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TMI Blog1998 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... he property, whose value is under dispute, consisted of a number of godowns, which the assessee-HUF had built in co-ownership with another HUF by the name of Shri Kanwal Kishore, HUF. The godowns were let out to various tenants. The gross annual rental income was Rs. 1,11,194 and Rs. 1,04,020 for the assessment years 1978-79 and 1979-80 respectively. A valuation report of an approved valuer Shri R.K. Sajdeh was submitted by the assessee and he had adopted a multiple of 10. The corresponding appeals of the Revenue in the case of other co-owner Shri Kanwal Kishore, HUF [W.T. Appeal Nos. 167 168 (Asr.) of 1984] were heard along with these appeals. As the issued involved in both the groups of appeals is the same and common arguments were addressed the decision in the assessee's case will govern the disposal of the appeals of the other HUF also. 4. Shri J.S. Arora, the learned departmental representative, argued the point about reduction of multiple by the AAC to 10 times and did not dispute the quantum of deductions of 33 1/3 per cent allowed from gross annual rental income. He relied heavily on the Punjab and Haryana High Court decision in the case of Prem Nath Anand and the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be low or unreasonable on the two valuation dates. The concept of market value of a property is integral to different Acts of the State enacted for different purposes. The Acts may be different and so may be the purposes of those Acts but what does not undergo a change are the principles on which market value of property is to be determined for the purposes of each enactment. The principles of valuation for determining the market value can, therefore, be gathered from various authorities under the different Acts. 7. Our attention in this case has been specifically drawn to a Supreme Court decision, a Third Member decision of ITAT and observations of an expert in his book, which are again based on decided case law. The comments of a registered valuer had also been filed and these are quoted in extenso in the combined order of the AAC. Let us analyse the position emerging on the basis of authorities cited and submissions made. 8. Firstly, we may consider the authority of our own High Court in the case of Prem Nath Anand. The High Court was considering a case of acquisition of an immovable property under the Income-tax Act. The Competent Authority determined the market value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in that case considered the argument about capitalisation done on the basis of return from gilt-edged securities, as was the view taken by the Supreme Court in an earlier case and it was held that the decision in the earlier case was not intended to lay down any invariable rule that whenever a method of capitalisation of net profit was adopted, the return from gilt-edged securities was to be the basis. The Supreme Court in the case of Smt. Shanti Devi in para 16 has dealt with the position of multiple to be applied for the purposes of capitalised value method. We quote a relevant part from para 16:- "16. A perusal of the decisions referred to above and some others which have not been cited here shows that in India the multiplier which is adopted in determining the compensation by the capitalisation method has been 33 1/3, 25, 20, 16 2/3, 11 and 8. The number of years' purchase has gradually decreased as the prevailing rate of interest realisable from safe investments has gradually increased-the higher the rate of interest, the lower the number of years' purchase. This method of valuation involves capitalising the net income that the property can fairly be expected to produce a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than 10 times, to be reasonable in respect of properties sold in February 1973, which were subjected to acquisition proceedings under the Income-tax Act. In that decision the High Court also took note of the multiple of eight and one-third times in section 11(1)(a) of the Urban Land (Ceiling and Regulation) Act, 1976. The Third Member decision of the Tribunal in the case of Hanumanmall Bengani dealt with the difference of opinion on the question of multiple to be applied under the yield method on a property to be valued under the Estate Duty Act on 24-1-1979. The authorities of Supreme Court in Smt Shanti Devi's case and the Gujarat High Court in Smt. Vimlaben Bhagwandas Patel's case were duly considered in that order and the Third Member agreed with the Accountant Member that a multiple of 8.5 times was quite reasonable. 