Gift-tax valuation of gifted property favours open-market price and stamp-duty value over notional rent capitalisation.

For gift-tax valuation of gifted house property, Section 6(1) of the Gift-tax Act requires estimation at the price the property would fetch in the open market. Section 6(3) applies only where the property is not saleable in the open market, so it does not govern a transferable house property. On that basis, the Tribunal treated the stamp-duty value adopted on registered transfer as a more direct indicator of market value than a notional rent capitalisation figure, and noted that Section 18A's relief for stamp duty paid fits this valuation scheme. The stamp-duty-based valuation was upheld and the rent capitalisation method rejected.

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Issues: Whether, for gift-tax purposes, the value of the gifted house property should be determined on the basis of the rent capitalisation method at Rs. 44,000 or on the basis of the value adopted for stamp duty at Rs. 1,75,000.

Analysis: The applicable rule was held to be Section 6(1) of the Gift-tax Act, under which the value of property transferred by gift is to be estimated at the price it would fetch if sold in the open market. Section 6(3) was treated as relevant only where the property is not saleable in the open market. The Tribunal reasoned that, where there is a registered transfer and the stamp authorities have adopted a particular value for levy of stamp duty, that value is a more direct indicator of market value than a hypothetical rent capitalisation figure. It further noted that Section 18A of the Gift-tax Act provides relief for stamp duty paid, which supports the legislative scheme of recognising stamp duty as part of the valuation context.

Conclusion: The stamp-duty-based valuation was upheld and the assessee's contention for adoption of the capitalised rent value was rejected.

Ratio Decidendi: For gifted property capable of being sold in the open market, the value under Section 6(1) of the Gift-tax Act is ordinarily the open-market price indicated by a real transfer and the valuation accepted by the stamp authorities, rather than a notional rent capitalisation figure.

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