Wealth tax---

---- Wealth tax---Valuation of property---General principles---Difference between valuation for fiscal statutes and for sale or compulsory acquisition-- Valuation of property by Tribunal based on material on record---Valid.

Valuation of an asset is not an exact science. Mathematical calculation is not possible. Money value attributable to the asset should be decided and estimated by the concerned statutory authority in a reasonable and judicial manner on the basis of the facts and circumstances available before him. Valuation should be made objectively and be based on some material. Even in cases where the asset to be valued has no real market, it is for the assessing authority to fix a notional market value. A hypothetical market is contemplated. Imponderables are involved in the matter of valuation. The qualitative and quantitative analysis in the matter of valuation will differ from asset to asset, from place to place, and also in relation to the particular statute for which the valuation and price of the property has to be determined. The approach will differ according to the nature of the statute. The principles that are ordinarily applied in the case of non-fiscal statutes like the Land Acquisition Act cannot be applied mechanically to cases arising under fiscal Acts.

The assessee owned 32 acres of land out of which 26 acres of land were covered with rubber plantations. Six acres were covered with trees like mango coconut, etc. There was also a building in the property used as residence and office by the assessee. The assessee valued the property as on the valuation date, viz., March 31, 1973, at Rs.96,000. The Tribunal held that the value of the property as on March 31, 1973, should be fixed at Rs.250 per cent of land. On a reference:

Held, that the Tribunal had fixed the value after adverting to relevant material. It had taken into account the valuation of the rubber estate in a good yielding area and the urbanisation of the area where the rubber estate was situated. Though the property was sold to the Housing Board on June 4, 1974, which reflects a value of Rs.440 per cent, that could not form the basis of valuation. The manner of valuation of the rubber estate by the Tribunal was justified in law.

C.I.T. v. George (P.I.) (1988) 171 ITR 620 (Ker.); C.I.T. v. Vimlaben Bhagwandas Patel (1979) 118 ITR 134 (Guj.); CWT v. Himalaya Trading Co. (1987) 168 ITR 586 (Delhi); CWT v. Sara Varghese (1988) 170 ITR 434 (Ker.) and Commissioner of Succession Duties v. Executor Trustees and Agency Co. -of South Australia Ltd. 74 CLR 358 ref.

P.K.R. Menon and N.R.K. Nair for the Commissioner.

P. Balachandran and Sudhir Gopi for the Assessee.

JUDGMENT

K.S. PARIPOORNAN, J: --At the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following question of law for decision of this Court:

"Whether, on the facts and in the circumstances of the case, the method and manner of valuation of rubber estate by the Tribunal is justified in law and facts?"

The respondent was assessed to wealth-tax. We are concerned with the assessment year 1973-74. Certain common questions of law were referred at the instance of the assessee herein for the very assessment year which were disposed of by this Court in the decision in CWT v. Sara Varghese (1988) 170 ITR 436.

The brief facts essential to understand the scope and impact of the question referred herein at the instance of the Revenue are as follows: For the assessment year 1973-74, the relevant valuation date was March 31, 1973. The assessee is an individual. She owned 32 acres of land out of which 26 acres of land were covered with rubber plantations. Six acres were covered with trees like mango, coconut, etc. There was also a building in the property used as residence and office of the assessee. The assessee valued the property as on the valuation date, viz., March 31, 1973, at Rs.96,000. This was made on the report of the registered valuer. The said valuation was not accepted by the Wealth-tax Officer. He found that 27.43 acres out of the total extent of 32 acres was sold to the Housing Board for Rs. 12 lakhs on June 4, 1974. That reflected the value of the land at Rs.440 per cent. On this basis, the Wealth-tax Officer estimated the value as on the valuation date by giving discount for the increase in valuation in the preceding years. Thus, for this particular assessment year for which the valuation date was March 31, 1973, the Wealth Tax Officer fixed the value of the property at Rs.350 per cent. In appeal, the Appellate Assistant Commissioner reduced the value to Rs.300 per cent. In further appeal before the Appellate Tribunal, after adverting to various facts and circumstances, the Appellate Tribunal held that the value of the property as on March 31, 1973, should be fixed at Rs.250 per cent. The Wealth Tax officer was directed to accept the value. It is thereafter at the instance of the Revenue that the question of law formulated herein has been referred for the decision of this Court.

