AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2005 (7) TMI 34
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch 31, 1983, the assessee transferred certain properties in favour of her children as per a sale deed dated March 28, 1983. One of the properties so transferred by the assessee comprised of 70 cents of land with a building at Ullur. Since the total consideration shown in the sale deeds was not adequate, the assessee herself had treated the transfer as involving gifts and accordingly, filed a return of gift for the assessment year 1983-84. In the return the value of the property at Ullur was shown at Rs. 1,95,000. The Assessing Officer referred the properties to be valued by the Departmental Valuation Officer for determining the value under section 15(6) of the Gift-tax Act, read with section 16A of the Wealth-tax Act. The Valuation Officer estimated the value as per his order dated March 9, 1988. The Gift-tax Officer had, however, passed the assessment order dated March 21, 1988 adopting the value of the properties fixed by the Valuation Officer. The value adopted by the Gift-tax Officer was Rs. 16,38,400 including the properties at Ullur based on the report of the Valuation Officer. As a matter of fact, the report of the Valuation Officer was given to the assessee only on April 8,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he value of Rs. 6,50,000 as fixed by the Commissioner of Income-tax (Appeals). We have heard the arguments made by learned senior counsel Sri P. Balachandran and also Sri P.K. Ravindranatha Menon, standing counsel for the Income-tax Department. Learned counsel appearing for the assessee contended that even though at the time of gift the property was lying vacant, the maintainable rent should have been arrived at on the basis of the annual rent arrived at earlier when the property was let out and not the actual rent the property was fetching subsequently when it was let out. Since the property was lying vacant at the time of the gift, what would be the maintainable rent to be adopted in such a case, arises for consideration. Following the decision of this court in CGT v. Mammen Mathew [1986] 158 ITR 466, wherein it was held that in the absence of rules made under the Gift-tax Act for determining the value of gifts, the procedure prescribed in the rules under the Wealth-tax Act for that purpose has to be followed, the Tribunal found that the property at Ullur should be valued in accordance with rule 1BB of the Wealth-tax Rules. Hence, the question as to what should be the maintain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riod for which the property is let, as the period of twelve months bears to such period; (b) 'house' includes an independent residential unit; (c) 'net maintainable rent', in relation to a house, means the amount of the gross maintainable rent as reduced by- (i) the amount of taxes levied in the previous year by any local authority in respect of the house; (ii) a sum equal to one-sixth of the amount by which the gross maintainable rent exceeds the amount referred to in sub-clause (i), in respect of the repairs of the house; (iii) any sums spent during the previous year to collect the rent from the house, not exceeding six per cent, of the amount by which the gross maintainable, rent exceeds the amount referred to in sub-clause (i); (iv) the amount of any premium paid during the previous year to insure the house against risk of damage or destruction; (v) the amount of ground rent payable during the previous year, where the property is subject to ground rent; and (vi) any sum paid in the previous year on account of land revenue or any other tax levied in the previous year by the State Government in respect of the house; (d) 'previous year' means the period which would be the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the fraction 100/9. As per sub-rule (2) the gross maintainable rent in relation to a house means the sum for which the house might reasonably be expected to be let from year to year. Therefore it is necessary to consider the actual let out value for the purpose of finding out whether such actual let out value is more than the reasonably expected let out value as determined in sub-rule (2)(a)(i). In the present case, the assessee has not adduced any materials to show as to what is the reasonably expected rent of similar buildings in the locality. Admittedly, the house was let out long prior to the gift in question and it was lying vacant at the time of gift. There is no dispute that the property was let out for Rs. 7,000 immediately after the gift in question. In such circumstances, even the future let out value can be taken as a piece of evidence to find out as to what is the reasonable expected rent. In Ambika Prasad Thakur v. Ram Ekbal Rai, AIR 1966 SC 605, the apex court considered the scope of section 114 of the Evidence Act and whether it is open to presume continuance backward. It was held as follows: "If a thing or a state of things is shown to exist, an inference of it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he apex court held that "where the shares in a public limited company are not quoted on the stock exchange or the shares are in a private limited company, the proper method of valuation to be adopted would be the profit-earning method". The apex court held that "for the purpose of such valuation, the taxing authority is not bound by the figure of profits shown in the profit and loss account because it is possible that the amount of profits may have suffered diminution on account of unreasonable expenditure or the directors having chosen to take away a part of the profits in the form of remuneration rather than dividends". We do not find that for the purpose of determining the valuation of a house property under rule 1BB the method of valuation of the share of a company may have any relevance. Further, even in the said decision, the apex court held that even for the purpose of such valuation, the taxing authority is not bound by the figure shown in the profit and loss account. On the other hand, a Division Bench of this court in T.A. Abdul Khader v. CWT [2006] 280 ITR 421 (Ker) (Case No. I.T.R. 270 of 1999) has considered the question of valuation of the building under section 7(1) ....