TMI Blog1967 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Calcutta Municipal Act, which was ₹ 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 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 ₹ 1,600 therefor. It is also not disputed that the premises is covered by a mortgage to Messrs. Bata Shoe Company Ltd. 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 ₹ 11,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 1,600 per month or ₹ 19,200 per year. The question is whether this is a maintainable net rental income. Here, we have to examine whether this rent of ₹ 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, of which the tenant is a director. In this locality properties of the same type would fetch ₹ 3,000 per month. I would, however, estimate the fair maintainable rental income of the property at ₹ 30,000 per year. Deducting therefrom ₹ 7,500 as outgoings, the net rental income would come to ₹ 22,500. Multiplying this by 20 times, the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellate Tribunal at ₹ 2,20,000. The Controller of Estate Duty became aggrieved by the order made by the Tribunal and obtained a reference to this court on the question of law set out at the beginning of this judgment. Mr. B.L. Pal, learned counsel for the revenue, did not dispute the proposition that, in estimating the principal value of any property, under section 36(1) of the Estate Duty Act, the Controller may proceed on opinion basis but that opinion must be objectively formed. His contention was that it was the duty of the Controller to find out the price obtainable in the open market and an opinion thus formed must bind the assessee. In order to appreciate the scope of this argument, it is necessary for us to refer to the language of section 36(1) which reads as follows: The principal value of any property shall be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased's death. According to Mr. Pal, the duty of the Controller was to determine the price that a willing purchaser would pay to a willing seller for the property, having due regard to its existing con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es under section 127(a) of the Calcutta Municipal Act, 1923. What happened in that case was that the respondents were the owners of premises No. 296, Bowbazar Street, Calcutta. The Corporation of Calcutta fixed the annual value of the said premises at a sum of ₹ 14,093 and directed the same to take effect from the second quarter of 1950-51. In fixing the annual value, the Corporation proceeded on the basis of ₹ 1,450 as the monthly rental value of the premises. On June 20, 1950, notice of the assessment, based on the said annual valuation, was served on the respondents. Respondent No. 1 filed an objection to the said assessment, under section 139 of the Act. Meanwhile, under the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, the standard rent of the said premises was fixed by the Rent Controller at ₹ 350 per month, with effect from April, 1951, and at ₹ 632-8-0 per month with effect from August, 1951. One of the objections raised by respondent No. 1 was that the Corporation had no power to fix the annual valuation at a figure higher than the standard rent. This objection was disallowed by the Corporation. Being aggrieved by the said orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be committing an offence if he collected a rent above the rate of the standard rent. One may legitimately say under those circumstances that a landlord cannot reasonably be expected to let a building for a rent higher than the standard rent. A law of the land with its penal consequences cannot be ignored in ascertaining the reasonable expectations of a landlord in the matter of rent. In this view, the law of the land must necessarily be taken as one of the circumstances obtaining in the open market placing an upper limit on the rate of rent for which a building can reasonably be expected to let. It is said that section 127(a) does not contemplate the actual rent received by a landlord but a hypothetical rent which he can reasonably be expected to receive if the building is let. So stated the proposition is unexceptionable. Hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market. But an open market cannot include a 'black market', a term euphemistically used to commercial transactions entered into between parties in defiance of law. In that situation, a statutory limitation of rent circumscribes the scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this aspect of the matter and, in our opinion, very rightly. Faced with the authorities to which reference has already been made, Mr. B.L. Pal, learned counsel for the revenue, in his fairness, did not dispute that in arriving at the figure of fair rent of the property regard shall have to be had to the provisions of the West Bengal Premises Tenancy Act. He, therefore, reframed his line of argument and contended that the provisions of the West Bengal Premises Tenancy Act permitted increase in the contractual rent, agreed upon years ago and the Tribunal should have taken that fact into consideration. Now section 8 of the West Bengal Premises Tenancy Act, 1956, defines fair rent. Mr. Pal submitted that clause (e) of section 8(1) applied to the instant case. That clause reads as follows: Where the provisions of clause (a) or clause (b) or clause (c) or clause (d) do not apply, such rent as would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein and where there are similar or nearly similar premises in the locality having regard also to the rent payable in respect of such premises: Provided that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the property would be the rental basis. In this opinion the Tribunal was not inherently wrong. When a person buys a property, he does so for two purposes, (a) to obtain an annual income, (b) to obtain security for his capital. If the property was merely a vacant land, it might be developed and made to yield such income, as it was capable of, in a metropolitan area where some sort of scarcity for accomodation prevails. The property was, however, burdened with a tenanted house and the income therefrom was controlled by a statute. This control on income was bound to react on the value of the property and application of the land and building method would not have been a proper method in the instant case. Further, the land and building method as adopted by the Assistant Controller and the Appellate Controller was somewhat an off-hand method. The valuation was made on a personal inspection of the property by the Assistant Controller from outside and on his subjective opinion that it was a first class building. The Assistant Controller was not sure of the area which this structure covered but merely made a rough estimate of it. Wherefrom he got the per cottah land value and per squar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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