TMI Blog1988 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 15,48,600 for the assessment year 1975-76. We are not concerned with the other assets of the assessee in this reference and, therefore, we have not considered it necessary to mention them. Being aggrieved by the assessment order passed by the Wealth-tax Officer for the assessment year 1975-76, the assessee carried the matter in appeal before the Commissioner of Wealth-tax (Appeals) (hereinafter referred to as the " Commissioner "). The Commissioner had, while disposing of the assessee's appeals for the preceding years 1967-68 to 1974-75, by a common order dated July 14, 1982, accepted the assessee's contention that the provisions of section 7(4) of the Act would be applicable to the assessment years prior to the assessment year 1976-77, and the value of the bungalow to be adopted for the purpose of assessment for the assessment years 1972-73, 1973-74 and 1974-75, would be the market value of the bungalow as on the valuation date relevant to assessment year 1971-72 which according to him was Rs. 4,46,600. He, therefore, directed the Wealth-tax Officer to adopt the value of the bungalow at Rs. 646,600 for the assessment years 1972-73, 1973-74 and 1974-75. The Commissioner, foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be made by applying the provisions of section 7(4) of the Wealth-tax Act, 1957 ? " Before we deal with the contentions which are raised on behalf of the Revenue and the assessee, it is necessary to set out the relevant provisions of the Act which fall for our consideration in this reference. Under section 3 of the Act, it is provided that subject to other provisions contained in the Act, there shall be charged for every assessment year commencing as and from the first day of April, 1957, a tax (hereinafter referred to as the wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I. The " net wealth referred to in section 3 is defined in section 2(m) of the Act as meaning the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date " other than certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred by the Wealth-tax Officer to the Valuation Officer under section 16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date or, in the case of an asset being a house referred to in sub-section (4), the valuation date referred to in that sub-section. (4) Notwithstanding anything contained in sub-section (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 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 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 sub-section shall apply only in respect of one of such houses whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-clause (b) of sub-section (2) of section 7 which deals with a case where the assessee carrying on business is a company not resident in India. This provision is, however, not relevant for the purpose of this reference. It will be seen that section 7(2)(a) gives an option to the Wealth-tax Officer to determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date subject to making certain adjustments. This provision would be attracted only in cases where the assessee is carrying on business for which the accounts are regularly maintained by him. In the case of such assessee, the Wealth-tax Officer may either value each asset held by the assessee in such business separately as provided in sub-section (1) or determine the net value of the assets of the business as whole on the basis of the balance-sheet as on the valuation date subject to certain adjustments. Sub-section (3), which also begins with a non obstante clause, empowers the Wealth-tax Officer to estimate the value of the asset as on the valuation date on the basis of the opinion of the Valuation Officer to whom he has made reference under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than those specified. Section 7 provides for the method of computation of the value of the assets and this valuation is to be done for the purpose of determining the net wealth as defined in section 2(m) and levying wealth-tax as provided in section 3. Therefore, the value of the assets of the assessee determined under any of the sub-sections of section 7 would be the value on the relevant or corresponding valuation date. The main contention of the Revenue is that sub-section (4) of section 7 is substantive in character and, that therefore, it operates prospectively. It was urged that this provision confers a right on the assessee to exercise an option to value the house exclusively used by him for residential purposes on the valuation date mentioned in the sub-section instead of valuing it on the basis of the estimated market price on the relevant valuation date as provided in sub-section (1). Therefore, even if section 7, on the whole, is held to be a machinery section providing for the method or manner of computation of the value of the assets belonging to the assessee to the extent sub-section (4) creates a right in favour of the assessee as stated above, it transgresses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as distinguished from the law which gives or defines the right, and which, by means of the proceeding, the court is to administer ; the machinery as distinguished from the product. Substantive law is concerned with the ends which the administration of justice seeks ; procedural law deals with the means and instruments by which those ends are to be attained. There is difference in the matter of construction between a law dealing with substantive rights which are already vested and one relating to procedure. There