Municipal capital-value valuation requires proper valuation method; balance-sheet figures alone do not determine taxable property value.

For municipal rating of factory buildings on a capital-value basis, the capital value must be determined by a proper valuation method, not by the book figures in a company balance sheet. Accounting entries made under the Companies Act serve financial reporting purposes and do not by themselves establish taxable capital value. The contractor's method, under which construction cost is estimated and appropriate deductions are made for age, obsolescence and related factors, was identified as the correct basis for valuation. The court below had adopted an erroneous approach, so the assessment was set aside and the matter remitted for fresh determination on the proper legal test.

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Issues: Whether the capital value of factory buildings under the municipal rules was to be determined by reference to book figures in the company balance sheet or by a proper valuation method, and whether the contractor's method was the correct basis for arriving at such capital value.

Analysis: The tax imposed under the municipal law was a rate on buildings, and for properties required to be valued on the capital basis the expression "capital value" had to be understood in the context of local taxation. The Court held that the balance-sheet figures prepared under the Companies Act were not decisive for municipal valuation, because those figures served accounting purposes and did not represent the capital value of the properties for rate assessment. The proper approach was the contractor's method, under which the cost of construction is estimated, deductions are made for age, obsolescence and similar factors, and the resulting effective capital value is then related to the annual value for rating purposes. The courts below had not applied that method correctly and had instead proceeded on an erroneous basis.

Conclusion: The capital value could not be fixed merely from the company accounts, and the contractor's method was the proper basis for valuation. The High Court's decision was therefore set aside and the matter was remitted for fresh determination of capital value after evidence.

Final Conclusion: The assessment question was reopened for proper valuation in accordance with the correct legal test, with the municipal authority's challenge succeeding and the matter sent back for reconsideration.

Ratio Decidendi: For municipal rating where property is to be assessed on capital basis, capital value must be determined by a proper valuation method such as the contractor's basis, and accounting entries in a company's balance sheet under the Companies Act do not by themselves furnish the capital value for taxation purposes.

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