TMI Blog1993 (9) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... thority had placed restrictions on the sale of the land. He had also observed that the properties owned by seven partners and when all the members of the family are concerned, since some of the partners represented their HUFs, there would be as many as 21 persons owning the properties. The land rate, in view of development around the cold storage has been reduced by 15% because of restriction that have been placed by the Moradabad Development Authority on sale of land beyond the normal limits allowed for residential purposes. The approved valuer also had noted that there are no sewer lines and the assessee had made its own arrangement for water supply through the tubewell. The rates of cost of construction as per the PWD Schedule of 1979-80 have been taken into account in valuing the properties. He had observed that in view of various restrictions as explained earlier, the best method of valuation of such type of building which is very old, containing out-dated method of storage, is the yield capitalisation method. Shri K.C. Srivastava submitted that the land rates adopted by him are based on the notifications that were issued under section 4(1)-2365/17-2-82-68 dated17-9-1982and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------- As against these values, the valuation adopted by the Valuation Officer are given below:--- --------------------------------------------------------------------------------------------------------------------------------------------------- Assessment year --------------------------------------------------------------------------------------------------------------------------------------------------- Particulars 1981-82 1982-83 1983-84 --------------------------------------------------------------------------------------------------------------------------------------------------- Land Building 41,07,000 44,32,000 52,93,000 Plant Machinery 7,73,150 10,44,080 10,43,185 Total 48,80,150 54,76,080 63,36,185 ----------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity that is available of the cold storage is a known factor and the rate that is charged of the storing of the commodity is also know and the expenses in maintaining and providing services in regard to such storage are usually a fixed factor, arriving at the figure of uniform yield from the property would not be difficult. He submitted that in the case of Naval Kishore Paliwal v. WTO [WT Appeal Nos. 604 to 608 Delhi Bench 'A' vide its order of 6-5-1987] had upheld the contention of the assessee for valuing the cinema building on the yield that is derived from the cinema building. He pleaded that the principle that was recognised in that case by the Tribunal was that a commercial property which has been specifically designed for a particular business, which in that case, it was a cinema building and could be used only for exhibiting films, in the like manners, the cold storage building is also capable of being used for storage of commodity and is not at all suitable for any other work. He submitted that since the Tribunal had recognised that principle of specific building for the sale of business and adopting the yield method, the same factor should prevail upon in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property. He submitted that though this was taken and the CIT(A) also held that the reference was not proper, however, he had used the valuation by the DVO as an expert view and consider the various aspects, the drawbacks as stated by the assessee and allowed deduction at 40% over the value, against which deduction, the Department has filed these appeals. He submitted that the CIT(A) having taken the trouble of considering the DVO's report as an evidence, then in all fairness he should have considered the approved valuer's report as well, because it would then be possible to evaluate the opinions of the two experts, and to judge for oneself which value is the near correct value. He pleaded that in all fairness the various restrictions as stated by him he would strongly plead that the yield method would be the most appropriate in the circumstances of the property. 5. Shri A.S. Luthra, Valuation Officer and Shri U.C. Mishra, Asstt. Valuation Officer were present during the hearing and placed their submissions in regard to valuation of the property, plant and machinery etc. The Valuation Officer submitted that the land rates though was made with reference to the notification iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the property which is divided to chambers and office, measurement of which were taken such as high thickness of the wall and the like and on that basis the CPWD rates of construction have been adopted and considering the extent of usage of the cold storage, the future life was estimated and for the period that has already been expired, depreciation has been allowed on a proportionate basis, giving almost near real value of the properties. The Valuation Officer submitted that profitability of business depends on several factors such as management. He submitted that cold storage mainly depends crops are good that is grown in the year in which the crops are grown, the assessee would have more income consequent to storage and in the year in which the crops are bad, it would result in less storage income. Therefore, the valuing of the building based on income would give a wrong picture. He submitted that the co-owners are none other than the family members and therefore it should not be a impediment in sale of the property. Insofar as valuing the machinery is concerned, there is hardly and improvement in the type of machinery or technology that is used and it has remained m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndas Patel's case on the aspect of capitalisation had observed that the rate should be just and should not be un-real and must have regard to the commercial rate of return. The Supreme Court in CWT v. P.N. Sikand [1977] 107 ITR 922 had observed that in valuing the property that is encumbered it should be valued as if there are no such encumbrances and from that value, the value of incumbrances should be deducted, as in that case, the sale of the land was subject to the un-earned increase being shared by the concerned authorities. 7. The valuation of any property normally involves certain elements such as identification, time, place or location of the property, the standard or method of valuation and the like. It is an accepted factor that exclusive ownership is more valuable then shared or joint ownership because the co-owner cannot enjoy the property as a full owner. The basis of estimate of value of the property has to necessarily take note all the relevant material, evidences, such as the nature of the property, type of construction, the place on which the property is located, surrounding areas, restrictions on sale of large area of land and many such factors. The properties h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome that is derived from the property also has to be the normal income. The factor normally would be based on the available capacity of storing of goods or commodities. The income that has been derived from the stated property has been fluctuating over the years and there does not appear that in any of the years, the income earned was on the available capacity of the building. The valuation dates being Dushera 1980, 1981, 1982 and the multiplication factor has already been so prescribed in Rule 1BB which could be adopted as the basis for determining the multiplication or capitalisation factor and on that basis we would adopt the multiplication factor as 12 times the net yield which is based on available capacity, not necessarily the capacity that is used by the persons but the capacity that is available for storage, after allowing of deduction on account of normal expenses. The various case laws cited have only provided a caution in adopting income capitalisation, which caution is based on consideration of abnormal profit or abnormal loss, resulting in abnormal value of the property which are not near the real value. The optimum capacity or the available capacity of storage is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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