Punjab-Haryana High Court
Commissioner Of Income-Tax vs Prem Nath Anand on 23 November, 1976
Equivalent citations: [1977]108ITR549(P&H)
JUDGMENT M.R. Sharma, J.
1. This judgment will dispose of Income-tax Appeals Nos. 6, 6A-2, 9 and 5 of 1975, as common questions of law and fact arise therein.
2. By four separate registered sale deeds dated March 25, 1973, Mohan Lal, Ram Sarup, Ram Lal and Daulat Ram sold their shares in the property comprising 8 shops and 5 sheds situated in the Industrial Area, Batala Road, Amritsar City, for a sum of Rs. 25,760 for 28/100 share, Rs. 23,000 for 25/100 share, Rs. 25,760 for 28/100 share and Rs. 17,480 for 19/100 share, respectively, to Khushal Chand, Prem Chand, Jagdish Lal and Abinashi Lal.
3. On September 6, 1973, the Inspecting Assistant Commissioner of Income-tax, Acquisition Range, Amritsar (hereinafter referred to as the "competent authority"), initiated acquisition proceedings in respect of each of the sales referred to above on the ground that the fair market value of the property relating to each of the sales exceeded the apparent consideration thereof by more than 15%. While doing so, he relied upon the report of Shri P. N. Rao, valuation officer, who fixed the value of this property at Rs. 1,80,000 calculated at the rate of 20 times the annual rent of Rs. 900 per month which this property carried. Before the competent authority the transferees filed certificates of an approved valuer who determined the value of the property in dispute by land and building method at Rs. 1,20,360, and by rent realisation method at Rs. 81,450. The said valuer had fixed the value of the property at Rs. 1,00,900 being the rough mean of the two values. The competent authority came to the conclusion that the difference between the fair market value and the apparent consideration was more than 15% of the apparent consideration and for that reason a presumption in law arose that the consideration as agreed to between the parties for the transfer of the impugned property had been under-stated with the object of evasion of tax. He, accordingly, ordered that the impugned property be acquired under Chapter XX-A of the Income-tax Act, 1961 (hereinafter called "the Act"), after obtaining the approval of the Commissioner.
4. The appeals filed by the transferees were allowed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, on the ground that the proper way of determining the fair market value of the property was to fix it at 12 times the annual rent after giving a rebate of 6% of "the annual rent for repairs. On this basis, the Tribunal came to the conclusion that the fair market value of the property was Rs. 1,00,224 and since it did not exceed by more than 15% of the apparent consideration, the impugned property was held to be not acquirable.
5. The revenue has come up in appeal before us. The principal argument raised by Shri D. N. Awasthy, the learned counsel for the revenue, is that the Appellate Tribunal should have determined the fair market value of the property in dispute on the basis of the cost of land and the building. He has further submitted that the transferee-respondents themselves relied upon a report of the valuer which indicated the cost of the property at Rs. 1,20,360 when calculated on this basis. Since this value showed a difference of more than 15% between the fair market value of the property and the apparent consideration, the Appellate Tribunal was not justified in reversing the order passed by the competent authority. The learned counsel also relied upon a Division Bench judgment of this court in Dina Nath v. Controller of Estate Duty [1970] 77 ITR 193 (Punj), in which for the purposes of the Estate Duty Act, 1953, the court laid down a principle for determining the value of the property on the basis of 17 times the annual rent after deducting therefrom /6th of the rent as the expenses allowed for repairs.
6. We, however, find that the ratio of Dina Nath's case [1970] 77 ITR 193 (Punj) goes against the revenue. In that case the last holder of the property had died on June 12, 1957, when the rate of interest was very low. It is a matter of common knowledge that by the year 1973, when the impugned property was sold the rate of interest allowed by the State Bank of India on long-term deposits was nine per cent. In this view of the matter, if the fair market value of the property can be determined on the basis of the return which landed property brings to its owner, the Tribunal by fixing this value at 12 times the annual rent did not commit any error of law.
7. Mr. Awasthy has also relied upon State of Kerala v. P. P. Hassan Koya AIR 1968 SC 1201 in which it was laid down that the land and the building constitute one unit and the value of the entire unit must be determined with all its advantages and potentialities. These observations were made in a case under the Land Acquisition Act and the learned counsel wants us to infer from these observations a principle which makes it incumbent upon the competent authority to determine the fair market value of the property on the basis of the cost of the land and the building alone and by no other method. We are, however, unable to accept this broad proposition enunciated by the learned counsel, for, in that very case, the Supreme Court observed as under (page 1203) :
"It cannot be laid down as a general rule applicable to all situations and circumstances that a multiple approximately equal to the return from gilt-edged securities prevailing at the relevant time forms an adequate basis for finding out the market value of the land. But in this case the trial court and the High Court were of the view that a multiple based on a return from the gilt-edged securities was the approximate multiple for determining the value of the property under acquisition, and no ground has been suggested for not accepting the basis and the rate of capitalization adopted by them."
8. Apparently, the court accepted the method of fixing the fair market value on the basis of a multiple of the return accruing to the owner thereof. In this situation, the method adopted by the Tribunal cannot be held to be open to challenge. Accordingly, we find no merit in these appeals and order the same to be dismissed.