1978 (7) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Validity of initiation of acquisition proceedings.
2. Determination of fair market value of the property.
3. Method of valuation applied by the Valuation Officer.
4. Comparable sales used for valuation.
5. Impact of tenancy and rent control legislation on property valuation.
6. Procedural aspects and time-bar of the appeal.

Detailed Analysis:

1. Validity of Initiation of Acquisition Proceedings:
The transferees contended that the initiation of acquisition proceedings was bad in law as it was made after the expiry of the prescribed time. The competent authority, however, held that the proceedings were validly initiated and obtained the approval of the Commissioner of Income-tax before making an order for acquisition under s. 269F(6) of the I.T. Act, 1961. The Tribunal upheld the initiation of proceedings, finding no procedural defect.

2. Determination of Fair Market Value of the Property:
The property was sold for Rs. 1,80,000, but the Valuation Officer determined the market value at Rs. 2,73,000. The competent authority recorded that the value exceeded the apparent consideration by 51% and issued a notice under s. 269D of the Act. The Tribunal, however, found that the property being fully tenanted, the appropriate method of valuation would be to capitalize the rent, as laid down in CED v. Radha Devi Jalan [1968] 67 ITR 761. The Tribunal noted that the sale instance cited by the transferees indicated that the property could not have been sold for more than the stated consideration.

3. Method of Valuation Applied by the Valuation Officer:
The Valuation Officer applied a method combining the rental method for the buildings' estimated life and the reversionary value of the land after the buildings had outlived their economic life. The Tribunal found this method inappropriate, holding that the property should be valued by capitalizing the rent, given its fully tenanted status. The Tribunal rejected the Valuation Officer's method, which included an imaginary future reversionary value of the land.

4. Comparable Sales Used for Valuation:
The competent authority relied on the sale of premises at 47, Shakespeare Sarani, and two other sales of vacant plots in 1974. The Tribunal found these sales not comparable as they involved vacant lands with prospects of immediate development, unlike the fully tenanted property in question. The Tribunal noted the sale of an adjacent property at 9, Acharya Jagadish Chandra Bose Road, which supported the transferees' valuation.

5. Impact of Tenancy and Rent Control Legislation on Property Valuation:
The Tribunal emphasized that the property was fully tenanted and subject to rent control legislation, which significantly impacted its valuation. The Tribunal applied the "yield or rental method" for valuation, consistent with the principles laid down in Radha Devi Jalan [1968] 67 ITR 761 (Cal). The Tribunal held that the statutory control on rents must be considered in determining the property's market value.

6. Procedural Aspects and Time-Bar of the Appeal:
A preliminary objection was raised that the appeal was time-barred. The Tribunal's order was received by the appellant on 3rd October 1975, but the appeal was filed on 3rd December 1975. The appellant contended that the correct date of receipt was 4th October 1975. Upon review, the court found the appeal was not time-barred and directed correction of the date in the petition.

Conclusion:
The Tribunal's order was upheld, finding no procedural defect in the initiation of proceedings, and the appropriate method of valuation was the rental method due to the property's fully tenanted status. The appeal was dismissed with costs, and the interim orders were extended for eight weeks.