1. This judgment will dispose of Income-tax Appeals Nos. 18 to 25 of 1977 which arise out of the same judgment of the Income-tax Appellate Tribunal, Amritsar, dated February 25, 1977.
2. Briefly the facts are that the property in dispute belonged to Shri Sardari Lal (hereinafter referred to as 'the transferor'). He completed its construction on March 31, 1970. It is a two and a half storeyed building. The ground floor was given by the transferror on lease to Radhey Mohan at a monthly rent of Rs. 480 on April 1, 1970.
3. The first floor of the building was in occupation of the transferor himself. He filed a suit for ejectment against the tenant on December 17, 1972, and obtained a decree on September 5, 1973, on the basis of a compromise. On September 4, 1973, the transferor agreed to sell one-fourth share of the property to Radhey Mohan, tenant (hereinafter called 'the transferee'), for a consideration of Rs. 27,500. Three more agreements to sell were entered into by the transferor subsequently, two with Brij Mohan, transferee, and one with Radhey Mohan, transferee, for one-fourth share each. Brij Mohan is the brother of Radhey Mohan. In pursuance of the agreement, the property was sold by the transferor in favour of Radhey Mohan and Brij Mohan for a consideration of Rs. 1,10,000. The two sale deeds were executed in favour of Brij Mohan for one-fourth share each in December, 1973, and June, 1974, and two sale deeds in favour of Radhey Mohan for one-fourth share each in January and June, 1974.
4. The Competent Authority, after receiving the information of transfer of the property from the office of the Sub-Registrar, Amritsar, referred the matter regarding valuation to Shri P. N. Rao, Valuation Officer of the Department. He assessed its value at Rs. 1,75,000 applying the land and building method. On the basis of the report, the Competent Authority was of the opinion that the consideration was understated in the sale deeds with the object of facilitating reduction or evasion of liability of the transferor to pay tax. Consequently, it initiated acquisition proceedings under Section 269D of the I.T. Act. The notice was contested by the transferees who obtained a report from Shri Kawasji, a registered valuer. He estimated the fair market value of the property at Rs. 1,05,000 on the basis of land and building method and at Rs. 57,600 on the basis of rental method. The Competent Authority, taking into consideration the aforesaid reports, held that the fair market value of the property was Rs. 1,99,300. It, therefore, ordered its acquisition.
5. Eight appeals were filed before the Income-tax Appellate Tribunal, Amritsar, against the orders of the Competent Authority, four by the transferor and two each by the transferees. The Tribunal held that the most appropriate method to determine the value of the property was the rent capitalisation method and applying that principle, its value came to Rs. 1,08,000 only. Consequently, it accepted the appeals and reversed thejudgment of the Competent Authority. The Commissioner of Income-tax .h^s come up in appeal to this court.
6. It is contended by Mr. Ashok Bhan that the order of ejectment had been passed by the civil court against Radhey Mohan, tenant, before the execution of the sale deed regarding the ground floor and that the first floor was in occupation of the transferor. He further submits that the provisions of the East Punjab Urban Rent Restriction Act were not applicable to the building at the time of sale as it was completed in March, 1970, and, therefore, the fair market price of the property could not be determined on the basis of rent capitalisation method. According to him, in this situation, the fair market price of the building could be worked out by the Tribunal on the basis of land and building method.
7. We have given due consideration to the arguments of the learned counsel but regret our inability to accept it. It is well settled that the fair market price of a property can be determined either by land and building method or by rent capitalisation method. In case a part of the building is on rent, it cannot be held that the determination of the Valuation of the building by rent capitalisation method is not correct. Even that method has been recognized by the Legislature under the W.T. Rules. It has been provided in Rule 1BB of the said Rules that the value of a house which is used for residential purposes can be determined by multiplying the net maintainable rent by the fraction 100/8. The method is also recognized by judicial decisions. The Supreme Court in State of Kerala v. Hassan Koya, AIR 1968 SC 1201, observed :
'When the property sold is land with building, it is often difficult to secure reliable evidence of instances of sale of similar lands with buildings proximate in time to the date of the notification under Section 4. Therefore, the method which is generally resorted to in determining the value of the land with buildings, especially those used for business purposes, is the method of capitalisation of return actually received or which might reasonably be received from the land and the buildings.'
8. The above principle can, in our view, be made applicable in determining the fair market price under the I.T. Act. In this view, we are fortified by the observations of this court in CIT v. Prem Nath Anand . Similar view was taken in Wenger and Co. v. District Valuation Officer : 115ITR648(Delhi) , CIT v. Smt. Vimlaben Bhagwandas Patel : 118ITR134(Guj) , Prodyut Kumar Dutta v. Competent Authority, IAC : 134ITR42(Cal) and CIT v. Asharfi Lal Gupta : 142ITR765(All) .
9. The fact that a part of the building is occupied by a landlord does not make any difference. The rent of that part can be determined by theCompetent Authority on the basis of the rent paid by the tenants in the same building or other buildings situated in the same locality. It is not necessary that the rent capitalisation method is applicable only to that property which is on rent. We get support in the above observations from Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee : 122ITR700(SC) . There, the owner of the property challenged the assessment made by the New Delhi Municipal Committee for the purpose of house tax. The house tax is determined on the basis of 'annual value' which in the case of any house or building means the gross annual rent at which the house or building may be expected to let from year to year minus certain specified deductions. Taking into consideration the provisions of the Municipal Act and the Delhi Rent Control Act, it was observed by their Lordships that, in relation to a building within the jurisdiction of the Committee, even if the standard rent had not been fixed by the Controller under the Delhi Rent Control Act, the landlord could not reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under that Act. That would be so equally whether the building had been let out to a tenant who had lost his right to apply for fixation of standard rent or the building was occupied by the owner himself. Therefore, in all such cases, the annual value of the building for purposes of house tax was limited to the measure of the standard rent determinable on the principles laid down in the Rent Control Act and it could not exceed such measure of standard rent. It is evident from the above observations that for determining the annual value of the property whether it is occupied by a tenant or by the landlord, the principle applicable is as to what rent the landlord is entitled to charge from the tenant. Similarly, for finding out the fair market value of the property in the possession of an owner himself, its hypothetical rent, taking into consideration the rents prevailing in the locality, can be determined.
10. The other contention of Mr. Ashok Bhan is that the fair market value of the property could be determined by rent capitalisation method if it was governed by the provisions of the East Punjab Urban Rent Restriction Act and not otherwise. However, we do not agree with it. In our view, the said method is equally applicable even to the buildings to which the Rent Control Acts are not applicable. In the case of such buildings, the fair market value can be determined on the basis of the agreed rent. Therefore, we are of the opinion that the fair market value of the building has rightly been determined by the Tribunal on the basis of rent capitalisation method.
11. Before parting with the judgment, we may notice a contention raised by Mr. G. C. Sharma. It is that the Tribunal determined the fair marketvalue of the property on the basis of rent capitalisation method. If two methods are available for determining the fair market value and one is adopted by the Tribunal, its finding cannot be upset on the ground that the other method should have been adopted by it. We find substance in this contention. Section 269H of the I.T. Act provides that an appeal against the order of the Tribunal can be filed in the High Court on a question of law. The question that the Tribunal, in order to determine the fair market value, applied one recognized method and not the other, will not per se constitute a question of law. The High Court normally shall not interfere with the discretion exercised by the Tribunal in applying the method for determining the fair market value of the property.
12. For the aforesaid reasons, we do not find any merit in these appeals and dismiss the same with costs.
Madan Mohan Punchhi, J.
13. I agree.