1988 (2) TMI 91 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of Prakash Talkies Property.
2. Valuation of Jeshingbhai's Wadi Property.
3. Valuation of Hathipura Property.

Issue-wise Detailed Analysis:

1. Valuation of Prakash Talkies Property:

The primary issue in both assessment years 1969-70 and 1970-71 was the valuation of the Prakash Talkies Property. The assessee HUF declared the property value at Rs. 3,16,800 based on a registered valuer's report, which used the rental method. The WTO referred the matter to the Departmental Valuation Officer (DVO), who considered the rent to be collusive due to the relationship between the tenant and the HUF members. The DVO valued the property based on profit-earning capacity and added the reversionary value of the land, arriving at Rs. 19,52,000 and Rs. 20,31,000 for the respective years. The CWT(A) directed the WTO to adopt the market value at Rs. 5 lakhs for both years, referencing a Tribunal decision in an estate duty case. The Revenue objected, arguing that estate duty valuations were not binding under the WT Act. The Tribunal found no good reasons to doubt the contractual relationship between the assessee HUF and the tenant, M/s. Prakash Talkies, and upheld the valuation method used by the registered valuer, rejecting the DVO's approach. The Tribunal concluded that the property should be valued using the rental method, considering it was a tenanted property.

2. Valuation of Jeshingbhai's Wadi Property:

For both assessment years, the Jeshingbhai's Wadi Property was valued by the assessee HUF at Rs. 65,400 based on the registered valuer's report using the rental method. The DVO valued it at Rs. 1,04,000 and Rs. 1,10,000, using both rental and land and building methods. The CWT(A) directed the WTO to adopt a fair market value of Rs. 58,000, applying a 12% capitalization rate as per the Gujarat High Court decision in CIT vs. Smt. Vimlaben Bhagwandas Patel. The Department argued that the capitalization rate was unrealistic, but the Tribunal agreed with the CWT(A) and the assessee's contention that the property, being wholly tenanted, should be valued using the rental method. The Tribunal modified the order to adopt the valuation of Rs. 65,000 as declared by the assessee.

3. Valuation of Hathipura Property:

The valuation of Hathipura Property for the assessment year 1969-70 was disputed. The registered valuer valued it at Rs. 3,30,000, while the DVO added the reversionary value, arriving at Rs. 9,50,000. The CWT(A) held that the reversionary value should not be added, citing the Calcutta High Court decision in CIT vs. Smt. Ashima Sinha. The Department argued that the property had potential for further development, but the Tribunal noted that the property was wholly tenanted and encroached upon, making the addition of reversionary value unrealistic. The Tribunal agreed with the CWT(A) that the property should be valued using the rental method without adding the reversionary value.

Conclusion:

The Tribunal upheld the CWT(A)'s decisions on the valuation of Prakash Talkies Property and Hathipura Property, rejecting the DVO's methods. The valuation of Jeshingbhai's Wadi Property was modified to Rs. 65,000 as declared by the assessee. The appeals filed by the Revenue were partly allowed.