J N BOSE Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) In this case we are concerned with valuation of certain property under the Wealth-tax Act, 1957. This relates to the assessment years 1962-63 to 1964-65. The problem is regarding the valuation of half share of the house property situated and lying at No. 2, Justice Chandra Madhab Road, Calcutta, for the purpose of computation of net wealth of the assessee under the Wealth-tax Act, 1957. The assessee is the owner of undivided half share of the aforesaid property, the other half being owned by his brother. A. N. Bose. It is recorded in the order of the Tribunal that the property had not been partitioned between the co-owners. The property waft let out on lease for 15 years with effect from the 1st of August, 1950, to the 31st July, 1965, to India Automobiles on a monthly rent of Rs. 7,500. It is stated that there was an option for a further term of five years. According to the terms of the lease the lessors were entitled to receive Rs. 90,000 per annum inclusive of municipal taxes amounting to Rs. 4,878.16 per annum. There was an option for renewal of the lease. In the wealth-tax returns for the aforesaid years the assessee had shown the valuation of the property as representing his half share at Rs. 4,31,499. The said valuation was arrived at on the basis of an earlier order of the Tribunal in the W.T.As. Nos. 157 and 158 of 1960-61, dated the 14th August, 1961, with regard to the assessment years 1957-58 and 1958-59. In the said order of the Tribunal the Tribunal has made the valuation after taking into account the valuation report of M/s. Talbot & Company, Surveyors and Valuers. But the Tribunal had modified the valuation made by the said M/s. Talbot & Company to the effect that the Tribunal had held that while the valuer had suggested that the rate of expected yield should be taken at 8%, the Tribunal was of the opinion that it should be taken at 7% and the allowance for the undivided share of the property should be taken at 10% instead of 20%. The face value of the property Vas taken by the Tribunal at Rs. 8,62,997 and the assessee's half share thus came to Rs. 4,31,499. In the said appeal it had been contended on behalf of the revenue that the assessee's tenant was getting a rent of Rs. 90,000 for a per of the property sublet and, therefore, it was reasonable to presume that when the lease expired the assessee would be in a position to get better rent. The Tribunal observed that this ignored an important fact in the sense that the Tribunal was concerned in that appeal with the market value of the share of the property as on the date of valuation subject to the handicaps and disabilities that existed on the date of valuation. Taking all these factors into consideration the Tribunal had arrived at the figure mentioned hereinbefore. In their report, Messrs. Talbot & Company had given the location of the property and had mentioned about the basis in which they had indicated in respect of two sales, one being a sale dated the 31st August, 1960, regarding 5/6ths share of Ezra Mansion for Rs. 5,00,000 with IV-storeyed blocks of buildings having frontages on Old Court House Street, Waterloo Street and Dacres Lane, land area about 44 kottahs yielding a total monthly rent of Rs. 8,000 and the other which was a sale dated(?) August, 1960, regarding 5/6ths share of Chowringhee Mansion for Rs. 11,470.58, land area 84 kottahs with IV-storeyed blocks of buildings having frontages on Park Street, Chowringhee Road and Kyd Street, yielding a total monthly rent of Rs. 10,970.83. For the relevent years with which we are concerned the Wealth-tax Officer did not agree with the estimated value of the property and fixed the sum of Rs. 13,59,960. His basis of estimate was rental income multiplied by 20 times. The half share of the same came to Rs. 6,79,980 which was taken as the assessee's share.

(2.) There was an appeal before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner observed that the Tribunal in disposing of the wealth-tax assessment for the assessment years 1957-58 and 1958-59 had taken the figure at Rs. 4,58,788. But according to the said Appellate Assistant Commissioner the said valuation was as on the 31st March, 1957. The Appellate Assistant Commissioner was of the opinion that since the property had been given out on lease by the appellant and the lease was about to expire, the value according to him should increase with the passage of time. The Appellate Assistant Commissioner further observed that the buildings which had been constructed were semi-permanent structures and if these were demolished after the lease period had expired, the value of the land alone would be more than Rs. 10,00,000. Considering all these circumstances the Appellate Assistant Commissioner was of the view that the fair market value of the land and building could be arrived at after multiplying the rental income by 16 times. By adopting this method of valuation the value of the land and buildings came to Rs. 5,34,000. If this figure was substituted for Rs. 6,79,980, the value of the land and buildings would be reduced by Rs. 1,45,980. The Appellate Assistant Commissioner, therefore, gave relief to the assessee by reducing the multiplying factor from 20 to 16 and reduced the value by Rs. 1,45,980. Against the aforesaid order of the Appellate Assistant Commissioner both the assessee and the department preferred appeals before the Tribunal. It was submitted on behalf of the assessee that the value as shown by the assessee should be accepted while the department contended that the valuation as taken by the Wealth-tax Officer should be restored. The assessee placed reliance on the previous order of the Tribunal referred to hereinbefore and submitted that there was no change since then either in the rent or in the structure. On the other hand, it was submitted on behalf of the revenue that since 1957-58 onwards there had been considerable increase in the valuation of the property. The lease period was on the point of expiry. The Tribunal, therefore, after considering these factors came to the conclusion that the lease was likely to expire shortly and, therefore, the assessee would get possession of the property and could utilise the same as per his own wish. The Tribunal adverted to the fact that the assessee might have to face some unnecessary litigation in getting the possession, etc., but that did not mean that the valuation of the property remained the same as before. The Tribunal, accordingly, was of the opinion that the Appellate Assistant Commissioner had considered these factors and the multiple of 16 times as applied by him could not be said to be in any way unfair or excessive. In the aforesaid circumstances on this aspect of the matter the Tribunal affirmed the order of the Appellate Assistant Commissioner.

(3.) Thereafter, having failed to get certain question of law referred to this court by the Tribunal (sic) by the assessee on an order being made under Section 27(3) of the Wealth-tax Act, 1957, the Tribunal has referred the following questions to this court: