T.M. Basu, J.
1. This income-tax reference raises interesting questions with regard to the valuation of a 'capital asset' for computing capital gains in income-tax law.
2. The question which this court directed the Income-tax Appellate Tribunal to refer under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') and which has been so referred by the Tribunal is in the following terms :
'Was there a valid and legal basis for the Tribunal's conclusion that capital gain arising out of the sale of the property at No. 221, Russa Road, Calcutta, would be Rs. 75,000 instead of a loss of Rs. 6,000 as claimed by the assessee?'
3. The facts leading to the instant reference may be briefly noted.
4. The assessee is a company in voluntary liquidation. The assessment year involved is 1962-63 for which the relevant financial year is the calendar year 1961.
5. In the return filed by the assessee for the assessment year 1962-63, the assessee had declared loss under the head 'capital gains' of Rs. 6,390 on the sale of properties Nos. 14 and 14/1, Arif Road, and 221, Russa Road. In the computation adopted by the assessee, the valuation of these properties as on January 1, 1954, was claimed to be Rs. 79,200 and Rs. 3,06,000 respectively. These computations were based on the respective valuation reports of Messrs. Talbot & Co. We shall have occasion to deal with the report in some detail at a later stage.
6. The property at 14 and 14/1, Arif Road, was sold away on October 30, 1961, for Rs. 1,05,000. The property at 221, Russa Road, was sold on April 11, 1961, for a sum of Rs. 3,00,000. Dealing with the contention of the assessee with regard to the capital loss on the sale of the aforesaid properties, viz., 14 and 14/1, Arif Road, and 221, Russa Road, the Income-tax Officer in paragraph 5 of the order of assessment for the assessment year 1962-63 observed as follows :
'The assessee has declared capital loss of Rs. 6,390 on the sale of properties Nos. 14 and 14/1, Arif Road, and 221, Russa Road. In the computation adopted by the assessee, the values of these two properties as on January 1, 1954, have been taken at Rs. 79,200 and Rs. 3,06,000 respectively based on the valuation report of Messrs. Talbot & Co. The valuation report is not based on verifiable data but is based on certain estimates. This report cannot, therefore, be acted upon. On the other hand, I find that in the wealth-tax assessment for the assessment years 1957-58, 1958-59 and 1959-60, the value of these two properties have been declared by the assessee as under, which was accepted for assessment purposes:
Valuation dateValue of 14 and 14/1, Arif Rd.Value of 221, Russa Rd.
Having regard to the rise in the valuation of real properties between January 1, 1954, and December 31, 1956, I estimate the value of the aforesaid two properties as on January 1, 1954, at Rs. 18,000 and Rs. 1,60,000, respectively.'
7. On the aforesaid basis, the Income-tax Officer computed the capital gains on the sale of 14 and 14/1, Arif Road, Calcutta, at Rs. 72,876 and the capital gains on the sale of 221, Russa Road, Calcutta, at Rs. 1,31,870.
8. In the instant reference, however, we are not concerned with the capital gains on the sale of 14 and 14/1, Arif Road, Calcutta.
9. Against the order of the Income-tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax, 'D' Range, Calcutta.
10. The relevant portion of the order of the Appellate Assistant Commissioner dealing with this particular question is to be found at paragraphs 7 and 8 of the order and may be set out hereunder :
'7. It is claimed that the Income-tax Officer should not have rejected the valuation report without going into the merits of the report itself. Secondly, it was claimed that the wealth-tax basis is wholly incorrect as the same was based on global valuation according to which the cost of the property was taken for the purposes of assessment. The assessee has specifically opted for the value on January 1, 1954, and the Income-tax Officer has completely ignored this.
8. I find that the valuer's report is on record. Later on the Income-tax Officer wanted the basis of the valuation and it has already been submitted to him. The valuation has been made by Sri S. De, Chartered Surveyor and Valuer of Messrs. Talbot & Co. I find no reasons for rejecting the report of the valuer. There is no material on record to suggest how the valuer's report is incomplete. In my opinion, the valuer's report gives all the details necessary and, as such, I will accept the report of the valuer. The value taken by the Income-tax Officer on the basis of the wealth-tax assessments is erroneous inasmuch as the wealth-tax assessments have been made on the basis of the global valuation and on the basis of the book cost of these properties. In the result, I hold that the capital gains or loss should be computed after taking into consideration the value of the properties as on January I, 1954, at Rs. 79,000 and Rs. 3,06,000, respectively. The Income-tax Officer will revalue the capital profit or loss by adopting this figure.'
