Last week, the Supreme Court of India passed an order regarding which method to be applied for valuation of the ‘Alpana Cinema’ situated at Model town, New Delhi for wealth tax assessment.
There, had been a long-term misunderstanding between the revenue department and the 6 appellants, the partners of M/s G.D. & Sons, firm that operates this cinema theater.
The Partnership firm, purchased this land and semi-conditioned building way back in 1965. The construction was completed and the cinema theater started running in this building. In 1976, The Department Valuation officer valued the building for assessment years 1970-71 to 1974-75 using the land and building method. The revenue department heavily depended upon the valuation report and rejected the assesses’ plea to consider the income capitalization method for the property valuation. Aggrieved by this, the assesses’ approached the Income Tax Appellate Tribunal (ITAT) Delhi in 1986.and the Tribunal held in favor of the appellants. The Revenue department aggrieved by the Tribunal’s order filed reference application through Department in the Delhi High Court and raised the following question:
”1. Whether on the facts and in the circumstances of the case the Incometax Appellate Tribunal was right in law for the purpose of Section 7(1) of the Wealth Tax Act in determining the assessee’s interest in the partnership firm by adopting the fair market value of the assets in question namely, the cinema building on the income mobilization basis instead of land and building method adopted by Wealth Tax Officer?
2. If the answer to the above question is in the negative and against the assessee then what ought to be the correct fair market value of assets in question?”
The High Court answered the question in favor of the revenue. This triggered the assesses’ to approach the apex court for appeal.
Justice Ashok Bhushan and Justice A.K. Sikri while disposing off the appeal in favor of the Revenue Department noted that the provisions of Section 7 are clear and unambiguous.
Dismissing the appeal, the bench quoted, “The mere fact that the building is only for the use of Cinema exhibition does not in any manner diminish the marketable price. At the relevant period uses of building as running Cinema were no less valuable.”
“. . . .objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of the view that the High Court did not commit any error in interfering with the order of ITAT,” the bench added.
Read the full text of the Judgment below.
