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of <h1>Court restricts use of development method in property valuation under I.T. Act, emphasizing fair market value.</h1> The High Court of ALLAHABAD partially allowed the writ petition challenging the valuation of a property for income tax purposes under the I.T. Act, 1961. ... Acquisition Of Property To Prevent Evasion Of Tax, Fair Market Value, Valuation Of Land Issues: Valuation of property for income tax purposes under the I.T. Act, 1961 based on differing reports by the official valuer, legality of the 'development method' of valuation, relevance of potentiality of land in determining fair market value, applicability of contractor's method of valuation for land, and validity of proceedings based on the second valuation report.In this judgment by the High Court of ALLAHABAD, the petitioner purchased a property in Kanpur and informed the Competent Authority under the I.T. Act, 1961. Initially, the official valuer valued the property at Rs. 74,000. However, upon receiving complaints of under-valuation, a second valuation report valued the property at Rs. 3,06,300 using the 'development method.' The petitioner challenged the jurisdiction of the proceedings, arguing that the second report was irrelevant and the method used was impermissible under the law.The court analyzed the two valuation reports by the official valuer. The first report valued the property based on the existing condition of the land and buildings, while the second report projected a higher value by considering the potential development of a shopping complex on the land. The court referred to legal precedents emphasizing that the fair market value should consider the potentiality of the land, not just its current use. However, it noted that the development method used in the second report was not applicable to a property already in use for building purposes.Regarding the contractor's method of valuation, the court distinguished its application to determining the capital value of a building from valuing land itself. The judgment highlighted that the contractor's method involves estimating the cost of land through other established methods, which was not followed in the second valuation report. The court found the second report's method irrelevant and prohibited its consideration in the proceedings under the I.T. Act, 1961.The judgment concluded by partially allowing the writ petition, issuing a writ of prohibition against the Competent Authority from relying on the second valuation report. The court emphasized that the proceedings were not solely based on the second report but also on other materials. The parties were directed to bear their own costs, and the interim stay order was discharged, bringing closure to the legal dispute.
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