Rental valuation of let out property under Gift-tax law recognised as a permissible open-market value method.

For valuation of a let out house property under the Gift-tax Act for an earlier assessment year, the open-market value was to be determined under section 6 as it then stood, and the rental or yield method was treated as a recognised way to arrive at that value. The commentary notes that rule 10 of the Gift-tax Rules did not then incorporate the later wealth-tax linkage, but that did not prevent adoption of a rental basis where appropriate. It further explains that the Tribunal's remand for fresh valuation on that basis was consistent with accepted valuation principles, and later wealth-tax jurisprudence was treated as supporting, rather than excluding, the method.

---

---

Issues: Whether, for the assessment year 1974-75 under the Gift-tax Act, the value of the gifted house property could be determined on the rental basis and whether the remand direction to value the property on that basis was legally sustainable.

Analysis: The gift had to be valued under section 6 of the Gift-tax Act, 1958, as it stood in the relevant assessment year, when the valuation provision required the price the property would fetch in the open market on the date of the gift. At that time, rule 10 of the Gift-tax Rules, 1958 did not contain any special link with the Wealth-tax Act or its rules, unlike the position introduced later. The Court noted that rule 1BB of the Wealth-tax Rules, 1957 was only a recognised rental or yield method and, though formally introduced later, it reflected an accepted mode of valuation. The Tribunal had not created a new basis unrelated to valuation law but had merely adopted the rental method for a let out property and remitted the matter for fresh valuation on that basis. The Court further treated the later wealth-tax jurisprudence as supporting the acceptance of the rental method as a legitimate valuation approach, rather than as excluding it.

Conclusion: The rental method was permissible on the facts, and the reference to the Tribunal's direction was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: For valuation of a let out property under the Gift-tax Act for an earlier assessment year, the rental method is a recognised and permissible method of arriving at open market value, even though the later statutory incorporation of that method in the Wealth-tax framework was not yet in force.

---