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TMI Blog1993 (2) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... area of 1076 sq. yards inclusive of area under auditorium is with the management (owners). 3. The dispute relating to valuation of Cinema came before the Settlement Commission for earlier years right up to assessment year 1976-77. The Settlement Commission fixed its value at Rs. 46,57,490. The Settlement Commission fixed the aforesaid value on ad hoc basis. The Valuation Officer (V.O.) while considering the question of valuation under section 16A(4) applied rent capitalisation method for let out property and land building method for the area held to be under self-occupation. The Valuation Officer, thus took net value of property at Rs. 78,85,950 for the assessment year 1978-79, progressively increased it and ultimately took it at Rs. 2,72,65,000 for the assessment year 1983-84. On appeal, CWI(A) agreed in principle with the method adopted by the Valuation Officer but applied uniformly multiplier of 12.5% in fixing value of let out portion. The value of other portion was also reduced by taking rates of land lower than taken by the Valuation Officer while applying land and building method. The CWT(A) also allowed certain benefit to the assessee for joint ownership. He took net va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for different years and in a year of loss the valuation may be nil". Thus, the market value of the property was its real worth on a given date. In case of cinema, the income is bound to fluctuate because income depends upon type of films received from the producers and exhibited. If there are good movies, then there is more audience and more receipts. If the pictures are not good, income will fall. In support of this view CWT(A) found support from assessee's accounts for assessment years 1978-79 to 1982-83. As per the chart, income for assessment years 1981-82 was Rs. 5,17,000 against Rs. 7,52,000 in earlier assessment year 1980-81 and Rs. 11,47,000 in assessment year 1982-83. If income yielding method was adopted value of property in 1981-82 should be less than 1980-81. He, therefore, rejected income yielding method. It is further mentioned by CWT(A) that even Settlement Commission was aware of above problem and, therefore, adopted land and building method right up to assessment year 1976-77 which position was accepted by the assessee. 6. The CWT allowed outgoings at 25% for repairs, municipal taxes, ground rent etc. and applied uniformly multiplier of 12.5% for all the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of plant and machinery, the learned CWT(A) considered the objection of the assessee but held that Valuation Officer rightly adopted replacement cost method and valuation taken by him was neither excessive nor unreasonable in any manner. Thus addition on account of plant and machinery was also upheld. 9. We have heard the parties at length. We have also carefully considered material available on record. Regarding valuation of cinemas, Shri C.S. Aggarwal, learned counsel for the assessee submitted that these commercial properties were to be valued on income capitalisation method. Reliance was again placed on the decision of the Tribunal in the case of Alpna Pictures. Shri Aggarwal emphasised that the department itself valued Naaz Cinema in earlier years on income capitalisation method. To CWT(A)'s view that the aforesaid method could become non-functional in the year of loss, Shri Aggarwal submitted that in such a situation the value assessed in the immdiately preceding year can be applied or by taking average of 4/5 years, the problem can be solved. It was accordingly submitted that land and building method was inappropriately applied. Alternatively it was submitted that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital value of the property determined by the appropriate authority in the latest assessment for purposes of property taxation, under the laws and regulations relating to municipalities and municipal corporations. Where the municipal valuation is prima facie too low having in view the rents actually received, or where an assessment of capital value is not made by a municipality, or the property is located in an area where there is no municipality, the Wealth-tax Officer may estimate the reasonable annual value of the property and determine its capital value as a multiple, say 20 times, of such annual value. " 12. In the case of State of Kerala v. P.P. Hassan Koya AIR 1968 SC 1201, the Supreme Court in the case relating to determination of compensation under section 23 of Land Acquisition Act disapproved of determining value of building by "breaking up value" of land and buildings separately. The land and the building constituted one unit and value of entire unit must be often determined with all its advantages and its potentialities. The Supreme Court further observed that when the property sold was land with building, it was often difficult to secure reliable evidence of instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be evicted because of rent control regulations, the appropriate method of valuation would be rent capitalisation method. In the case of Debi Prosad Poddar v. CWT [1977] 109 ITR 760 (Cal.), Sabya Sachi Mukherji Justice (later Chief Justice of India) held that appropriate method of valuation of building which could not be demolished without ejecting tenants protected under the Rent Restiction Act was, "the rental method i.e., method based on the expected return by letting out". Their Lordships further laid down following principles : " (4) Which one of the various methods would be suitable for a particular case must depend upon the nature of the property, the location of the property, the purpose for which the property is used and several other objective factors, viz., the time when the valuation is made, the prospect of buying and selling in respect of the property at the relevant time and also special features In respect of the property, if there be any. Taking all these factors into consideration it is, therefore, necessary to determine which one of the various methods will be most suitable to reach as accurate as possible guess as to the valuation on the valuation dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that restrictions under NDMC are equally cumbersome. Therefore having regard to material on record and the situation in which the properties were placed on the relevant valuation dates, the most appropriate method of valuation was income capitalisation method. 