TMI Blog1966 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing two questions of law along with a statement of the case to the High Court. In compliance with the said order of the High Court, we submit the following two questions of law under section 27(3) of the Wealth-tax Act along with the agreed statement of the case : " (i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in ignoring the value of the land surrounding the buildings in valuing the properties Nos. 1 and 2 ? ; and (ii) Whether an asset such as land acquires value only when there is an intention to sell ? 2. For the assessment year 1959-60, the assessee, V. C. Ramachandran, sent his wealth-tax return on March 31, 1959, showing a total wealth of Rs. 3,41,106 comprised of immovable property of the value of Rs. 2,57,777 and movable property worth Rs. 83,329. The immovable properties consisted of four items, viz. : (i) the house bearing door No. 6, Richmond Road, Bangalore; (ii) house bearing door No. 3, Cunningham Road, Bangalore ; (iii) house bearing door No. 31, Chinnaswamy Mudaliar Road, Bangalore; and (iv) house bearing door No. 33, Chinnaswamy Mudaliar Road, Bangalore. The annual letting value of the first item wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties may have large compounds, they could not be converted into house sites without damaging the main building. 4. The Appellate Assistant Commissioner held that item No. (ii), viz., No. 3 Cunningham Road property, should be valued on the basis of twenty times the net annual letting value and that item No. (i), viz., No. 6 Richmond Road, should be valued on the basis of twenty times the net annual letting value plus the appurtenant site at the rate of Rs. 3 per sq. ft. Copy of the Appellate Assistant Commissioner's order is annexure 'B' and forms part of the case. 5. Against this order of the Appellate Assistant Commissioner, the department preferred an appeal before the Tribunal. The department's contentions before the Tribunal were : (i) that the ' return' from any asset was not a safe guide to determine the value of that asset ; and (ii) that the potential value of the building should also be taken into account in arriving at the value of the building. On the other hand, it was contended on behalf of the assessee that in view of the fact that in the locality in which these properties were situated, plots could not be easily sold; the potential value could not be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal thought that an asset has no market value until it is put up for sale. Very properly, the learned counsel for the assessee did not support that view. It is an obviously wrong view. Hence, no further discussion on that point is called for. Hence, we answer the second question in the negative, i.e., an asset such as land does not acquire value, only when there is an intention to sell it. This leaves us with the first question referred to. Parties are agreed that the proper basis for determining the value of an asset other than cash is to find out its market value. But the real difficulty arises in determining the basis for ascertaining the market value. On behalf of the revenue, it is contended that the only reasonable basis is the prices obtained by the sales of other similar lands near about the land in question. On the other hand, it is contended, on behalf of the assessee, that in a case like the one before us, where we are concerned with buildings with compounds in a city, which buildings are in the possession of tenants and the tenants cannot be either evicted or the rent payable by them enhanced except in accordance with the provisions of the Rent Control Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the "Act". We have no hesitation in holding that the power conferred on the Wealth-tax Officer under section 7 of the "Act" is a judicial power. The same has to be exercised in a judicial manner. The exercise of that power is open to review in appeal by the Appellate Assistant Commissioner and thereafter by the Tribunal. In fairness to the learned counsel for the revenue, it must be said that he did not contend otherwise. Now coming back to the question of valuation of the assets, with which we are concerned in this case, the mode adopted by the Tribunal is in our opinion in accordance with law. The properties, with which we are concerned in this case, are admittedly in the possession of tenants. It is not the case of the revenue that it is within the power of the assessee to resume possession of those lands except under circumstances mentioned in the Rent Control Act. Further, it is not disputed that the assessee is not competent to enhance the rent payable by his tenants except in accordance with the Rent Control Act. It does not appear to have been contended before the Tribunal that there is either a case for taking possession of any of the items of properties or even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket value has to be ascertained by the court in each case with due regard to the conditions of the time and factors which affect transactions between a willing seller and an intending buyer. In any case, the decision at best is to be regarded as approximate and not mathematically accurate estimate. A well recognised basis of valuation of buildings in urban areas is the rent normally realised by these when these are leased out to others and the rent expected to be got if these are in occupation of the owners. The valuation of a land with building thereon by valuing the land and the building separately and adding the value of the one to the other does not furnish a reliable estimate of the property. In this connection, we may refer to the circular issued by the Central Board of Revenue in the matter of valuation of immovable property. It is no doubt true that the circular has no statutory force. But, then, the circular in question is binding on the officers subordinate to the Central Board of Revenue. That apart, that circular shows how the highest authority dealing with wealth-tax has understood the scope of section 7 of the "Act". This is what the circular says : " The value of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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