1987 (10) TMI 82 - AT - Wealth-tax

Summary

Issues Involved:
1. Impact of the Urban Land (Ceiling & Regulation) Act, 1976 ("ULC Act") on property values.
2. Effect of the presence of cultivators and/or trespassers on property valuations.
3. Rate of capitalizing net rental income from properties.
4. Inclusion of reversionary value of leased property at Juhu village.

Issue-wise Detailed Analysis:

1. Impact of the Urban Land (Ceiling & Regulation) Act, 1976 ("ULC Act") on Property Values:
The appellants contended that the Commissioner (Appeals) failed to appreciate the legal impact of the ULC Act on the values of the properties. Under sections 3 and 6 of the ULC Act, holders of vacant property were required to file statements of their vacant lands, and under section 10(1), a notification was issued for the acquisition of land by the State Government. The appellants argued that the Valuation Officer rejected the submissions regarding the ULC Act's impact, stating it only affected the owner's right to transfer property. However, the main effect was on the holder's right to the property itself, as the holder was bound to transfer the property to the Government at a low rate of compensation. The Tribunal agreed that the Valuation Officer did not properly consider the ULC Act's effect and the notification under section 10, which significantly impacted property valuation.

2. Effect of the Presence of Cultivators and/or Trespassers on Property Valuations:
The appellants argued that some plots were subjected to adverse possession by cultivators or hutment dwellers. They presented evidence, including 7/12 extracts, showing that certain lands were in possession of cultivators or hutment dwellers. The Tribunal agreed that the Valuation Officer failed to consider the provisions of the Bombay Tenancy & Agricultural Land Act, 1948, and the Limitation Act, which affected the value of lands occupied by cultivators and hutment dwellers. The Tribunal emphasized the need to account for these factors when determining property values.

3. Rate of Capitalizing Net Rental Income from Properties:
The appellants contended that the Commissioner (Appeals) erred in adopting a 6 1/2 percent rate for capitalizing net rental income. The Tribunal agreed that the rate of capitalizing rental income should be reconsidered, suggesting an 8 percent rate for rented properties and a 6 1/2 percent rate for leasehold land, as mentioned in rule 1BB. The Tribunal emphasized the need to apply a reasonable rate of yield considering the circumstances.

4. Inclusion of Reversionary Value of Leased Property at Juhu Village:
The appellants argued that the Commissioner (Appeals) erred in including the reversionary value of the land up to the year 1994 and beyond for the Juhu village property, which was leased out to a tenant and protected under the Bombay Rent Act. The Tribunal agreed, citing the Calcutta High Court's decision in CIT v. Smt. Ashima Sinha, which criticized the "reversionary" method of valuation. The Tribunal held that no separate addition could be made for the reversionary value of land for properties given on lease, as tenants could not be evicted after the lease expired, effectively becoming statutory tenants under sections 12 and 13 of the Bombay Rent Act.

Detailed Valuation of Specific Properties:

Versova Village:
The property at Versova village, consisting of four different plots, was valued by the assessee's valuer and the departmental valuer at significantly different amounts. The Tribunal considered the property's sale to M/s. Kopotra Builders for Rs. 1,60,200 in March 1979 and the compensation rate under the ULC Act. The Tribunal concluded that the property should be valued at Rs. 1,20,000 for the assessment year 1977-78 and Rs. 1,40,000 for the assessment year 1978-79, confirming the valuation for subsequent years as declared by the assessees.

Mogra Village:
The property at Mogra village, consisting of three different plots, was valued differently by the assessee's valuer and the departmental valuer. The Tribunal considered the property's sale to M/s. Lloyds Enterprises for Rs. 2 lakhs in 1981 and the impact of the ULC Act and Bombay Tenancy Act. The Tribunal confirmed the valuation put by the Commissioner (Appeals) at Rs. 1,50,000 for the assessment years 1977-78 and 1978-79.

Kapashiwadi:
The property at Kapashiwadi, Andheri (West), was valued by the assessee's valuer and the departmental valuer differently. The property was sold with occupants for Rs. 3 lakhs in 1981. The Tribunal confirmed the valuation by the Commissioner (Appeals) at Rs. 1,83,000 for the assessment years 1977-78 and 1978-79, and Rs. 2,43,000 for the assessment years 1979-80 and 1980-81.

S.V. Road, Mogra:
The property at S.V. Road, Mogra, was valued by the assessee's valuer and the departmental valuer differently. The property fetched Rs. 4,50,000 in 1981. The Tribunal agreed with the Commissioner (Appeals) that the Valuation Officer's valuation was reasonable and confirmed the values put by the Commissioner (Appeals).

Amboli Village:
The property at Amboli Village, Vira Desai Road, Andheri (West), was valued by the assessee's valuer and the departmental valuer differently. The property was leased out to Rahejas for a period of 98 years. The Tribunal confirmed the valuation by the Commissioner (Appeals) at Rs. 3,92,697 for all the years under appeal.

Juhu Village:
The property at Juhu Village, leased out to Bharat Petroleum, was valued differently by the assessee's valuer and the departmental valuer. The Tribunal held that the Commissioner (Appeals) was not justified in valuing the property by adopting an ad hoc value and directed that the actual rent received by the assessees should be capitalized at 6 1/2 percent, adding the reversionary value worked out by the D.V.O., with a 5 percent deduction for joint ownership.

Oshiwara Village:
The property at Oshiwara Village, consisting of 11 different plots, was declared surplus and notified under section 10 of the ULC Act. The Tribunal directed that the property should be valued at Rs. 10 per sq. metre, with the area in terms of sq. metres to be provided by the assessees.

Conclusion:
The Tribunal allowed the appeals in part, confirming the valuation of certain properties by the Commissioner (Appeals) and directing specific valuations for others based on the principles laid down. The Tribunal emphasized the need to consider the impact of the ULC Act, the presence of cultivators and hutment dwellers, and the appropriate rate of capitalizing rental income while determining property values.