Jagannatha Shetty, J.
1. These are references under section 27(1) of the Wealth-tax Act, 1957. The common question referred is :
'Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that a deduction of 10% has to be allowed on the property owned by the co-owners even when the valuation is made on rental capitalisation method ?'
2. The facts lie in a narrow compass :
The assessee is one of the co-owners of a property consisting of a shop building and godown with appurtenant land. For the assessment years 1976-77, 1977-78 and 1978-79, the Wealth-tax Officer assessed the value of the property at Rs. 4,69,000 by rental capitalisation method by employing the multiple of 11.11.
3. The Appellate Assistant Commissioner upheld the valuation made by the Wealth-tax Officer. But the Tribunal held that a multiple of 10 would be sufficient for determining the fair market value of the property. It also held that the assessee is entitled to deduction at 10% on the valuation made since the property is a co-owner's share. There is no other reason given by the Tribunal. It has followed its earlier order in another case. It is said that generally the Tribunal allows 10% allowance while determining the fair market value of a co-owner's share.
4. The question is, whether such allowance or deduction at the rate of 10% is justified even when the valuation is determined by adopting the rental capitalization method.
5. Mr. Srinivasan, learned counsel for the Department, urged that when once the rent is ascertained and a proper multiple is employed the fair market value determined thereon, for the purpose of section 7, cannot further be reduced by 10 per cent. merely because the assessee is a co-owner. If 10 per cent. is allowed, according to the learned counsel, then it would be actually applying a method of valuation quiet different from the rental capitalization method.
6. Section 7 of the Wealth-tax Act provides for ascertaining the market value of assets. It reads :
'7. Value of assets how to be determined. - (1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date.'
7. So far as immovable property is concerned, it has always a market value which has to be ascertained as on the valuation date, that is, the price it would fetch if sold in the open market on the valuation date. The valuation by rental capitalisation method depends upon the rent actually paid in respect of the premises occupied by tenants or on the rental value of the self-occupied buildings. After so ascertaining the annual rental value, it has to be capitalised by an appropriate multiplier. This has been generally accepted as the correct method of determining the fair market value of an immovable property. This method does not permit any other deduction in the valuation so determined.
8. Thus far, Mr. Srinivasan is correct in his submission. But if the asset to be valued represents a share of a co-owner, whether 10 per cent. deduction has to be allowed and, if so, on what principle, is the next question for consideration. By capitalisation of rental income, the fair market value of the property belonging to all the co-owners is first determined and then it is apportioned corresponding to the share of each co-owner for the purpose of section 7. But the purchaser of a share in a property is not as comfortable as a purchaser of an absolute ownership. There are inherent disadvantages and difficulties of enjoying a co-owner's share by the purchaser if it is sold in the open market.
9. In Lalita Jabbar v. Competent Authority : 133ITR389(Cal) , the Calcutta High Court observed that an undivided half share of the property purchased would not and could not be half of the value of the entire property if sold in the open market. A purchaser of an undivided share of a property cannot also enjoy the property in the same way as the full owner of the entire property. For such enjoyment, the purchaser may have to seek partition of the property which may be by mutual consent or by a long drawn litigation in a partition suit.
10. These are well-known facts in respect of which, as the Calcutta High Court has observed in J. N. Bose v. CWT : 104ITR83(Cal) , judicial notice can be and should be taken.
11. Text book writers also have recognised this basic fact. In Modern Methods of Valuation of Land, Houses and Buildings [Fifth edition (1962)] by David M. Lawrence and others, it is stated at p. 46 :
'It is generally recognised, however, that a share in a property is less attractive to prospective investors than absolute ownership, owing to the very limited control which the owner of the share has over the property as a whole. To allow for this factor, a deduction of say 10 per cent. is often made from the estimated value of the share.'
12. Since there are difficulties inherent in the enjoyment of an undivided share in a property purchased in the open market, courts and text-book writers have permitted allowance or deduction of at least 10 per cent. from the estimated value of the share. This is an universally accepted principle in respect of which no legitimate objection can be taken by the Revenue.
13. In the result, we answer the question in the affirmative and against the Revenue.