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TMI Blog1988 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... c companies from time to time and at the time of valuation dates relevant for the years under consideration and which may be stated as 21st Oct., 1968 and 9th Nov., 1969 for asst. yrs. 1967-70 and 1970-71, respectively. It was under the occupation of a tenant, M/s. Prakash Talkies at a monthly rent of Rs. 2,640 to which it was sold on 12th March, 1970 for Rs. 5,00,000. 3. For each of the two years the assessee HUF declared the valuation of this property at Rs. 3,16,800. This valuation was based on the report of the registered valuer Shri G.S. Desai who had estimated the future life of this property to be at 50 years and had worked out the valuation of the property on rental method by capitalising the net annual rent of Rs. 25,344 by the multiplier 12.5. The WTO did not accept the valuation and therefore referred the matter for the valuation by the departmental valuation officer (DVO). 4. The DVO noted that the tenants of the property M/s. Prakash Talkies was a partnership firm of six persons but all the said partners were in one way or the other related to the members of the assessee HUF. In his opinion therefore it was a collusive arrangement and the rent of Rs. 2640 per mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also objected to. According to the assessee HUF the property in question was required to be valued on rental method and when such method is adopted in the valuation of this property the question of computation of the reversionary value of the land would not at all arise. Finally it was brought to the notice of the CWT(A) that the Tribunal in EDA No. 27/Ahd/75-76 had an occasion to consider the value of this property in the estate duty case of one of the deceased coparceners of the assessee HUF and therein the market value of this property was approved to be at Rs. 5,00,000. The learned CWT(A) held that since in 1970 the value of this property at Rs. 5 lakhs was adopted by the Tribunal in the estate duty case supra and such valuation was also accepted by the Department, that valuation should be adopted for both the years under consideration. The learned CWT(A) further observed that though the property was sold for Rs. 5 lakhs in 1970 yet no action was even taken by the Department under s. 52(2) of the IT Act, 1961, reported to him. On these grounds therefore the learned CWT(A) directed the WTO to adopt the market value of this property at Rs. 5 lakhs for both the years under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the WTO in the valuation of the property in question in the present cases. Mr. Vyas highlighted the facts that even the licence for exhibition of cinematographs existed in the name of one of the members of the assessee HUF and that itself went to show that the business of the firm was in fact being run by the members of the assessee HUF themselves and therefore there was all justification for the DVO to adopt the income earning capacity of the property as the basis of his valuation. In reply, Mr. K.C. Patel, the learned counsel for the assessee not only supported the order under appeal tooth and nail but took us through the entire paper book as submitted by the assessee and which contains the valuation reports of the registered valuer and of DVO besides assessee's objection to DVO's report. It was submitted by Mr. Patel that the property in question has, since after its construction in 1920, been on tenants was of several persons. Mr. Patel pointed out that the rent being paid by its tenant on 1st Sept., 1940 was Rs. 908 per month and that could have been adopted as the standard rent in the present case but the partnership firm M/s. Prakash Talkies paid a higher rent than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and fittings) under rent note dt. 19th March, 1940. Then this property was let out under rent note dt. 6th Oct., 1944 at a monthly rent of Rs. 1400 to one Mr. L.R. Chhadba. The said consolidated amount of Rs. 1400 per month was inclusive of Rs. 870 per month for rent for the premises and Rs. 530 per month as rent for furniture. Then again by rent note dt. 2nd May, 1962 it was let out to the present tenant M/s. Prakash Talkies at a monthly rent of Rs. 2273 which was inclusive of Rs. 1773 and Rs. 500 for rent for premises and for furniture, respectively. Thereafter, the rent appears to have been revised to Rs. 2640 per month. In appreciating these facts it shall have to be kept in mind that the property appears to have been constructed to be used by dramatic companies or for exhibition by means of cinematograph. These facts clearly bring it out that the rent of this property on 1st Sept., 1940, which is the relevant date for determining standard rent under the provisions of Bombay Rents, Hotels and Lodging House Rent Control Act, 1947, was Rs. 908 and keeping in mind the definition of standard rent as given in s. 5(10)(b)(i) and of the premises in s. 5(d) and of tenant in s. 