Leasehold interest by holding over can be a taxable asset, and rental capitalisation may validly govern valuation.

A leasehold interest continued after expiry of the lease and uninterrupted possession by the lessee can amount to a tenancy by holding over, creating a fresh month-to-month tenancy under the Transfer of Property Act. Such an interest is juridical, transferable and heritable, and therefore falls within the wide meaning of "assets" and "belonging to" the assessee for wealth-tax purposes under section 2(e)(v). Valuation of the properties on a rental basis was also upheld, because the Tribunal could rely on location, income-yielding capacity and other relevant facts, and the commercial property's rental capitalisation on a multiple of ten disclosed no legal error.

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Issues: (i) Whether the assessee's interest in leasehold properties, after expiry of the leases and continued possession, constituted an asset includible in net wealth under section 2(e)(v) of the Wealth-tax Act; and (ii) whether valuation of the properties on the basis of rental income, including adoption of a multiple of ten in respect of the commercial property, was justified.

Issue (i): Whether the assessee's interest in leasehold properties, after expiry of the leases and continued possession, constituted an asset includible in net wealth under section 2(e)(v) of the Wealth-tax Act.

Analysis: On the facts found, the leases had expired years earlier, yet the assessee remained in uninterrupted possession and the lessor had taken no effective steps to recover possession. The continued occupation was therefore treated as possession under a tenancy by holding over, creating a fresh month-to-month tenancy under the Transfer of Property Act. Such an interest was held to be juridical, transferable and heritable, and therefore an interest in property falling within the wide meaning of "assets" and "belonging to" the assessee for wealth-tax purposes. The court also held that, by reason of the amended language of section 2(e)(v), the interest had been available for more than six years from the date it vested.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the interest was an asset includible in net wealth.

Issue (ii): Whether valuation of the properties on the basis of rental income, including adoption of a multiple of ten in respect of the commercial property, was justified.

Analysis: The court accepted that valuation depended on relevant facts, including location and income-yielding capacity, and found no infirmity in the Tribunal's choice to value the properties on a rental basis. The commercial property's location and rent justified departure from the earlier cost-based approach, and the multiple adopted was found to rest on relevant considerations rather than on any legal error.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the rental-based valuation was upheld.

Final Conclusion: The reference was answered in favour of the Revenue on all the questions referred, and the assessee failed on both includibility and valuation.

Ratio Decidendi: A leasehold interest continued under a tenancy by holding over is a transferable and heritable property interest capable of constituting an "asset" for wealth-tax purposes, and valuation of such property may properly be made on a rental capitalisation basis where the facts justify it.

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