Residential property valuation under estate duty follows the frozen wealth-tax basis, not the ordinary rental method.

Residential house property falling within section 36(3) of the Estate Duty Act must be valued on the special wealth-tax footing, because that provision imports the Wealth-tax Act and the relevant rules for valuation on the valuation date or date of death. Where the property was exclusively used for residential purposes, section 7(4) of the Wealth-tax Act applies and the frozen or pegged-down value principle governs. On that basis, the ordinary rental method under Rule 1BB was not to be applied, and the valuation had to follow the wealth-tax basis accepted for the property.

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Issues: Whether the valuation of the residential house property for estate duty purposes was required to be determined under section 36(3) of the Estate Duty Act by applying section 7(4) of the Wealth-tax Act, 1957, and whether the rental method under Rule 1BB of the Wealth-tax Rules was called for.

Analysis: The property was accepted to be residential in nature. Once that character was established, section 36(3) of the Estate Duty Act became applicable and required the value to be determined in accordance with the Wealth-tax Act and the rules made thereunder. As the deceased had been assessed to wealth-tax only up to an earlier assessment year, the case fell under the clause requiring valuation on the valuation date or date of death in accordance with the Wealth-tax Act. The provision also brought in section 7(4) of the Wealth-tax Act, 1957 for a house exclusively used for residential purposes, so that the pegged down or frozen value concept governed the valuation. On that footing, the property had to be valued by reference to the wealth-tax basis rather than by adopting the general rental method under Rule 1BB.

Conclusion: The valuation adopted by the revenue authorities could not stand, and the residential property was to be taken at the lower value accepted on the wealth-tax basis. The appeal was allowed in favour of the accountable person.

Final Conclusion: The decision affirms that, for residential property covered by section 36(3) of the Estate Duty Act, valuation must follow the special wealth-tax-based mechanism and the frozen value principle, displacing the ordinary rental method.

Ratio Decidendi: Where a residential house property falls within section 36(3) of the Estate Duty Act, its estate duty value must be determined on the wealth-tax footing under section 7(4) of the Wealth-tax Act, 1957, on the basis of the applicable frozen value principle rather than the general valuation method.

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