AI Drafter 
TaxTMI 
TaxTMI 
1984 (9) TMI 40
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....e year 1971, the tenants with the consent of the owners formed a housing co-operative society and the deceased who was one of the tenants joined the society and became the owner of the flat which was in his occupation. The deceased paid a consideration of Rs. 31,500 towards the purchase price of the flat and purchased five shares of the face value of Rs. 250 each of the society. The membership of the society was held by the deceased jointly with petitioner No. 2. On July 11, 1973, the deceased filed his return of net wealth for the assessment year 1973-74, the relevant valuation date being March 31, 1973. In the said return of wealth, the deceased showed the value of the flat at Rs. 54,700 in accordance with the valuation report dated October 12, 1972, prepared by Mr. Liloowalla. By assessment order dated September 26, 1973, the WTO completed the assessment for the assessment year 1973-74, accepting the value of the flat as stated by the deceased. The WTO gave relief under s. 5(1)(iv) of the W.T. Act, 1957, in respect of the flat to the deceased. For the assessment years 1974-75 to 1980-81, the same valuation was accepted by the WTO and relief was granted to the deceased under s....
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....No. 1 did not accept the valuation report tendered by the petitioners and held that it was defective as the market rate of the land as on the date of death of the deceased was not taken into consideration. The other minor dispute before respondent No. 1 was in respect of the quantum of royalty to be received in respect of book, I" Roses in December ", written by late Mr. Chagla. The dispute in respect of that item no longer survives and the present petition under art. 226 of the Constitution of India is filed on October 13, 1983, to challenge the legality of that part of the assessment order whereby the value of the flat was determined at Rs. 7,50,000. The petitioners also challenge the legality of the notice of demand issued by respondent No. 1 on September 19, 1983, calling upon the petitioners to pay additional estate duty of Rs. 3,92,820. Mr. Seervai, learned counsel appearing in support of the petition, submitted that the value of the flat shall be estimated to be the price which it would fetch if sold in the open market at the time of the deceased's death. The Controller, who is required to determine the value, says the learned counsel, must be guided by the provisions of ....
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....ts, Hotel and Lodging House Rates Control Act, 1947, which, inter alia, provide that it shall not be lawful to claim or receive on account of rent any amount in excess of standard rent. The standard rent is the rent at which the premises were let on September 1, 1940, or the rent at which they were first let subsequent to that date. Section 18 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, makes it an offence punishable with imprisonment, when any amount in excess of standard rent is received in any form. The standard rent of the flat was Rs. 270 per month and the rateable value was settled by the Municipal Corporation for the purpose of payment of municipal taxes by taking this amount as the basis. The rateable value is assessed by determining the value of the property and it is now well settled that while determining the value, regard must be had to the provisions of law which control the fixation of rent as well as those regulating the powers of the landlord to take possession from the tenant. The assessing authorities have to determine the value of the property by applying the principles laid down in the rent legislation for fixation of the standard rent ....
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.... the amount arrived at by multiplying the net maintainable rent in respect of the part of the house used for residential purposes by the fraction 100/8 ; and (b) the amount arrived at by multiplying the net maintainable rent in respect of the remaining part of the house, if any, by the fraction 100/9: Provided that in relation to a house which is built on leasehold land, this sub-rule shall have effect as if for the fraction 100/8 in clause (a) or, as the case may be, the fraction 100/9 in clause (b), the fraction 100/9 and 100/10, respectively, had been substituted. Explanation.-For the purpose of this sub-rule, a house shall be deemed to be mainly used for residential purposes, if the built-up floor area thereof used for residential purposes is not less than sixty-six and two-thirds per cent. of its total built-up floor area. (2) For the purposes of this rule, (a) `gross maintainable rent', in relation to a house, means (i) the sum for which the house might reasonably be expected to let from year to year; or (ii) where the house is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in sub-clause (i), t....
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....o year, if in occupation of the owner and upon the annual rent received or receivable in case of occupation by the tenant. The receipt of actual rent or sum which could be expected on hypothetical letting could never be in excess of standard or fair rent fixed by the Rent Legislation. In ss. 22 and 23 of the I.T. Act, identical method is provided for ascertaining the annual value of the building for charging income-tax under the head " Income from house property ". The value of the flat in accordance with rule IBB of the W.T. Rules was only Rs. 15,521.11 as demonstrated in the report dated January 19, 1983, prepared by the valuers Sykes, Patkar & Divecha. The deceased did not feel it necessary to reduce the value of Rs. 54,700 assessed prior to the enactment of rule IBB, as the house property of the value of less than Rs. 1,00,000 was exempted. Section 5 of the E.D. Act, 1953, is the charging section and prescribes that in the case of every person dying after the commencement of the Act, a duty called "estate duty ", shall be levied upon the principal value of all the property which passes upon death of such a person. The principal value is to be ascertained in accordance with s....
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.... be valued on the basis of vacant possession, reliance is placed on the observations in para. 163 on page 78 of Halsbury's Laws of England, third edition, volume 15. The observations were based on the decision in Welby Dawson v. IRC [1921] 97 Estates Gazette 183, a decision which is not available for appreciation. In my judgment, valuation cannot be on the basis of vacant possession for several reasons. In the first instance, such, assumption is not warranted by the provisions of the E.D. Act. Secondly, the flat was occupied by the deceased with his son, petitioner No. 2, and the members of his family at the time of death and petitioner No. 2 has continued to occupy the flat even thereafter as legal representative. The petitioner No. 2 was jointly holding the membership rights of the society with the deceased, and the flat was bequeathed in favour of petitioner No. 2 under the will. In these circumstances, it is futile to claim that valuation should be on the basis of vacant possession. The hypothetical sale in the open market could only be on the basis that actual possession is not possible. Even in England, the hardship caused by the rule to beneficiaries, who would have to pay d....
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....ch annual value has to be found by applying a certain percentage which may not be the same for lands and buildings. Sections 22 and 23 of the I.T. Act and rule I BB of the W.T. Rules recognise the same method, and, in my judgment, a harmonious construction demands that an identical method should be employed while determining the value under s. 36(1) of the E.D. Act, even in cases where death has occurred prior to March 1, 1981. To accept the claim of the Revenue that the only method of valuation is land and building would lead to very anomalous results, like a flat would be valued for the purpose of wealth-tax under rule I BB and in case the assessee dies on the day next to the valuation, then the accountable person would be required to pay duty based on a different method and by which the valuation of flat would be far in excess than that determined for the purpose of wealth-tax. The Legislature, therefore, to give effect to this harmonious construction inserted sub-s. (3) of s. 36 in the E.D. Act, and in my judgment, the method recognised under rule IBB for valuation is the only method available to the Controller for valuation of the flat under s. 36(1) of the E.D. Act. It was fa....