Capitalisation of rental income for acquired municipal property may use years' purchase linked to prevailing gilt-edged security returns.

Compensation for acquired income-producing municipal house property was assessed by capitalising the net annual rental income. The proper years' purchase was treated as dependent on the prevailing return on gilt-edged securities at the date of the Section 4(1) notification, rather than on any fixed uniform multiplier. Applying that method, the Court noted that Government securities were carrying 3% interest at the relevant time, so 33 1/3 years' purchase was taken as the appropriate basis, with the statutory 15% addition thereafter. The compensation was therefore recomputed on that footing.

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Issues: Whether the compensation for acquired house property in a municipality should be assessed by capitalising the net annual rental income, and whether the proper number of years' purchase should be fixed with reference to the prevailing interest on gilt-edged securities at the date of notification.

Analysis: The property acquired was a site with a building, wells and trees, and the admitted method for valuing such income-producing municipal property was capitalisation of the net annual rental. The dispute concerned the multiplier to be applied. The Court preferred the approach that links years' purchase to the rate of return on Government securities prevailing at the time of the Section 4(1) notification, rather than any rigid or uniform rule. On the facts, gilt-edged securities were carrying three per cent interest at the relevant time, making 33 1/3 years' purchase the appropriate basis, with the statutory 15 per cent allowance added thereafter.

Conclusion: The compensation had to be recomputed on the basis of 33 1/3 years' purchase, with the statutory addition, resulting in relief to the appellant.

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