Open-market valuation of gifted property must use actual rent on the gift date, not later rents or post-gift agreements.

For valuation under section 6(1) of the Gift-tax Act, the relevant test was the price the gifted property would fetch in the open market on the date of the gift. Capitalisation of rent was an accepted valuation method, but the proper input was the rent actually realised from the property at that date unless shown to be collusive or understated. Because the property had been in tenancy since 1965 and no material showed the settled rent was not the true market rent, later rent from another portion of the building and rent agreed after the gift were irrelevant. The Tribunal's valuation was upheld, and the issue was decided for the assessee.

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Issues: Whether the value of the gifted property was rightly determined at Rs. 1,00,000 on the basis of the rent actually fetched by the property under tenancy up to the date of the gift.

Analysis: The applicable valuation test under section 6(1) of the Gift-tax Act was the price the property would fetch in the open market. Capitalisation of rent was an accepted method of valuation, but the relevant rent was the rent actually realised from the gifted property on the date of the gift, unless shown to be collusive or understated. The property had remained under tenancy since 1965, and there was no material to show that the rent settled with the tenant did not reflect the true market rent. Later rent fetched by a different portion of the building and rent agreed after the gift were not relevant for valuing the property as on the date of the gift.

Conclusion: The valuation fixed by the Tribunal was upheld and the question was answered in favour of the assessee and against the Revenue.

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