TMI Blog2001 (2) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 and Rs. 32,25,680 respectively. The returns were processed under section 16(3) of the Wealth-tax Act, fixing the net wealth at Rs. 30,76,400, Rs. 29,64,700 and Rs. 32,27,210 respectively for the assessment years 1989-90, 1990-91 and 1991-92. Subsequently it came to the notice of the Assessing Officer that the assessee had not admitted the correct assessable wealth and hence wealth had escaped assessment for these three years. The assessments were reopened and notice under section 17 was issued to tax the escaped wealth. In response to the above notice, the assessee filed wealth-tax returns on 21-6-1994 and 27-1-1995 disclosing the net wealth as admitted in the original returns. The Assessing Officer subsequently issued a letter on 26-2-1996, to which the assessee replied on 14-3-1996. After considering the objections raised by the assessee in his letter dated 14-3-1996, the Assessing Officer held that while computing the net wealth on the basis of rent capitalisation method, the assessee has not taken into consideration the value of the amenities separately charged. This value of the amenities, the Assessing Officer held, is a part of the rent collected but in a different nomenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessments in this case was bad in law. This contention was rejected by the CIT(Appeals) on the ground that since the reopening was done vide notices dated 3-3-1994, 14-12-1994 and 14-2-1994 respectively for the assessment years 1989-90, 1990-91 and 1991-92, which were all within the period of four years from the end of the assessment years during which the Assessing Officer can reopen the assessment under section 17(1A) of the Wealth-tax Act. 5. Considering the rival submissions, we are of the view that there is no flaw in the order of the CIT(Appeals) on this point in view of the amendment brought into section 17 by the Direct-tax Laws (Amendment) Act, 1987, with effect from 1-4-1989, by which the Legislature omitted the words "by reason of the omission or failure on the part of any person" occurring in section 17(1)(a). In view of this position, we decline to interfere with the order of the CIT(Appeals) on this point. 6. On merit, it was the case of the assessee before the CIT(Appeals) that the Assessing Officer was not justified in coming to the conclusion that while fixing the value of the property on the basis of rent capitalisation method, the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed deduction of 40 per cent of the gross amount received in respect of the amenities in the income-tax proceedings and hence the net amount of the surplus available should be considered for the purpose of the capitalised value of the building. The CIT(Appeals) relying on the decision of the Calcutta Bench of the Income-tax Appellate Tribunal in the case of H.M. Punwani v. Asstt. CWT [1997] 61 ITD 203, held that though the items of property fitted for providing additional facilities to the tenants do not form the house property, still these items will, nevertheless, remain includible in the net wealth of the assessee, differently computed, in spite of the fact that the resultant consequences may not, in any way, have any substantial difference. The first appellate authority held that charges in respect of each and every service amenity do not have to be added to the actual rent so as to make it annual rent within the meaning. Charges for these facilities which the owner is obliged to provide, whether by way of requirement under some municipal/ local law/ rules or by way of making property fit/suitable for effective/proper use and for which the owner has made some substantial a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to the actual rent to bring within the expression annual rent under rule 5 of Schedule III." The assessee's representative further submitted that at the time of hearing in connection with income-tax proceedings, the assessee had furnished all the details of services rendered and considering all the facts the CIT(Appeals) and the Assessing Officer in subsequent assessments had allowed 40 per cent deduction towards expenses and also accepted the income returned under other sources. Since the Revenue has accepted the position that service charges are payments made for facilities provided, they had no connection with the rent received or receivable and, therefore, the income returned should be treated as income from other sources. The assessee's representative reiterated the submission that whatever may be the claim made with regard to charges received for services rendered, such as common lighting, outside light, watch and ward, car park, water facility, lift operations, etc. were provided by the assessee and the expenses were reimbursed. The CIT(Appeals) accepted this position and the Assessing Officer also accepted it in subsequent years. The assessee's learned representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Schedule HI of the Wealth-tax Act. Rule 5(2) of Schedule HI defines the "rent received or receivable". It includes all payments for the use of the property, by whatever name called, and the benefits or perquisites whether convertible into money or not. The learned departmental representative, therefore, submitted that service charges is something that forms part of the rent but only bifurcated by the assessee by a different nomenclature so as to exclude it from the purview of rent received or receivable, which is not permissible. The learned departmental representative further distinguished the decisions relied on by the assessee's learned representative as not applicable to the instant case of the assessee for the reason that all these decisions were rendered under the Income-tax Act, which is different from the Wealth-tax Act on the point at issue. 12. We have heard rival submissions and gone through the orders of the Revenue authorities and the decisions cited. The valuation of the asset is to be done as per Schedule III of the Wealth-tax Act. it is not disputed that as per Rule 4 of Schedule III any amount paid by the assessee to a local authority in respect of the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of 'rent received or receivable' appearing in Rule 5 (2) of the Wealth-tax Rules, Schedule III. In the case of Kanak Investments (P.) Ltd. the Calcutta High Court has held. "Where composite rent is received by the assessee from the tenants it should be split up and the amount attributable to the building only should be computed under section 9(1) of the Indian Income-tax Act, 1922, while the amount attributable to the amenities provided by the assessee to the tenants should be assessed under section 12 of the Act." In the instant case, the assessee received rent separately from the amount for the services rendered. It is difficult to hold that services rendered is a part of the real worth of the property and as such the payments also form part of the rent received. The case of the assessee is that these are reimbursement of the expenses and, therefore, do not form part of the value of the property. We are inclined to accept this contention of the assessee. It is the case of the assessee that actual reimbursement has only been claimed by him and the balance was offered along with the rent, which forms part of the rent received or receivable. Explanation (2) to Rule 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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