TaxTMI 
TaxTMI 
1988 (3) TMI 56
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Wealth-tax Officer as representing the value of the undivided 1/4th interest of each of the assessees in the immovable property jointly owned by each assessee with three others on M.G. Road ? (ii) If the answer to question No. (i) is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal was right in directing that an average between the values assessed by the land and building method and the rent capitalisation method should be taken for arriving at the market value of the jointly owned property for the assessment year 1973-74 ? (iii) If the answer to question No. (ii) is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for arriving at the value by the land and building method, an addition of Rs. 1,18,980 for value of land 'at second floor level' was not warranted ? (iv) If the answer to question No. (ii) is in the affirmative, whether the Tribunal was justified in discounting the 1/4th value of Rs. 2 lakhs arrived at with reference to the average value of Rs. 8 lakhs by the land and building method and the rent capitalisation method to Rs. 1,75,000 for the specia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....property was Rs. 1,51,080 and after deductions for property tax, ground rent, repairs etc., the net rent was fixed at Rs. 1,02,314 and by capitalising the same by 10 times, the value was arrived at Rs. 10,23,140. The assessees objected to this valuation. Even so, the Wealth-tax Officer adopted the valuation made by the Valuation Officer and passed an order of assessment dated December 1, 1975. This was affirmed in appeals by the Appellate Assistant Commissioner, by orders dated August 11, 1976. The assessees appealed to the Appellate Tribunal. It was contended that the valuation based solely on the probable yield would not reflect the real value of the property. It was contended that the value reflected by the rental capitalisation method should be checked up by other appropriate methods such as the land and building method, etc. The multiplier of 10 adopted was also challenged. On behalf of the Revenue, it was submitted that since the instant property was a tenanted one, the capitalisation of rental method adopted is the only appropriate method to arrive at the value of the asset as on the valuation date. There was no question of adopting any other method of valuation. The Appella....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te further that while capitalisation of rental is certainly an appropriate method, it cannot be said to be the only method which is to be applied. On the facts of the case, the Tribunal held that a proper method which takes into consideration the inherent value of the property as well as the value with reference to rental would be obtained by averaging the two values, i.e., by the rental method and the land and building method. In this perspective, the Tribunal held that the value by the land and building method comes to Rs. 6 lakhs and the value by the capitalisation method is Rs. 10,23,140. The aggregate of the two values would work out to Rs. 16,23,140 and the average value works out to about Rs. 8 lakhs. So considered, the value of each undivided share would be Rs. 2 lakhs. It cannot be forgotten that the building is one which is jointly owned and what is transferable in each case is the undivided right of ownership and, therefore, a discount has to be given for that aspect. Though there are cases in which the valuers had given a discount of 20% for an undivided share in a property, the Tribunal, on the facts of this case, held that though the value of each undivided share woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecisions in the cases of Rajasekhara v. Chairman, City improvement Trust Board, Mysore City, AIR 1957 Mys 20, State of Kerala V. I. P. Hasan Koya, AIR 1968 SC 1201, Narayana Gajapatiraju v. Revenue Divisional Officer, AIR 1939 PC 98, T. Kanakasabapathi Pillai v. Commissioner of Wealth-tax [1964] 51 ITR 146 (Mad), Commissioner of Wealth-tax v. V. C. Ramachandran [1966] 60 ITR 103 (Mys), Controller of Estate Duty v. Radha Devi Jalan [1968] 67 ITR 761 (Cal), C. Krishna Prasad v. Commissioner of Wealth-tax [1970] 76 ITR 115 (Mys), Goutham Chand Galada V. Commissioner of Wealth-tax [1972] 86 ITR 292 (Mad) and MahMudabad Properties (P) Ltd. v. Commissioner of Income-tax [1972] 85 ITR 500 (Cal). From the said decisions, the following principles emerge: (a) In respect of immovable property, there is no fixed market, such as market for share, or for other commodities like sugar, cloth, etc. (b) There must be a certain amount of guess--but the guess must be an intelligent one based on certain objective factors which have rational nexus with the valuation. (c) There are different methods--and which one would be suitable for a particular property must depend upon the particular