COMMISSIONER OF WEALTH TAX VS SMT. SUGUNA MAHENDRAN, 1995 PTD-MADRAS-HIGH-COURT-INDIA 958 (1993)

Wealth tax-----

----Reference---Valuation of assets---Valuation of property on the basis of C.B.D.T. circular following income capitalisation method and ignoring sale made four years after the assessment year---Tribunal's valuation was proper-- No question of law arose from it---Indian Wealth Tax Act, 1957, S.27---CBDT Circular No. 326, dated 6-2-1982.

Held, dismissing the application for reference, that it is not at all permissible for the assessing authority or for that matter the Tribunal to rely upon an event of sale which takes place subsequent to the assessment year in question to determine the value of the property as in the relevant assessment year. Such .a method is not known in the filed of income capitalisation method. On the contrary, the value is worked out from the event of sale that takes place till the assessment year if that assessment year happens to be subsequent to the year of sale. In addition to this the Tribunal could not be held to have committed an error of law in relying upon Circular No.326, dated February 6, 1952, as that circular was issued for the purpose of determining the value of the lands by following the income capitalisation method. No question of law arose for reference.

Ellerman Lines Ltd. v. CIT (1971) 82 ITR 913 (SC); Navnit Lal C. Javeri v. K.K. Sen, AAC (1965) 56 ITR 198 (SC) and Varghese (K.P. v. ITO (1981) 131 ITR 597 (SC) ref.

J. Jayaraman for C.V. Rajan for Petitioner.

P.P.S. Janardhana Raja for Respondents.

JUDGMENT

K.A. SWAMI, C.J.---These petitions are filed under section 27(3) of the Wealth Tax Act, 1957, seeking a direction to the Tribunal to stare the case and refer the following question of law, which, according to the petitioner, arises in T.C.Ps. Nos. 833, 837 and 841 of 1991, relating to the assessment year 1982-83 in each case:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the first appellate authority holding that the Assessing Officer should not have based the valuation on the event which occurred in 1986 and ignored the Board's Circular No. 326 (See (1982) 134 ITR (St. 167), dated February 6, 1982?"

It is contended on behalf of the petitioner that the Board's Circular No.326 (see (1982) 134 ITR (St.) 167), dated February 6, 1982, is only directory and in addition to that it only lays down the guidelines, therefore, the Tribunal ought not to have completely rested its decision as to income capitalisation only that circular and ought to have relied on the sale of the property that had taken- place in the year 1986 and on that basis it should have worked out the value of the property backwards as in the assessment year 1982-83. On the contrary, it is contended by learned counsel for the assessee that it is not at all open to determine the value of the property on taking into consideration the event of sale that takes place nearly four years after the assessment year. As far as Board's Circular No. 326 (see (1982) 134 ITR (St.) 167), dated February 6, 1982, is concerned, the same was in force in the assessment year 1982-83, therefore, the Tribunal was justified in relying upon the same.

We are of the view that it is not at all permissible to the, assessing authority or for that matter the Tribunal to rely upon an event of sale which takes place subsequent to the assessment year in question to determine the value of the property as in the relevant assessment year. Such a method is not known in the field of income capitalisation method. On the contrary, the value is worked out from the event of sale that takes place till the assessment year if that assessment year happens to be subsequent to the year of sale. In addition to this the Tribunal cannot be held to have committed an error in law in relying upon Circular No.326 (See (1982) ITR 134 (St.) 167), dated February 6, 1982, as that circular is issued for the purpose of determining the value of the lands by following the income capitalisation method. The circular lays down the guidelines for the purpose of determining the valuation so that different methods are not followed by the Department for the purpose of determining the value of the property. In order to ensure uniformity in the manner and mode of determining the value of the property, the wealth tax circular in question has been issued under section 10 of the Wealth Tax Act. In this ' regard, we may usefully refer to the decision of the Supreme Court in K.P. Varghese v. ITO (1981) 131 ITR 597, in which it has been held as follows:

"But the construction which is commending itself to us does not rest merely on the principle of contemporanea exposition. The two circulars of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of subsection (2) and they depart or deviate from such construction. It is now well-settled as a result bf two decisions of this Court, one in Navnit Lal C. Javeri v. K.K. Sen, AAC (1965) 56 ITR 198 and the other in Ellerman Lines Ltd. v. CIT (1971) 82 ITR 913, that circulars issued by the Central Board of Direct Taxes under section 119 of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act."

However, it is contended that as the circular prescribed only the guidelines, the actual value of the property as in the assessment year 1982-83 ought to have been determined. With reference to this contention it is sufficient for us to observe that the question is not framed in that fashion Therefore, it need not be considered. For the reasons stated we are of the view that no referable question of law as raised by the petitioner arises in these cases. Accordingly, the tax case petitions are rejected.

M.BA./726/T.F. Order accordingly.