JUDGMENT B.P. Jeevan Reddy, C.J.
1. The Income-tax Appellate Tribunal, Allahabad, has referred the following two questions, relating to the assessment years 1972-73, 1974-75 and 1975-76, under Section 256(1) of the Income-tax Act, 1961 :
"(1) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the value of the assessee's share in the let out portion of the assessee's property is to be computed after exclusion of reversionary value of land ?
(2) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the question of valuation was not referred to the proper valuer and directing the Wealth-tax Officer to refer the valuation again to the competent valuer to determine the assessee's share in the firm and not to go by the valuation made by the Valuation Officer who had valued the assets of the firm ?"
2. In respect of the assessment years 1977-78 and 1979-80 too, the very two questions are referred separately.
3. It is stated by learned counsel for the Revenue that the first question has to be answered against the Revenue and in favour of the assessee following the decisions of this court in CWT v. Ram Saran Kajriwal [1987] 168 ITR 485 and CWT v. Sri Ram Narain Garg [1988] UPTC 30. Accordingly, the first question is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. We shall confine our consideration only to question No. 2.
4. The assessee is an individual. On the valuation dates relevant to the assessment years 1972-73, 1974-75, 1975-76 and 1977-78, the assessee was a partner in the firms, M/s. New Cawnpore Floor Mills and M/s. Kejriwal Floor Mills. Similarly, on the valuation dates relevant to the assessment years 1972-73, 1974-75, 1975-76, 1977-78 and 1979-80, he was a partner in another firm, M/s. Nagarmal and Co. While assessing the wealth of the assessee on the relevant valuation dates, the Wealth-tax Officer found that the value of the land and buildings and plant and machinery belonging to the above firms, as shown by the assessee in his return, was on the lower side. He, accordingly, referred the matter to the departmental Valuation Officer. On receiving the report of the Valuation Officer, he adopted the value of the land and buildings and plant and machinery as determined in the report of the departmental Valuation Officer and completed the assessment. The assessee preferred appeals. The Commissioner of Income-tax (Appeals) set aside the valuation of the share of the assessee in the aforesaid three firms made by the Wealth-tax Officer. He directed that the said shares should be valued in accordance with the provisions of Rule 2 of the Wealth-tax Rules and if a reference is to be made under Section 16A, reference should be to the Valuation Officer specifically appointed for the valuation of shares in a partnership firm. Aggrieved by the decision of the Commissioner of Income-tax (Appeals), both the assessee and the Revenue filed appeals before the Income-tax Appellate Tribunal. The Tribunal observed in its judgment that there are different Valuation Officers for valuing land and buildings and other assets and for valuing shares in partnership firms. A list of such valuers is provided in Notification No. S. O. 1699 dated March 13, 1974. The present is a case of valuation of shares in partnership firms. It cannot, therefore, have been referred to a valuer who was competent to value other assets but not competent to value shares in a partnership firm. The Commissioner of Income-tax (Appeals) was, therefore, right in giving the direction he did. If the matter is referred to a new valuer, he shall obviously keep in mind the various principles enunciated by courts including the Allahabad High Court in Seth Satish Kumar Modi v. WTO [1983] 139 ITR 373. The Tribunal, accordingly, disposed of the appeals whereupon the Revenue applied for and obtained this reference.
5. This case was heard earlier by a Bench of this court which called for a supplementary statement of case from the Tribunal. The Tribunal has, accordingly, drawn up a supplementary statement on December 22, 1988. and submitted it to this court.
6. Section 4(1) of the Wealth-tax Act (as it stood at the relevant time) says that, in computing the net wealth of an individual, there shall be included, as belonging to that individual where the assessee is a partner in a firm, the value of his interest in the firm determined in the prescribed manner. Section 7(1) provides the mode of valuation of assets. It says "subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated 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." Section 16 prescribes the procedure which the Assessing Officer has to follow. Section 16A provides that, for the purpose of making an assessment under this Act, the Assessing Officer may refer the valuation of any asset to a Valuation Officer, if he is of the opinion that the value as returned by the assessee is less than its fair market value and in some other situations which it is not necessary to set out in detail. Sub-sections (2) to (5) prescribe the procedure which the Valuation Officer should follow in determining the value of the assets. Sub-section (6) says that, on receipt of the report of the Valuation Officer, the Assessing Officer should proceed to complete the assessment in conformity with the valuation report of the Valuation Officer so far as the valuation of assets referred to him is concerned. Rule 2 of the Wealth-tax Rules provides the manner in which the interest of a person in a firm shall be valued. It says that in the first instance, the net wealth of the firm shall be determined. From the said net wealth, an amount equal to the amounts of its capital shall be allocated among the partners in the proportion in which they have contributed the same and the residue of the net wealth of the firm shall be allocated among the partners as if dissolution of the firm has taken place on the valuation date. Rule 3A prescribes the jurisdiction of Valuation Officers. The jurisdiction is determined both territory-wise and valuation-wise and also having regard to the nature of the asset. Rule 8A prescribes the qualifications of registered valuers (Section 34AB provides for registration of Valuation Officers). Rule 8A contemplates valuers competent to value different types of assets, namely, (i) valuer of immovable property other than agricultural lands, plantations, forests, mines and quarries, (ii) valuers of agricultural land other than plantations, (iii) valuers of coffee plantations, tea plantations, rubber plantations and other plantations, (iv) valuers of forests, (v) valuers of mines and quarries, (vi) valuers of stocks, shares, debentures, securities, shares in partnership firms and of business assets, including goodwill but excluding those referred to in Sub-rules (2) to (6) and (8) to (11), (in Sub-rules (2) to (6) are the valuers mentioned hereinbefore while those mentioned in Sub-rules (8) to (11) are those mentioned hereinafter), (vii) valuers of machinery and plant, (viii) valuers of jewellery, (ix) valuers of works of art, and (x) valuers of life interest, reversions and interest in expectancy, vide Sub-rules (2) to (11) respectively. Different qualifications are prescribed for each of the said categories of valuers. While it is not necessary to mention those qualifications, it is sufficient to mention that qualifications appropriate to the work expected of them are prescribed.
