COMMISSIONER OF WEALTH TAX VS SMT. TARABEN R. PATEL
[1993 PTD 539]
[198 I T R 657]
[Karnataka High Court (India)]
Before K.Shivashankar Bhat and R. Ramakrishna, JJ
COMMISSIONER OF WEALTH TAX
versus
Smt. TARABEN R. PATEL
Income-tax Referred Cases Nos. 64 to 79 of 1986, decided on 18/03/1991.
Wealth tax---
---- Valuation of property---Valuation by adopting average as per rent capitalisation method and land and building method---Valid.
There are several methods adopted in determining the market value of a particular property at a particular time. The best evidence in regard to the, market value would be the value of the property itself if it has been the subject of purchase near about the valuation date. The next best evidence would be the value fetched for a similar property to the vicinity at about the same time. In the absence of such evidence resort is made to determine the value by capitalising the rent which the property would fetch if let out or is fetching if already let out, Resort is also made to an estimate by an expert on the basis of value of the land and building. It is usual to value the properties by more than one method so as to cross-check and adopt an average. This is resorted to when there is great disparity between the valuation arrived at by different methods.
The assessee, an individual, owned a theatre complex in Bangalore. Though, initially, in the wealth tax returns, the Assessee had shown the cost of construction of the property as noted in the books as part of the net wealth, subsequently she got the property valued by an approved valuer and the entire property was valued at Rs.30 lakh. However, the Valuation Officer to whom the matter was referred by the Wealth-tax Officer valued the property on the basis of land and building method and arrived at the value of Rs.46 lakh. The Appellate Assistant Commissioner found that the entire property has been let out and, therefore, adopted rental basis for valuation as an initial step and arrived at the value of Rs.25 lakh, and, on the basis of land and building method, the value would be Rs.42.3 lakh. In view of the vast disparity between the two values, he adopted the average method, i.e. by averaging the two valuations. The Tribunal affirmed this order. On a reference:
Held, that the Tribunal was right in law in upholding the order of the Appellate Assistant Commissioner who directed the Wealth Tax Officer to adopt the average of values as per the rent capitalisation method and the land and building method.
Neelaveni (S.) (Smt.) v. CWT (1980) 125 ITR 665 (Kar.) applied.
G. Chandrakumar and S.R. Shivaprakash for the Commissioner.
G. Sarangan and K. Gajendra Rao for the Assessee.
JUDGMENT
K. SHIVASHANKAR BHAT, J.---The following question was referred under the provisions of the Wealth Tax Act, 1957:
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in upholding the order of the Appellate Assistant Commissioner who directed the Wealth Tax Officer to adopt the average of the value as per the rent capitalisation method and land and building method?"
The assessee is an individual owning a theatre complex in Bangalore. Though, initially, in the wealth Tax returns, the assessee had shown the cost of construction of the property as noted in the books as part of her net wealth, subsequently she got the property valued by an approved valuer and the entire property was valued at Rs.30 lakh. However, the Valuation Officer to whom the matter was referred by the Wealth-tax Officer valued the property on the basis of land and building method and arrived at the value of Rs.46 lakh. The Appellate Assistant Commissioner found that the entire property has been let out and, therefore, adopted the rental basis for valuation as an initial step and arrived at the value of Rs.25 lakh, and on the basis of land and building method, the value arrived at was Rs.42.3 lakh. In view of the vast disparity between the two values, he adopted the average method, i.e., by averaging the two valuations, following the decision of this Court in Smt. S. Neelaveni v. CWT (1980) 125 ITR 665. The Revenue questioned this before the Appellate Tribunal. The Appellate Tribunal affirmed the aforesaid order. Hence, these references.
The only contention advanced by the Revenue is that the principle of averaging was wrongly applied and that the method of valuing land and building should have been applied in the instant case. Learned counsel for the Revenue contended that, under section 7 the market value will have to be arrived at for the 'purpose of assessing the value of the property for wealth tax and the only proper method will be the method of valuing land and building separately.
Learned counsel for the Revenue contended that the earlier decision of this Court in Smt. Neelaveni's case (1980) 125 ITR 665 was on its facts and the observations made therein and referred to by the Tribunal in its order were just passing references. In the said decision reported in (1980) 125 ITR 665, the Bench observed (at page 668):
"There are several methods adopted in determining the market value of a particular property at a particular time. The best evidence in regard to the market value would be the value of the property itself if it has been the subject near about the valuation date. The next best evidence would be the value fetched for a similar property in the vicinity at about the same time. In the absence of such evidence resort is made to determine the value by capitalising the rent which the property would fetch if let out or is fetching if already let out. Resort is also made to an estimate by an expert on the basis of value of the land and building. It is usual to value the properties by more than one method so-as to cross-check and adopt an average. This is resorted to when there is great disparity between the valuation arrived at by different methods."
These observations cannot be ignored on the ground that then observations were not necessary for the purpose of the said case. The principle; involved had to be stated though, having regard to the facts of the said case, there was no occasion to apply the particular observation. Even otherwise, we are of the view that the view expressed by this Court is quite reasonable and we do not find any reason to depart from the earlier view. For the reasons stated above, the question referred to us is answered in the affirmative and against the Revenue.
M.BA./2043/T???????????????????????????????????????????????????????????????????????????????????? Question answered.