is no vested right in procedure but the case of vested rights is different. It stands to reason that the procedure provided in a statute for enforcement of substantive rights conferred thereby should be construed as far as possible so as to give effect to, and not to nullify, those rights. A mere procedural provision ought not to be allowed to whittle down or modify a substantive provision of law. Procedural enactments should be construed liberally and in such a manner as to render the enforcement of substantive rights effective. It is no doubt true that nobody has a vested right in procedural law, that is to say, that when a change is made in procedural law, it takes retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y often-be inconvenient and may not yield a true estimate of the net value of the total assets of the business. The Legislature has, therefore, provided in sub-section 2(a) that where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may determine the net value of the assets of the business as a whole, having regard to the balance-sheet of such business as on the valuation date and make such adjustments therein as the circumstances of the case may require. But the power conferred upon the tax officer by section 7(2) is to arrive at valuation of the assets, and not to arrive at the net wealth of the assessee. Section 7(2) merely provides a machinery in certain special cases for valuation of assets, and it is from the aggregate valuation of assets that the net wealth chargeable to tax may be ascertained. The power conferred upon the tax officer to make adjustments as the circumstances of the case may require is also for the purpose of arriving at the true value of the assets of the business. Sub-section (2)(a) of section 7 contemplates the determination of the net value of the assets having regard to the balance-sheet an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the value of the asset has to be determined for the purposes of computation of the net wealth of the assessee ". Same view was expressed by the Andhra Pradesh High Court in CWT v. Pachigolla Narasimha Rao [1982] 134 ITR 640. It was observed therein that section 7 provides " the mode of ascertaining the value of assets " for the purposes of the Act. The Supreme Court in CWT v. Maharaja Kumar Kamal Singh [1984] 146 ITR 202 at p. 206 observed: " Section 7 is important which provides the method how the value is to be assessed. " It would appear from the above decisions that sub-sections (1) and (2) of section 7 provide a machinery for the purpose of ascertaining the wealth of the assessee by valuing his assets. Value of an asset is estimated on the basis of the price it would fetch on the valuation date if sold in the open market under sub-section (1), while under subsection (2), the Wealth-tax Officer has an option to determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and make such adjustments therein as the circumstances of the case may require. As observed by the Supreme Court in Kesoram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et held by the assessee in respect of that business. On a plain reading of the section, it is clear that section 7(2)(a) gives an option to the Wealth-tax Officer concerned to adopt the valuation shown in the balance-sheet of the business of the assessee making such adjustments in that valuation as the circumstances of the case may require. " These two decisions also make it clear that section 7(2)(a) merely provides an alternative method of valuing the assets. But all the same, it is a method of valuation which is prescribed by that provision. Now, let us consider sub-section (1) in the context of sub-section (4) and sub-section (2) of section 7. Is it a machinery provision like sub-section (1) and sub-section (2) which have been held to be machinery or is it a substantive provision of law as contended on behalf of the Revenue ? In view of the settled position of law, sub-section (1) and sub-section (2) of section 7 are machinery provisions and they provide a method of valuing the assets of the assessee for the purpose of ascertaining the net wealth. Sub-section (4) deals with only one of the assets of the assessee, namely , house, which is exclusively used by him for resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise than as regards the matter of procedure unless that effect cannot be avoided without doing violence to the language of the enactment. Sub-section (4), as observed above, is in the procedural field. It is a machinery provision which provides for an alternative method of valuation of one of the assets of the assessee, namely, a house, exclusively used by him for the purpose of residence. This provision does not impair any existing right or obligation. Even if it confers a right on the assessee to exercise an option as aforesaid, as contended on behalf of the Revenue, such right is in the procedural field'. In our opinion, therefore, having regard to the settled principles of law, the provision contained in sub-section (4) becomes operative retrospectively in the sense that it would apply to all pending assessment proceedings. An appeal is a continuation of the original proceedings and, therefore, if the proceedings are pending even at the appellate stage, proceedings would be considered to be pending for the retrospective operation of sub-section (4). We do not find any force in the argument that sub-section (4) has transgressed the machinery provision and entered the fiel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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