Protected tenancy controls property valuation and defeats acquisition for alleged understatement when rent capitalisation is the proper method.

Protected tenancy under the applicable rent law could not be ignored in valuing the property, because the licensee in possession became a deemed protected tenant on the statutory amendment. In that setting, fair market value had to be assessed on the rent capitalisation method rather than the land and building method. The competent authority's failure to consider the tenancy status and the departmental valuation material meant the sale consideration could not be treated as understated, and acquisition on that ground was not sustainable. Interconnection between the transferor and transferee companies, including common directors and shareholders, did not displace the legal effect of the protected tenancy.

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Issues: Whether the property transfer could be acquired on the ground of understatement of consideration, and whether the fair market value had to be determined by the land and building method or the rent capitalisation method in view of the protected tenancy under the rent law.

Analysis: The licensee was in possession of the property when the rent legislation was amended, and by the statutory deeming provision it became a protected tenant. The tenancy could not be ignored merely because the transferor and transferee companies were interconnected or had common directors and shareholders. The valuation report itself disclosed a fair market value on the rent capitalisation basis, and the competent authority had failed to consider the effect of the protected tenancy and the departmental valuation material. On those facts, the rent capitalisation method was the appropriate method, and the sale consideration could not be treated as understated so as to justify acquisition.

Conclusion: The acquisition was not justified and the appeal failed.

Ratio Decidendi: Where the purchaser is a protected tenant under the applicable rent law, the fair market value must be determined on the rent capitalisation basis, and acquisition for alleged understatement cannot be sustained if the competent authority ignores that tenancy and the valuation material supporting it.

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