months immediately preceding the valuation date. In the instant case, there is no finding either by the Income Tax Officer or by the Appellate Assistant Commissioner that the flat at Bombay was exclusively used by the assessee for residential purposes throughout the period of twelve months immediately preceding the valuation date.

In our view, therefore, the Tribunal was right in directing the authorities below to remit the matter to the Wealth Tax Officer for consideration whether the conditions therein have been fulfilled or not in respect of the flat in Bombay, so that the assessee could exercise the option in respect of the flat. For the reasons aforesaid, we' answer both the questions in the affirmative and in favour of the assessee.

There will be no order as to costs.

SHYAMAL KUMAR SEN, J.--- I agree.

M.BA./211/T.FReference answered