TMI Blog1979 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a report from a registered valuer as to the valuation of that property. The value of the building was given at Rs. 83,907. The valuer valued the site at Rs. 5.25 per square feet. But he bad taken into account only the actual built area. The WTO accepted the valuation of the building and also the rate per square feet for the site. He, however, found no justification to exclude the unbuilt area of the site. Taking the valuation of unbuilt area also he assessed the market value of the building at Rs. 2,06, 127. The assessment for the five years was finalised together. On appeal by the assessee, this valuation was confirmed by the AAC. This order was not challenged further by the assessee. For the assessment year 1970-71, the assessee furnished the value of the building at Rs. 1,00,000 and submitted that capitalisation of annual rental value method was applicable even to the self-occupied house in view of the decision of this court in CWT v. V. C. Ramachandran [1966] 60 ITR 103, in which case, the assessee himself was the party. Similarly, for the assessment year 1971-72 also, the assessee furnished valuation of the building at Rs. 1,00,000 but furnished the annual rental value at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, there was no reason why the same basis should not have been adopted in respect of self-occupied building. He submitted that the adoption of land and building method was not justified. Sri S. R. Rajasekharamurthy, learned counsel for the revenue, submitted that self-occupied building stands on a different footing as the owner can sell the building to any willing purchaser and give vacant possession, whereas it may not be possible to give vacant possession of tenant occupied building in view of the restrictions on eviction of tenants by the Karnataka Rent Control Act, 1961. He also submitted that in the present case, there was only one method of valuation furnished by the assessee which was accepted by the revenue for the five assessment year; 1965-66 to 1969-70, i.e., land and building method and, therefore, the adoption of the same value for the assessment years 1970-71 and 1971-72 was justified and cannot be questioned by the assessee. In this case, the question for consideration is not as to whether the adoption of rental value method to the rented buildings of the assessee was correct, but the question is as to whether the rental value method should also have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven case. It also depends on the fact as to whether it is tenant-occupied and if so, the rent which is being paid and whether the enhancement of rent and eviction of tenant is statutorily controlled, because the restriction on enhancement of rent and on the securing of vacant possession, certainly deter a willing purchaser from offering a better price. Therefore, in order to estimate the value of buildings two well-known methods of ascertaining the market value of building which have come into existence are the rental value method and the land and building method. Some times an average of the two valuations is also adopted. Bat which of the three methods is appropriate in given case must always depend upon the facts and circumstances of that case. In order to ascertain the market value of immovable properties there are well settled guidelines laid down in several decisions of the Supreme Court, while dealing with the question of ascertaining market value for purposes of payment of compensation for the land acquired, under s. 23 of the Land Acquisition Act, and in other cases of compulsory acquisition of property for public purpose. The principles on the basis of which market valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as fair value of the property. (vide pp. 383 387) (iii) Vacant premises have considerably larger value than business premises which are occupied by tenants. (vide p. 387) These principles laid down by the Supreme Court, in respect of ascertaining the market value of immovable properties, apply equally for the purpose of ascertaining market value of the immovable properties as required under s. 7 of the Act. The aforesaid principles have been applied to the valuation of buildings for the purpose of the Act or under the E. D. Act by the High Courts in the following decisions. (i) In the case of K. Bhoomiamma v. CED [1978] 115 ITR 703, Division Bench of this court upheld the valuation of a building for purposes of computation of estate duty at the price for which it was purchased by the deceased, three years before his death, rejecting the plea of the accountable person that as the building was let out after purchase, rental method of valuation should be adopted, which would have come to less than half the price for which the property was actually purchased. (ii) In the case of J. N. Bose v. CWT [1976] 104 ITR 83, the Calcutta High Court held that in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 648 (Delhi), the building property of the assessee situate at Connaught Place area of New Delhi was partly tenanted and partly self-occupied. For purpose of levying wealth-tax, the Valuation Officer valued the tenant-occupied portions on the basis of capitalising rental value. In respect of self-occupied portions, he fixed the value of the building on the basis of prevailing rates for sale of commercial flats in the same locality and the value of the site on the basis of price paid in respect of sale of an adjacent property. The legality of this valuation was questioned by the owner in a writ petition. The Delhi High Court rejected the plea of the petitioner therein that the self-occupied portions also should have been valued by adopting rental value method and upheld the land and building method adopted for ascertaining the market value of portions of the building. (vi) This court in the earlier case of the assessee, CWT v. V. C. Ramachandran [1966] 60 ITR 103, held that market value has to be ascertained by the court in each case with due regard to the conditions of time and factors which affect transactions between a willing seller and an intending buyer and in any case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll in determining the valuation of the self-occupied residential house. As regards the method required to be adopted in ascertaining the market value of a building, the substance of all the aforesaid decisions may be summarised as follows: (1) Rental value method.-The rental value method of ascertaining the market value of a building is as follows., (i) by ascertaining rental value of a building either on the basis of the rental value fixed by the local authority concerned or by taking the rent paid when occupied by tenants, or on the basis of, rent paid in respect of comparable buildings in the vicinity or on the basis of the opinion of an expert valuer. (ii) capitalisation of annual rental value so ascertained by an appropriate multiplier. (2) Land and building method:-Market value of a house property under this method could be ascertained as follows : (i) on the basis of the information about the price paid in bona fide purchases of comparable properties located in the neighbourhood when available, or (ii) on the basis of price paid to the same property, if it was purchased, or (iii) by securing the report of an expert valuer made having due regard to all relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the assessee, however, placed reliance on the decision of this court in the earlier case of the assessee, CWT v. V. C. Ramachandran [1966] 60 ITR 103, relevant portion of which reads (p. 110): " 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." , We do not think that the aforesaid decision intended to lay down, as an invariable rule, that in respect of self-occupied buildings, capitalisation of rental method should be adopted as the basis for ascertaining the market value of the property. Moreover, in the said case, the only matter for consideration was, the valuation of buildings of the assessee in the possession of tenants yielding only a fixed rental income. It was held that in respect of rented buildings, capitalisation of annual rental value, by an appropriate multiplier, was the correct method. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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