Income Tax Appellate Tribunal - Mumbai
Dr. A. Gomes vs Fifth Wealth-Tax Officer on 19 October, 1987
Equivalent citations: [1988]26ITD108(MUM)
ORDER
M.A. Ajinkya, Accountant Member
1. The common grounds raised in these appeals challenge the valuations placed by the Commissioner (Appeals) on the assessees' shares of the properties situated at Versova, Mogra, Amboli, Andheri, Bandivali and Juhu. In general terms, the assessees' objections to the valuations adopted by the CWT(A) are four-fold and these may be summarized as under :
(1) The CWT (Appeals) failed to appreciate the legal impact of the Urban Land (Ceiling & Regulation) Act, 1976 hitherto referred as ("ULC Act") on the values of the said properties.
(2) The CWT(A) failed to appreciate and take into account the effect of the presence of cultivators and/or trespassers on the valuation of these properties.
(3) The CWT(A) erred in adopting the rate of 61/2 per cent for capitalising the net rental income from these properties.
(4) With reference to the property situated at Juhu village, the CWT (A) erred in seeking to include the reversionary value of the land up to the year 1994 and beyond. Since these premises had been leased out to tenant, it was not open to the CWT (A) to include the reversionary value particularly in view of the fact that the tenant would be fully protected from eviction under the Bombay Rent Act.
2. Certain facts may briefly be stated. Dr. A. Gomes and Mr. B. Gomes had equal share in certain properties situated at Versova, Mogra, Amboli, Andheri, Bandivali, Juhu, Oshivara, Kevnigaothan, Caesar Road, Goregaon and Kapasi. The details of the area, the valuation by the assessees as on 31-3-1980 and 31-3-1979, the valuation adopted by the WTO on the basis of D.V.O. and that adopted by the CWT (A) as on 31-3-1980 in brief are as under :
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Details of area Valuation by asses- Valuation by Valuation adopted
sees as on 31-3-1980 WTO on the by CWT(A) as on
& 31-3-1979 basis of 31-3-1980
DVO
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1. Versova 1,60,200 5,47,000 1,60,000
2. Mogra 88,900 8,62,000 3,94,000
3. Amboli 1,88,134 5,20,000 2,05,291
4. Caesar Road 23,400 19,000 16,000 (Garage
5. S.V. Road 90,000 4,11,000 4,25,000 (Andheri)
6. Bandivali 7,710 49,000 27,000
7. Veera Desai 2,70,000 4,13,000 3,92,700 Road (Amboli)
8. Juhu 1,02,600 25,72,000 8,55,000
9. Juhu 1,80,000 2,08,000 2,03,000
10. Oshivara 1,05,872 3,20,000 2,03,000
11. Kevnigaothan 97,200 3,70,000 19,400 (House)
12. Caesar Road 54,000 95,000 17,500
13. Goregaon 2,050 3,000 2,050
14. Kapasi 29,590 2,83,000 2,83,000 It would thus be seen that all the properties were valued by the CWT (A) for Rs. 33,09,000 and after 5 per cent deduction the final valuation was taken at Rs. 31,44,550 for the assessment year 1980-81. The share of Dr. A. Gomes was Rs. 15,72,275 and that of Mr. B. Gomes was also the same. Similar details for the assessment years 1977-78 and 1978-79 have also been given by the assessees in a compilation filed by them. Such details appear at pages 1 to 17 of the compilation filed by Shri S.K. Mukherji, who appeared on behalf of the assessees. It would appear that the assessees had shown valuation of these properties as per valuation reports made by the assessees' valuers on 16-7-1974 and 20-6-1978. The department adopted the valuation as per the valuation reports of the D.V.O. and the CWT(A) adopted his valuation for the reasons given by him in his order. Before going into the details of valuation of each property, certain broad submissions which were made by Shri Mukherji may first be considered.
3. Shri Mukherji argued that the CWT(A) had completely ignored the legal effect of the ULC Act. under Section 3 of the ULG Act, persons were not entitled to hold vacant land in excess of the ceiling limit. Under Section 6 of the ULC Act, the holders of vacant property were required to file statements of their vacant lands and under Section. 8 the competent authority is required to prepare a draft statement setting out what vacant lands are in possession of each holder. A notification was made on 30-6-1977 under Section. 10(1) of the ULC Act. Section 10(1) of the Act reads as under :
10. Acquisition of vacant land in excess of ceiling limit.-(1) As soon as may be after the service of the statement under Section. 9 on the person concerned, the competent authority shall cause a notification giving the particulars of the vacant land held by such person in excess of the ceiling limit and stating that-
(i) such vacant land is to be acquired by the concerned State Government ; and
(ii) the claim of all persons interested in such vacant land may be made by them personally or by their agents giving particulars of the nature of their interests in such land, to be published for information of the general public in the Official Gazette of the State concerned and in such other manner as may be prescribed.
