1994 (3) TMI 131 - AT - Income Tax

Summary

Issues Involved:
1. Fair market value reduction of properties at Bhaktinagar, Shiyabaug, and Haribhakti House.
2. Deduction for co-ownership in Haribhakti House.
3. Allowance for repairs and maintenance.
4. Assessment of rental value for the vacant portion of Haribhakti House.
5. Rate of interest for capitalisation of income.
6. Valuation of Bhaktinagar plot.
7. Valuation of Shiyabaug property.

Detailed Analysis:

1. Fair Market Value Reduction of Properties:
The Departmental appeal challenges the reduction in the fair market value of properties at Bhaktinagar, Shiyabaug, and Haribhakti House by the Dy. CIT(A). The Assessing Officer had adopted values based on the Departmental Valuation Officer's (DVO) report.

2. Deduction for Co-ownership in Haribhakti House:
The Tribunal upheld the Dy. CIT(A)'s decision to allow an 8% deduction for co-ownership, aligning with an earlier Tribunal decision in the assessee's own case for assessment years 1972-73 to 1977-78. The DVO's contention that a 5% deduction was fair was dismissed.

3. Allowance for Repairs and Maintenance:
The Tribunal agreed with the Dy. CIT(A) that a 1/6th deduction for repairs and maintenance was justified. This decision was based on the fact that such deductions are standard under the IT Act, WT Rules, and supported by case law (Dina Nath vs. CED). The DVO's argument that the assessee had not provided proof of repairs and was receiving service charges from tenants was not sufficient to deny the deduction.

4. Assessment of Rental Value for the Vacant Portion of Haribhakti House:
The Tribunal upheld the Dy. CIT(A)'s assessment of the rental value for the vacant portion at Rs. 1.75 per sq. ft., considering it fair and reasonable. The DVO had assessed it at Rs. 2.50 per sq. ft., citing market trends and comparable properties. However, the Tribunal found the Dy. CIT(A)'s valuation more appropriate given the property's specific circumstances and historical rental rates.

5. Rate of Interest for Capitalisation of Income:
Both parties agreed that the issue of the rate of interest for capitalisation of income was covered by an earlier ITAT Ahmedabad Bench decision, which considered 12% reasonable. The Tribunal upheld the Dy. CIT(A)'s direction to adopt this rate.

6. Valuation of Bhaktinagar Plot:
The Tribunal found the Dy. CIT(A)'s valuation of the Bhaktinagar plot, partially acquired by the Baroda Municipal Corporation, to be lacking in adequate basis. The DVO's valuation, based on comparable sale instances and market rates, was deemed more appropriate. The Tribunal directed that the land's value be adopted at the market rate assessed by the DVO, subject to modification based on the final compensation determined by municipal authorities.

7. Valuation of Shiyabaug Property:
The Tribunal addressed the valuation of the Shiyabaug property by noting that the first appellate authority had directed it to be valued at Rs. 5 per sq. mt., considering the Urban Land Ceiling Act constraints. However, the Tribunal found that since no part of the land had been declared surplus and vested in the State Government, the valuation should reflect the market rate, adjusted for transfer restrictions. The Tribunal directed the value be adopted at 75% of the DVO's market rate assessment, supported by a similar decision in Sachindra Chowdhury vs. WTO.

Conclusion:
The appeal was partly allowed, with the Tribunal upholding some of the Dy. CIT(A)'s decisions and modifying others to align with market valuations and legal precedents.