SMT. VEENA DEVI SINGHANIA VS COMMISSIONER OF WEALTH TAX, 1995 PTD-CALCUTTA-HIGH-COURT-INDIA 1105 (1991)

(a) Wealth tax---

---Deductions---Estimated notional amount of capital gains tax---Not deductible---Indian Wealth Tax Act, 1957.

An assessee is not entitled to deduction of the estimated notional amount of income-tax on capital gains for purposes of assessment to wealth tax.

Vinita Devi Singhania (Smt.) v. CWT (1991) 191 ITR 233 (Cal.) fol.

(b) Wealth tax---

----Net wealth---Compulsory deposit in the compulsory deposit scheme (I.T. Payers) Account---Compulsory deposit to be taken into consideration in computing net wealth---Indian Wealth Tax Act, 1957.

The compulsory deposit in the Compulsory Deposit Scheme (I.T. Payers) account under the Compulsory Deposit Scheme (I.T. Payers) Act, 1974, is to be taken into consideration in computing the net wealth of the assessee.

Sunanda Devi Singhania (Smt.) v. CWT (1993) 204 ITR 842 (Cal.) fol.

(c) Wealth tax---

----Valuation of assets---Valuation of jewellery---Indian Circular F: No.6/8/68 W.T., dated 20-9-1968 cannot affect valuation for assessment years other than assessment years 1968-69 to 1970-71---Indian Wealth Tax Act, 1957---Circulars F. No. 6/8/68-W.T., dated 20-9-1968, F. No.6/11/69-W.T., dated 3-7-1969.

Circular F. No.6/8/68-W.T., dated September 20, 1968, is applicable to the assessment year 1968-69 and the two succeeding assessment years 1969 70 and 1970-71 only as liars been clarified by the subsequent Circular F. No.6/11/69-W.T., dated July 3, 1969. Paragraph 1 of the Circular draws attention to the clarification of wealth tax guideline notes with regard to the valuation of immovable property and jewellery published earlier. Paragraph 2 clearly shows that the valuation made by an approved valuer for the assessment year 1968-69 was to be accepted for the next two years, viz., 1969-70 and 1970-71, with "such adjustments as may be considered necessary in the circumstances of any particular case" where valuation of immovable property was concerned. It further laid down that in regard to jewellery the valuation made by an approved valuer of the assessment year 1968-69 was to be accepted for the next two years also "with such adjustments as may be considered necessary on account of changes in the price of gold, etc." Even then it was clarified that adjustments will be permissible "where there has been a substantial alteration in or addition to the asset having the effect of. increasing or decreasing the value of the asset to a significant extent".

Held, that, in the instant case, excepting the contention that Circular F. No.6/8/68-W.T., dated September 20, 1968, would govern the valuation for all the years subsequent to the assessment year 1968-69, no argument was advanced on the merits. Having regard to the facts and circumstances of the case and having regard to the intent and purport -of the said circular, the Tribunal was justified in holding that the circular could not affect the valuation of the assessment years other than the assessment years 1968-69 to 1970-71.

Dr. D. Pal, M.K. Murarka and J.P. Khaitan for the Assessee.

Sunil Mukherjee led by A.C. Moitra for the Commissioner.

JUDGMENT

AJIT K. SENGUPTA, J.---In this reference under section 27(1) of the Wealth Tax Act, 1957, the following questions of law have been referred to this Court, for the assessment years 1978-79, 1979-80 and 1980-81, at the instance of the assessee:

Common questions in R.A. No. 118(Cal.) of 1987 and R.As. Nos. 119 and 134(Cal.) of 1987:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction of the estimated notional amount of capital gains tax?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the compulsory deposit in the 'Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, was to be taken into consideration in computing the net wealth of the' assessee?"

There is an additional question in R. As. Nos. 119 and 134/(Cal.) of 1987, which is as follows:

"(3)Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the Circular No. F. No.6/8/68 W.T., dated September 20, 1968, cannot affect the valuation for the assessment years other than 1968-69 to 1970-71?"

The first common question is concluded by the decision of this Court in Matter (Wealth Tax) No.1158 of 1984 (Smt. Vinita Devi Singhania v. CWT (1991) 191 ITR 233) where judgment was delivered on February 18, 1991. Following the said decision, the first common question in this reference is answered in the affirmative and in favour of the Revenue.

The second common question is concluded by the judgment delivered in Matter No.5571 of 1987 (Smt. Sunanda Devi Singhania v. CWT (1993) 204 ITR 842 (Cal.). Following the said decision, we answer the second common question in the affirmative and in favour of the Revenue.

The facts relating to the third question are as follows:

For the assessment years 1979-80 and 1980-81, the assessee disclosed the value of her jewellery at Rs.4,14,996 on the basis of the report, dated February 19, 1979, of her own valuer for the assessment year 1978-79. It was claimed that the valuation once made, was valid for three years. The Wealth Tax Officer did not accept this contention and valued the jewellery at Rs.4,75,996 in the assessment year 1979-80 and at Rs.5,42,996 in the assessment year 1980-81. On appeal, the Commissioner of Wealth Tax (Appeals) confirmed these additions. On further appeal to the Tribunal, it was contended on behalf of the assessee that, under Circular No. F. No. 6/8/68 W.T., dated September 20, 1968, the valuation of jewellery, when made by an approved valuer for one assessment year, was to be accepted for the subsequent two years also and that the valuation for the assessment year 1978-79 made by the registered valuer should have been accepted for the next two assessment years 1979-80 and 1980-81 also. Opposing this contention, the Departmental Representative contended that the said circular was applicable to the assessment year 1968-69 and the two succeeding assessment years 1969 70 and 1970-71 only as has been clarified by the subsequent Circular F. No.6/11/69-W.T., dated July 3, 1969. The Tribunal noticed that, by its order, dated October 3, 1986, in Wealth Tax Appeals Nos. 455 and 456(Cal.) of 1986 in the case of Raghupati Singhania (H.U.F.), the Tribunal categorically held that the said circular, dated September 20, 1968, cannot affect the valuation for the assessment years other than 1968-69 to 1970-71. Following the said order, dated October 3, 1986, the Tribunal held that the circular relied upon by the assessee did not apply to the assessment years under consideration and as such the assessee was not entitled to the benefit of the provisions under this circular.

