1987 (7) TMI 130 - AT - Wealth-tax

Issues Involved:
1. Valuation of immovable properties "L.N. Talkies" and "Laxmi Talkies."
2. Whether the rent capitalisation method is appropriate for valuing the properties.
3. Whether the rent received by the assessee is low or the transaction of lease is not genuine.
4. Determination of the agricultural nature of land at Bage-Firdosh.
5. Exemption under sections 5(1)(iv) and 5(1)(xxxii).

Detailed Analysis:

1. Valuation of Immovable Properties "L.N. Talkies" and "Laxmi Talkies":
The primary issue pertains to the valuation of two immovable properties belonging to the assessee. The values returned by the assessee and those adopted by the WTO based on the valuation report of the D.V.O. were significantly different. The properties were leased out to two registered firms in 1958, with agreements renewed in 1975. The monthly rent at the time of valuation by the D.V.O. was Rs. 2,200 for L.N. Talkies and Rs. 3,400 for Laxmi Talkies. The D.V.O. rejected the rent figures disclosed by the assessee, deeming them "collusive," and adopted a different method of valuation based on the income of the firms, applying a multiplier of 9.09. The CWT(A) found no sufficient evidence to hold that the lease rent was low or the transaction was not genuine, thus accepting the lease rent as genuine.

2. Rent Capitalisation Method:
The CWT(A) and the Tribunal examined whether the rent capitalisation method was appropriate for valuing the properties. The Tribunal referred to previous cases, including the Ahmedabad Tribunal's decision in the case of Bai Nani D/o. Dayaram, which supported the use of the rent capitalisation method. The Tribunal held that the rent agreed upon by the parties should be the basis for valuation and that the D.V.O.'s method of capitalising the firms' income was incorrect. The Tribunal directed that a multiplier of 12.5 times the net rental income should be applied to value both properties.

3. Genuine Rent and Lease Transactions:
The Tribunal found that the genuineness of the lease agreements and the rent disclosed by the assessee were not in doubt. The D.V.O.'s claim of "collusive rent" was rejected as there was no evidence of comparable cases showing higher lease rent in the area. The Tribunal noted that the rental income as per the lease deeds had been accepted by the ITO in the income tax assessments of the assessee. Therefore, the D.V.O. was not justified in substituting his own figures for the rent.

4. Agricultural Nature of Land at Bage-Firdosh:
For the assessment years 1978-79 and 1979-80, the issue of whether the land at Bage-Firdosh was agricultural was raised. The WTO had considered the land as non-agricultural and denied exemption under section 5(1A). The CWT(A) set aside this portion of the assessment order, directing the WTO to re-examine the question of the land's agricultural nature, referring to the decision of the Gujarat High Court in CIT vs. Sarifabibi Mohmed Ibrahim. The Tribunal found no infirmity in the CWT(A)'s order and declined to interfere.

5. Exemption under Sections 5(1)(iv) and 5(1)(xxxii):
The Tribunal addressed the issue of whether exemptions under sections 5(1)(iv) and 5(1)(xxxii) were independent of each other. The WTO had denied exemption under section 5(1A) as the assessee had already availed of the maximum limit of Rs. 50,000 in respect of other assets. The CWT(A) directed the WTO to re-examine the question of exemption under various provisions of section 5. The Tribunal upheld the CWT(A)'s direction, allowing the exemption to be considered separately.

Conclusion:
The Tribunal partly allowed the Revenue's appeals for all three years, rejecting the D.V.O.'s valuation method and upholding the rent capitalisation method based on the lease agreements. The Tribunal also upheld the CWT(A)'s direction to re-examine the agricultural nature of the land at Bage-Firdosh and the exemptions under sections 5(1)(iv) and 5(1)(xxxii). The assessee's C.O. for the assessment year 1978-79 was dismissed.

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