11. In view of the above discussion, it has to be held that the multiple of 10 times cannot be said to be low or unreasonable in the case of assessee for both the assessment years under appeal. Regarding the two decisions of Amritsar Bench cited by the departmental representative, it may be pointed out that the issue was not thrashed out in detail in those cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal on the same set of facts, it will not only shake the confidence of the public in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrariness and whims and fancies of the individuals presiding over the Courts of the Tribunals and not reached objectively on the basis of the facts placed before the authorities. If a Bench of a Tribunal on the identical facts is allowed to come to conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why is a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be fortiori with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot brought any material that it is State Bank of India, which has provided interest at 10 per cent on long-term deposits-What to say of it on gilt-edged securities or Government bonds. Moreover, the certificate furnished of Vijaya Bank (which was nationalised in April 1980) was not furnished before the authorities below and as such it cannot be admitted in evidence on account of Rule 29 of the Income-tax Appellate Tribunal Rules, 1963 as amended to date. 19.1 Moreover, the accounting periods for the assessment years under consideration are ending 31-3-1978 and 31-3-1979, respectively and the Vijaya Bank is nationalised in April 1980. Therefore, it has allowed interest at 10 per cent on or before 31-3-1978 and 31-3-1979, then it cannot be relied upon, because on these dates the Bank was in competition to have capital by way of deposits and, therefore, on such deposits, it can and has to allow higher rate, interest than that of Nationalised Banks or State Bank of India or on bonds by Government of India or Reserve Bank of India. 20. Furthermore, their Lordships of Hon'ble Supreme Court in the case of P.P. Hassan Koya, held that the land and the building constitute one unit and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 12 times upheld by the Punjab and Haryana High Court in the case of Prem Nath Anand Further, the outgoings are not to be allowed and there is no scope for these to be allowed in these cases, for determining the market value by this method (rental capitalization method) as for this method gross rent or receipt of the rent from the tenant is to be the basis. Hence, I set aside the order of the AAC and restore that of the WTO. 23. In the result, the appeals of the Revenue are allowed. ORDER U/S 24(11) OF THE W.T. ACT, 1957 READ WITH SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is a difference or opinion on the point of applying the multiple for determining the market value of assessee's rented properties, we refer the case to the President of the Appellate Tribunal in accordance with section 24(11) of the Wealth-tax Act, 1957 read with section 255(4) of the Income-tax Act, 1961. THIRD MEMBER ORDER The Hon'ble President has referred this matter to me under section 24(11) of the Wealth-tax Act read with section 255(4) of the Income-tax Act, on account of difference between the Members of Amritsar Bench who heard the appeals in the first instance. The following point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion contained in the book "Valuation in Court" by Roshan H. Namavati where the observations of the Hon'ble Gujarat High Court in the case of Smt. Vimlaben Bhagwandas Patel were quoted in extenso. The decision of the Hon'ble Punjab and Haryana High Court in Prem Nath Anand's case was distinguished in so far as it was held to be not applicable to the case of the assessee. The learned Judicial Member, on the other hand, for adoption of the multiple at 12 placed exclusive reliance on the decision of the Jurisdictional High Court in the case of Prem Nath Anand's case. The observations of the Hon'ble Madras High Court in the case of L.G. Ramamurthi case were cited in support of the proposition that on the same set of facts the Tribunal should not come to the conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on earlier occasion. Instance of Smt. Gurmat Kaur's case was quoted where the same Bench followed the decision of Punjab Haryana High Court on the issue of application of multiple for assessment year 1977-78. The order is dated 21-6-1985. It was also held that the decision of the High Court was binding on the Bench of the Tribunal workin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to determination of annual letting value of the property and the other the multiple to be applied. Under section 23 of the Income-tax Act, the annual value of the property consisting of any building and land appurtenant thereto is as under:- "(a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable." The aforesaid value is to be arrived at after allowing deductions as specified under section 24 of the Act. The aforesaid mode of valuation has been given recognition to in the form of Rule 1BB of Wealth-tax Rules. Similar deductions have been incorporated under the aforesaid rule of the Wealth-tax Rules which again speak of net maintainable rent in respect of the property. Sub-section (2) of Rule 1BB of Wealth-tax Rules lists the deductions allowable from gross maintainable rent as defined therein. Thus, it is the net rental value derived from the property to which the multiple is to be applied for arriving at the market value of the property. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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