Fair market value evidence need not follow a nationalisation compensation formula when valuing assets for capital gains.

Accepted valuation evidence can support a tribunal's finding of fair market value; on the facts discussed, the 1949 architects' valuation, later accepted in income-tax assessments and supported by market conditions, was treated as a proper basis rather than conjecture. A compensation formula in the First Schedule to the Life Insurance Corporation Act, 1956, was also said not to control valuation for capital gains purposes, because that schedule governs nationalisation compensation on an aggregate basis and does not prescribe a mandatory method for valuing individual assets. The article concludes that fair market value must be determined on its own statutory footing unless the governing law requires otherwise.

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Issues: (i) Whether the Tribunal's finding that the fair market value of the assessee's movable properties as on 1 January 1954 corresponded to the 1949 architects' valuation was based on conjecture and surmise. (ii) Whether the fair market value of the properties as on 1 January 1954 was required to be determined on the same basis or formula as that adopted for computing compensation under the First Schedule to the Life Insurance Corporation Act, 1956.

Issue (i): Whether the Tribunal's finding that the fair market value of the assessee's movable properties as on 1 January 1954 corresponded to the 1949 architects' valuation was based on conjecture and surmise.

Analysis: The Tribunal had material before it showing that the 1949 revaluation by chartered architects was not disputed, that the enhanced valuation had been accepted in later income-tax assessments, and that prices of immovable properties had generally risen after the Second World War. The reduction made in the actuarial valuation was for the limited purpose of computing surplus under the insurance rules and did not negate the earlier valuation as evidence of market value for capital gains purposes. The finding was therefore supported by evidence and not by guesswork.

Conclusion: The answer is in the negative and in favour of the assessee.

Issue (ii): Whether the fair market value of the properties as on 1 January 1954 was required to be determined on the same basis or formula as that adopted for computing compensation under the First Schedule to the Life Insurance Corporation Act, 1956.

Analysis: The compensation provisions in the First Schedule governed the computation of compensation payable on nationalisation, but they did not lay down a formula for valuing each individual asset for capital gains purposes. Part A dealt with compensation on an aggregate basis, and Part B referred only to the market value of land and buildings without prescribing a separate formula for their valuation. The revenue's reliance on the compensation schedule as a mandatory valuation method was therefore misplaced.

Conclusion: The answer is in the affirmative and in favour of the assessee.

Final Conclusion: Both referred questions were answered in favour of the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: Where a tribunal's valuation finding is supported by accepted valuation evidence and surrounding circumstances, it is not conjectural; and a compensation schedule designed for nationalisation does not control the determination of fair market value for capital gains unless the statute so provides.

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