TMI Blog1980 (2) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 300 as ground rent for the same out of the total ground rent of Rs. 1,327.30 payable for the land. The first floor was at that time in possession of three tenants on a total rent of Rs. 328. They were using the same for residential purpose. However, eviction proceedings against them were pending and the transferee was given the right to pursue them for its benefit. After this sale, the transferee succeeded in obtaining vacant possession from the tenants in October, 1975. This was stated to be under settlement with them in terms of Which each one of them was paid Rs. 35,000 by the tranferee. The transferee further spent an amount of Rs. 75,000 for getting the residential purpose of the property converted into commercial nature from the Land Development Office and New Delhi Municipal Committee. The application in this regard was moved on March 9, 1976, and was accepted on March 27, 1976. A sum of Rs. 17,600 had also been spent earlier by the transferee on the stamp paper and registration charges while getting the sale deed executed in its favour. That apart, the transferee also incurred expenditure of Rs. 2,75,000 towards renovation and conversion of the property into com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment prevailed in the area which considerably restricted the grounds on which the tenants could be ejected. The value of the property when considered in the context of rent realised, the capitalisation of the annual rental value came to about Rs. 40,000 only. Before effecting the sale, the transferor had got the value of the property assessed from its valuers, M/s. B. M. Sharma and Associates, who after considering both the yield method and the land and building method determined the value at Rs. 2,20,000. It was as such that it was agreed to be sold for Rs. 2,20,000. A great risk was said to have been taken by the transferee in purchasing the property at that value also, as it could as well be that the tenants were not evicted and the permission to convert the user of the property from residential to commercial denied. The Competent Authority, however, did not accept these contentions and instead relied upon the value computed by the departmental valuer on the basis of developmental method. That valuation had been arrived at by the valuer as under : " Valuation on developmental method : Covered area of offices excluding toilet blocks open terraces--4,780 sq. ft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration had not been truly stated in the sale deed. The transferor and the transferee were held to have failed to lead any evidence to rebut the presumption so created. In the ultimate analysis the Competent Authority after obtaining the prior approval of the CIT as provided for in s. 269F(vi) of the Act directed the acquisition of the property. In appeal, however, the Income-tax Appellate Tribunal quashed the acquisition after observing that a building with vacant possession and a building with tenants are two different things altogether, so far as market value is concerned. In the case of a building with tenants, specially in an area where rent control statutes prevail, the prospects of getting a good price for the building were held to be far from bright. On the other hand, a building with vacant possession offers immediate and attractive options either as capital investment or as a business venture. The market value of the two types of buildings was held to be not comparable. The essential point in the present case noticed was that the transferee had taken a risk in buying the property which was in the possession of old tenants. There was no certainty that the transferee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. This potential user of the property in future, therefore, could not be ignored in the determination of its market value. The property in dispute is situated in Connaught Circus which is the most central commercial area of New Delhi. The values of properties there are fairly high. Their values came up for consideration before the Delhi High Court in the case of Wenger and Co. v. District Valuation Officer, Now Delhi [1978] 115 ITR 648. It was found that the rate of Rs. 3,200 per square yard of the land there appeared reasonable as another property bearing No. 98, Connaught Place, constructed on 212 square yards of land was sold in August, 1973, for Rs. 8 lakhs. The value of land in that case had been computed at Rs. 3,477 per square yard. With these instances of sales in the area available, it is clear that the valuation of Rs. 300 per square yard for the land underneath the property in dispute a opted by the transferor's valuer was too low. The same could not by any stretch be treated as the market value of land there. Even if Rs. 3,000 per square yard was adopted, the value of the land would have turned out to be Rs. 12 lakhs for 400 square yards. In case, the transferee got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rina Building, New Delhi. It was computed at Rs. 27,54,500. It was situated on 6,400 square yards of land and was lying let out. If that valuation was taken into consideration, the value of 400 square yards of land of the property in dispute would just come to about Rs. 1,50,000. Another instance has been cited from the side of the respondents of the valuation of a Queensway property by the departmental valuer at Rs. 1,54,000 in the year 1972-73. This covered 800 square yards with 2 storeyed building on it. It was, however, lying entirely let out. These instances, of valuations of the properties are relevant for the present case as they were in similar circumstances lying let out to tenants. The revenue has, however, vehemently asserted that the method of capitalisation of rental value was not even adopted by the transferor's valuer. Instead he took into account the method of computing the market value of the land and the building. He in this regard committed grave error inasmuch as the value of the land was taken at Rs. 300 per square yard while it was above Rs. 3,000. Secondly, he did not take into account the potentialities of the property for future. We in this regard find th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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