TaxTMI 
TaxTMI 
1996 (3) TMI 50
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....e property at No. 32, Nungambakkam High Road, Madras, to his two grand nephews on February 1, 1974. The return of gift was filed, declaring the value of the gift at Rs. 1,25,000. The Gift-tax Officer, however, took the value of the Assistant Valuation Officer, to whom the matter was referred, under section 15(6) of the Act for determining the value of the property in question. The Assistant Valuation Officer, while arriving at the value of the property at Rs. 3,25,700, took into consideration the area of the plot on which the property is situated and also depreciated the value of the superstructure thereon. Aggrieved by the valuation made by the Gift-tax Officer, the assessee went on appeal before the Commissioner of Gift-tax (Appeals) who directed the Gift-tax Officer to reduce the value to Rs. 2,25,000 and also to allow the deduction towards stamp duty paid in accordance with law. Both the assessee and the Department, aggrieved by the order of the Commissioner of Gift-tax (Appeals), preferred separate appeals to the Tribunal. The Tribunal held that in the case of the above-said property, which was let out, the rental method should be adopted for valuation. It also noted the argum....
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....een the Gift-tax Act or the Rules, on the one hand, and the Wealth-tax Act or the Rules, on the other hand, which could be made use of in making the assessment under the Gift-tax Act. Then in the Gift-tax Act, while section 6 provides for determination of value of gift, section 15(6) of the said Act, as it existed on and after January 1, 1973, and before April 1, 1989, provided thus : "Notwithstanding anything contained in section 6, for the purpose of making an assessment under this Act, the Assessing Officer may refer to a Valuation Officer, the valuation of any property transferred by way of gift-- (a) in a case where the value of the property as returned is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so returned is less than its fair market value ; (b) in any other case, if the Assessing Officer is of opinion :-- (i) that the fair market value of the property exceeds the value of the property as returned by more than such percentage of the value of the property as returned or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the prope....
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....r, it would fetch if sold in the open market on the valuation date or, . . ." Section 16A of the Wealth-tax Act, 1957, provides for the Wealth-tax Officer referring the valuation to the Valuation Officer. Section 16A is similar to the abovesaid section 15(6) of the Gift-tax Act. We have considered the rival submissions. Even in the above referred case in CWT v. Kasturbhai Mayabhai [1987] 164 ITR 107 (Guj), which was affirmed by the Supreme Court in CWT v. Sharvan Kumar Swarup and Sons [1994] 210 ITR 886, we find that the abovesaid aspect was considered in the context of the above referred to section 7(3) and section 16A of the Wealth-tax Act. The following is the relevant observation of A. M. Ahmadi J., (as he then was), speaking for the Division Bench, which delivered the said judgment : "Counsel for the Revenue next contended that section 16A empowers the Wealth-tax Officer to make a reference to the Valuation Officer if in his opinion the returned value is less than the market value of the asset in question. According to him, if rule 1BB were to operate retrospectively, it would render sections 7(3) and 7(4) as well as section 16A(6) redundant. Under section 7(4), the a....
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.... referred to the Valuation Officer, the said officer has to fix up the value only in accordance with rule 1BB. But, it is a moot question how far in the present case, which is not a wealth-tax case, but a gift-tax case, in the absence of the abovesaid link between the Gift-tax Act or the Rules, on the one hand, and the Wealth-tax Act or the Rules, on the other hand, at the relevant point of time (as mentioned in paragraph 3 (see page 658) above), the abovesaid rule 1BB of the Wealth-tax Rules as such can be applied to the gift-tax assessment in question. Only in this regard, learned counsel for the respondent submits (as also mentioned in paragraph 6 (see page 659) above) that the first of the abovesaid two questions referred to us is not happily worded. According to him, the Tribunal only held that the already well recognised rental method "should be adopted" for the valuation of the properties let out. No doubt, this method came to be recognised by the Government incorporating it in the abovesaid rule 1BB from April 1, 1979. That does not mean, according to him, that the said method could not be adopted earlier either under the Wealth-tax Act or Gift-tax Act. Looking at from t....
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....802 (Bom). . . The learned judge held that the same method provided under rule 1BB of the Wealth-tax Rules must be applied for the purpose of ascertaining the value for payment of estate duty and drew support for the conclusion from the decision of the Mysore High Court in the case of CED v. J. Krishna Murthy [1974] 96 ITR 87 . . . I am in respectful agreement with the conclusion reached by the learned, judge." (emphasis supplied) The following further observation of the Bombay High Court in the abovesaid decision is also significant : "By far the more prevalent, especially in urban areas, is the annual value method (another name for the abovesaid "rental method"), where the net notional annual rental value of the property is determined in the manner done for income-tax purposes. The amount is then capitalised by a multiplier, depending on the economic factors prevalent at the relevant time. Annual value method is entirely based on the rent realised from the property and the rent is standard or fair rent when it is regulated by rent legislation. The annual value method is a statutorily recognised method for valuation of houses for the purpose of municipal tax, income-tax and ....