1984 (7) TMI 121 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of tenanted and self-occupied portions of the property.
2. Method of valuation: rental method vs. reversionary method.
3. Appropriate multiplying factor for valuation.
4. Consideration of potential value for unconstructed portions.
5. Treatment of incomplete construction in valuation.

Detailed Analysis:

1. Valuation of Tenanted and Self-Occupied Portions of the Property:
The primary issue was the valuation of the house property at 129A, S. P. Mukherjee Road, Calcutta, for the assessment years 1973-74, 1974-75, 1975-76, and 1976-77. The ground, first, and second floors were tenanted during 1973-74 and 1974-75, while the third floor was under construction. For 1975-76 and 1976-77, the third floor was completed and occupied by the assessee. The assessee contended that the valuation should be based on the rental method for the tenanted portions and proportionate rental method for the self-occupied third floor, as per the Supreme Court's decision in Dewan Daulat Rai Kapoor.

2. Method of Valuation: Rental Method vs. Reversionary Method:
The WTO had referred the valuation to the Departmental Valuation Officer (DVO), who used the reversionary method, valuing the property at Rs. 10,44,000. The AAC, however, held that the rental method should be used for the tenanted portions, excluding the reversionary value of the land, as per the principles laid down by the Calcutta High Court in CIT vs. Smt. Ashima Sinha and J. N. Bose vs. CWT. The Tribunal upheld the AAC's decision, stating that the value of the land cannot be added separately when using the rental method.

3. Appropriate Multiplying Factor for Valuation:
The AAC applied a multiplying factor of 10, considering the rate of return on investment and the rent realized from the property. This was contested by the Revenue, suggesting the factor should be higher. The Tribunal, referencing the Supreme Court's decision in Union of India vs. Shanti Devi and the Gujarat High Court's decision in CIT vs. Vimlaben Bhagwandas Patel, upheld the AAC's application of a multiplying factor of 10, considering it reasonable based on the prevailing interest rates and market conditions.

4. Consideration of Potential Value for Unconstructed Portions:
The DVO and the Revenue argued that the potential value of the unconstructed portions (above the third floor) should be included in the valuation. The Tribunal rejected this contention, stating there cannot be potential value for an asset not in existence on the respective valuation dates.

5. Treatment of Incomplete Construction in Valuation:
For the assessment years 1973-74 and 1974-75, the third floor was under construction. The Tribunal, referencing the Madras High Court's decision in CWT vs. S. Venugopala Konar, held that the value of incomplete construction should be based on the actual amount spent on construction as of the valuation dates. The WTO was directed to recompute the value by adding the year-wise investment for the third floor to the value determined by the rental method.

Conclusion:
The appeals for the assessment years 1973-74 and 1974-75 were allowed in part, directing the WTO to recompute the value considering the actual investment in the third floor. The appeals for the assessment years 1975-76 and 1976-77 were dismissed, upholding the AAC's valuation based on the rental method for both tenanted and self-occupied portions.