Once such a notification was issued, the land is to be acquired by the State Government. Just as any other land is compulsorily required to be acquired by the State Government a,nd such land can only be valued on the basis of the compensation the State is required to pay. Shri Mukherji argued that the Valuation Officer has totally rejected the submissions made by the assessees in respect of the impact of the ULC Act on the ground that the ULC Act merely affected the owner's right to transfer his property. The main effect of the Act is on the holder's right to the property itself because after the notification is issued under Section. 10 of the ULC Act, the holder of such land is entirely bound to transfer the property to the Government at a ridiculously low rate of compensation. Shri Mukherji then drew our attention to an order dated 6-10-1984 which was in response to an application for declaration under Section. 21(1) of the ULC Act for construction of houses for weaker section of the society filed by the two assessees on 31-3-1979.
By this order, the Commissioner, Konkan Division, and the Competent Authority, Greater Bombay, rejected the scheme submitted by the two assessees under Section. 21(1) and declared that the case would be governed by the existing provisions of the ULC Act. The Commissioner declined to permit the applicant to continue to hold such lands for the purpose of construction of houses for weaker sections of the society under Section. 21(1) of the ULC Act. A copy of this order is filed at page 447 of the compilation.
4. Shri Mukherji thereafter pointed out that in respect of some of the properties covered by the notification under Section. 10, the asses-see had entered into development agreements with certain persons and builders, the details of which were as under :
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Properties S. No./H. No. Date of Builder's Consideration Agreement Name
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Versova 26/1-5 &
36/2, 4 & 5 31-3-79 Kopotra 1,60,200
Builders
Mogra 11/2 &
13/5/1 12-2-81 Lloyd 2,00,000
Enterprises
Amboli 50/10 1-3-80 Lloyd 75,000
Enterprises
" 76/1 23-2-81 S.S. Pol & 3,00,000
Others
" 55/4 12-8-81 Mr. S.S. Pol 29,000
" 55/1 12-8-81 -do- 9,000
" 44B/5 -do- -do- 15,000
" 39/7 -do- -do- 3,000
Amboli
Andheri(W) 67A/1/30 -do- -do- 8,000
" 73/6 -do- -do- 6,000
Amboli
Pardi Pard
Andheri (W) 8/1 & 2 -do- -do- 9,000
Caesar Rd.
near Church
Amboli,
Andheri (W) C.T.S.
Bombay- 58 578 -do- -do- 72,000
Bandivali
(Jogeshwari) 41, 42
Rly. Station 8/4B, 3 -do- -do- 27,000
Goregaon - -do- -do- 2,000
Kevni
Gaothan C.T.S.
571, 573
& 574 12-8-81 &
30-4-82 -do- 1,20,000+2,30,000
He submitted that these agreements can Lave no impact on the valuation of the properties because they were conveyances of the lands inasmuch as the assessees continued to remain the owners.
They were only amounts received in consequences of agreements to sell. On the valuation dates in question, the lands were still under notification of acquisition authorities and the effect to such notification could only be given by taking statutory compensation as the market value. Shri Mukherji. submitted that these development agreements were irrelevant for the valuation dates in question, for all such agreements were entered into on dates subsequent to the valuation dates. Finally and without prejudice, Shri Mukherji argued that the Valuation Officer was bound, in any event, to restrict the value of the properties to the development agreement consideration and should have taken into account the increase in land prices between the valuation dates and the dates of the agreements and should have accordingly scaled down the values of these properties as on the valuation dates. He lastly argued that the sale instances relied upon by the Valuation Officer did not in a single instance relate to a property which is hit by the ULC Act.
5. The second limb of Shri Mukherji's argument was that some of the plots at Versova, Mogra and Amboli were subjected to adverse possession. Such plots were in the possession of either cultivators or hutment dwellers and in support of this argument Shri Mukherji filed copies of 7/12 extracts of some of these lands. The lands at Survey No. 26 at Versova and Survey Nos. 11, 13 and 22 atMogra and Survey Nos. 55, 55, 73, 25, 24 and 22 at Amboli were in the possession of cultivators at Serial No. 17A at Oshiwara, 41 & 42B at Bandivali, 156 at Goregaon, 76 at Kapashi and 571 at Kevni Gaothan were in the possession of hutment dwellers. Shri Mukherji argued that the Valuation Officer had failed to take into account the provisions of the Bombay Tenancy & Agricultural Land Act, 1948 so far as the land occupied by the cultivators were concerned. He further argued that the lands occupied by hutment dwellers had also gone down in value inasmuch as the right of such trespassers became absolute after 12 years in view of the provisions of the Limitation Act. He pointed out that a Valuation Officer's estimate of the time taken in the legal proceedings for evicting such hutment dwellers showed his complete ignorance of realities.
