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TMI Blog1991 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... gift at Rs. 8,549 only. The Gift-tax Officer, however, determined the value of the gift at Rs. 1,75,000 by his order dated March 28, 1979. The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner was of the view that the assessment required enhancement and accordingly, he issued a notice to the assessee intimating, inter alia, that the value of the leasehold interest in the above property as on the date of gift would work out to Rs. 5,45,700, which will be the value of the taxable gift for the assessment year in question, i.e., 1973-74, as against the value of the taxable gift of Rs. 1,75,000, determined by the Gift-tax Officer. The assessee replied to the proposed enhancement contending that it was much too excessive. The Appellate Assistant Commissioner dealt with the contentions of the assessee and he came to the finding that the yield rate of 5.5 per cent. was justified in the facts and circumstances of this case and he has given elaborate reasons therefor. At the time of hearing before the Appellate Assistant Commissioner a contention was raised that the gifted property consisted of two leasehold properties and the unexpired period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or. March 31, 1972 (valuation date for wealth-tax assessment for the assessment year 1972-73 ) and as on June 26, 1972 ( the date of making the gift). (iii) The computation showing the basis on which the return of gift was filed showing the value of gift at Rs. 8,549. (iv) The value of the property shown in the wealth-tax return of Miss Shradha Poddar. " Another contention was raised before the Appellate Assistant Commissioner that there was a restriction as to the transfer of the lease without the prior consent in writing of the Commissioner. The Appellate Assistant Commissioner also recorded as follows : " Apart from the valuation of gifted property there is another question which cropped up during the course of hearing, i.e., that there was a restriction on the transferability of the property. It was stated that clause (5) of the lease deed of January 2, 1958, states as under : '5. And will not assign, transfer (transfer of lease) underlet or part with the possession of the demised land or any part thereof without the prior consent in writing of the Commissioner.' Similar provision is contained in clause (6) of the lease deed of June 26, 1983. The Gift-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the value of gift should be taken as the same as has been accepted in the case of the other co-owner, Shri Bimal Kumar Poddar. In view of the clear direction of the learned Appellate Assistant Commissioner regarding the value of the taxable gift, I have no alternative but to accept the value of gifted property determined by the learned Appellate Assistant Commissioner. The gift-tax liability is, therefore, computed as under: Rs. The value of gift determined by the learned Appellate Assistant Commissioner 5,45,700 Less : Deduction 5,000 Taxable gift 5,40,700 Thereafter, the assessee took up the matter before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) considered the facts and circumstances of this case in detail and he observed as follows : " In short, the Appellate Assistant Commissioner has given categorical finding that the rate of return for the purpose of capitalisation of the property should be taken at 5.5 per cent. The only two points on which the assessment was set aside and required further determination by the Gift-tax Officer pertained to the ascertainment of net income attributable to the two gifted proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant's share. Although, as a matter of fact, the Gift-tax Officer has not said so specifically in the impugned assessment order, the Appellate Assistant Commissioner's earlier direction in this behalf remains undisturbed as the facts indicated above support his finding. In that view of the matter, the Gift-tax Officer was justified in adopting the valuation suggested by the Appellate Assistant Commissioner and to that extent I find no reason to interfere. Before parting with the appeal, it is, however, necessary to say that the Appellate Assistant Commissioner's observation that 'a minor is not competent to contract and, therefore, cannot even be a lessee' is erroneous. The gifts were accepted by her father and natural guardian, Sri Saroj Kumar Poddar, on her behalf and, therefore, there is no infirmity in effecting such gifts of leasehold interest. The fact that the Gift-tax Officer has not given a finding to this effect in the impugned order does not make any difference. " A contention was also raised before the Commissioner of Incometax (Appeals) that a similar gift in respect of another property was valued at a much lower rate. The Commissioner of Income-tax (Appeals) ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in Special Land Acquisition Officer, Davangere v. P. Veerabhadarappa [1985] 154 ITR 190 does not help the assessee in any way. In fact, at page 200, it was observed that the 'investment in housing involves certainty of labour and effort such as maintenance, collection of rent, payment of taxes, etc., and the rate of return expected, therefore, was 11/2 per cent. to 21/2 per cent. more than what was expected from gilt-edged securities '. This observation actually goes against the assessee. On the leasehold land, the assessee has constructed superstructures and derived income and so much income would be more than the rate of interest on gilt-edged securities. Taking all these factors into consideration, the rate of return adopted at 5.5 per cent. is quite reasonable. Taking the entire facts into consideration, we hold that the value determined is quite justified. " On these facts, seven questions were raised by the assessee under section 26(1) of the Gift-tax Act, 1958, but only two questions have been referred. The Tribunal did not refer the other questions as either those questions did not arise out of the order of the Tribunal or the same were well-settled. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late authority, i.e., the Appellate Assistant Commissioner dated May 22, 1980. There the Appellate Assistant Commissioner came to a categorical finding after taking into account all the facts and circumstances relevant to the issue that the return rate of 5.5 per cent. was justified for the period under consideration. This having not been challenged, the assessee is precluded from challenging the same while the Gift-tax Officer gave effect to the order of the said Appellate Assistant Commissioner. A contention was raised before us that the Tribunal did not consider a restrictive covenant and the precarious lease and what would be the effect of such covenant and restriction on the valuation of the property. We have already set out in extenso the order of the second appellate authority, i.e., the Commissioner of Income-tax (Appeals) in this case. He has taken into account all the facts and circumstances of the case and, on the facts, he came to the conclusion that no such valuation for the restrictive clause was necessary. It cannot be said that the Commissioner of Income-tax (Appeals) did not take into account the contentions raised before him but since the valuation was determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us. The lessee in this case would have enjoyed the lease for a number of years had it not been gifted away. Our attention has been drawn by Mr. Roy to another decision of the Supreme Court in the case of Special Land Acquisition Officer, Davangere v. P. Veerabhadarappa [1985] 154 ITR 190. There the question was whether the method of valuation arrived at by the courts below in adopting " fifteen " to be the multiple for computation of capitalised value of certain agricultural lands acquired in the years 1971 and 1972 was correct or not. There the Supreme Court observed as follows (at page 200): " Some 20 to 30 years back, i.e., till the early 50's it was taken as a settled rule of practice, that the capitalized value of agricultural lands should be arrived at 20 years' purchase having regard to the rate of interest on gilt-edged securities at five per cent. That rule no longer can be adhered to in view of the changed economic situation. In the early '70s, people believed that investment in housing was more secure than other forms of Government securities in respect of safety of investment. Investment in housing involves certainty of labour and effect such as maintenance, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. When the rate of return on investing was 8.25 per cent. in the years 1971 and 1972, a person investing his capital in agricultural lands would ordinarily expect 2 per cent. to 3 per cent. more than what he could obtain from gilt-edged securities or other forms of safe investment and, therefore, the proper multiplier to be applied for the purpose of capitalisation could not, in any event, exceed 'ten'. In the present case, the State Government, however, contends that the proper multiple to be applied should be 121/2 in computation of the capitalised value of the lands in these cases having regard to the rate of return of 8 per cent. at the relevant time, i.e., on the date of the notification under section 4(1) of the Act. In view of this, it must be held that the multiple of 121/2 should be applied in the computation of the capitalised value of the lands. " The facts of this case before the Supreme Court are entirely different. In that case, the Court was concerned with the valuation of the agricultural lands where there are many imponderables as the investor runs a much greater risk like vagaries of weather and other uncertainties ; no security of principal, no liquidity of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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