TMI Blog1996 (1) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. " 2. The return of gift in this case was filed by the donee in his capacity as the legal heir of his late grand mother Smt. Rani Bai who was also the donor of the impugned property in this case. Smt. Rani Bai gifted an immovable property, being a residential property at Sri Ganganagar, to her grand son Shri Khusbir Singh on 23-5-1989 by executing a gift deed wherein the value of the property was shown at Rs. 20,000. A notice dated 15-4-1991 under section 16(1) of the Act was issued to the assessee in response to which the return was filed on 23-5-1991. The value of the property in the return was shown at Rs. 1,21,200. This value was based on the valuation made by a registered valuer who in turn had valued the property as per the rules provided in Schedule III to the Wealth-tax Act, 1957, read with Schedule II to the Gift tax Act, 1958. The A.O. made a reference to the ld. CGT, Jodhpur who vide his letter dated 22-9-1992 directed the AO to accept the value of the gifted property in accordance with Schedule III to the Wealth-tax Act, 1958. Accordingly, the AO accepted the return of the assessee as filed and determined the value of taxable gift on 2-11-1992 at Rs. 1,01,200 afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply the provisions of rule 3. Merely saying that it was not practicable was not sufficient. The final argument was that the AO had acted under the directions of a higher authority, viz., the ld. CGT and, hence, was bound to follow the said directions. Thus, in view of all these circumstances, it could not be said that the order of the AO was erroneous and prejudicial to the interests of the revenue. 5. Shri R.K. Bhayana, the ld. DR., in his reply stated that it was necessary in this case to slightly dwell upon the background of the case. It was stated that the stamp duty issue was decided on 14-6-1990. But till then the assessee had not bothered to file the return even though the return of the registered valuer was obtained prior to that, that is on 13-11-1989. But when the stamp authorities determined the value at Rs. 5.50 lacs, the assessee felt cornered and filed the return showing the valuation at Rs. 1,21,200 as per rule 3 of Schedule III. When once the assessee had accepted the valuation as per stamp authorities and paid stamp duty thereon, it did not lie in the mouth of the assessee to say that valuation as per Schedule III should be accepted for gift-tax purposes. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of choice or option. The rule-making authority has prescribed only one method for valuing the unquoted equity shares. If this method were not to be followed, there is no other method prescribed by the rules. The acceptance of the assessee's contention would mean that it would be open to the Wealth-tax Officer to adopt such other method of valuation as he thinks appropriate in the circumstances. This is bound to lead to vesting of uncalled for wide discretion in the hands of Wealth-tax Officers/valuing authorities. It would lead to uncertainty and may be arbitrariness in practice. Where there is a rule prescribing the manner in which a particular property has to be valued, the authorities under the Act have to follow it. They cannot devise their own ways and means for valuing the assets. It is equally well to remember that rule 1D does not treat the break-up value as the market value. A deduction of 15 per cent is made in the break-up value to arrive at the market value. It is equally relevant to notice that rule 1D uses the expression 'shall', which prima facie indicates its mandatory character. " 6.2 It may be pertinent to observe that the Supreme Court held as above when se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Wealth-tax Act. This statutory recognition not only brought harmony between the two direct tax legislations but also emphasized that methods prescribed are indeed recognised methods and more so, when, after the amendment, the concept of 'market value' was done away with. Further, the mandatory character is also reinforced by the fact that not only the procedural provision, namely, Schedule II to the Act uses the word 'shall', but the substantive provision, section 6(1) also uses the word 'shall'. 8. At this juncture, it would also be pertinent to take note of the decision of the Bombay High Court in the case of Madhusudan Dwarkadas Vora v. Superintendent of Stamps [1983] 141 ITR 802. In the said case, in order to value the property for probate duty the assessee had valued the property higher rent capitalisation method, as prescribed under the Wealth-tax Act. On the other hand, the stamp authority wanted to value the property on the basis of land and building method. The Hon'ble High Court held that the method prescribed by the Wealth-tax Act was a well-recognised method of valuation and accordingly rejected the contentions put-forth on behalf of the Superintendent of Stamps. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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