6. The third limb of Shri Mukherji's argument concerned the property at Juhu bearing Survey No. 26, Hissa No. 1. In this regard, Shri Mukherji pointed out that this property was leased out to Burmah Shell and argued that the provisions of Section5(ll)(b) of the Bombay Rent Act would apply and, therefore, the assessees would not be able to eject the present tenants from occupation of these plots even after the expiry of the present lease in the year 1994. He drew our attention to Section12(1) of the Bombay Rent Act which provided that a landlord shall not be entitled to the recovery of possession of any premises so long as the tenant pays, or is ready and willing to pay, the amount of the standard rent and permitted increases, if any, and observe and perform the other conditions of tenancy. He also drew our attention to Section5(11) of the Rent Act where the word 'tenant' is defined as any person remaining, after the determination of the lease, in possession with or without the assent of the landlord of the premises leased to such person or his predecessor. Shri Mukherji further argued in respect of Juhu property that only capitalisation rent is permissible as no account could be taken for the value of reversion of land. The entire property, being land and building situated at the aforementioned Survey No., was given on lease up to 1994. The Valuation Officer had based his valuation on the premises that the lessee might be evicted within a period of 5 years after the conclusion of the lease period. It was the case of Shri Mukherji that under the Rent Act the tenant could not be evicted when his contractual tenancy expired. He became a statutory tenant vide Sections 12 and 13 of the Bombay Rent Act and, therefore, in respect of such premises which were given on lease (or rented), no reversionary value of land could be calculated. He relied on the decision of the Calcutta High Court in the case of CIT v. Smt. Ashima Sinha [1979] 116 ITR 26. At pages 38 and 39 of the report, the Calcutta High Court have observed as under:
We have failed to understand either the principles or the logic of the "reversionary" method of valuation as applied by the Valuation Officer of the department in the instant case. After following the 'yield or rental' method and having arrived at a figure the Valuation Officer has added to it the value of an imaginary reversion in future. We invited Mr. Pal to cite any authority which has approved or indicated this method but he was unable to do so. It is stated in Parks' Valuation (at p. 38) that when a property is valued on rental basis the result is the value of the land and building taken together which cannot afterwards be apportioned. In the method adopted by the Valuation Officer the value of the land is taken twice, being included in the amount arrived at by the 'yield or rental' method and again under the 'reversionary' method. This is an entirely novel approach but in our view erroneous.
Shri Mukherji also relied on another decision of the Calcutta High Court in Sudesh Chandra Talwar v. CWT [1982] 137 ITR 483 where the aforementioned decision in Mrs. Ashima Sinha (supra) was followed. He also brought to our notice a decision of the Indore Bench of the Tribunal in the case of Smt. Rubabbai Inayat Hussain v. WTO [1983] 5 ITD 526. The same argument was advanced by Shri Mukherji in respect of the valuation of the property at S.V. Road bearing OTS No. 23. Here also, he argued that the Valuation Officer was not justified in making a separate addition on account of the deferred value of the land. He further argued that the valuation should be done by capitalising the net return at 10 to 11 per cent. He admitted that this property was sold on 20-11-1980 for Rs. 4,50,000 but this date was much later than the relevant valuation date. In respect of properties at Caesar Road (CTS No. 578) and Kevnigaothan, Shri Mukherji argued that Rule 1BB should be applied.
7. We have now to consider the CWT (Appeals)'s orders for the years under appeal in the light of the various submissions made in respect of the different properties. It would appear from the details of immovable properties given by Shri Mukherji that there are nearly 14 different properties (inclusive of properties at Amboli village) and we have to classify them according to their characteristics. Some of these properties undoubtedly are affected by the provisions of the ULO Act. Some of the properties are in possession of cultivators and therefore are affected by the provisions of the Bombay Tenancy and Agricultural Act. Some of the lands are occupied by hutment dwellers or are let out or leased out. Their valuation will be affected by the provisions of the Bombay Rent Act. All these properties have been considered by the CIT (Appeals) in a detailed order for the assessment year 1977-78 and he has followed the principles in valuing them for the subsequent assessment years. Although Shri Mukherji has not presented arguments regarding the valuation of each of the properties separately, certain broad details and principles for determining the valuation of the properties may be considered.
