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TMI Blog2012 (11) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... he District Valuation Officer including the reversionery interest - valuation of the land as done by the valuation officer is upheld, however on the portion of the building accepting the valuation in calculating the annual letting value, the Officer shall take note of depreciation allowed on the building portion and adopt capitalisation factor at 8% to arrive at the valuation for the purpose of assessment - To the above stated extent, the order of the Tribunal stands modified. - TC.(A).No. 1267 of 2005 - - - Dated:- 22-6-2012 - Mrs.Justice CHITRA VENKATARAMAN, Mr.Justice K.RAVICHANDRABAABU, JJ. For Appellant : Mr.Subbaraya Aiyar For Respondent : Mr.K.Sueshkumar JUDGMENT CHITRA VENKATARAMAN, J. The present appeal is by the assessee by raising following questions of law :- "(1)Whether the Appellate Tribunal is right in law confirming the order of the Gift Tax Officer in bringing to tax the deemed gift on transfer of reversionary right attached to the property as being otherwise than for adequate consideration, ignoring the value of the tenancy rights granted? (2) Whether the Appellate Tribunal is right in law directing adoption of the market value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation adopted by the officer failed to take into account the lease encumbering the property upto 2039. If that had been taken note of, then the value of the reversionery right would not be more than Rs.10 lakhs. It is seen from the order of the Commissioner of Income Tax (Appeals) that in the course of the proceedings, the Assessing Officer and the District Valuation Officer were called to submit reports supporting the stand taken in the valuation made. It was pointed out therein that even though the property had been leased out for a period of 60 years, the Board of Directors of the lessor company and lessee company are one and the same. Taking note of the same, the monthly lease rent of Rs.2000/- per month for the land more than 23 grounds and building, was not a real market value. However, the Valuation Officer pointed out that under the lease deed dated 18.2.99, the property in question was leased for 30 years from 1.4.79, with the option to renew the lease. Therefore, the lease period was not for 60 years as mentioned by the assessee. It was further contended that the lease was colourable one and the lessee being none other than Vasan Publications (P) Limited, where the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax (Appeals) omitted to note that the valuation done by the District Valuation Officer took note of the reversionery value of the leased property and that he pointed out that the lease rent did not reflect the fair market rent. In the circumstances, the Revenue pleaded that the value adopted by the Officer is correct. On considering the rival submissions, the Tribunal pointed out that the property in question was transferred by the assessee to its subsidiary company whose shares were transferred within 8 years from the date of transfer of the said capital asset and holding company ceased to hold the shares of the subsidiary company after the transfer of the property. The agreement of surrender of lease hold right by M/s.Vasan Publication Private Limited to M/s.Gemini Film Processing Industries Private Limited was entered on 15.7.87 after the financial year under consideration 31.3.1987 and this agreement entered into after the end of the financial year, could not be given any importance. Taking note of the fact that the management and control was with the assessee, the Tribunal pointed out that it was for the assessee to establish the truth of those documents relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. 7. Per contra, learned standing counsel for the Revenue pointed out that when the purchaser himself had valued the reversionery interest of the property at Rs.2,59,50,000/-, within a short period of nine months from the date of sale, it is clear that the consideration shown in the document at Rs.10 lakhs under valued one and did not reflect the adequate consideration. In the circumstances, rightly the Tribunal considered the case of the Revenue to restore the assessment. 8. Heard learned counsel for the assessee as well as learned Standing counsel for the Revenue and perused the records. 9. A perusal of the deed of sale executed on 25th September 1986 by the assessee in favour of its subsidiary company M/s.Gemini Film Processing Industries Private Limited shows that a sum of Rs.10 lakhs was paid by the transferree to the assessee transferor as a consideration for the transfer of the assessee's right and interest in the property including the right to receive the rent from the lessees during the subsistence of the lease together with the reversionery right, title and interest of the transfer to take over possession of the property from the lessee Vasan Publication Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale had been taken place in the year 1983. The valuation report dated 16.10.91 refers to 98, Radhakrishna Salai, Madras of an extent of 10.653 grounds and the total consideration as on 19.2.1987, the date of sale was 96,00,000/-. Thus, taking note of the above sale instances and the increase in the land rate to be linear with respect to time factor, the value of one ground as on September 1986 was arrived at the rate of Rs.8,30,800/- per ground as against Rs.2,31,000 adopted and arrived at the fair market value at Rs.1,98,51,600/-. The assessee pointed out that the valuation had been made by the Officer under the assumption that it was free hold property. When the property in question was subjected to long term lease, the valuation should have been done taking note of the above said aspect and had it been done, the value as indicated by the assessee in the sale deed could be accepted as a correct value. The valuation Officer however rejected the contention and pointed out that at the time of execution of lease deed, the key Board of Directors of the lessee company M/s. Vasan Publications Private Limited and lesser company Gemini Pictures Circuit Private Limited was one and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actual rent received or receivable by the owner in respect of such would be the annual rent. For the time being, we are not concerned about the clauses in the proviso. Rule 8 states circumstances under which Rule 3 shall not apply. Rule 8 provides for the method. The value of the property shall be determined in the manner laid down under Rule 20. Rule 20 is a residuary provision which states that for the purposes of the Wealth Tax Act, the valuation of assets, being an asset which is not covered by rules 3 to 19, other than cash, shall be estimated to be the price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date. Keeping this in the background that the valuation for the purpose of deemed gift has also go to be done as per the Wealth Tax Rules, if one analyses the valuation done for assessment under the Wealth Tax Act and under the Gift Tax Act, the difference in the method adopted would be clear. 12. As far as the valuation done under the Wealth Tax assessment is concerned, after arriving at the land value at Rs.2,31,000/- per ground, for the purpose of Wealth Tax assessment, the Valuation Officer took note of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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