Andhra Pradesh H.C : The alleged uncertainties, hazards, risks of litigation and burden of tax liability, etc., pleaded by the assessee constituted factors for reduction of valuation up to 50 per cent. of the valuation fixed by the approved valuer

High Court Of Andhra Pradesh

Commissioner of Wealth-tax vs. Trustees Of H.E.H. The Nizam’s Jewellery Trust

Assessment Year : 1982-83

Section : 7, 27

G. Chandraiah And Challa Kodanda Ram, JJ.

Referred Case No. 172 Of 1996

December 10, 2013

JUDGMENT

G. Chandraiah, J. -As per the orders of the Division Bench of this court dated November 9, 1995, in W. T. C. Nos. 26 and 29 of 1994, the following three questions of law have been referred, said to be arising out of the order of the Tribunal, dated February 25, 1991, in W. T. A. No. 1432/ Hyd/1989 for the assessment year 1982-83, under section 27(1) of the Wealth-tax Act, 1957 (in short “the Act”).

“1.Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in confirming the order of the Commissioner of Wealth-tax (Appeals) in so far as fixing the value of the beneficial interest in the corpus at 50 per cent. of the value fixed by the valuer on the alleged grounds of uncertainties, hazards and risks of litigation, etc. ?

2.Whether the Appellate Tribunal is justified in holding that the alleged uncertainties, hazards, risks of litigation and burden of tax liability, etc., pleaded by the assessee constituted factors for reduction of valuation up to 50 per cent. of the valuation fixed by the approved valuer ?

3. Whether the Appellate Tribunal is justified in holding that the Wealth-tax Officer would be entitled to make further adjustments to the valuation as determined by the Valuation Officer under section 16A(5) of the Wealth-tax Act ?”

2. The issue involved in the order of the Tribunal is with respect to the remainder interest in the jewellery trust of the assessee, who is one of the beneficiaries of the trust. The assessment of the interest of the assessee in turn was depending on the valuation of the jewellery, which was the asset of the trust. The Tribunal disposed of the said appeal by following its own order for the assessment years 1980-81 and 1981-82, which was reported in WTO v. Trustees of HEH the Nizam’s Jewellery Trust [1990] 35 ITD 402 (Hyd), paragraph 106 of the said order, the Tribunal has recorded its opinion that the first appellate authority has correctly made a deduction for adjustment on account of uncertainties, hazards and risk of litigation. The Tribunal also has referred to the factum of joint ownership, cumulative burden of tax liabilities and various other uncertainties and held that the valuation adopted by the Departmental Valuer was rightly reduced by 50 per cent. on account of these depressing factors, justifying such reduction of 50 per cent. in valuation.

3. Heard the learned senior counsel, Sri S. R. Ashok assisted by Sri Sasidhar Reddy, appearing for the Department and the learned counsel, S. Ravi assisted by Sri S. Ravindra Chenji, appearing for the assessee.

4. Learned senior counsel for the Department has drawn the attention of this court to the order of the Tribunal in W. T. A. Nos. 620 to 622/Hyd/88 and W.T.A. Nos. 672 and 753/Hyd/88 for the assessment years 1980-81 to 1981-82 (reported in Trustees of HEH the Nizam’s Jewellery Trust (supra). He would submit that there is no basis for the Tribunal to give 50 per cent. reduction in valuation, in that view of the matter, it is submitted that inasmuch as under section 16A(5) of the Act, the valuation as determined by the Valuation Officer is binding on the Wealth-tax Officer and in the absence of cogent reasons for differing with the valuation as determined by the Wealth-tax Officer, giving of 50 per cent. discount in the valuation is totally unwarranted.

5. The learned senior counsel would refer to the order of the Division Bench in W.T.C. Nos. 26 and 29 of 1994 dated November 9, 1995, wherein, this court observed as follows:

“From these orders, the broad basis on which the Appellate Commissioner and the Tribunal ordered reduction of 50 per cent., is no doubt discernible. But still the question remains as to the effect of the alleged inhibiting factors and to what extent the deduction must be given on account of the contingencies referred to by the assessee. As already noticed, the contentions were put forward on both sides in this regard and the Tribunal has extensively referred to those contentions and recorded an omnibus finding at paragraph 106. We do not find the discussion and conclusion vis-Aÿ-vis the particular depressing factors pointed out by the assessee. There is no specific finding whether any or all of those factors did exist, how far they were relevant and if so, to what extent they go to reduce the valuation.”

