In estimating the principal value of any property under section 36(1) of the Estate Duty Act, the Controller may proceed on an opinion basis, but that opinion must be objectively formed, taking into consideration the provisions of the West Bengal Premises Tenancy Act, 1956, which imposed restrictions on the rent that could be charged for the premises.

BANERJEE, J.

1. This is a reference under section 6(3) of the Estate Duty Act, 1953.

2. The question of law referred to this court is :

Did the Tribunal, on the facts and in the circumstances of the case, adopt the proper basis for assessment of principal value of premises No. 226/1, Lower Circular Road, Calcutta ?

The circumstances under which the above quoted question comes up for consideration are hereinafter stated in brief : Premises No. 226/1, Lower Circular Road, Calcutta, belonged to one Kamala Prasad Jain, who died on December 21, 1959, leaving a will by which he appointed his wife, Sm. Radha Devi Jalan, as the executrix. In making the return under the Estate Duty Act, the executrix, as the accountable person, showed the value of the said premises at Rs. 1,35,000. This was apparently done on the basis of the annual value of the premises, under the Calcutta Municipal Act, which was Rs. 13,608. The Assistant Controller of Estate Duty was of the opinion that the annual value was too low and should not be utilised for the purpose of valuing the premises. He formed this opinion on the basis of local inspection of the premises from outside. In the report of local inspection, he expressed the following view :

.... It a appeared to be a first class building in an aristocratic locality and in a very good state. It is a two-storeyed house of first-class materials with an attractive lawn in its front.

It is not disputed that the premises is in the occupation of an old tenant of the name of M. L. Khaitan, paying a monthly rent of Rs. 1,600 therefor. It is also not disputed that the premises is covered by a mortgage to Messrs. Bata Shoe Company Ltd.

3. The Assistant Controller of Estate Duty at first adopted the land and building method of valuation for the purpose of evaluating the property. The calculation made by the Assistant Controller, on that basis, is hereinbelow set out : Rs. Rs.

Land : 32 cottahs at the rate of Rs. 11,000 per cottah on average 3,52,000

Structure from a rough estimate (in the absence of exact particulars) : the building stands on about half a Bigha (10 cottahs), i.e., 7,200 sq ft., say, 7,000 sq. ft. Cost at the rate of Rs. 20 (for ground floor) and Rs. 15 (for first floor), i.e., Rs. 35 per sq. ft. 2,45,000

s

The building is in a very good of maintenance. Hence, depreciation of only 10 per cent. is allowable 24,500

2,20,500

5,72,500

Considering, however, the fact that the house was under a mortgage to Messrs.

Bata Shoe Co. Ltd., the Assistant Controller took the value of the property in the round figure of Rs. 5,00,000. The Assistant Controller then proceeded to value the property on rental basis. In that context, he observed as follows :

4. From the aforesaid figure, he deducted the outstanding liability under the mortage of the property to Bata Shoe Co. Ltd. and arrived at the valuation of Rs. 5,00,000 for the premises. According to the calculations by the Assistant Controller, the principal value of the property, whether estimated on the land and building method or under the rental value method, yielded the same result.

Aggrieved by the order, the accountable person preferred an appeal before the Appellate Controller of Estate Duty, who partly allowed the appeal with the following observation :

In determining the market value of the property the Assistant Controller considered both the rental aspect as well as the cost of land and cost of construction of the building aspect. Actual rent in this case is Rs. 1,600 per month or Rs. 19,200 per year. The question is whether this is a maintainable net rental income. Here, we have to examine whether this rent of Rs. 1,600 would be maintained in future having regard to the condition of the property, the locality and facilities available at present. I am of the opinion that the actual rent is indeed a privileged rent, because the tenant has been occupying the house for a number of years. Moreover, the house is mortgaged to Messrs. Bata Shoe Company Limited, o