8. Shri Malik mostly relied on the orders of the CWT (Appeals). Certain general principles in this regard may be laid down. We agree with Shri Mukherji that the Valuation Officer has not taken into account the effect of the ULC Act and particularly the notification Under Section 10 of that Act which affects the valuation of lands at Andheri (Versova and Amboli village), Jogeshwari, etc. Secondly, we also agree that no proper consideration has been given to the fact that some of the lands in Amboli village were in the possession of tenant cultivators and some of the lands were occupied by hutment dwellers. These factors, we agree, have to be taken into account while determining the value of the lands. Thirdly, we agree that the lands, which are tenanted or which are given on lease, have to be valued by applying the principle of rent capitalisation. Fourthly, we accept the argument that in respect of property at Juhu which is given on lease, no separate addition can be made in respect of the reversionary value of land in view of the decisions of the Calcutta High Court in Smt. Ashima Sinha's case (supra). Fifthly, we hold that in respect of the lands where agreements to sell have been entered into and sale considerations received, the amount so received will reflect the true market value on the date of valuation nearest to the date of sale or sale agreements, as the case may be. Such price would also provide a good guidance for determining the valuation of that land for earlier years. Lastly, we agree with Shri Mukherji that in respect of such of the properties at Amboli which are built up, tenanted and used as residence, Rule 1BB is clearly applicable and that reversionary value of land cannot be separately added. In this regard, the contentions raised by the Sr. Departmental Representative in the departmental appeals are rejected. The valuation of such properties for earlier years will have to be fixed with reference to the sale price realised by the assessee at a later date. Sixthly, we would hold that the rate of capitalisation in respect of rented properties should be adopted at 8 per cent and of leasehold land at 61/2 per cent which is the rate mentioned in Rule 1BB and which can be considered having regard to all the circumstances of the case as a reasonable rate of yield in such cases. In the light of the principles laid down above, we have to decide how the valuation of different lands should have been done by the authorities below. We find that the assessees themselves have declared this value for the assessment year 1979-80. So far as assessment years 1977-78 and 1978-79 are concerned, we would take into account the total area of the land which is 11,625 sq. metres. We find that under Section 11 of the ULC Act, the maximum price that the State Government could pay is Rs. 10 per sq. metre in the case of vacant land situated in an urban agglomeration. Having regard to this rate of compensation that the assessees could expect to get, we would hold that the assessees could easily be expected to get Rs. 1,16,254 in respect of this land although it was declared surplus and notified Under Section 10 of the ULC Act. Keeping this value in mind and after taking into account the amount realised by the assessees on 31-3-1979 for this land, which was sold with the occupants for Rs. 1,60,200, we would hold that the ends of equity would be met if the value of the land is adopted at Rs. 1,20,000 for the assessment year 1977-78 and Rs. 1,40,000 for the assessment year 1978-79. The valuation of this land at Rs. 1,60,200 for the assessment years 1979-80 and 1980-81 as declared by the assessees themselves is confirmed.
9. In the course of the arguments before us, Shri Mukherji pleaded for a specific finding about how the valuation of the following properties should have been done. He did not seriously press for such specific finding in respect of other properties where the tax effect was not much. The properties on which Shri Mukherji wanted a specific finding are as under :
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SI. No. Name of the property
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1. Versova Village.
2. Monga Village.
3. Kapasiwadi.
4. S.V. Road, Mogra, Andheri (W), Bombay
(vide item No. 18 in the statement of properties
given by the assessee at page 15 of compilation).
5. Amboli Village (vide item No. 20 of the statement of
properties at p. 15 of compilation).
6. Juhu Village (vide item No. 21 in assessee's
statement of properties at p. 17 of compilation).
7. Oshiwara Village (item No. 23 in the assessee
statement at p. 17 of compilation).
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We will deal with each of the above properties separately.