7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the business of the partnership firm. On the face of it the property was a tenanted property since a long time and therefore it should have been valued on the basis of rental method as was done by the registered valuer. We agree with Mr. Patel that once a property is regarded to be a tenanted property no FSI could be said to be available for further development by the owner. We further agree with him that in tenanted properties valuation by rental method should be done. In the instant case the DVO has not only valued the property on the basis of income from the business of the partnership firm being run in such tenanted property and which was a basis which would under the circumstances of a given case lead to absurdity in the matters of valuation, but had also added the reversionary value of the land to the rental annua; value arrived at by him on the basis of income from the business of the tenant. In our opinion, adoption of such method of valuation of a property is not at all sound and valid method in so far as valuation of tenanted properties are concerned. For these reasons we would reject the expert opinion of the departmental valuer and would prefer the opinion as exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the name of one of the members of the assessee HUF and therefore on that ground the contractual relationship between the partnership firm and the assessee HUF as that of landlord and tenant be rejected is also not convincing. The provisions of the Cinematograph Act, 1952 required that exhibitions by means of cinematographs could be made in a place which is licensed under Part III of the said Act. The licence is to be issued by the DM and has to contain certain terms and conditions. As the various provisions of the said Act, including ss. 7,10 14 go to indicate such a licence is to be issued in respect of a place where exhibition by means of cinematograph is to be carried on. There is no material before us to hold that the holder of such a licence cannot permit another person to exhibit film by means of cinematograph. The requirement of the said Act appears to be that for exhibition by means of cinematograph in a place the holder of the licence should be an owner or possessor of the place. As stated above there is no material before us to hold that Shri Kulinsinh Manibhai in whose name the licence issued under the said Act stood could not have allowed a partnership firm in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be valued as per the report of the DVO. As against it Mr. Patel not only submitted that the Revenue had accepted the decision of the Gujarat High Court in the case of Smt. Vimlaben Bhagwandas Patel but also contended that it cannot be lost sight of that this property being wholly tenanted and occupied by old tenants was required to be valued in terms of the decision of the learned CWT(A). Mr. Patel referred us to the objections of Mr. K.R. Amin, the registered valuer of the assessee and submitted that it would be totally unrealistic to lose sight of the restrictive provisions of the Rent Control Law as applicable to the State of Gujarat. In the end of his arguments Mr. Patel however agreed that if the valuation as declared by the assessee in its return for both the years be restored then the assessee HUF would not mind. 18. The facts relating to this property are not in dispute. What in fact is in dispute is the rent capitalisation factor. It is an admitted position that this property is wholly tenanted. In view of this fact we agree with the learned CWT(A) and as also Mr. Patel that the only proper method to be applied to the valuation of this property is rental method. The que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee HUF is in occupation of the tenants. The tenants consist of single storeyed very old structures and the number of tenaments range between 60 to 65. It is also an admitted position that the open land which lies there in this property has been encroached upon by the tenants and/or by certain other persons and as reported by the DVO, disputes with the tenants regarding encroachments are pending in Courts. 21. The registered valuer valued this property at Rs. 3,30,000. However the DVO added the reversionary value of Rs. 8,14,276 to his valuation determined as per rental method and thus valued this property at Rs. 9,50,000. 22. Before the CWT(A) it was urged on behalf of the assessee HUF that the learned valuation officer had ignored certain broad facts. It appears to have been urged that the learned DVO had erred in assuming the estimated future life of the construction over this property for 10 years and then again assuming that after that period the entire property would revert to the assessee HUF. It had further been urged before him that the occupation of the small tenants who were thereon this property was protected under the Rent Control Act. Relying on the Calcutta High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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