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TMI Blog1987 (7) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. These agreements were renewed in 1975. The monthly rent at the time of the valuation by the D.V.O in the case of L.N. Talkies was Rs. 2,200 whereas in the case of Laxmi Talkies the figure was Rs. 3,400 per month. It is an admitted fact that both the firms consisted of either the Karta of the assessee HUF, or his mother, wife and children in various combinations. 3. The assessee's returned figures were supported by valuation reports which in the case of both the properties took into consideration the capitalised value of the net rental income(actual) and also adding thereto the reversionary value of the land. 4. The D.V.O on the other hand rejected the figure of rent disclosed by the assessee on the ground of it being "collusive." He adopted the method of capitalising the income of the firms itself after reducing therefrom the expenses and other outgoings. The D.V.O. adopted a multiplier of 9.09 viz., 11 per cent. He also valued the properties on the basis of the Land Building Method which according to him gave nearly identical figures. 5. The ld. CWT(A) after examining the various aspects disposed of the matter on the following lines: "5. Therefore, he entire c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that the assessment of valuation must take into account the measure of fair rent and that even where the fair rent is not fixed it would have to be arrived at keeping in view the principles for determination of fair rent. Reliance was placed on the decision of the Gujarat High Court in CIT vs. Vimlaben Bhagwandas Patel (1979) 13 CTR (Guj) 27: (1979) 118 ITR 134 (Guj) in support of the submission that the rate of capitalisation should not be unreal and that the just reasonable and appropriate rate of capitalisation would be 8 1/3 times the net average annual income which would give the yield of 12 per cent per annum on the investment of capital in property. 10. Shri Harne, the learned Authorised Representative for the Department strongly relied on the reasons given by the CWT(Appeals) in para 5 of his order for preferring the land and building method to the method of capitalisation of the yield. In our view, however, simply because of the interrelations between the assessee, the partners of the firm and the shareholders and directors of the limited company and simply because the rent of the theatre was fixed by mutual agreement it cannot be said that low rent of the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y supported the orders of the WTO. It was contended that the properties could be got vacated by the assessee HUF from the lessee under various circumstances outlined in s. 13 of the Bombay Rents Hotel and Lodging House Rates Control Act, 1947. According to him the expected life of the properties was 40 to 50 years and these could be even got demolished around 1991, since the construction period pertained to the early forties. It was further urged that since the properties had been leased to firms in which the assessee itself was interested the same would automatically revert to the assessee on the dissolution of the firms. These submissions were made to show that the properties did not suffer from any constraints pertaining to "tenancy rights". 7. The DVO was also present and was heard in support of his valuation report. According to him the assessee's rental figures could not be accepted being of a collusive nature since properties had been rented to near relatives. It was also submitted that the lessees were at liberty to sub-let some portions of the premises without any reference to the lessor. It was further urged that there were no restrictive clauses in the lease deeds whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, Darta K.T, Mehta, Baroda vs. WTO (WTA Nos. 486 to 492/Ahd/80 dt 10th Feb.,1981) (7) Shri Poonjabhai Vanmalidas (HUF) order of AAC for asst. yrs. 1968-69 to 1970-71. 9. We have considered the rival submissions and have also perused the relevant portions of the paper book to which a reference was made during the course of the arguments. It is seen that the value of L.N. Talkies was shown by the assessee at a figure of Rs. 3,84,000 for the asst. yrs. 1970-71 to 1975-76 and accepted after appellate proceedings for asst. yrs. 1970-71 to 1972-73, and by the WTO himself for asst. yrs. 1973-74 and 1974-75. In respect of asst. yr. 1975-76 the WTO accepted the returned figure but the CWT set aside the order by taking action under s. 25(2). We have not been informed about the fate of the reassessment. In respect of asst. yr. 1976-77 the assessee returned a figure of Rs. 5,00,000 but a figure of Rs. 8,22,344 was adopted and which is the subject matter of appeal before the AAC. 9.1 In respect of Laxmi Talkies an identical situation exists except that the returned figure is Rs. 6,20,000 for asst. yrs. 1971-72 to 1975-76 and for asst. yr. 1976-77 a figure of Rs. 13,68,077 is the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the lease deeds is not bona fide or that it is low. Even the genuineness of these documents is not doubted. Under these circumstances the DVO was not empowered to brush aside these documents and record a finding of "collusive rent". The DVO should have brought on record the 'rental income' derived in respect of other cinema buildings let out in Ahmedabad as also locality thereof before tinkering with the figures disclosed by the assessee. In the absence of such figures he was not empowered to substitute any other figure in preference to the one disclosed by the assessee. 9.5 In the light of the discussion in the preceding paras we are inclined to reject the figures of valuation as adopted by the DVO. We are, however, of the view that in the interest of justice some upward hike is called for in the valuation. It is an admitted fact that the prices of immovable properties have gone up substantially. We also find that the figures disclosed by the assessee pertain to the valuation date "Diwali 1973" whereas we have to fix the valuation in asst. yrs. 1977-78, 1978-79 and 1979-80. According to us a multiplier of 12.5 times applied to the net rental income would be appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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