Rent capitalisation valuation of tenanted property cannot be increased again by adding reversionary land value

For tenanted commercial property subject to rent-control restrictions, valuation under the rent capitalisation method already reflects the combined value of the land and the building as it stands and the rent it is likely to fetch. The reversionary value of the land cannot be added again, because that would duplicate land value merely on the assumption of a future availability of the site. The Punjab and Haryana High Court thus upheld the assessees' valuation method and answered the reference against the Revenue on the valuation issue.

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Issues: Whether the reversionary value of land could be added to the valuation of let-out property arrived at by the rent capitalisation method.

Analysis: The property consisted of old, tenanted commercial buildings subject to rent control restrictions. In such a case, valuation by the rent capitalisation method takes into account the land and the structures together, reflecting the controlled value of the property as it stands and the rent it is likely to continue to fetch. Adding the reversionary value of the land thereafter would amount to a second inclusion of the land value. The value of the land cannot again be added merely because the buildings are old and the land may become available at some uncertain future time.

Conclusion: The reversionary value of the land could not be added to the valuation arrived at by the rent capitalisation method, and the issue was answered in favour of the assessees.

Final Conclusion: The reference was answered against the Revenue on the valuation question, and the assessee's method of valuation was upheld.

Ratio Decidendi: Where a tenanted property under rent-control restrictions is valued by the rent capitalisation method, the resulting valuation already reflects the combined value of the land and building, so the reversionary value of the land cannot be added again.

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