9911796707
TMI Blog1987 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... persons being let out to them. The Wealth-tax Officer referred the valuation of all the three properties under section 16A of the Act to the Valuation Officer. Being bound by the valuation report, he computed the value of the assessee's share in the aforesaid properties as per the Valuation Officer's report. There is no indication in the assessment order about the method on which the valuer had worked out the valuation. Against the assessment order, the assessee preferred an appeal before the Commissioner of Wealth-tax (Appeals). From the appellate order, it is clear that the valuation of these properties was determined by " rent capitalisation method " and further the valuer also added certain amounts for reversionary value of land to the rent capitalised value to arrive at fair market value of the property as on the valuation date: Before the Commissioner of Wealth-tax (Appeals), two points were taken by, the assessee. The first was with regard to the residential portion in the occupation of the assessee. The contention was that the value of that portion should have been determined in terms of section 7(4) of the Act, i.e., on the same value as it was adopted for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax Officer himself. Thus, the provisions contained in these two sub-sections direct the authorities concerned to imagine hypothetical open market where there are willing purchasers and a seller and to estimate in " money's worth " the value of an asset, on a fictional sale, as if it was to be sold, in the open market, on the appointed date. Such estimate in " money's worth " shall be taken to be the value of that asset for wealth-tax purposes. The wealth-tax authorities are, therefore, entitled to adopt such method as will entitle them to determine the market value of a given asset. The estimated value, therefore, which may be determined, by whatever method employed, must be reasonably proximate to the market value. It is for these reasons that the method employed to work out the market value in a given case assumes importance in these proceedings and the valuation determined by the authority concerned has been made subject to review before the hierarchy of higher authorities named under the Act. Before proceeding further, we may note that it was not disputed before us that the correct method of valuing the properties in dispute is to capitalise the annual rent received fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the rental method. It simply states that after capitalisation of the rent you cannot deduct the depreciated value of the buildings on the land, and say that the result is the definite value of the land." Learned counsel appearing for the assessee contended that the passages relied upon on behalf of the Department have been the subject-matter of scrutiny by the Calcutta High Court in at least two decisions and the contentions based on those passages, like the one raised in the present case, have been repelled. He further argued that when the value of a given property is worked out by capitalising the rent, it is entirely wrong to think that the value so determined is the value of the superstructure only and it does not include the value of the land over which the building is standing and the land appurtenant thereto. It was argued that in permitting addition for the reversionary value of land to the rent capitalised value, it will amount to double addition for land value. For this proposition, he referred to certain judicial precedents to which we will refer later. He then submitted alternatively that assuming the reversionary value of land could in certain circumstances be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her two important factors which are taken into account are the rate of land and the rate of interest which are assumed to be static. The entire concept is based on an imaginary hypothesis and mathematical calculation. It is possible that none of the assumptions on which the reversionary value of the land is added may come true. The building may be destroyed by an act of God or it may be maintained by timely repairs in good state. Likewise, it would be highly imaginary to forecast the land value, and determine the reversionary value thereof, as the rate of land may vary according to inflation during the period in future. This will also be equally true as regards the rate of interest. It is not necessary for us to pursue this line of reasoning any further for we would like to restrict the scope of the question referred to us to the facts of the instant case. As noted earlier, we are concerned with the valuation of properties which are governed by the Rent Control Act. So long as the properties are in possession of the tenant, there is no chance of any variation in the amount of rent in years to come, much less of its going down. Under the Rent Control Act, the tenant cannot be evic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 (Mys), as per headnote of the report, the Mysore High Court observed : " In the case of buildings with compounds in a city, which are in the possession of tenants and the tenants cannot be either evicted or the rent payable by them enhanced except in accordance with the provisions of the Rent Control Act, the only appropriate method of valuation is to capitalise the annual rent by a certain number of years' purchase. The method of valuing the site and the building separately and adding up the values would be improper in such cases." The same view has been expressed by the Calcutta High Court in CED .v. Radha Devi Jalan[1968]67 ITR 761. It was a case arising under the Estate Duty Act where the property in dispute was let out on monthly rent and was in the occupation of an old tenant. The court observed (at page 770): " Lastly, in case of buildings which are in possession of tenants ...... the only appropriate method of valuation is to capitalise the annual rent by a certain number of years' purchase. The method of valuing the land and the building separately. and adding up the values would be improper in such cases ........." There are numerous other judicial precedents e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