9.1 The property at Versova village is situated off Yari Road Extension, Near Seven Bungalows, Andheri (W), Bombay. It admeasures 11,625 sq. metres and consists of four different plots of land. The property has been valued by the assessee's valuer as on 16-7-1974 at Rs. 20,930 and as on 20-6-1978 at Rs. 29,150. The departmental valuer has valued this property at Rs. 3,98,000 for assessment year 1977-78 and Rs. 4,68,000 for assessment year 1978-79. The assessees themselves have declared the value of the property at Rs. 1,16,200 as on 31-3-1980 and 31-3-1981, whereas the D.V.O. has valued the property at Rs. 5,47,000 for the year ended 31-3-1981. The CWT (Appeals) have valued the property at Rs. 1,60,000 as on 31-3-1980 and at Rs. 1,50,000 for earlier years. Although it was argued before us that it is an agricultural land which qualifies for exemption Under Section 5(1) and that it is a surplus land notified as such Under Section 10 of the ULC Act and further that it consisted of land-locked marshy land which had no access, we find that the land was sold with the occupants on 'as is where is' basis to M/s. Kopotra Builders for Rs. 1,60,200 in terms of agreement for development dated 31-3-1979. The collective effect of these factors has to be taken into account. under Section 11 of the ULC Act, the maximum price that the State Government could pay in the case of a vacant land situated in urban agglomeration is Rs. 10 per sq. metre. Having regard to this rate of compensation, the assessee could expect to get at least Rs. 1,16,254 in the event of the Government acquiring the land. At the same time, this land was sold for Rs. 1,60,200 in March 1979. After taking into account these two facts and the valuation placed on it by the CWT (Appeals) and all other factors which have been brought to our notice and to which we have referred here in above, we would hold that the ends of equity would be met if the value of this land is adopted at Its. 1,20,000 for the assessment year 1977-78 and Rs. 1,40,000 for the assessment year 1978-79. The valuation of this land at Rs. 1,60,200 for the assessment years 1979-80 and 1980-81 as declared by the assessees themselves is confirmed.
9.2 The next property is Mogra village situated at Jogeshwari (E). This consists of three different plots of land admeasuring together 10,874 sq. yds. One property at Survey No. 22/1 and CTS No. 338 is not a property which is agreed to be sold, whereas the other two properties at Survey Nos. 11/2 (3,235 sq. yds.) and 13/5/1 (75 sq. yds.) have been sold with the occupants on 'as is where is' basis to M/s. Lloyds Enterprises vide development agreement dated 12-2-1981. The whole of this property was valued at Rs. 1,05,330 on 16-7-1974 for the assessment year 1977-78 and Rs. 88,000 on 20-6-1978 for the assessment year 1978-79 by the assessee's valuer. The D.V.O. has valued the whole of these properties at Rs. 5,38,000 and Rs. 6,21,000. Here again, it has been argued that the whole of this land has been declared as surplus and notified as such under Section 10 of the ULC Act. It is encumbered by tenants and affected by the Bombay Tenancy Act. The property at Survey No. 22/1 is occupied by hutment dwellers who are in adverse possession of this land for over 12 years. In this case, the value of the property at Serial No. 22/1 will have to be made separately. The rest of the two properties has fetched the assessees as much as Rs. 2 lakhs in 1981. We have, therefore, to consider three basic facts in valuing this property (Survey Nos. 11 to 13/5/1 which have been sold along with occupants). Firstly, this property, in spite of the encumbrance, has fetched Rs. 2 lakhs in 1981 and the same value can reasonably be put on the same property as on 31-3-1980 and 31-3-1979 on the principle that property valuation remains the same for three years. So far as the assessment years 1977-78 and 1978-79 are concerned, we have to accept the fact that this property is in possession of tenants and the tenants cannot either be evicted or rent payable by them enhanced except in accordance with the provisions of the Rent Control Act or the Bombay Tenancy Act. We do not agree with the D.V.O. that the tenants who are occupying this land can be evicted in a period of 5 years and the deferred value that he has arrived on these two plots of land at Rs. 3,47,290 and Rs. 2,78,201 for the first plot and Rs. 3,000 and Rs. 3,375 for the second plot is without regard to the realities. Normally, rent capitalisation would provide the best guide for valuing these lands for the earlier two years if it is established that the tenants occupying these lands are governed by the Bombay Rent Control Act, But that is not the case here. The property is governed by the Bombay Tenancy and Agricultural Land Act. The sale instances quoted by the D.V.O. are of properties which are not hit by the provisions of the ULG Act and therefore not comparable. Taking all these factors into account, we would confirm the valuation put by the CWT (Appeals) on these properties at Us. 1,50,000 for the assessment years 1977-78 and 1978-79.
