Gift-tax valuation of let property follows actual rent under Rule 3 unless non-practicability and prior approval for estimation are shown.

Gift-tax valuation of let immovable property must be made on the basis of net maintainable rent where the disclosed rent is supported by records and there is no reliable material to treat it as collusive or concessional. Actual rent, if higher than municipal valuation, forms the gross maintainable rent for applying Rule 3 of Schedule III. The special estimate method under Rule 20 cannot be used unless it is shown that Rule 3 is not practicable and the required prior approval has been obtained. On these principles, the disclosed rent value was upheld and the Revenue's estimate rejected.

---

---

Issues: Whether the gifted immovable property was required to be valued under the rent capitalisation method under the valuation rules applicable to gift-tax, or whether the revenue was justified in discarding the disclosed rent and adopting a valuation on estimate basis under the open market value method.

Analysis: The disclosed rent could not be rejected as collusive or concessional merely on suspicion, especially when the income-tax records had consistently accepted the rent and there was no reliable material to show that the letting arrangement was a device to depress value. For valuation under the applicable rules, the relevant enquiry was the net maintainable rent, and where the property was let and the actual rent exceeded the municipal valuation, the actual rent constituted the gross maintainable rent. Rule 3 of Schedule III was therefore workable on the facts. Rule 8 could not be invoked unless it was shown that Rule 3 was not practicable and the prescribed prior approval had been obtained. That precondition was not satisfied, so Rule 20 could not be applied.

Conclusion: The revenue was not justified in discarding the assessee's disclosed value or in adopting the Valuation Officer's estimate. The property had to be valued under Rule 3 on the basis of the disclosed rent, in favour of the assessee.

Ratio Decidendi: Where the actual rent and municipal valuation provide the basis for computing net maintainable rent, Rule 3 of Schedule III applies and the special estimate method under Rule 20 cannot be used unless non-practicability of Rule 3 and the requisite prior approval are established.

---