COMMISSIONER OF WEALTH TAX VS SMT. JYOTSANA BAID
1995 P T D 1089
[210 I T R 767]
[Rajasthan High Court (India)]
Before K C. Agrawal, C.J. and V.K Singhal, J
COMMISSIONER OF WEALTH TAX
Versus
Smt. JYOTSANA BAID
D.B. Wealth Tax Reference No. 51 of 1983, decided on 10/11/1993.
Wealth tax---
---- Net wealth---Valuation of residential house---Provisions of S. 7(4) inserted by Finance Act, 1976, with effect from 1-4-1976 are procedural and retrospective in nature---Apply to pending assessments---Indian Wealth Tax Act, 1957, S.7(4). .
Section 7(4) of the Wealth Tax Act, 1957, inserted by the Finance Act, 1976, with effect from April 1, 1976, is procedural and has retrospective effect and would apply to pending assessments for the assessment years 1972-73 to 1975-76.
CWT v. Niranjan Narottam (1988) 173 ITR 693 (Guj.) and Gulabrai Hanumanbox v. CWT (1992) 198 ITR 131(Gauhati) fol.
CWT v. Man Bahadur Singh (1994) 208 ITR 658 (Raj.) ref.
G.S. Bapna for the Commissioner.
N.M. Ranka for the Assessee.
Date of hearing: 10th November, 1993.
JUDGMENT
The Income Tax Appellate Tribunal has referred the following question of law arising out of its order, dated October 20, 1981, in respect of the assessment years 1972-73 to 1975-76:
"Whether, on the tact s and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 7(4) of the Wealth Tax Act, 1957, are procedural in nature and retrospective in operation and, therefore, the sane are applicable to the assessment years under consideration?"
The point to be determined is whether the provisions of section 7(4) of the Wealth Tax Act, 1957, which came into force with effect from April 1, 1976, were procedural in nature and retrospective in operation in respect of value of self-occupied property and whether the value in respect of the assessment year 1971-72 was to be adopted for the later years.
The provisions of section 7(4) were inserted by Act No. 66 of 1976, with effect from April 1, 1976, which reads as under:
"Notwithstanding anything contained in subsection (1), the value of a house belonging to the assessee and exclusively used by him for 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 Assessing 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."
From a perusal of the above section, it is evident that the said provision is an overriding provision over subsection (1) which gives jurisdiction to the Wealth Tax Officer to estimate the price of an asset which it would fetch if sold in the open market on the valuation date. Subsection (1) of section 7 is subject to the rules made the re-under and subsection (4) overrides the provisions of subsection (1). In accordance with the provisions of subsection (4), the valuation of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of 12 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 first day of April, 1971, whichever date is earlier. This subsection has frozen the value in respect of a residential property, which must be used exclusively by the assessee for residential purposes throughout the period of 12 months immediately preceding the valuation date. Section 3 is the charging section and section 7 is the machinery section by which the charging section is made effective. The matter with regard to the point as to whether section 7(4) is a procedural provision and not a substantive provision and is applicable retrospectively to all pending assessment proceedings came up for consideration before the Gujarat High Court in the case of CWT v. Niranjan Narottam (1988) 173 ITR 693, wherein it was held that the provisions of section-7(4) have retrospective operation as considering them so does not impair existing rights or obligations.
In Halsbury's Laws of England, Volume 36, Third Edition, at page 423, it has been observed as under:
"Presumption against retrospection.---The general rule is that all statutes, other than those which are merely declaratory, or which relate only to matters of procedure or of evidence, are prima facie, prospective; and retrospective effect is not to be given to them unless, by express words or necessary, implication, it appears that this was the intention of the Legislature." .
Gulabrai Hanumanbox v. CWT (1992) 198 ITR 131 (Gauhati) has held that section 7(4) of the Act is procedural and has retrospective effect and would apply to pending assessments. It may be noted that the provisions of section 7(4) give an option to the assessee and, therefore, if the option is not exercised then he may insist on valuation of the property in accordance with the provisions of rule 1-BB. The option could be given in respect of any pending assessment and the retrospectively could not be considered as giving any right to the assessee for reopening closed assessment. While interpreting the provisions of rule 1-BB framed under section 7(1) of the Wealth Tax Act, it was held by this Court in the case of D.B. Income Tax Reference No.107 of 1982---CWT v. Man Bahadur Singh ('1994) 208 ITR 658, that the provisions of rule 1-BB are retrospective in operation and would apply to assessments pending as on the date of the coming into force of the Rules. The object of the provision is to bring simplicity besides giving a benefit to the assessee in respect of valuation of property. In these circumstances, when neither the right of any person is affected nor the provisions of section 7(4) come in the way of the charging section and are only machinery provisions to make the charging section effective, the provisions of section 7(4) have to be considered as procedural and, therefore, applicable to all cases pending on the date of coming into force of the Act. In these circumstances, it is held that the Income Tax Appellate Tribunal was justified in coming to the conclusion that the provisions of section 7(4) of the Wealth Tax Act are procedural in nature and are applicable to all cases which were pending on the date of coming, into force of the said Act.
Accordingly, the reference is answered in favour of the assessee and against the Revenue.
M.B.A./815/F.T. Reference answered.