7. Now, coming back to the facts of the case, the appellate authority has said that, while valuing the share of the assessee in the partnership firms aforesaid, reference ought to have been made to the valuer of stocks, shares, debentures, securities, shares in partnership firms and of business assets, including goodwill but excluding those referred to in sub-rules (2) to (6) and (8) to (11), i.e., to the valuer mentioned in Sub-rule (7) of Rule 8A. The appellate authority was of the opinion that the Wealth-tax Officer was in error in referring the said question to the valuer of immovable properties. Indeed, the reference was only to one valuer for valuing both the lands and buildings and plant and machinery, for which Rule 8A prescribes different valuers. Before proceeding further, it would be appropriate to refer to Circular No. 96 dated November 25, 1972, [1973] 91 ITR (St.) 1, issued by the Central Board of Direct Taxes which is styled "Explanatory Notes on the provision of the Taxation Laws (Amendment) Act, 1972". Among other matters, the said circular sets out the appointment and jurisdiction of Valuation Officers, conditions for reference to Valuation Officers, functions of the Valuation Officers and their registration. Under the head "Registered Valuers", para 43 sets out ten categories of valuers which are mentioned in Rule 8A of the Wealth-tax Rules and which we have specified herein-above. We are referring to the circular because the appellate authority has referred to this circular.
8. There was a good amount of debate before us as to the interpretation to be placed upon Sub-rule(7) of Rule 8A. The words are "a valuer of stocks, shares, debentures, securities, shares in partnership firms and of business assets, including goodwill but excluding those referred to in sub-Rules (2) to (6) and (8) to (11)". The same are found repeated in the circular aforementioned. The argument of learned standing counsel for the Revenue was that the words " but excluding those referred to in Sub-rules (2) to (6) and (8) to (11)" qualify all the preceding expressions, namely, stocks, shares, debentures, securities, shares in partnership firms and business assets, including goodwill, whereas the contention of learned counsel for the assessee was that the said words qualify only the last of the assets, namely, "Business assets including goodwill". The contention of the Revenue is that where a partnership firm owns land and buildings, plant and machinery and other business assets including goodwill and if the Wealth-tax Officer is of the opinion that all of them should be valued by a valuer, the matter must be referred to three valuers. The valuation of land and buildings should be referred to the valuer of immovable properties referred to in Sub-rule (2) of Rule 8A. The valuation of plant and machinery must be referred to the valuer of plant and machinery referred to in the said Rule 8A and valuation of other business assets and goodwill must be referred to the valuer of stock, shares, debentures, etc., including shares in partnership firms mentioned in Sub-rule (7). On the other hand, the contention of learned counsel for the assessee was that such a course involves duplication of work and unnecessary harassment to the assessee. His contention was that the valuer mentioned in Sub-rule (7) of Rule 8A should value the share in a partnership firm whatever be the assets of the partnership firm. Even if the partnership firm owns lands and buildings, machinery and plant and other business assets, all must be valued only by one valuer, that is the valuer mentioned in Sub-rule (7). On a consideration of the rival contentions and the scheme of Rule 8A, we are inclined to agree with learned standing counsel for the Revenue. It may be noticed that the qualifications prescribed for each category of valuers are different. Separate qualifications are prescribed precisely because a valuer who is equipped and qualified to value a particular type of asset may not be equipped and qualified to value another type of asset, to wit, a valuer of immovable property may not be competent to value mines, quarries or, for that matter, stocks, shares, debentures, etc., or works of art and jewellery. But this does not mean that the Wealth-tax Officer is bound to refer every asset owned by a partnership firm to the appropriate Valuation Officer. The question of reference to the Valuation Officer arises only where he is satisfied within the meaning of Section 16A(1) that a reference to a Valuation Officer is necessary. Take for example, a partnership firm which owns lands and buildings, machinery and plant and other business assets including goodwill. The Wealth-tax Officer may think that only the machinery and plants must be referred to the Valuation Officer and he can do so. He is not bound to refer for valuation all other assets of the partnership firm also to appropriate Valuation Officers. In this case, it is not clear from the record as to whether the Wealth-tax Officer referred the valuation of shares in the partnership firms and business assets including goodwill. The assessment orders show that the Wealth-tax Officer referred the valuation of land and buildings and plant and machinery owned by the said three firms. Indeed, he does not appear to have valued the business assets of the firms including goodwill, if any, separately. The appellate authorities were, however, of the opinion that the valuation of the valuers competent to value lands and buildings/plant and machinery was not proper and that reference should be made to the valuer mentioned in Sub-rule (7) of Rule 8A. The orders do not show as to what happened to the valuation reports relating to land and buildings and plant and machinery. Both the appellate authorities do not appear to have addressed themselves to the words "but excluding those referred to in Sub-rules (2) to (6) and (8) to (11)" occurring in Sub-rule (7) of Rule 8A. They seem to be under the impression that the valuer mentioned in Sub-rule (7) would be competent to value all the assets of the partnership of whatever nature they are. In this assumption, they do not appear to be justified. In the circumstances, the proper course would be to call upon the Tribunal to pass appropriate orders in the light of the principles indicated in this judgment. Question No. 2 is, accordingly, returned answered with an observation that the Tribunal shall pass appropriate orders in the light of the discussions made in this judgment and give appropriate directions to the Wealth-tax Officer.
9. The wealth-tax reference is answered accordingly. No costs.