1. The assessee in this case possessed 17 items of immovable properties in respect of which he adopted the valuation of Rs. 3,53,626 which was accepted by the wealth-tax authorities for the assessment year 1960-61. The WTO, for the assessment year 1965-66, found that according to the Inspector's report, the value of all the items of properties would be Rs. 19,33,247. However, after visiting personally every property and taking into consideration several other factors, he valued all the properties at Rs. 16,29,061.
2. The assessee went in appeal to the AAC. He applied different methods of valuation depending upon the location and the extent of the properties. In respect of houses which had considerable vacant land around them, he determined the value of the house with the appurtenant land and of the excess land separately. He also adopted a different basis in respect of properties situate in Netaji Subhas Chandra Bose Road which he considered very valuable. As regards the properties situate at Harrington Road, the AAC felt that the adoption of the rental method would be highly unrealistic. Therefore, in valuing the properties, he adopted the split up yield method as adopted by the WTO, but reduced the value of the land from Rs. 10,000 to Rs. 9,000 per ground in respect of properties at Harrington Road. However, in respect of properties situate in Netaji Subhas Chandra Bose Road, the AAC arrived at the valuation by adopting the mean between the value based on the rental method and the value based on the building-cum-site method and granted relief in a sum of Rs. 66,083.
3. The matter was taken to the Income-tax Appellate Tribunal by the assessee. Before the Tribunal, it was contended that the method of valuing the site and the building separately and adding up its value was improper and that even if the site-cum-building method of valuation was held applicable to some of the properties of the assessee, the rates adopted by the WTO were excessive. The Tribunal found that so far as door Nos. 56, 61, 62 and 63, Harrington Road, were concerned, they were governed by the Rent Control Act, but the rent paid was not shown to be in respect of the house as well as the land around them. In respect of these properties, the Tribunal held that it is not possible to rule out the rental method altogether as unworkable or unrealistic, for the prospective buyer will take note of the poor yield for a considerable length of time till he can get away from the clutches of the Rent Control Act and, therefore, it is unfair to value the properties on the basis of the market value. The Tribunal, however, felt that in respect of these properties, the assessee had not placed any material to show that the rent paid would cover not only the building but also the surrounding lands which are extensive and, therefore, the AAC has rightly adopted the valuation of the surplus land and of the building on the basis of applying 20 times the net yield. Thus, the Tribunal felt that there is no material produced by the assessee to show that the entire lands surrounding the building also came under the pur-view of the Rent Control Act and it adopted the value of the superstructure at Rs. 30,000 but with regard to the surrounding land, it fixed Rs. 9,000 per ground and after giving the benefit for parcelling out for roads, etc., at 1/5th of the same value, fixed the value of the land at Rs. 75,000. Thus, the Tribunal fixed the aggregate value for No. 56, Harrington Road, at Rs. 1,05,000.
4. So far as door No. 61, Harrington Road, is concerned, the Tribunal adopted the value of the superstructure at Rs. 20,520 as worked out by the assessee and fixed the value of the vacant land at Rs. 45,000 by adopting the value at Rs. 9,000 per ground and after deducting 1/5th for parceling out for roads, fixed the value for that property at Rs. 65,000. So far as door No. 62, Harrington Road, is concerned, the assessee haw worked out the value of the superstructure at Rs. 31,700 on the basis of the rental method. The Tribunal, however, proceeded on the basis that the building is let on a private tenancy and as the prospect of higher rent in respect of the building cannot be ruled out altogether, the property has to be valued at Rs. 75,000. With regard to the property bearing door No. 63, Harrington Road, for the same reasons as was given for door No. 62, the Tribunal fixed the value of the property at Rs. 75,000.
5. As regards the property bearing door No. 178/179, Netaji Subhas Chandra Bose Road, Madras, the Tribunal found that this property is situated in the thick of the business locality and having regard to the fact that the building is let on rent of Rs. 800 p.m. for five years and then at the rate of Rs. 950 p. m. for a further period of five years, the rental method will not determine the true value of the property and that the value adopted by the AAC at Rs. 1,85,000 is fair and reasonable.
6. Aggrieved by the value fixed by the Tribunal in respect of the above items of properties, the following question of law has been referred to this court at the instance of the assessee :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in the method of valuation adopted by it in valuing door Nos. 56, 61, 62 and 63, Harrington Road, Madras, and door Nos. 178 and 179, Netaji Subhas Chandra Bose Road, Madras ?'