We heard counsel for the Revenue as also counsel for the assessee. Counsel for the Revenue submitted that though the Revenue: prayed for referring three questions of law, this Court directed reference of only one of the questions, the question formulated hereinabove, holding that the above question is comprehensive enough to take in the other points covered by the two other questions. It was argued that the Appellate Tribunal totally erred in fixing the value of the property for the assessment year 1973-74 at Rs.250 percent. The value obtained for the same property soon after the valuation date from the Housing Board at Rs.440 per cent is a strong item of evidence which was not given due weight by the Appellate Tribunal. What is more, the Appellate Tribunal referred to the valuation of rubber estates in the year 1969, near Thodupuzha and, based on that, the Appellate Tribunal arrived at the valuation of the instant property which is situate at a different place, in Ernakulam town. These two aspects have totally vitiated the conclusion of the Appellate Tribunal. So, counsel for the Revenue submitted that the manner and method of valuation of the rubber estate by the Appellate Tribunal is wholly erroneous and unjustified in law. Counsel for the respondent-assessee submitted that the question of law referred for the decision of this Court at the instance of the Revenue is really a question of fact and no question of law arises out of the appellate order of the Tribunal dated October 28, 1980. It was further argued that the determination of the value on the valuation date is largely one of fact, and, as a final fact-finding authority, it is for the Appellate Tribunal to advert to all relevant facts and circumstances and determine the value. The Appellate Tribunal 'has referred to the valuation of the rubber estate in Thodupuzha, though the instant property is situate at Ernakulam. By reference to the particular category of property (rubber estates), the Appellate Tribunal fixed the value at Rs.250 per cent for the property in question after giving due credit to the situation of the property in the instant case, namely, that it is in the neighboring area of Kalamassery and the area has become urbanised by then. We are of the opinion that the question regarding valuation of property is purely a question of fact and no question of law can ordinarily arise unless there is violation or non-adherence to the principles of valuation. (See CWT v. Himalaya Trading Co. (1987) 168 ITR 586 (Delhi). Keeping in mind the principles laid down in the said decision, we are of the view that the question referred to this Court by the Appellate Tribunal is not a question of law, but purely a question of fact.

Counsel for the Revenue submitted that in the Himalaya Trading Co.'s case (1987) 168 ITR 586 (Delhi) what was involved was only the method of valuation. Here the question referred to this Court is regarding "the method and manner of valuation" of rubber estates. So, the manner of valuation involves the application of the principles of law. We are of the view that there is no substance in this plea. In Chambers Twentieth Century Dictionary, New Edition, 1983, at page 766, the word "manner" is explained thus:

"Manner---the way in which anything is done; method; fashion; personal style of acting or bearing; custom; style of writing or of thought ...social conduct; good behaviour..."

At page 791 of the same book, the meaning of the word "method" is given thus:

"Method---the mode or rule of accomplishing an end; orderly procedure; manner; orderly arrangement, methodicalness; classification; a system, rule; manner of performance; an instruction book systematically arranged..."

So, it is evident that the manner and method of valuation substantially involve similar concepts. In this view, we hold that the question referred to this Court at the instance of the Revenue is purely a question of fact and no question of law arises.

Even on merits, we are of the view that the decision of the Appellate Tribunal cannot be said to be legally unsustainable. Regarding valuation, what we are concerned with is the market value of the property. It is the price, which a willing buyer will pay to a willing seller. It will vary from case to case. Valuation is not an exact science. Mathematical calculation is not possible. Money value attributable to the asset should be decided and estimated by the concerned statutory authority in a reasonable and judicial manner on the basis of the facts and circumstances available before him. Valuation should be made objectively and should be based on some material. Even in cases where the asset to be valued has no real market, it is for the assessing authority to fix a notional market value. A hypothetical market is contemplated. Imponderables are involved in the matter of valuation. Some of the principles to be borne in mind in that direction have been stated in the Bench decision of this Court in CIT v. P.I. George (1988) 171 ITR 620. Decisions are legion dealing with various aspects regarding valuation. The qualitative and quantitative analysis in the matter of valuation will differ from asset to asset, from place to place, and also considering the particular statute for which the valuation and price of the property has to be determined. It cannot be a wooden rule. Different methods and approaches necessarily in the context of different statutes under which the market value of an asset has got to be determined pose difficult problems. The market value has got to be fixed with reference to the particular statute. The approach will differ, according to the nature of the statute, between fiscal statutes or non-fiscal statutes. Among the non-fiscal statutes, the Land Acquisition Act is an important legislation. Among the fiscal statutes, the Income-tax Act, the Wealth Tax Act, the Gift-tax Act, the Municipalities Act, etc. are important. In fixing the market value of a particular asset or property, the approach and analysis are likely to vary according to the subject-matter of legislation. The principles that are ordinarily applied in the case of non-fiscal statutes like the Land Acquisition Act cannot be applied mechanically to cases arising under the fiscal statutes. These aspects have been dealt with in Vimlaben Bhagwandas Patel's case (1979) 118 ITR 134 (Guj.) at pages 188 and 191 and in Commissioner of Succession Duties v. Executor Trustee and Agency Co. of South Australia Ltd. (74 Commonwealth Law Reports 358 at page 373) and the Bench decision of this Court in CIT v. George (P.I.) (1.988) 171 ITR 620. It will be useful to bear in mind what Dixon, J. said in Commissioner of Succession Duties v. Executor Trustee and Agency Co. of South Australia Ltd. (74 CLR 358) (see 171 ITR at page 632):

