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TMI Blog1993 (10) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... e above reference are as hereunder : The assessee is a Hindu undivided family which owned land measuring 1 acre 6 guntas. The assessee has put up industrial sheds on this plot and has leased them to tenants. The total net rent receivable by the assessee in respect of the sheds let out to the tenants was Rs. 3,24,454 per year. For the purpose of wealth-tax assessment for the year 1984-85, the assessee valued the land at Rs. 1,45,000 on the basis of a report of an approved valuer and the value of the constructions was taken at the written down value. The total valuation of the assets declared was Rs. 10,51,993. The Wealth-tax Officer accepted this valuation and completed the assessment under section 16(3) of the Act. The Commissioner of Wealth-tax was of the view that the said assessment was erroneous and prejudicial to the interests of the Revenue. He has pointed out in his order that the gross rental collections in respect of the sheds let out was as much as Rs. 4,00,529 ; that even if 1/6th of this amount is deducted towards repairs after deduction of municipal taxes, the net rent would come to Rs. 3,24,454 ; that, even if the multiplier '10' is adopted, the value of the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Wealth-tax Officer and that as he has not followed the circular, for that reason also his order is erroneous. Learned counsel for the assessee contended that the rent capitalisation method for purpose of valuation can be adopted only in cases of pucca building in developed urban area to which rent restriction laws apply ; that in the present case, the property consists of only industrial sheds and not regular buildings and that they were also not subject to the Rent Control Act having been built recently and as such the rent capitalisation method could not have been applied. He further contended that, under section 7 of the Act, the Wealth-tax Officer had a discretion to apply any one of the methods of valuation and that as he has adopted the land and building method and fixed the value under section 16(3) Of the Act, his order cannot be said to be erroneous. He pressed into service the decision in CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC), which is also referred to by the Tribunal, in support of the contention that when the officer in exercise of his discretion, adopts one of the methods available to value a property, that order cannot be said to be erroneous merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, could have only considered the question whether the Commissioner's order could be sustained on the ground oft which it was made. If it could not be sustained on the ground on which it was made, the Tribunal, in the assessee's appeal, could not have sustained the Commissioner's order on some other ground. In this connection, we may refer to the decision in CIT v. L. F. D'silva [1991] 192 ITR 547 (Kar). The court was dealing with the provisions of section 263 of the Income-tax Act which are similar to section 25 of the Wealth-tax Act and the power of the Appellate Tribunal under section 253(1)(c) of the Income-tax Act corresponding to section 26 of the Wealth-tax Act. This court has agreed with the following principles laid down in CIT v. Jagadhri Electric Supply and Industrial Co. [1983] 140 ITR 490, 502 (P H) (at page 555) : "The jurisdiction vested in the Commissioner under section 263(1) of the Act is of a special nature or, in other words, the Commissioner has the exclusive jurisdiction under the Act to revise the order of the Incometax Officer, if he considers that any order passed by him was erroneous in so far as it was prejudicial to the interests of the Revenue. Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds which were available to him at the time of the passing of the order do not find a mention in his order appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under section 263(1) of the Act. ..." In the present case, the Commissioner has nowhere referred to the Departmental circular in his order to come to the conclusion that the Wealth-tax Officer's order is erroneous. Even the points referred to this court do not require the court to give any opinion on whether the Commissioner's order was correct in view of the Departmental circular. As such, the Revenue cannot now be permitted to urge that the Commissioner's order is correct because the Wealth-tax Officer had not followed the Departmental circular. In the circumstances, it is not necessary to go into the question whether the Departmental circular only lays down the guidelines or whether it is mandatory. Now, coming to the point at issue, the Commissioner has held that the order of the Wealth-tax Officer was erroneous and prejudicial to the Revenue mainly on the ground that, when there was material on record to show that the buildings had been let out and were fetching co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rajasekhara v. Chairman, CITB, AIR 1957 Mys 20, it has been held that a well-recognised basis of valuation of buildings in urban areas is the rent normally realised by the owner when they are leased to others and the rent expected to be got, if these are in occupation of the owners ; that the valuation of land with building thereon by valuing the land and the building separately and adding the value of the one to the other does not furnish a reliable estimate of the property. In CWT v. V. C. Ramachandran [1966] 60 ITR 103 (Mys), it has been held at page 110 as hereunder : "....A Well recognised basis of valuation of buildings in urban A areas is the rent normally realised by these when these are leased out to others and the rent expected to be got if these are in occupation of the owners. The valuation of a land with building thereon by valuing the land and the building separately and adding the value of the one to the other does not furnish a reliable estimate of the property." B In the above case, the court has taken note of the fact that the properties were in the occupation of tenants ; that the assessee could not have secured possession of the properties except as prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proper method to be adopted is the rent capitalisation method and that the land and building method does not reflect the probable worth of the property. Coming to the contention of learned counsel for the assessee that the adoption of the rental method is restricted to cases where the property is a pucca building in a developed area and to which rent restriction laws are applicable, in the present case, merely because the property is described as industrial sheds, it cannot be said that they are only temporary structures or that they are not pucca buildings. With regard to the applicability of rent restriction laws, though in some cases the fact that the rent restriction laws were applicable to the buildings involved in those cases has been referred to, that has not been the main consideration to hold that rental method has to be adopted. In fact in P. P. Hassan Koya's case, AIR 1968 SC 1201, the Supreme Court has not referred to the applicability of any rent restriction laws while holding that, in determining the value of land with building, the method to be adopted is capitalisation of the return actually received or which might reasonably be received from the property. If r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under section 7 of the Act is a judicial power and that the same D has to be exercised in a judicial manner. In the present case, the industrial sheds had been constructed for letting them out for running industries and they had been so let out for that purpose, which is commercial in nature, to which rent restriction was not applicable under the Rent, Control Act since it was within the exempted E period. The rent fetched by the property was available on record and it was quite considerable. In such a case, the recognised method of valuation that should have been adopted was the rental method. The decisions of the Supreme Court and this court which are binding on the assessing authority have laid down that, in a case of this type, the land and building F method is not proper for the purpose of determining the value. The Wealth-tax Officer, ignoring the well-recognised principles of valuation and also ignoring the material available on record regarding the rent fetched by the property, accepted the valuation made by the assessee by adopting land and building method. The assessing authority has not acted judiciously and he has committed an error in valuing the property by the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh there are some recognised methods of valuation, the officer had to adopt that method which has been recognised as the proper method by judicial pronouncements, considering the nature of the property. Even in a case where discretion is given under the statute, the above decision shows that the selection of the method must be judicious. In the present case, as already pointed out, the method chosen by the Wealth-tax Officer on the material available on record and in the light of the binding decisions of this court and the Supreme Court for valuing the property in question was not, judicious. Hence, the Tribunal could not have, on the basis of the above decision, held that the order of the Wealth-tax Officer was not erroneous or that the Commissioner could not have interfered with it. Learned counsel for the assessee contended that it is for the final A fact-finding authority to decide on the facts, of the case as to which is the method to be adopted to arrive at the proper market value and that that finding of the Tribunal would be binding on the High Court. In support of this contention, he relied upon the decision in CIT v. P. I. George [1988] 171 ITR 620 (Ker). This decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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