7. It is seen from the question referred that this reference covers only door Nos. 56, 61, 62 and 63, Harrington Road, Madras, and door Nos. 178 and 179, Netaji Subhas Chandra Bose Road, Madras, and that we are not concerned with the valuation of the other items of properties. After a due consideration of the matter, we are inclined to agree with the method of valuation adopted by the Tribunal.
8. So far as the properties on Harrington Road are concerned, the Tribunal has determined the value of the superstructure and the land on which the superstructure stands on the rental method and valued the lands which are not appurtenant to the building separately. So far as the property at Netaji Subhas Chandra Bose Road is concerned, the valuation adopted is only on the rental basis. But the assessee would contend that since the building has been let out for a period of ten years, the value adopted by using the rental method should be reduced giving due allowance to the fact that the building is let on a ten year lease and the prospective purchaser will not pay the same price which he would pay for a freehold property. Section 7 of the W.T. Act defines market value as the price the property will fetch in the open market. Therefore, the wealth-tax authorities are entitled to adopt such method as will enable them to determine approximately the market value. It has been found by the Tribunal that the rental agreements in relation to the buildings have not been shown to include the extensive vacant land surrounding the building. In view of the said circumstances, the Tribunal has adopted the rental basis for fixing the value of the building and the actual market value for the vacant land and determined the aggregate value of the entire land and building comprised in the various premises. We do not see any error in adopting such a basis in respect of the properties where there are buildings surrounded by large extent of vacant site which cannot be taken to have been let out along with the building for its convenient enjoyment. We do not, therefore, see any justification for interfering with the method of valuation adopted by the Tribunal in respect of the properties in Harrington Road.
9. The learned counsel for the assessee refers to the decision in Gouthamchand Galada v. CWT : 86ITR292(Mad) , in support of his stand that the method of valuing a building with the appurtenant land and the other vacant land separately cannot be legally sustained. But we do not find any support from the said decision for the assessee's said contention. There, the assessee owned a building constructed on a land of 18 grounds and let it out to the Government of Tamil Nadu on a monthly rent. In his wealth-tax returns, the assessee valued the property at twenty times the annual rental value of the premises. The WTO held that the capital value returned by the assessee was only for the building and five grounds which was necessary for the convenient occupation and enjoyment thereof, and valued the balance of 13 grounds at the market price. On appeal, the AAC deleted the addition holding that in a property let out along with vacant land appurtenant to it, it must be assumed that the rent includes the ground rent also unless it is shown that the rent is confined to the use of the building alone. On appeal, the Tribunal held that as the assessee had not produced evidence to show that the lease was of the entire property including the land, it must be presumed that the Government had taken on lease only the building and, hence, the method of valuation adopted by the officer was justified. On a reference, this court held that the inference of the Tribunal that the lease was of the building alone being based purely on the fact that the lease was in favour of the Government cannot be supported as correct and, therefore, remitted the matter to the Tribunal for fresh consideration after taking fresh evidence. In this case, the Tribunal specifically finds that the lessees of the above premises have not been shown to have taken on the lease the entire properties including the vacant site and, therefore, the rent paid by them should be taken to be only for the building and the appurtenant land. So long as there is no evidence that the lease was in respect of the entire property including the vacant site, the Tribunal was justified in adopting the method of valuing the building and the vacant site separately.
10. In CWT v. Ramachandran : 60ITR103(KAR) , the Mysore High Court, and in CED v. Radha Devi Jalan : 67ITR761(Cal) , the Calcutta High Court, had held that in the case of buildings with compounds in a city which are in the possession of tenants and the tenants cannot either be evicted or the rent payable by them enhanced, except in accordance with the provisions of the Rent Control Act, the only appropriate method of valuation is to capitalise the annual rent by a certain number of year's purchase and the method of valuing the land the building separately and adding up the values would be improper in such cases. We do not see how these decisions will help the assessee. They were cases where the building and the site on which it stood were valued separately and the value was added up to determine the value of the building. But that is not the case here. Here the building and the land on which it stood were separately valued by capitalising the annual rent by a number of years' purchase. It is only the excess land which cannot normally be treated as appurtenant to the building that was separately valued at the market value. Therefore, the principle of those decisions cannot be applied here. We are, therefore, of the view that the method of valuation adopted by the Tribunal is justified on the facts and circumstances of this case.
11. The question referred is, therefore, answered in the affirmative and against the assessee. The assessee will pay the costs of the Revenue. Counsel's fee is fixed at Rs. 500.