2002 (8) TMI 250 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of the value of the appellant's self-occupied property.
2. Adoption of property value at Rs. 87,178 as per Schedule III of the Wealth Tax (WT) Act.
3. Applicability of the second proviso to Rule 3 of Schedule III of the WT Act.
4. Applicability of the third proviso to Rule 3 of Schedule III of the WT Act.
5. Exception provided in proviso 3 of Rule 3 of Schedule III of the WT Act.

Detailed Analysis:

Issue 1: Confirmation of the Value of the Appellant's Self-Occupied Property
The appellant objected to the confirmation of the value of their self-occupied property at Rs. 13,00,000 by the CIT(A)-III, Baroda, against the value of Rs. 87,178 placed by the appellant as per Schedule III of the WT Act. The Tribunal noted that the value of the property had been consistently accepted at Rs. 87,178 in all subsequent years except for the year under consideration.

Issue 2: Adoption of Property Value at Rs. 87,178 as per Schedule III of the WT Act
The appellant argued that the value of Rs. 87,178, as declared by them and accepted in subsequent years, should be adopted. The Tribunal observed that the value of the residential property, when arrived at by multiplying the net maintainable rent by the figure 12.5, comes to Rs. 87,178. This fact was undisputed by the CIT(A) and the Departmental Representative.

Issue 3: Applicability of the Second Proviso to Rule 3 of Schedule III of the WT Act
The AO had determined the value of the property at Rs. 13,00,000 based on the second proviso to Rule 3 of Schedule III, which states that if the value of a property acquired after 31st March 1974 is lower than the cost of acquisition, the cost of acquisition should be taken as the value. The Tribunal noted that this proviso was incorrectly applied by the AO, as the third proviso provides an exception.

Issue 4: Applicability of the Third Proviso to Rule 3 of Schedule III of the WT Act
The appellant contended that their case was governed by the third proviso to Rule 3, which provides that the second proviso shall not apply if the house is exclusively used by the assessee for their own residence throughout the period of twelve months immediately preceding the valuation date and the cost does not exceed Rs. 25 lakhs for properties outside metropolitan cities. The Tribunal agreed with the appellant, noting that the intention of the third proviso is to remove hardship for those acquiring a single residential house for their own residence.

Issue 5: Exception Provided in Proviso 3 of Rule 3 of Schedule III of the WT Act
The Tribunal concluded that the third proviso was indeed applicable, as it was intended to benefit taxpayers who acquire one house for exclusive residential use. The Tribunal emphasized that it is impossible to expect an assessee to use the property for twelve months immediately preceding the valuation date in the year of its purchase. Therefore, the benefit of the third proviso should not be denied in the year of acquisition.

Conclusion:
The Tribunal directed the AO to adopt the value of the property at Rs. 87,178 as declared by the appellant. The appeal was allowed, and the Tribunal appreciated the presentation by the appellant's advocate.

Result:
The appeal is allowed.