6. On the other hand, Sri S. Ravi, learned senior counsel for the assessee, would submit that the Tribunal has merely followed its earlier orders for the assessment years 1980-81 and 1981-82. He would point out that the said order remained unchallenged, whereunder after considering the material on record and material placed before the Tribunal, the Tribunal came to the conclusion that reduction of 50 per cent. in value is required to be made on account of various uncertainties surrounding sale of jewellery. He further submits that in the absence of challenge to the earlier order of the Tribunal dated June 12, 1990, whereunder the valuation of the asset has been arrived at a particular figure, it is not open to come to a different conclusion without there being a specific challenge to the finding recorded by the Tribunal. He would further submit that these questions need not be answered on account of the fact that they are pure questions of fact.

7. Having considered the rival submissions, we desired to ascertain from the learned counsel for the Department whether any proceedings were initiated, questioning the order dated June 12, 1990, for the assessment years 1980-81, 1981-82, the learned senior counsel for the Department was not able to confirm, even after consulting the Department officials, whether there was any appeal preferred by the Department.

8. On the other hand, the learned counsel for the assessee, on instructions, from his client submitted that at no point of time the assessee had received any notice about any case with respect to the Tribunal’s order dated June 12, 1990. In those circumstances, we deem it that there was no appeal, challenging the order of the Tribunal dated June 12, 1990. In the absence of challenge to the order of the Tribunal, which was merely relied on by the Tribunal in passing the orders, which were the subject matter of the present reference case, whether the issue relating to the reduction of 50 per cent. in valuation of the asset can be challenged. In so far as the order of this court in W. T. C. Nos. 26 and 29 of 1994 is concerned, we should not lose sight of the fact that they were made in the context of calling the Tribunal to refer the questions of law said to arise from the orders of the Tribunal. While dealing with an application seeking to call for the reference of a question of law said to be arising from an order of the Tribunal, the opinion expressed in a prima facie view and the examination of the order of the Tribunal is only for the purpose of coming to a conclusion about whether a question of law arises or not ? As a matter of fact, consideration by the court at that stage is perfunctory, and in the order the Division Bench observed that “the ultimate conclusion reached by the Tribunal may or may not be right. But we are unable to say that no debatable question of law at all arises for the ostensible reason that a question of valuation is generally considered to be a factual question”. As a matter of fact the court had referred to its earlier order.

9. The learned counsel for the assessee has drawn the attention of Rajasthan court to the judgments reported in CIT v. Mohd. Bux Shokat Ali (No. 2) [2002] 256 ITR 357 and CIT v. Gnan Ganga Science Institute [1999] 238 ITR 473 (Guj).

10. The Tribunal in its order dated June 12, 1990, had in fact approved the valuation which was determined by the Appellate Commissioner, who had the benefit of going through the entire record placed before him. It is well settled that a finding of fact as recorded by the Tribunal is final and binding on the High Court while answering a reference.

11. Learned counsel for the assessee also referred to the order of the hon’ble Supreme Court dated September 9, 1996 in S.L.P. No. 4195 of 1996 and S.L.P. No. 4665 of 1996.

12. As a matter of fact we may notice that when the order dated November 10, 1996, of this court in W.T.C. No. 14 of 1993 was challenged before the hon’ble Supreme Court, the hon’ble Supreme Court observed as under :

“…some of the reasons given by the High Court in the order questioned herein do indicate as if the High Court has expressed its opinion on the merits of the question. We see no basis for the said apprehension. It is obvious that the reasons given in the order questioned herein are merely the reasons for directing the reference and do not amount to expression of the opinion on the merits of the questions.”

13. We are completely in agreement with the judgments cited supra 1 and 2 wherein it has been held that merely because a reference was called for under section 256(2) at a later stage, observations made at that stage are not conclusive and not binding on the court while answering the reference. In that view of the matter, the observations made by this court while calling for reference of the questions in W. T. C. No. 40 of 1994 are only prima facie in nature and this court while answering the questions may take entirely different view as it is, at that stage the facts and law relating to the case in issue are considered in totality.

14. It is well settled by a catena of judgments, that the Tribunal is the last fact finding authority and the High Court in exercise of its jurisdiction under section 27 of the Act and section 256 of the Income-tax Act has to accept the finding as recorded by the Tribunal as correct unless a specific question as to the perversity of such finding of fact has been raised in the given case.

15. Questions Nos. 1 and 2, relating to valuation of the asset in issue, in the present case are pure questions of fact. In view of the facts and in the circumstances of the case, we deem it appropriate that the two questions are required to be answered in favour of the assessee and against the Revenue.

16. So far as the third question is concerned, we decline to answer the same in view of the fact that the Wealth-tax Officer had in fact adopted the valuation as determined by the Valuation Officer and in that view of the matter the question does not arise from the order of the Tribunal and as such the same is declined to be answered.

17. Accordingly, this reference case is disposed of answering questions Nos. 1 and 2 in favour of the assessee and against the Revenue. No order as to costs.

[Citation : 361 ITR 668]