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HIGH COURT OF CALCUTTA
SABYASACHI MUKHERJI, R. N. PYNE
DEBI PROSAD PODDAR - Appellant
Versus
COMMISSIONER OF WEALTH-TAX - Respondent
Matter 711 Of 1970
Decided On : SEPTEMBER 13, 1974
WEALTH TAX - Valuation of immovable property - Rental method - Held, in the facts and circumstances of the case, the rental method is the more reliable method than the method of valuing it on the basis of land.
Fact of the Case:
The assessee purchased the house property (godowns) at Nos. 196, 197 and 198, Maharshi Devendra Road, Calcutta, in 1946 for a sum of Rs. 3,20,000. The said property bears three municipal numbers but the property is really one. It consists of very old godowns standing on an area of about 42 cottahs of land on the said Maharshi Devendra Road, opposite Mayo Hospital in Calcutta. It was let out to three different tenants. The question arose about the valuation of these properties on the relevant valuation dates for different years with which we are concerned in this reference varying some time in the end of March, 1957, or beginning of April of the subsequent years.
Finding of the Court:
In the instant case we have to bear in mind that the property in question had been let out. Also it appears that the litigation for eviction of the tenants were pending on the relevant valuation dates and even when the hearing of the appeal were going on before the Tribunal. It was stated that the assessee had purchased the property in question for the purpose of building multistoreyed structure in the property. It has to be borne in mind that the godowns and other structures are over 100 years old. There was no evidence or no assertion to the contrary to contradict the purposes of purchase by the assessee. The fact that the building and structures were very old and the fact that the assessee had been litigating in court for several years to obtain possession corroborate this assertion that the assessee wanted the property in question for better amount--perhaps better return. To take the value on the basis of building and land separately or even of land separately would not be the appropriate method because the land could not have been sold without demolishing the structure and the structures could not have been demolished without ejecting the tenants which in view of the Rent Restriction Act and the present position of the litigation was no easy matter. Having regard; therefore, to these features and also to the fact that there were no objective factors to indicate any real transaction of sale of the property of this type or of the same quality or approximately at the same time, there is even the absence of any reliable evidence by the broker or dealer which could have justified any view about the trend of market, it appears that the rental method, i. e. ; method based on the expected return by letting out is the more reliable method in the facts and circumstances of the case, than the method of valuing it on the basis of land which we said before could not have been availed of because of the difficulties mentioned before.
Issues: None
Ratio Decidendi: In the premises, we are of the opinion, that in this case there is no basis for rejecting the rental method even though that method gives the result of having a value less than the price paid prior to the date of valuation, but that was because the original purpose was frustrated.
Final Decision: In the aforesaid view of the matter the question referred is answered in the negative and in favour of the assessce. Each party will pay and bear its costs.
( 1 ) IN this reference we are concerned with the question of valuation of immovable property. In order to appreciate the question referred we will briefly state the facts. This reference is in respect of assessment to wealth-tax for the assessment years 1957-58 to 1962-63. The assessee purchased the house property (godowns) at Nos. 196, 197 and 198, Maharshi Devendra Road, Calcutta, in 1946 for a sum of Rs. 3,20,000. The said property bears three municipal numbers but the property is really one. It consists of very old godowns standing on an area of about 42 cottahs of land on the said Maharshi Devendra Road, opposite Mayo Hospital in Calcutta. It was let out to three different tenants. The net annual rents received from these godowns were) Rs. 10, 359 in the assessment years 1957-58 to 1960-61, Rs. 11,490 in the assessment year 1961-62 and Rs. 8,971 in the assessment year 1962-63. We are not quite aware as to the reasons for the variation of rents for the different years mentioned above. Counsel for the assessee suggested that perhaps it was due to the agreement or contract between the tenants and the landlord in question. The question arose about the valuation of these properties on the relevant valuation dates for different years with which we are concerned in this reference varying some time in the end of March, 1957, or beginning of April of the subsequent years. The assessee valued this property for all these six assessment years at Rs. 2,07,180 at the rate of 20 times of annual rental income. The Wealth-tax Officer did not accept the valuation shown by the assessee. He valued the land separately at the rate of Rs. 15,000 per cottah and, accordingly, valued the land at Rs. 6,30,000. He valued the structures and godowns on the said land at Rs. 90,000 taking the gross value at Rs. 1,50,000 and allowed depreciation on this value for Rs. 60,000 and computed the net value of the buildings at Rs. 90,000. Thus, the total value of the property was computed by the Wealth-tax Officer at Rs. 7,20,000 for all these years. It would be appropriate in this connection to set out the reasons of the Wealth-tax Officer for this conclusion with reference to the order passed in respect of one of these years. He stated :"the assessee has house property in Calcutta at 196, 197 and 198, Maharshi Debendra Road, Calcutta. The property consists of about 42 cottahs of land on which single storeyed structure exists. The structure is about 100 years old. The property was acquired in 1946 for Rs. 3,20,000. It is fully let out. Municipal value is Rs. 13,470. The assessee has valued the property at Rs. 2,07,180. In my opinion the valuation is not correct. The assessee purchased the property in 1946 for Rs. 3,20,000. The valuation after 11 years must have very much increased. I value the properties according to the land and building valuation methods. I estimate the value of land at Rs. 15,000 per cottah. Therefore, for 42 cottahs the valuation comes to Rs. 6,30,000. As mentioned hereinbefore the cost of construction was taken at Rs. 1,50,000 and depreciation was allowed at 50 per cent. and the total net cost of construction was computed at Rs. 90,000 making the valuation of the property at Rs. 7,20,000. "
( 2 ) THE assessge went up in appeal before the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner it was contended that the Wealth-tax Officer was in error in valuing the land and building separately. According to the assessee the same should have been valued at 20 times the net rent income. The Appellate Assistant Commissioner, however, did not accept the said contention. The Appellate Assistant Commissioner was of the view that the property was situated in the heart of the commercial centre of the city. According to him there was a great demand for land and building in that area amongst the business community. However, considering the fact that the godowns were in possession of the tenants who cou
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