The only contention raised at the hearing before us is that the circular referred to above will be applicable for all the assessment years and it was not confined only to the assessment year 1968-69 and the two succeeding assessment years, i.e. 1969-70 and 1970-71.

The said circular is to the following effect:

"It has already been clarified (vide Letter F. No.6/8/68-W.T., dated September 20, 1968, printed here as Annexe) by the Central Board of Direct Taxes that an assessee may rely on the certificates given by approved valuers for the assessment year 1968-69 while returning the value of an asset for the subsequent two years also. You have enquired whether it means that the Wealth Tax Officers too would adopt the same value, which has been assessed for the assessment year 1968-69, for the subsequent two assessment years. In this respect, your attention is invited to section 7 of the Wealth Tax Act, which provides that the value of the asset shall be estimated to be the price which it would fetch in the open market on the valuation date. As the market value of the assets does vary from time to time, it may not be possible for the Wealth Tax Officers to invariably adopt the same value for an asset over a period of three years. However, ordinarily, they would not disturb the valuation placed on a particular asset for the assessment year 1968-69 while making the wealth-tax assessments of the two assessment years immediately following, unless the circumstances of the case clearly justify a deviation from the past assessed value."

The letter, dated September 20, 1968, `mentioned in the aforesaid circular is to the following effect:

"Attention of the Commissioner is invited to the clarification given with regard to the valuation of immovable property and jewellery in the wealth tax guidance notes recently published.

It has been stated in these notes that, where immovable property is valued by' an approved valuer, the valuation made for 1968-69 assessment will be acceptable for the next two years also with such adjustments as may be considered necessary in the circumstances of any particular case. In regard to jewellery, it has been stated that, if the valuation has been made by an approved valuer for the assessment year 1968-69, it will be acceptable for the next years also, with such adjustments as may be considered necessary on account of changes in the price of gold, etc. The intention is that the value of immovable property or jewellery as determined in the wealth tax assessment for the assessment year 1968-69 would, ordinarily, be adopted for the next two years as well. This will be the position regardless of whether the valuation of immovable property or jewellery as determined in the assessment for 1968-69 is based on the report of an approved valuer or otherwise. Because the Wealth Tax Officers are expected to bestow due-care and attention in determining the value of assets for the assessment year 1968-69, in the context of the new penalty provisions, the adoption of the same value for the next two assessment years will duly safeguard the interests of the Revenue while it will also obviate inconvenience and expense to taxpayers in having their assets valued by approved valuers year after year. For the assessment years 1969-70 and 1970-71, adjustments to the value of an asset as determined in the assessment for 1968-69 will be necessary only where there has been substantial alteration in, or addition to the asset or circumstances or events have intervened having the effect of increasing or decreasing the value of the asset to a significant extent. Instances of such circumstances and events are damage to property due to floods, earthquakes or other causes, new developmental activities undertaken by the State in the locality in which the property is situated or in the case of jewellery, a sharp increase or decrease in the price of gold or precious stones.

It has been stated in the guidance notes that, in cases where the tax payers have entrusted the valuation of their assets to approved valuers, and the approved valuers require more time for valuing the assets, taxpayers may approach the Wealth Tax Officers concerned, who will freely grant extension of time up to a period of two months. In this connection, it is clarified that such extensions may also be allowed in cases of those taxpayers who have not been able to entrust the 'work of valuation, due to death of approved valuers in any particular region for a particular category of assets but want them to be valued by approved valuers before filing their wealth tax returns."

On a reading of the aforesaid circular and its Annexure, we are of the view that the said circular is not applicable to the assessment year under consideration. Paragraph 1 of the circular draws attention to the clarification of wealth tax guideline notes with regard to the valuation of immovable property and jewellery published earlier. Paragraph 2 clearly shows that the valuation made by an approved valuer for the assessment year 1968-69 was to be accepted for the next two years, viz., 1969-70 and 1970-71, with "such adjustments as may be considered necessary in the circumstances of any particular case" where valuation of immovable property was concerned. It further laid down that, in regard to jewellery, the valuation made by an approved valuer for the assessment year 1968-69 was to be accepted for the ` next two years also "with such adjustments as may be considered necessary on account of changes in the price of gold, etc," Even then it was clarified that adjustments will be permissible" where there has been a substantial alteration in having the effect of increasing or decreasing the value of the asset to a significant extent".

Except raising the contention that the said circular will govern the valuation for all the years subsequent to the assessment year 1968-69, no argument was advanced on the merits.

Having regard to the facts and circumstances of the case and having regard to the intent and purport of the said circular, we are of the view that the Tribunal was justified in holding that the circular cannot affect the valuation for any assessment year other than assessment years 1968-69 to 1970-71.

For the reasons aforesaid, we answer the third question in the affirmative and in favour of the Revenue.

There will be no order as to costs.

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

M.B.A./821/F.T. Reference answered.