featur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....method for a particular land should be preferred. If, however, there is any objective reliable evidence of any transaction of sale of the land or property similar in quality or of the same type and at approximately the same time, then that would, however, provide more reliable method to follow. " The above two decisions were followed in a later decision in Sudesh Chandra Talwar v. CIT [1982] 137 ITR 483 (Cal), at pp. 488 and 489. These decisions were cited with approval by the Gujarat High Court in CIT v. Vimlaben Bhagwandas Patel [1979] 118 ITR 134 at p.191. But the learned judge of the Gujarat High Court went further and held that since there are different methods and approaches to find out the market value of a property, and there is really a problem in the application of these methods to the facts of a particular case and the choice as to which of the method should be preferred is really difficult, the competent authority shall collect all the relevant materials and evidence by applying the wellknown and recognised methods, i.e., land and building method, contractor's method, rental or yield basis method and comparable sales method, and work out each estimation of the market....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve profits of the lands acquired. These methods, however, do not preclude the court from taking any other special circumstances into consideration, the requirement being always to arrive as near as possible at an estimate of the market value. In arriving at a reasonable correct market value, it may be necessary to take even two or all of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in respect of the situation or the extent or the potentiality nor is it possible in all cases to have reliable material from which that valuation can be accurately determined." Similar matter came up for consideration before the Full Bench of this court in Rarukutty v. Special Tahsildar [1973] KLT 573. Issac J. took the view that the market value of a land with buildings on it depends on a variety of circumstances and that the method of capitalisation of income is " only " method which may be resorted to in appropriate cases. The learned judge further held that there is no hard and fast rule that can be applied for determining the market value of property and the court can take into account, in a suitable and appropriate case,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal, obtained by averaging the two values, i.e., by the rental method and the land and building method, is justified and is not open to any objection. If the principle of valuation adopted by the Appellate Tribunal is not open to any objection, the only further question that arises is whether the actual value of the asset, as fixed by the Tribunal, is open to any objection. As stated by the Supreme Court in CWT v. Raghubar Narain Singh [1984] 146 ITR 228, the market value of an asset would be a question of fact, but if the Tribunal has arrived at the conclusion by taking wrong principles into consideration, then such a finding would not be binding on the High Court. We have already held that the principles borne in mind by the Appellate Tribunal in fixing the value of the asset is justified in law. On that basis, the Tribunal held that the value, of the assets on the basis of the rental method (capitalisation) is Rs. 10,23,140. On the other hand, the value by the land and building method comes to, Rs. 6 lakhs. The Tribunal worked out the average value at Rs. 8 lakhs . Since the value to be computed in the instant case is an undivided share, it called for an allowance of discount....
X X X X Extracts X X X X
X X X X Extracts X X X X
....more conservative estimate." The above observations have our respectful concurrence. We should state that the Appellate Tribunal is the final fact-finding authority under the scheme of the Act. The ultimate purpose is to arrive at the correct/proper " market value " of the asset. The law is clear that in arriving or fixing the " market value ", the authority is not tied down to adopt any one or the other of the methods. It is open to the appropriate authority to adopt any one or two or more methods or even a combination of the methods, provided they are reliable, objective and relevant. It is for the Appellate Tribunal as the final fact-finding authority to determine on the facts of each case which is the method to be adopted to arrive at the proper " market value ". That this has been properly done in the instant case in the light of the decisions of the Supreme Court and a Full Bench decision of this court, cannot be doubted at all. In this case, the following aspects deserve special mention. The valuation report (land and building method), fixed towards the value of the second floor (terrace), a sum of Rs. 1,18,980 on the basis that further structure can be constructed ....