The reversionary value of a tenanted property should not be included in the market value of the building for the purpose of wealth tax assessment.

The following question has been referred by the Income-tax Appellate Tribunal, Guwahati Bench at the instance of Revenue under section 27 (1) of the Wealth-tax Act, 1957 (for short, the Act) :

"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that reversionary value of the land in question of the tenanted property should not be taken into account ?"

2. The reference arises in regard to wealth-tax assessments in relation to three brothers who own undivided £rd share in certain common assets. The assets include a building in property No. 250 B, Lake Town, within the limits of Calcutta Corporation. The assessees valued it at Rs. ],79,224/-as suggested by an approved valuer. This valuation was made by the multiplier method on the basis of the contract rent. Wealth-tax Officer (WTO) referred the matter to the Departmental Valuation Officer, who fixed the value at Rs. 5,05,838/- by adding the value of the 'reversionary right of the landlord' to the value arrived at on the basis of the rent. The WTO accepted the same and passed assessment order on that basis. The appellate authority held that there was no justification to include the value of the reversionary right in the market value of the building and this has been affirmed by the Tribunal in further appeal at the instance of the Revenue. Revenue sought reference being dissatisfied with the findings of the two appellate authorities.

3. Under the provisions of the Act, wealth tax is payable on the net wealth as assessed by the statutory authority subject, of course, to various admissible deductions. Wealth includes all assets. Necessarily building would be part of the wealth for the purpose of the Act.

4. Learned counsel for the Revenue, Shri DK Talukdar submitted that rent adopted for the purpose of calculation is very low and therefore cannot be the basis for determining the market value of the building. We do not find any such question had been canvassed before the statutory authorities and no such question has been referred by the Appellate Tribunal. Therefore, it is not open to the Revenue to raise this contention.

5. Neither the Act nor the Rules framed thereunder lay down any guidelines for determining market value of land or house property. The question of valuation has arisen under the Land Acquisition Act, 1894. There is not in general any market for land in the sense in which one speaks of a market for shares or commodities. The value at any particular time of shares or commodities can easily be ascertained by the prices ruling in the market. Therefore valuation is based on price paid within a reasonable time in bonafide transactions of purchase of comparable land in the vicinity or on a number of years purchase of actually or immediately prospective profits of the land acquired or on opinion of experts. These methods 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 See, Special Acquisition Officer vs. T. Adinaryana Setty, AIR 1959 SC 429; Tribeni Devi vs. Collector, Ranchi, AIR 1972 SC 1417; Controller of Estate Duty vs. Bijoy Kumar Khandelwal, 108 1TR 864 (Gauhati).

6. In the case of house property or land with building, it is often difficult to secure reliable evidence of instances of sale of similar property proximate in time to the relevant date. Therefore, the method generally adopted in-determining the value of land with buildings, particularly those used for comm­ercial purposes, is the capitalization method, i.e. a number of years purchase on the basis of return actually received or which might reasonably b; received from the property. Ordinarily, though not invariably, a multiplier approxim­atel