9.3 As regards the plot No. 22/1, which is not a subject-matter of sale and which is encumbered by hutment dwellers besides being a land-locked plot, the CWT (Appeals) has put the fair market value of this plot at 50 per cent of the value put by the D.V.O. because, according to the CWT (Appeals), the value of land-locked property should be 1/4th of the belt rate. He has valued the same at Rs. 1,70,000. In our opinion, the CWT (Appeals) has not given adequate weight to the fact that apart from being a, land-locked plot, this plot is also encumbered with hutment dwellers. On the other hand, it is also a large plot of land nearer to the Eastern Express Highway. After taking this fact into account and after taking note of the fact that other two plots which were also encumbered by tenants did fetch Rs. 2 lakhs in 1981, we would value this plot at Rs. 1 lakh for the assessment years 1977-78 and 1978-79 and at Rs. 1,20,000 for the assessment years 1979-80 and 1980-81. The valuation of this property would be re-calculated accordingly.
9.4 The next property is the one at Kapashiwadi, D.N. Nagar, Andheri (West). This property is at Survey No. 76/1 admeasuring 3,681.90 sq. metres valued by the assessee's valuer at Rs. 28,312 and Rs. 29,590 respectively for the assessment years 1977-78 and 1978-79. The property has been sold with occupants on 'as is where is' basis for Rs. 3 lakhs on 23-2-1981. This property was declared surplus and notified as such under Section 10 of the ULC Act. It was fully leased out to one Mrs. D' Souza on annual rent of Rs. 50 and, according to Shri Mukherji, the Asstt. Valuation Officer had valued this property in his report dated 16-8-1983 for these assessment years at Rs. 1,08,000. The CWT(A) has placed the valuation of Rs. 1,83,000 on this property for assessment years 1977-78 and 1978-79 and Rs. 2,43,000 for the assessment years 1979-80 and 1980-81. It is pertinent to note that this property is at Andheri (W). It admeasures 3,681 sq. metres or 4,383 sq. yds. The properties at Andheri (W) have potential of development and the values placed by the CWT(A) are much lower than the value realised by the assessees. We do not find any reason therefore to interfere with the valuation of the CWT(A) which is confirmed for all the years under appeal.
9.5 The next property is the property at S.V. Road, Mogra. This property admeasures 1,920 sq. metres. It was valued at Rs. 64,979 for the assessment year 1977-78 and Rs. 82,800 for the assessment year 1978-79 by the assessees' valuer and at Rs. 2,19,000 and Rs. 2,99,000 by the Departmental Valuation Officer. It has fetched as much as Rs. 4,50,000 along with another property situated at Caesar Road, Andheri. CWT (Appeals) has valued this property at Rs. 2,19,000 for the assessment year 1978-79 and Rs. 4,25,000 for the assessment year 1980-81. There are 8 tenants on this property. The D.V.O. has valued this property at Rs. 3,83,000 as on 31-3-1979 and Rs. 4,11,000 as on 31-3-1980. CWT(A) has dealt with this issue at pages 18-20 of his order. All the arguments that have been raised before us were raised before the CWT(A) and he has summarized them in his order and rejected them. We agree with the CWT(A) that the Valuation Officer has been very reasonable in valuing this property at Rs. 2,19,000 as on 31-3-1977. The total built up area of this property is just 680 sq. metres and unutilized balance of 1,240 sq. metres was available for the assessees' use. CWT(A) found that the instance of sale cited by the Valuation Officer in Annexure 1 and in particular instance No. 3 of his report of sale of plot No. 30 at S.V. Road, Andheri, admeasuring 714.60 sq. metres giving a rate of Rs. 675 per sq. metre was a comparable rate. The Valuation Officer has given proper margin for the fact that this plot was near the Andheri Rly. Station and has adopted a rate of Rs. 350 per sq. yard as the rate applicable on 31-3-1977 and deferred for 21 years. We are inclined to agree with the CWT(A)'s conclusion in respect of this property particularly when we see that the property has fetched almost double the price in 1981 with all the encumbrances that it is supposed to have. Here again, we do not find it necessary to interfere with the order of the CWT(A) which is well-reasoned and well-documented. The values put by the CWT(A) on this property are consequently confirmed.
