Mahavir Prasad Jaipuria vs Gift Tax Officer

S.B. Sinha, C.J.—The petitioner in this case has questioned the valuation made by the concerned respondents under the provisions of the Gift-tax Act, 1958 (''the Act''). The valuation of the property was made by the second respondent upon issuing a show-cause notice to the petitioner. The proposed valuation of the said property is the subject matter of the writ petition.

In view of the order proposed to be passed by us, it is not necessary to state the facts of the case in great details. Suffice to note that the petitioner submitted gift-tax returns for the year 1975-76 including the valuation of his 1/3rd share of the property situated at 8, Prithiviraj Road, New Delhi with the first respondent who appointed second respondent as the Valuation Officer. Respondent No. 2 issued notice to the petitioner intimating him about the valuation to be Rs. 4,34,400. The petitioner filed objections and informed that the assessments for the years 1971-72 to 1977-78 were subject matters of C.W. No. 649 of 1979 pending in the High Court. The second respondent, however, assessed the property on the basis of earlier order dated 24-2-1978 at the same value u/s 16A(5) of the Wealth-tax Act, 1957.

Section 6 of the Act reads thus:

Value of gifts, how determined. -(1) Subject to the provisions of sub-section (2), the value of any property, other than cash, transferred by way of gift shall, for the purpose of this Act, be its value as on the date on which the gift was made and shall be determined in the manner laid down in Schedule II.

(2) Where a person makes a gift which is not revocable for a specified period, the value of the property gifted shall be the capitalized value of the income from such property during the period for which the gift is not revocable.

It is, thus, not in dispute that the valuation of the property which was the subject-matter of gift is required to be done in terms of Schedule II appended to the Act which reads as under:

SCHEDULE II

[See section 6(1)]

RULES FOR DETERMINING THE VALUE OF PROPERTY GIFTED

Value of gifted property, how to be determined. -(1) Subject to the provisions of rules 2 to 7, the value of ''any property'' other than cash, transferred by way of gift shall, for the purposes of this Act, be determined in accordance with the provisions of Schedule III to the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act), which shall apply subject to the following modifications, namely:--

In the said Schedule,-

(a) references by whatever form of words to the Wealth-tax Act shall be construed as references to this Act;

(b) in rule 5, the reference to the year ending on the valuation date shall be construed as a reference to the previous year as defined in this Act;

(c) save as provided in clause (b), references to the valuation date shall be construed as references to the date on which the gift was made;

(d) reference to section 7 of the Wealth-tax Act shall be construed as references to section 6 of this Act;

(e) references to section 16A of the Wealth-tax Act shall be construed as references to sub-section (6) of section 15 of this Act.

Keeping in view the fact that the mode of valuation has been laid down in the aforementioned Schedule II, there cannot be any doubt whatsoever that the said valuation is required to be made strictly in terms thereof.

The said rules are procedural in nature and partake of the character of a rule of evidence. A rule, which is procedural in nature, will apply to a pending proceeding also. The respondents admittedly have not valued the property in terms of the said rules in Schedule II.

This interest of justice could be sub-served if this writ petition is disposed of with a direction that the subject property be valued in terms of rules as contained in Schedule II. For the reasons aforementioned, this writ petition is disposed of with the aforementioned directions. But in the facts and circumstances of the case there shall be no order as to costs.