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TMI Blog1982 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... leased out to Gen. Kumaramangalam at Rs. 300 per month. The area of the land came to 6,627 sq. yds. of which Rs. 1,988 sq. yds. were built up, the balance of the land accounting for some garden, internal roads, etc. The assessee worked out the value of this building at Rs. 1,81,252 and indicated her share as Rs. 60,147. The WTO referring the matter to a departmental valuer fixed the value of the property at Rs. 27,38,000 and the assessee's 1/3rd share at Rs. 9,12,700 on which the assessment was made. On appeal, the CWT (A) worked out the value of this property at Rs. 15,64,272 and the assessee's share at Rs. 5,21,424 which valuation is in dispute before us. 2. The ld. counsel for the assessee having taken us through the details about the situation, area, tenancy, etc., of the property has pointed out that the valuation fixed by the departmental authorities is excessive. In the first place the WTO was in error in following the VO's report and in computing the value of the entire property in which the assessee had 1/3rd share and treating the 1/3rd of that value as the value of the asset in the assessee's hands. The valuation of a proportionate interest in a property would not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the market value of the entire property. Reference is made in this connection to s. 44 of the Transfer of Property Act and certain provisions of the Partition Act, 1893. The ld. counsel has also referred to standards authorities on Estate Duty such as Green and Hanson and other authorities like Open Market Valuation by Vinayak Sawant to stress the substantial reduction in value and almost unsaleability in the case of jointly owned properties. The reduction of 15 per cent for joint ownership is, according to the ld. counsel, unjustifiably low as pointed out by authorities like Babcock. 4. The Poona property jointly owned by the 3 sisters is situated on Cantonment land where under the terms of the grant the military authorities can resume the possession of the land at any time by paying a compensation for the value of the structure put up by the assessee. The assessee has valued this land having regard to the almost negligible value of the land on which the structure stands, in view of the provisions for assumption of possession at Rs. 47,000 whereas the Department valued this property on the basis of the VO's report at Rs. 3,00,000 for the first year and Rs. 3,70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be evaluated. The building is given on a lease and licence basis and this is revocable by the licensee. The tenants have no right of enjoyment over the land so that they cannot restrict either the sale of the land or obstruct the assessee in receiving the full price for the same. It is also pointed out that the leasehold interest of the mother had been vested in the 3 co-sharers. There cannot, therefore, be any substantial deterioration in the value of the property because of joint ownership. Moreover, in the present case the tenants are not outsiders. Reference is made to the decision of the Calcutta High Court in the case of CWT vs. Md. Ismail (1979) 117 ITR 273 (Cal). The reduction given by the CWT (A) for joint ownership, according to the ld. counsel, is in fact on the high side. 7. With regards to the Poona property, it is pointed out, the assessee's position is stronger. Through the lands belongs to the Cantonment granted under its Rule, the assessee has got the property built on the same. There is no tenancy problem in this property. The assessee has the right to receive the value of the building even if it is resumed. The assessee has right to sell the building. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by V.B. Cole, page 40 : Joint ownership where the deceased owned only an undivided share interest in a property the value should be based on the open market value, at the date of death, of the right to receive the deceased's share of the net income (actual or estimated) arising out of the property, with the prospect that at some future, but indeterminate date there will be a sale of the property and an entitlement to the deceased's share in the proceeds of sale. The value of this future entitlement to a share in the proceeds of sale, is, in practice, disregarded and the value of the deceased's undivided share is found by capitalising his share of the net income at investment rates current at the date of death." "Valuation of Land for Estate Duty by Ray Carter, Second Edn.: Undivided Shares: "The basis is the value of the deceased of the appropriate share of the income, or estimated income, and a similar share in the sale price of the property at some future date. It is thought that for all practical purposes this value can be obtained by capitalising the deceased's shares of income, or estimated income, for the whole of the term of his interest in the property and ig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint interest in an asset like a running business or an intangible asset like a copy right or trade mark etc. We have no hesitation in holding that joint ownership of this building would certainly not be a big handicap for the assessee to make a sale of their share of the same, nor is the fact that the tenants are relatives of the assessee of any importance, because as we mentioned earlier a building like the present in Bombay has tenants, multi-lingual and multi-national and even multi-racial residing in them. The mention of members of the family being tenants will be absolutely irrelevant and an anachronism. We, therefore, hold that merely because the assessee has a joint interest in the property, her claim that it will sink its value substantially or will have no value at all cannot to accepted. Flats in Bombay are less costly than independent houses of the same area, but this depends on the construction of the houses as well as the value of the land. Ironically flats in multi-storied buildings may have more purchasers and may fetch proportionately a higher price on account of the situation of an urban property or the tenants market. Even if, therefore, the assessee's claim fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the available rent should be made the basis of computation of value. This is sought to be supported by the decisions of the Supreme Court. It is true that rented premises would be subject to Rent Control. The fair rent fixed or that can be fixed should form the basis of valuation under rental method. This is the decision of the Supreme Court. The rental method, however, is only one of the methods of valuation which could be adopted especially in the absence of any other method. The market value is the basis of valuation as laid down in s. 7 of the WT Act. The fact being that in the present case the tenants are close relatives of the assessee, in fact one of them being the very donor who gifted the property to her, it would be presumptuous to assume the tenants would obstruct the sale of the property which could alone reduce the value of the properties in the light of the Rent Control Act. What we want to emphasise is that as claimed by the assessee rental method alone is not the only method of valuation of the present properties. 11. Even in the light of the above general characteristics we do not find substantial defects in the valuation of these properties as made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or no consequence as will be considered by a willing purchase of the property. Even though some Cantonment lands have been resumed, they are only resumed for governmental purposes and not for handing over to some other persons. Even a freehold land belonging to any assessee is liable to be acquired by the government for public purposes. The purposes for which the Cantonment resumes a land being thus limited to not even public purposes but to Cantonment or governmental purposes only, in our opinion, the chances as a matter of fact of such resumptions are very rate. The ld. counsel brought to our notice cases of resumption of properties in some instances particularly in a particular locality. Such instances can be indicated even in the case of freehold land where for instance there is a scheme of road extension, dam construction etc. in particular area. These few instances of resumption out of the thousands of land grants made by the Cantonment all over the country certainly are not indicative of any likely chance of the lands being resumed. Even from a theoretical point of view, therefore, the probability of resumption is very small so as to render this argument almost ineffective ..... X X X X Extracts X X X X X X X X Extracts X X X X
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