9.6 The next property for consideration is situated at Amboli Village, Vira Desai Road, Andheri (W), Bombay. This property consists of two plots with part of Survey Nos. 18 and 19 and Survey No. 17 admeasuring in all 13,107 sq. yds. This property has been valued by the assessees' valuer at Rs. 2,70,000 and by the D.V.O. at Rs. 4,57,000. CWT(A) has put the valuation of this property at Rs. 3,92,700 for all the four years under appeal. This property has been leased out to Rahejas for buildings known as 'Flower Bloom' and 'Flour Queen' for a period of 98 years. It was argued that the lease rent may be capitalised at 12 per cent in perpetuity and not at 61/2 per cent. CWT(A) has dealt with the valuation of this property on pages 22 and 23 of his order. The indentures of lease were prepared on 20-3-1974 and 26-7-1974 for annual rent of Rs. 10,650 and Rs. 16,350. The Valuation Officer has capitalised the lease rent at 61/2 per cent. Following this rate of capitalisation (namely 61/2 per cent), the CWT(A) determined the fair market value of this property at Rs. 4,15,395 and reduced 5 per cent thereof on account of joint ownership. CWT(A) has accepted the contention of the assessees that a portion of the land had gone under development for road and this area was lost since the assessees sold one plot to one Co-op. Housing Society, and the other plot to another Co-op. Housing, Society. He has confined the valuation to capitalisation of lease rent. Here again, the CWT(A)'s argument that the rate of capitalisation for land is in consonance with the lower rate of capitalisation for rent laid down in Rule 1BB and the further argument that the period of lease being long (98 years), there was security of return in respect of lease rent and therefore the rate of capitalisation of 61/2| per cent was reasonable. CWT(A) also has given a proper discount on account of joint ownership. Therefore, the valuation put by the CWT(A) at Rs. 3,92,697 on this land for all the years is also confirmed.
9.7 The next property for consideration is the one situated at Juhu Village, Juhu Tara Road, Santa Cruz. This property is indicated by Survey No. 26 and admeasures 8,551 sq. yds. This property has been leased out to Bharat Petroleum, a Govt. of India Undertaking, from 20-8-1957. Its value was shown at Rs. 1,39,770 for assessment year 1977-78 and at Rs. 1,02,600 for assessment year 1978-79. The D.V.O. valued this property at Rs. 16,02,000 for assessment year 1977-78 and Rs. 18,94,000 for assessment year 1978-79. CWT(A) valued it at Rs. 8,55,000 for all the four years. In respect of this property, Shri Mukherji argued that 70 per cent of the total area was declared as surplus land in the hands of the assessees by a notification under Section 10 of the ULC Act. He pleaded that the whole of the property has been leased out to Bharat Petroleum and its net rent may be capitalised in perpetuity and that the deferred reversionary value and the potential value put on it by the D,V.O. was not justifiable in view of the provisions of Section12 of the Bombay Rent Act. The CWT(A) has dealt with the valuation of this property at great length on pages 23 to 27. After taking all the arguments, which are summarized as above, into account, the CWT(A) concluded as under :
Considering the large size of the appellant's plot and considering the fact that the purchaser of this property will not get the full return on his investment for another 22 years, it will be proper if the rate of Rs. 100 per yd. (which is ridiculously low for a plot of 8,551 sq. yds.in Juhu) is applied for valuing this property, This will compensate for all the adverse factors present in this property and also account for the value of the ownership rights of the appllants. The fair market value of Rs. 8,55,100 will include also the reversionary value of the present rental income which the D.V.O. has determined at Rs. 83,039 and also account for the salvage value of the structure and the deduction for joint ownership. The WTO will substitute this figure for Rs. 16.02 lakhs in the impugned assessment order.
This valuation put by the CWT(A) is contested by the assessees.
9.8 From the papers filed before us (pages 463 to 482), it would appear that the first lease agreement in respect of this property was entered into on 18-6-1957. The lessor is described as one Joseph Bruno Gomes, executor of the Will of late Basil Francis Gomes. What is leased out is described as all that piece or parcel of land hereditaments and premises together with the bungalow and cottage and all other structures thereon situated at Juhu, Bombay, and described in the Schedule to the deed. The Schedule described the area of the plot at 8,551 sq. yds. registered in the books of the Collector of Land Revenue under Certificate No. 26 Hissa No. l. The period of the lease was for 17 years and the annual rental was fixed at Rs. 5,500. On 3-7-1967, there was a deed of variation in terms of which the lease was due to expire on 19-8-1974. On 21-5-1974, the then Burmah Shell wrote to Mr. B. Comes conveying their intention to renew the lease for a further period of 20 years with effect from 20-8-1974 at the same rate and the same terms and conditions. This is therefore a leased out property of which valuation has to be made. The lease was taken as far back as in 1957 and the lessee even now continues to be in possession of the property. As we have already indicated in the preceding paragraphs, one cannot determine reversionary value of land in properties of this type in view of the decision of the Calcutta High Court in Smt. Ashima Sinha's case (supra). The concept of land value in reversion will have no place in Bombay where the Rent Control Act prevails. In the case of Sudesh Chandra Talwar (supra), the Calcutta High Court observed that in order to arrive at a valuation in respect of the property there must certainly be a certain element of guess but the guess must be based on certain facts and according to certain principles which would be on the facts and circumstances of the case as fair to the revenue as to the assessee. The High Court took note of its earlier decision in the case of Smt. Ashima Sinha (supra) and made the following observations at page 492 :
Under the WT Act, Section7, it is the duty of the WTO to form his opinion as to what would he the market value of the property on the relevant date. The submission of the valuer's report either one way or the other cannot be determinative of the value which a property will be supposed to fetch in an open market on the relevant valuation date, as has been aptly observed :
'In any event, even if the valuer was an expert, he is not a witness of fact but a mere witness of an opinion. That opinion, therefore, cannot bind the court or the Tribunal or the income-tax authorities.' [See the observation of Chief Justice P.B. Mukharji, in the case of Mahmudabad Properties (P.) Ltd. v. CIT [1972] 85 ITR 500 (Cal.) at page 528].
