1993 (2) TMI 141 - AT - Wealth-tax

High Court, Immovable Property, Market Value, Movable Property, Municipal Corporation, Valuation Date, Valuation Officer

Issues Involved:
1. Valuation of Odeon Cinema, Connaught Place, New Delhi.
2. Valuation of Naaz Cinema, Lucknow.
3. Valuation of land at Shanker Road, New Delhi.
4. Valuation of property at Faiz Bazar, Daryaganj, New Delhi.

Detailed Analysis:

1. Valuation of Odeon Cinema, Connaught Place, New Delhi:
The dispute centers on the valuation method for Odeon Cinema. The initial value fixed by the Settlement Commission was Rs. 46,57,490 for the assessment year 1976-77. The Valuation Officer (V.O.) used the rent capitalisation method for the let-out portion and the land & building method for the self-occupied area, resulting in a value of Rs. 78,85,950 for 1978-79, which increased to Rs. 2,72,65,000 by 1983-84. The CWT(A) agreed with the V.O.'s method but applied a uniform multiplier of 12.5% for the let-out portion and adjusted the land rates for the self-occupied portion, resulting in a lower value of Rs. 53,64,194 for 1978-79 and Rs. 1,43,80,024 for 1983-84.

The assessee contended that the entire property should be valued using the income capitalisation method, supported by CBDT circulars and various High Court decisions. The CWT(A) rejected this, citing the fluctuating nature of the cinema business and the potential for loss, which would make the income capitalisation method unreliable. The CWT(A) also considered the rates taken by the Delhi High Court in a similar case and adjusted the land rates accordingly.

Upon review, the Tribunal held that the lower authorities erred in using the cost replacement method and should have used the income capitalisation method. The Tribunal emphasized that commercial properties are generally valued based on their income potential, and the income capitalisation method is supported by judicial precedents and CBDT circulars. The Tribunal directed that the value be recalculated using the income capitalisation method, with appropriate deductions for outgoings and a multiplier of 8.

2. Valuation of Naaz Cinema, Lucknow:
The V.O. initially valued Naaz Cinema at Rs. 11,22,000 for 1978-79 to 1980-81 using the income capitalisation method. For 1981-82 to 1983-84, the V.O. switched to the land and building method, resulting in higher values. The CWT(A) upheld the land and building method but directed the V.O. to rework the valuation for 1978-79 and 1979-80 based on average income, with the lower of the two figures being adopted.

The Tribunal found that the lower authorities should have consistently used the income capitalisation method for Naaz Cinema, as it is a commercial property. The Tribunal directed that the value be recalculated using the income capitalisation method, with the average income of the previous four years being considered.

3. Valuation of Land at Shanker Road, New Delhi:
The land at Shanker Road was initially leased for constructing a cinema, but due to various legal challenges and objections from the Municipal Corporation of Delhi (MCD), the construction could not proceed. The V.O. valued the land as residential property, relying on sale instances from New Rajinder Nagar and taking the area as 3954 sq. yards.

The CWT(A) upheld the V.O.'s valuation, treating the plot as residential and valuing the excess area separately. The assessee contended that the land should be valued based on its actual use and the ongoing litigation, which made it unattractive to potential buyers.

The Tribunal found that the lower authorities erred in treating the plot as residential and not considering the ongoing litigation and restrictions on the land. The Tribunal directed that the value returned by the assessee be accepted, as there was no reliable data to suggest a higher market value.

4. Valuation of Property at Faiz Bazar, Daryaganj, New Delhi:
[Details not provided in the text]

Conclusion:
The Tribunal directed that the valuation of Odeon Cinema and Naaz Cinema be recalculated using the income capitalisation method, considering the average income of the previous years and appropriate deductions. For the land at Shanker Road, the Tribunal accepted the value returned by the assessee, considering the ongoing litigation and restrictions. The Tribunal emphasized the importance of using appropriate valuation methods based on the nature and use of the property, supported by judicial precedents and CBDT circulars.

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