Municipal valuation of factory buildings must follow statutory cost-and-depreciation method, not income-tax depreciation principles.

Municipal valuation of a factory building under section 174 of the Nagar Mahapalika Adhiniyam, 1959 must be based on the present cost of erecting a comparable building, with depreciation allowed according to the building's actual condition and the value of appurtenant land added. The authorities erred by not properly assessing the structure's condition and by applying income-tax depreciation concepts, which are not the statutory basis for municipal valuation. Additional evidence produced at the first appellate stage could be considered because it was already on the record when the second appeal was heard. The valuation orders were quashed and the matter remitted for fresh assessment under the correct method.

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Issues: (i) Whether the annual value of a factory building under section 174 of the Nagar Mahapalika Adhiniyam, 1959 was determined on a proper legal basis; (ii) Whether the appellate court could rely on additional evidence produced at the first appellate stage to sustain the valuation.

Issue (i): Whether the annual value of a factory building under section 174 of the Nagar Mahapalika Adhiniyam, 1959 was determined on a proper legal basis.

Analysis: For buildings falling within clause (a), the statute requires assessment on the basis of the present cost of erecting a similar building, after allowing depreciation with reference to the condition of the structure, and then adding the value of the appurtenant land. The record showed that the condition of the building had not been properly assessed by the authorities below, and the appellate determination also proceeded on an erroneous approach by invoking depreciation concepts drawn from income-tax law, which are not the governing criteria for municipal valuation.

Conclusion: The valuation was not made on the correct legal basis and could not stand.

Issue (ii): Whether the appellate court could rely on additional evidence produced at the first appellate stage to sustain the valuation.

Analysis: The additional material had already been brought on record in the first appeal and was available when the second appeal was heard. Since it was part of the record, the appellate court was not barred from referring to it while deciding the matter. The objection to its consideration therefore failed.

Conclusion: The appellate court was not in error in taking the material into account.

Final Conclusion: The valuation orders were quashed and the matter was sent back to the assessing authority for reconsideration in accordance with the correct statutory method.

Ratio Decidendi: In valuing a factory building for municipal assessment, the authority must ascertain the present cost of erecting a comparable building, deduct depreciation according to the building's actual condition, add the appurtenant land value, and cannot substitute income-tax depreciation principles for the statutory valuation method.

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