On the facts of that case, they held that rent capitalisation was the best method for arriving at the valuation of the property. In the other decisions of the Calcutta High Court in the case of Subhkaran Chowdhury v. IAC [1979] 118 ITR 777, and. in the case of CIT v. Panchanan Das [1979] 116 ITR 272, the High Court has consistently followed the same view. We are, therefore, of the opinion that the CWT(A) was not justified in valuing this property by adopting an ad hoc value of Rs. 100 per sq. yd. particularly when he observed that it would meet the ends of justice if the fair market value is determined by capitalising the rent received and adding to it the reversionary value up to 1994 of the right to receive rent as taken by the D.V.O. We have already indicated earlier that for the purpose of capitalisation 61/2 per cent return in respect of lease rent should be adopted particularly when there is a fair degree of certainty about the return and security of property. Here also, we would direct that the actual rent received by the assessees should be capitalised at 61/2 per cent and since at the present moment the lease is up to 1994, the reversionary value in respect of the right to receive rent worked out by the D.V.O. of Rs. 83,034 for assessment year 1973-74 and similar such values for subsequent years as per the D.V.O.'s report should be added thereto. From the figure so arrived at deduction of 5 per cent may be allowed for joint ownership. We have given these directions after taking into account all the arguments advanced by Shri Mukherji. We accept that no separate addition should be made in a property of this kind for reversionary value of land. We also accept that a contractual tenant, if he continues to be in possession of the premises, almost acquires the status of statutory tenant and this fact has to be taken into account while determining the principle of valuation in a property of this type. The revaluation of the Juhu property will be carried out by the WTO for all the years under appeal as per the directions given above.
9.9 The last property is the property at Oshiwara Village, Jogeshwari. This property admeasures 32,381 sq. yds. It consists of 11 different plots of land which, according to the assessees' counsel, have been declared surplus and notified under Section10 of the ULC Act. Here also, the land situated at Sr. No. 17/1A is adversely possessed. All other lands are reserved for Maharashtra Housing Board. It would appear that this property was sold to Mr. Pol for Rs. 2 lakhs on 'as is where is' basis in terms of agreement dated 19-2-1981. The DVO has valued this land at Rs. 2,89,000 and Rs. 2,99,000 for the assessment years 1977-78 and 1978-79 and the CWT(A) has valued it at Rs. 2,89,000 for assessment years 1977-78, 1978-79 and 1979-80 and at Rs. 3,08,000 for 1980-81. It was Shri Mukherji's contention that, in any case, the land should not be valued at anything more than what it actually fetched. The CWT(A) confirmed the rate of Rs. 9 per sq. yard in respect of this land as taken by the Valuation Officer. All these lands were notified in 1960 in acquisition for Maharashtra Housing Board and the acquisition proceedings are still not dropped. As stated earlier, these are also declared surplus in a notification under Section10 of the ULC Act. We have indicated in respect of the Versova property that even under the Urban Land Ceiling Act, the maximum rate of compensation available would be Rs. 10 per sq. metre. The area of this land is 32,381 sq. yards. The area in terms of sq. metres has not been indicated. Therefore, it would not be unfair to the assessees if we direct that the property should be valued @ Rs. 10 per sq. metre. The WTO may obtain from the assessees the figures of its area in terms of sq. metres for such valuation. In this context, it may be stated that the argument advanced by Shri Mukherji about plot No. 17/Al is not acceptable because no evidence of the fact that this was adversely possessed was produced before us to controvert what has been stated by the CWT(A) in this behalf in para 22 of his order for the assessment year 1977-78.
9.10 In respect of other properties, the valuation made by the CWT(A) which was not seriously pressed by Shri Mukherji is confirmed. The appeals will be treated as allowed in part.