Madras High Court
Commissioner Of Income-Tax vs J.V.K. Rao on 20 August, 2002
Equivalent citations: (2003)184CTR(MAD)187, [2002]258ITR90(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT K.P. Sivasubramaniam, J.
1. The assessee sold a house property in question for a sum of Rs. 3,50,000 during the assessment year 1984-85, the property having been obtained by him under a partition deed dated June 15, 1959, wherein the value of the said house had been shown as Rs. 20,000. The Income-tax Officer fixed the fair market value as on January 1, 1964 at Rs. 30,000 and the capital gains was arrived at Rs. 1,86,357. An appeal was preferred by the assessee contending that as on January 1, 1964, the value of the property should have been adopted at Rs. 1,80,000 and not as Rs. 30,000. He also filed a certificate obtained from the Sub-Registrar, Madras, showing the value as Rs. 1,80,000 as on January 1, 1964. This plea was however, rejected by the Income-tax Officer, and on a further appeal by the assessee, the Tribunal relying on the quantum of the municipal tax paid by the assessee as well as certificate issued by the Sub-Registrar, Periamet, Madras, accepted the claim of the assessee.
2. The Revenue filed T. C. P. No. 254 of 1991, before this court under Section 256(2) of the Income-tax Act, 1961, and on the directions of this court, the Tribunal referred the following questions of law :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right and had valid materials to accept the claim regarding the fair market value of the property as on January 1, 1964 at Rs. 1,80,000 in the place of Rs. 30,000, adopted by the Income-tax Officer ?
2. Whether the Tribunal's view that the certificate by the Sub-Registrar cannot be ignored and should be accepted, is reasonable, supported by valid materials and sustainable in law ?"
3. Learned counsel appearing for the Revenue contends that the Tribunal took into account municipal tax, which was payable in respect of the property and such mode of assessment was not acceptable for the purpose of arriving at the fair market value.
4. Learned counsel relies on the judgment of the Supreme Court reported in Chimanlal Hargovinddas v. Special Land Acquisition Officer, , which arose under the provisions of the Land Acquisition Act, 1894. Learned counsel contends that the Supreme Court had pointed out in the said judgment, the methodology for the determination of market value by stipulating various factors and that the Supreme Court had not indicated the municipal tax as one of the alternative basis for calculation.
5. We have considered the submissions submitted on behalf of the Revenue and also perused the judgment of the Supreme Court, cited above.
6. It is true that the Supreme Court had not indicated the rate of municipal tax as an index for arriving at the fair market value. Nor is there any observation in the judgment holding that the calculation on the said basis would be incorrect.
7. Fixation of market value depends on several factors inclusive of the area of the property, location and proximity of the area, comparative genuine instances of sale, guideline value, annual rental value, in case of urban properties, future potential for development, etc.
8. There can be no single fixed formula and as the Supreme Court had pointed out, the evaluation of the factors of course would depend on the facts of each case and there cannot be any hard and fast or rigid rule. In the present case we are concerned with the fair market value as on January 1, 1964, when such sale transactions were far lesser and comparable sales in the area were not available. It is only in those circumstances, the assessee had obtained a certificate from the Sub-Registrar, Madras, which had been accepted by the Tribunal. The Revenue is unable to show as to why this certificate should not be accepted.
9. In addition to the said certificate, the Tribunal also adopted a calculation on the basis of the municipal tax. It is well known that the rental value is also an acceptable basis for calculation of the value of the buildings. Likewise, levy of municipal tax is also based on the commercial and market value of the property and the age of the building. In this case, apart from the certificate from the Sub-Registrar, Madras, the only other available index was the annual rental value as would be reflected by the municipal tax paid in respect of the property. There is also no denial of the fact that municipal tax is based on several factors inclusive of rental value and is therefore, definitely an acceptable formula, at least in the absence of other materials.
Therefore, the calculation being based on the certificate from the Sub-Registrar and fair assessment on the basis of municipal tax and there being no other conflicting materials or data, we do not find any reason to interfere with the order of the Tribunal. Hence, the questions raised for consideration are answered in favour of the assessee.