16. In our considered view, the learned CWT(A) rejected above method on unsound reasons. Assuming here that all data collected is relevant and figures of cost of construction on different valuation dates are correct, the cinemas constructed at huge costs (as worked out) were to serve a purpose and that purpose can only be to earn income. How then income or return can be ignored ?--to make entire thing a futile exercise. No reasonable prudent man can be expected to ignore return from investment in a commercial asset. Commercial assets are acquired for return and not alone for prestige, pleasure or passion. The argument that there can be loss in cinemas for 2-3 years is of no avail. Profit and loss are two sides of coin called business and no sensible businessman can dispute that any venture undertaken for profit may result in loss. But this factor does not deter a businessman from acquiring business assets. What is taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction on account of unearned increase in the value of land be also worked out as per Rule 7 of Schedule-Ill. No separate addition be made for machine. On the above principles and by applying income capitalisation method, the value of Naaz Cinema,Lucknowshould also be worked out. It Is, however, made clear that in no case value of property is to be taken at a figure lesser than the one returned by the assessee as there is no material on record to show that value declared was shown under any wrong or misconception of facts or law. We direct accordingly. III--Land atShanker Road,New Delhi: 19. The aforesaid plot of land atShanker Road.New Delhiis measuring 4166.70 sq. yards as per the lease deed. The other facts as available in the decision of Hon'ble Delhi High Court in the case of Smt. Damyanti Sahni v. MCD [CPW No. 725 of 1975, dated 1-6-1984] are that the plot was allotted to the assessees and their predecessors as highest bidder for sum of Rs. 2,56,550 in auction held on 11th November, 1954 by the Ministry of Rehabilitation as cinema site. A perpetual lease for 99 years was granted vide Lease Deed dated4th October, 1956. It was, however, wrongly mentioned in the lease dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking space is against building bye law and very much inadequate. 12. The plot in question has since been transferred to M.C.D. along with services of the colony by the Government of India, and hence applicant is not the owner. " The assessees then requested Municipal Corporation vide letter dated21st May, 1974, to review their order rejecting the sanctioned plan. Having received no response, a fresh letter dated16th April 1975was addressed to Municipal Corporation alleging that sanction was being withheld on malafide grounds and was unwarranted. This claim was, however, rejected by the Municipal Corporation as per letter of its Executive Engineer, dated26th May, 1975informing that the plan was rightly rejected and matter could not be reconsidered. 21. The assessee then filed Writ Petition before Hon'ble High Court on 2nd June, 1975 seeking the following reliefs :-- " (i) Directing the M.C.D. to reconsider on merits according to law the said building plans submitted by the petitioner for the construction of a cinema building ; (ii) restraining the M.C.D. from representing to the Delhi Development Authority (DDA) to show the said plot in the Zonal Plan as an open space or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plot is residential and there are buildings of old Rajinder Nagar." He upheld the valuation made by the Valuation Officer. The area held to be in possession in excess of the area mentioned in the lease deed was directed to be valued at Rs. 500 per sq. yard as on 31-3-1978 and at Rs. 1,750 per sq. Mt. as on 31-3-1983. For in between years, the value was to be increased as per price index for each year. The land rate for area stated in lease deed was fixed at Rs. 2,250 sq. Mts. as on31-3-1984. All other objections raised on behalf of the assessee were rejected. 24. The aforesaid order of CWT(A) has been challenged before us. It has been contended that CWT(A) was not right in treating the plot in question as a residential plot and fixing valuation accordingly. The sale instances relied upon related to a comer plot better situated and so could not be treated as comparable to the plot in question. The CWT(A) was also not justified in ignoring the fact that the plot under the master plan of the DDA and MCD was shown as an open park and not a residential or cinema site. Shri Aggarwal on the facts of the case and in view of the stand taken by the MCD, claimed that the property had no va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of any other reliable data of similar disadvantages, the best course would be to accept the value as returned by the assessees from year to year. There is no material nor there is any justification or basis to claim that as on the valuation date the market value of the property was higher than the one returned by the assessee. We accordingly direct that the value returned be accepted. 26. The learned CWT(A) was wholly in error in adding separately value of area beyond stated in the lease deed on the basis of actual physical possession. There is no finding that aforesaid possession on any valuation dates matured into ownership. The possession of property without a legal title cannot be held as an assessable asset under the Wealth Tax Act. In this connection, it would be relevant to refer to definition of asset given in section 2(e) of W.T. Act which specffically excludes any interest for a period less than 6 years. It cannot be stated that the given possession of assessees created an interest beyond a period of 6 years. We, therefore, see no merit in the addition made by the learned CWT(A). Likewise, we do not find any merit in the claim of Shri Aggarwal that nothing could be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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