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TMI Blog1979 (7) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... hase to the Competent Authority under the I.T. Act, 1961. The Competent Authority referred the matter to its official valuer to determine the fair market value of the property. According to the first report, which was given in April, 1974, the value was determined at Rs. 74,000. Subsequently, the Competent Authority received complaints that the property has been purchased by the petitioner on a gross under-valuation. On that basis, the Competent Authority referred the question of valuation to the official valuer again. The official valuer filed a fresh report, indicating that the fair market value of the property was Rs. 3,06,300. He applied in this report, what is called as the " development method " of working out the fair market value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,18,337 and he determined the expected monthly income from the shopping complex after it had been constructed at Rs. 5,919. This monthly income was capitalized at the 7% rate of interest in the property which gave the value at Rs. 6,76,471. On that basis he determined the present worth of the developed land at 7% interest to be about Rs. 700 per sq. yd. In other words, in simpler language, this report determined the fair market value of the land on the date of sale by imagining that a modern shopping complex would be constructed on it, and after construction the value would be on the basis of 7% of the expected income. The question is whether such a method of valuation is, in law, permissible to determine the fair market value. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s irrelevant. " These observations are applicable on all fours. It has been emphasised that in the present case, proceedings for demolishing the building were going on and the petitioner fully intended to rebuild after demolishing the existing structure. But, as observed by the Supreme Court, this intention is entirely irrelevant for determination of the fair market value at the date of sale, specially when the site in question was already a building site. Learned counsel for the revenue invited our attention to certain passages from Parks on Valuation, 1970, 4th edn., but we do not find that there is any material which is relevant to the facts of this case. Learned counsel for the revenue relied on Godhara Borough Municipality v. God ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rent is fixed as the basis of assessments than that which it is believed the owner would really be willing to pay for the occupation of the premises. " The contractor's method may well be applied for finding out the capital value of a building. This case is no authority for the proposition that the contractor's method can be adopted for finding out the value of land simpliciter. In this method also the cost of the land is estimated at the third stage by some other well-known method. The contractor's method is to determine the capital value of an existing building, not of the site of that building. Further, the second valuation report does not adopt the contractor's method. It adopts a method which is not known to law for determining th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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