"I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second, the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a Court's attitude in the application of the test. In a case of compensation, doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate."

It is not a wooden or mechanical rule that can be applied to determine the value of an asset or property as applicable in all cases, whatever be the nature of the statute under which the valuation has to be fixed.

In this case, the assessee was the owner of 26 acres of rubber plantation. She was residing in the building situated in the said property. There was also an office belonging to her. We are concerned with determining the value of the property for the purpose of wealth tax. The purpose is to ascertain what money value is contained plainly in the asset so as to afford a proper 1 measure of liability to tax. It is a levy imposed on a person holding the property. That makes all the difference from the perspective with which the property will have to be valued, as distinguished from a case arising under the Land Acquisition Act or fixing the value in the case of sale--whereby the property is lost for ever, and what is paid when the property is acquired is "compensation". In fiscal statutes, the property is still retained. The levy is made to enable the assessee to hold the property. The tax that is levied is a burden or impost to hold the property and that will be only minimal.

The rubber estate in this case is of a sizable nature. There were earlier assessments relating to this property. The Appellate Tribunal referred to the valuation of the rubber estates near Thodupuzha, where the value percent was fixed at Rs.50 based upon an open sale in 1970-71. The attention of the Appellate Tribunal was invited to the fact that the rubber estate in the instant case is near Ernakulam and the value fixed for a property at Thodupuzha may not provide a safe guide. The Appellate Tribunal held that the Thodupuzha is a plantation area and even where good yielding rubber trees existed, the value was only Rs.50 per cent in 1970-71. The rubber estate in the instant case is near Edappilly, adjacent to the metropolitan town Ernakulam, Cochin. The value of good yielding rubber estate in Thodupuzha may provide a guidance for valuation of similar property and is not totally irrelevant. Even reckoning the rapid urbanisation of Ernakulam, and reckoning with the fact that the valuation has to be fixed, for a period of years, the Appellate Tribunal held that, for the year 1973-74, Rs.250 per cent will be the proper market value. The Appellate Tribunal fixed the above valuation after adverting to relevant material. Thus, the valuation of a rubber estate even in a good yielding area and bearing in mind the urbanisation of the area where the rubber estate in question is situated, the value was fixed in the instant case. We are not in a position to say that the Appellate Tribunal adverted to irrelevant material or failed to advert to relevant factors. In the matter of valuation of property, imponderables are involved. The perspective with which valuation has to be fixed in this case is by bearing in mind the purpose of the fiscal statute in question. Though the property was sold to the Housing Board on June 4, 1974, which reflects a value of Rs. 440 per cent, that cannot form the basis that can be mechanically adopted for the purpose of fixing the value of the property in cases arising under Wealth Tax Act. Different considerations apply in determining the market value of properties under the fiscal statutes. In the light of the above salient aspects and considering the factors that weighed with the Appellate Tribunal in determining the value of the property at Rs. 250 per cent for the year 1973-74, we are of the view that there has been a proper determination of the value of the property on the valuation date. Therefore, we answer the question referred to us in the affirmative, against the Revenue and in favour of the assessee.

A copy of the judgment under the seal of this Court and signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, according to law.

M.BA./1579/TReference answered.