TMI Blog1991 (5) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... joint owners of a property situated at No. 8/87-E, Tea Estate Compound, Race Course Road, Coimbatore - 640 108. As per registered deed of sale dated 26-2-1982 the assessees sold the property to M/s. Premier Instruments Coimbatore Ltd. (a public limited company), which is admittedly managed by D. Vijay Mohan, one of the assessees, as its Managing Director. The sale consideration was fixed at Rs. 4,46,000 and a right vested in the two assessees to have the property reconveyed to them after 25 years at the cost of Rs. 4,46,000 plus the depreciated value of any improvements effected. The assessees also obtained the right of pre-emption (on the same terms i.e. at Rs. 4,46,000 plus the depreciated value of any improvements effected), in case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,46,000 but also the valuable rights of reconveyance and pre-emption retained by the assessees. He relied upon the Delhi High Court judgment in CGT v. Dr. (Kaviraj) Khajan Chand [1990] 182 ITR 469 and the Madras High Court judgment in CGT v. Indo Traders Agencies (Madras) (P.) Ltd. [1981] 131 ITR 313. The learned Departmental Representative submitted as under : That the property in question was very well located in Coimbatore. It had been constructed on a site of approximately 1/2 acre. The built up area was 605 sq. mts. At Rs. 1.50 per sq. ft. the purchaser would realise about Rs. 10,000 per month as rent. Taking 8 times the rent as annual value and capitalising this at 12.5 times (period of vesting of property 25 years - average 12.5), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company agreeing to reconvey the property to the owners as set out in the covenant herein below and also the first option granted to them, the owners hereby convey and transfer absolutely unto the company the property more fully set out and described in the schedule hereunder together with the all lands, appurtenances, right of way, easement, privileges and advantages whatsoever, with all and absolute right, title and interest of the owners unto and upon the properties hereby conveyed to the company to have and hold the same and to the absolute use and benefit of the company for ever and free of all encumbrances and the owners do hereby deliver possession of the property set out in the Schedule hereunder to the company. The company do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. Property tax receipts. 3. Copy of the wealth-tax order assessing the property in the name of the owners, Sri D. Vijay Mohan and his wife Mrs. Vanitha Mohan. " 7. It is clear from a perusal of these clauses that the consideration for the transfer was not only the sum of Rs. 4,46,000 but also rights of re-conveyance and first option retained by the assessees. It is also seen that unlike, as in other sale deeds, the original documents have not been handed over to the purchasers. This shows that ultimately the assessees did intend to exercise their right of reconveyance at the end of 25 years. 8. The question that now arises, is how to wax value these rights of re-conveyance and first option retained by the assessees ? No doubt the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is not necessarily what is ultimately determined by someone else as market value. Learned standing counsel for the Commissioner stressed that the adequacy of the price has to be judged only in the light of the market value of the property transferred and according to him, there is no other yardstick which could be applied to a situation like this. We are unable to agree. We may explain why we disagree with him by taking an example. Supposing an old lady who owns a neighbouring property, wants to part with it to a medical practitioner, so that the medical practitioner would be of immediate assistance to her as and when she needs it and she parts with the property at what the parties conceive to be a reasonable price, could it be said th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of consideration involved in the transaction. As a matter of fact, the Delhi High Court in the case of Dr. (Kaviraj) Khajan Chand upheld the finding of the Tribunal that market value of Rs. 3,37,792 with respect to land gifted, where there was a complete prohibition of transfer by sale for the first ten years would stand reduced to Rs. 15,136 (the original cost of the land) for the purposes of gift-tax assessment. What has been transferred in the case before us is right to property circumscribed by rights of re-conveyance and pre-emption. The net value of the property transferred (bereft of these rights) would certainly be far lower than the real value. 13. The fact that the valuation by the registering authority was not contested cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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