IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 21/08/2002
Coram
The Honourable Mr. Justice R.JAYASIMHA BABU
and
The Honourable Mr. Justice K.P.SIVASUBRAMANIAM
T.C. No. 511 of 1993
and T.C.Nos. 512 to 517 of 1993
M.K.Kuppuraj (HUF),
Coimbatore. ..Applicant in
T.C.No.511 of 1993
M.K.Kuppuraj (individual),
Coimbatore. ..Applicant in
T.C.Nos.512 to 515 of 1993
Shri M.K.Ananthakumar,
Coimbatore. ..Applicant in
T.C.Nos.516 and 517 of 1993
-Vs-
The Commissioner of Wealth-tax,
Coimbatore. ..Respondent in all
the Tax Cases
Tax Case References under Sec.256 (1) of the Income-tax Act, referred
by 'A" Bench of the Income-tax Appellate Tribunal, Madras.
!For Applicants : Mr.R.Meenakshisundaram
For Respondent : Mr. T.Ayyasamy,
Spl. GP (Taxes)
:ORDER
(Order of the Court was made by R.JAYASIMHA BABU, J.)
The question referred to us at the instance of the assessee is as to
whether the Tribunal was right in having applied the proviso to Section 7 (4)
of the Wealth Tax Act in respect of a part of the property and not to the
whole of it. The assessment year is 1981-82.
2. The assessee owns a house property called “Hawarden” at Thiruchy
Road, Coimbatore. The property consists of 175 cents of land with built up
area of 1187 sq. Metres. The assessees claimed the benefit of the proviso to
Section 7 (4) of the Wealth Tax Act. The assessing authority while granting
exemption under that provision, limited it to an extent of 88 cents out of the
175 cents, after expressing the view that that extent was the reasonable
extent which could be regarded as the land appurtenant to the house. He
thereafter estimated the value of the remaining 87 cents and calculated the
same in the assessable wealth of the assessee. He relied upon the Town
Planning Rules which stipulated, according to him, that the open area shall be
“not less than 1/3 of the area of the site open to the sky”.
3. An appeal to the appellate authority having proved unsuccessful,
the assessee carried the matter in further appeal to the Tribunal. The
Tribunal confirmed the order of the Commissioner after holding that the extent
of land determined by the assessing officer was capable of being independently
developed and, therefore, that extent cannot be regarded as part of the house
as the remaining extent in the view of the Tribunal was sufficient to enable
the assessee to enjoy the house.
4. Section 7 of the Wealth Tax Act deals with the manner in which the
value of the assets is to be determined. Sub-section(4) thereof which is the
relevant sub-section requiring our consideration reads thus:-
“(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 Assessing 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 which the
assessee may, at his option, specify in this behalf in the return of net
wealth.”
5. This sub-section does not set out a definition of the term ”
house” nor does it lay down any ceiling regarding the extent of open space
which can be regarded as part of the house. The term “house” is not defined
in the definition Section 2 of the Wealth Tax Act.
6. The tests that are required to be satisfied to attract the proviso
to Section 7 (4) are (i) that the property must belong to the assessee and
(ii) that it should be used exclusively for ‘residential purpose’. In the
event of the assessee having more than one residential house, option is given
to the assessee to specify the house in respect of which he wishes to avail
the benefit under that proviso.
7. It is the case of the assessee that the house in respect of which
the benefit under the proviso to Section 7 (4) has been availed is a
residential house being used by the assessee for the purpose of his residence.
That fact is not disputed by the Revenue. The house itself is a large house.
It also has a large open space around it. The Wealth Tax Act does not impose
any limit on the extent of open space which may be retained by the assessee
for the better enjoyment of his residential house. The limitations regarding
the holding of urban land is not the subject matter of the Wealth Tax Act but
of a separate enactment. It was not necessary for the purpose of Wealth Tax
Act, as it stood during the relevant year, to determine the extent of the land
which can be regarded as either reasonably necessary or as being appuretnant
to the house. Once it is found that the house is infact a residential house
and that the land is being used as the ground attached to the house for the
benefit of the residents of the house, it remains a part of the house for the
purpose of the proviso to Section 7 (4). Importing into this provision
notions as to what the assessing officer or other authorities may regrd as the
optimum size or reasonable size for the house is wholly beyond their
jurisdiction. It is not for the authorities to decide for the assessee as to
what the size of his house should be or the extent of the garden or other area
which the assessee should have for the house in which he lives. Any such
enquiry is outside the scope of the Wealth Tax Act.
8. Learned counsel for the assessee submitted that the present
assessee is a member of the family of late Sri Shanmugam Chettiar, who was at
one time the Finance Minister for the Union of India and that the house had
been purchased by him together with the enclosed grounds and that the area of
the house as also the extent of the grounds attached to it are the same even
now.
9. Although on account of the preasure of population and the high
cost of land in urban areas, the extent of living space available to the
average urban dweller has dwindled and having the benefit of open space, much
less garden space, is almost a luxury, nevertheless, the fact that in earlier
times houses were large and that they had large open spaces around is not to
be whished away or to be regarded as being impermissible by reason of the
limited space and the high cost of such space in more recent years. If a
person had acquired a house for being used as a residential house and that
house hapened to have large open space around it for use as garden or as play
area or other purposes, as long as the house is used solely for residence and
the benefit of those grounds are confined to the residents of the house and
their visitors, such a house with its grounds would qualify for exemption
under Section 7 (4). Importing individual notions as to what should be the
reasonable size of a house or what should be the reasonable extent of the open
space around is not a permissible exercise in making the assessment under the
Wealth Tax Act.
10. The assessing officer has referred to the Town Planning Rules
which stipulates that the extent of the open space around the house should be
not less than one third of the built area. Even those Rules do not impose a
limit on the maximum open space that can be left around the house. The
assessing officer cannot take a rule under a different enactment specifying a
minimum and convert that into a maximum for the purpose of the Wealth Tax Act
and thereafter bring to tax a part of the house which should have been
excluded from valuation under Section 7 (4). The Tribunal was wholly in error
in upholding that exercise which the assessing officer had resorted to.
11. When the statute provides an exemption it is not to be whittled
down arbitrarily by the assessing officers by importing their private notions
of reasonableness into the provision which grants exemption.
12. The question referred to us is, therefore, answered in favour of
the assessee and against the Revenue.
Index:Yes
Website:Yes
To
1. The Asst. Registrar
Income-tax Appellate Tribunal
121 Nungambakkam High Road
Chennai.
2. The Commissioner of Income-tax, Madurai
3. The Commissioner of Income-tax (Appeals) IV, Madras-34
4. The 2nd Income-tax Officer, Madras-2
5. The Commissioner of Income-tax, Madurai
dev/