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High Court Of Calcutta
SABYASACHI MUKHERJI, SUDHINDRA MOHAN GUHA
SUDESH CHANDRA TALWAR - Appellant
Versus
COMMISSIONER OF WEALTH-TAX - Respondent
Matter 672 Of 1977
Decided On : 03/05/1981
WEALTH TAX - Valuation of property - Rental method - Held that, in the instant case, the rental method based on actual rent received from the property subject to variation permissible under the rent restriction laws would be the proper method of valuation.
Fact of the Case:
The assessee purchased a property consisting of a two-storeyed building and open land measuring 17 cottahs and 8 chattaks on 30th March 1964 for Rs. 1,20,000. The assessee's father was living in the said building as a tenant at a monthly rent of Rs. 434 when it was purchased and he continued to live therein at the same monthly rent after it was purchased. The WTO proceeded to make his own valuation by adopting the rental method. Having regard to the situation of the property, the size of the building and the amenities it commended, the WTO was of the opinion that the property should fetch a rent of not less than Rs. 2,000 per month and that the rent of Rs. 434 p.m. being paid by the father of the assessee was ridiculously low and did not represent the real rental value of the said property.
Finding of the Court:
The Tribunal held that the land-cum-building method adopted by the assessee's valuer as well as the AAC was the most appropriate method of valuation to be adopted in this case. However, the Tribunal set aside the AAC's decision and restored the appeal to his file for fresh disposal in the light of the observations made by the Tribunal.
Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in the instant case the land-cum-building method was the most appropriate method of valuation ? if the answer to question No. 1 be in the negative, whether the correct method of valuation would be rental method based on the actual rent received from the property ?
Ratio Decidendi: The court held that the rental method based on actual rent received from the property subject to variation permissible under the rent restriction laws would be the proper method of valuation in the instant case. The court reasoned that the property was let out to the assessee's father for 20 years at a monthly rent of Rs. 434, which was the same rent that was being paid after the purchase of the property. The court also noted that the AAC and the Tribunal had found that the entirety of the premises, including the building and the land, had been let out. Therefore, the purchaser of the property would have to purchase the property with the tenant who was the tenant not only of the building but also of the land. The court further held that the rent could not be said to be unfair or low or that it could not be considered to be the standard rent in the light of the rent restriction laws.
Final Decision: Question No. 1 is answered in the negative and in favour of the assessee. Question No. 2 is also answered in favour of the assessee. The parties will pay and bear their own costs.
( 1 ) IN this reference under Section 27 (3) of the W. T. Act, 1957, the following questions have been referred to this court :"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in the instant case the land-cum-building method was the most appropriate method of valuation ? if the answer to question No. 1 be in the negative, whether the correct method of valuation would be rental method based on the actual rent received from the property ?"
( 2 ) IN order to appreciate the questions it would be relevant to refer to certain facts. The assessment years involved are 1964-65, 1965-66, 1966-67, 1967-68, 1968-69 and 1969-70 for which the respective valuation dates were 31-3-64, 31-3-65, 31-3-66, 31-3-67, 31-3-68 and 31-3-69. The question of valuation of the property at premises No. 8, Dover Park, Calcutta, on the respective valuation dates was involved in the appeals before the Tribunal leading to the present reference. The said property is a trust property. It was purchased on the 30th March, 1964, for Rs. 1,20,000 by the trustees for the benefit of the minor beneficiary. It may be mentioned that the trustees were the two major sons of the tenant of the premises and one at the relevant time was a solicitor of this court. The beneficiaries of the trust are the minor children of the settlor. The said property consists of a two-storeyed building and open land measuring 17 cottahs and 8 chattaks. The building consists of 7 rooms with a garage and a servant's quarters attached to it. The assessee's father was living in the said building as a tenant at a monthly rent of Rs. 434 when it was purchased by the trustees and he continued to live therein at the same monthly rent after it was purchased. Inasmuch as certain controversy has arisen as to whether the rent was fair or not, it is appropriate, in our opinion, to refer to the order of the AAC wherein he observed, inter alia, as follows :"the property was purchased for Rs. 1,20,000 in March, 1964. The appellant's father, Sri Shive Charan Laul Talwar, was a tenant in this house for over 20 years at a monthly rent of Rs. 434. This property had 17 cottahs of land and a two-storeyed building consisting of 7 rooms, garage, servants' quarters, etc. "
( 3 ) THE Tribunal also in its appellate order observed as follows :"it appears that the assessee's father was living in the premises as a tenant at a monthly rent of Rs. 434 and he continued to live in the premises as a tenant on a monthly rent even after it was purchased by the trustees for the benefit of the minor. The area of the said premises, according to the approved valuer's report, is 17 cottahs 6 chattaks. The building is two-storeyed and consists of 7 rooms and it has a lawn, a garage and servants' quarters attached to it. "
( 4 ) THE situation of the property is admittedly in a good residential area of the city. The assessee got the property valued by an approved valuer. The said valuer valued the land at Rs. 86,875 by applying the rate of Rs. 5,000 per cottah. Making an allowance of 10 per cent. for largeness of the area he determined its value at Rs. 78,000. He valued the building at Rs. 71,000 after allowing a depreciation of 30 per cent. After deducting 7 per cent. simple interest towards deferred development the approved valuer valued the entire property as on each of the valuation dates at Rs. 1,10,000 by applying the land-cum-building method. The WTO proceeded to make his own valuation by adopting the rental method. Having regard to the situation of the property, the size of the building and the amenities it commended, the WTO was of the opinion that the property should fetch a rent of not less than Rs. 2,000 per month and that the rent of Rs. 434 p. m. being paid by the father of the assessee was ridiculously low and did not represent the real rental value of the said property. After making a deduction on account of municipal taxes, collection charges,
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