Commissioner of Income Tax vs J.V.K. Rao

K.P. Sivasubramaniam, J.—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.

The Revenue filed T. C. P. No. 254 of 1991, before this court u/s 256(2) of the Income Tax Act, 1961, and on the directions of this court, the

Tribunal referred the following questions of law :

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 ?

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 ?

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.

Learned counsel relies on the judgment of the Supreme Court reported in Chimanlal Hargovinddas Vs. Special Land Acquisition Officer, Poona

and Another, , 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.

We have considered the submissions submitted on behalf of the Revenue and also perused the judgment of the Supreme Court, cited above.

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.

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.

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.

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.