11. We may point out at this stage that the Appellate Assistant Commissioner appears to be under a misapprehension as to what is meant by 'global valuation' in the Wealth-tax Act, 1957. The relevant provision in the Wealth-tax Act, 1957, with regard to the valuation of assets is Section 7 which, in so far as is material for the point under consideration, may be set out hereunder;
'7. (1) 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.
(2) Notwithstanding anything contained in Sub-section (1),--
(a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustments therein as the circumstances oi the case may require . . . . '
12. Reference may also be made in this connection to a circular issued by the Central Board of Revenue, being Circular No. 3 W. T. of 1957 dated September 28, 1957. The circular proceeds to state, inter alia, as follows :
'Where the valuation of the various assets of a business is likely to involve difficulty, Section 7(2) enables the Wealth-tax Officer to evaluate the assets in bulk, taking the business as a whole. As a matter of practice the Wealth-tax Officer should ordinarily apply this 'global valuation' in all cases of business, particularly in the case of companies, if the accounts have been found to be reliable, and there is no reason to suspect any fraud on the part of the assessee. For this purpose, the net wealth may be taken as the sum of the paid-up capital, reserves and the balance to the credit of the profit and loss account. The liabilities shown in the balance-sheet will have to be scrutinised carefully and any item which is not a liability proper should be added back. If according to the accounting system of the assessee the original value of the 'block' (i.e., fixed assets) is kept unaltered and depreciation is provided for by constituting a fund out of which investments are made, the value of depreciation fund should be excluded from the computation. Where the closing stock is undervalued, the amount representing the under-valuation should be added back. From the net amount so arrived at, the net value of the exempted assets, i.e, the value of the exempted assets diminished by the liabilities relating thereto, should be excluded.'
13. As will appear from the provisions of Section 7(2) of the Wealth-tax Act, 1957, read with the circular which uses the expression 'global valuation' an expression which is not to be found in the statute, it is of the essence of this kind of 'global valuation' that the determination of the net value of the assets of the business is to be made as a whole. This is apparent from the crucial expression used in Section 7(2)(a) of the Wealth-tax Act, 1957, which provides :
'. . . . the Wealth-tax Officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business . . . . '
14. Therefore, unless the net value of all the assets of a company in its business has been determined as a whole by the Wealth-tax Officer, it would, in our view, not be correct to say that it is a case of 'global valuation'. It is clear from the order of the Income-tax Officer in the instant reference that the assessee in the wealth-tax assessments for the assessment years 1957-58, 1958-59 and 1959-60 had declared the net value of Arif Road properly and the Russa Road property separately and had declared the individual net value of the different assets. It is further apparent from the order of the Income-tax Officer that the net values for these properties which had been separately declared by the assessee-com-pany had been accepted by the Wealth-tax Officer for assessment under the Wealth-tax Act, 1957. The Appellate Assistant Commissioner therefore was clearly in error in coming to the conclusion 'that the wealth-tax basis is wholly incorrect as the same was based on global valuation'. The Appellate Assistant Commissioner was further in error in coming to the conclusion that the assessee had specifically opted for the value on January 1, 1954, and the Income-tax Officer had completely ignored this. As will appear from the order of the Income-tax Officer which we have quoted above, after recording the assessee's own valuation of premises No. 221, Russa Road, which for the above assessment years was declared at Rs. 1,68,924 and having regard to the rise in the valuation of real properties between 1st January, 1954, and 31st December, 1956, the Income-tax Officer estimated the value of the Russa Road property as on 1st January, 1954, at Rs. 1,60,000. It seems that this aspect of the Income-tax Officer's order was completely missed out by the Appellate Assistant Commissioner.
15. With regard to the findings of the Appellate Assistant Commissioner on the question of the valuation report submitted by Talbot & Company we shall have occasion to advert to this aspect of the matter at a later stage.
16. Aggrieved by the order of the Appellate Assistant Commissioner the Income-tax Officer went up on appeal before the Income-tax Appellate Tribunal, B-Bench, Calcutta. The relevant portion of the order of the Income-tax Appellate Tribunal is to be found at paragraph 6 of the order and is in the following terms:
'As regards the capital gains, we are satisfied that the Appellate Assistant Commissioner was right in accepting the valuation as on January 1, 1954, of the property at Arif Road at Rs. 79,200 on the basis of the valuation report. However, as regards the property at 221, Russa Road, it has been sold during the previous year for a sum of Rs. 3,00,000. Prima facie, the valuation of the property as on January 1, 1954, at Rs. 3,06,000 does riot appear to be justified. The valuers have purported to value the land at Russa Road at Rs. 3,400 per cottah (there are 3 bighas) in 1950, at Rs. 2,500 per cottah in 1952-53 in Tagore Park of Prince Anwar Shah Road and at Rs. 2,500 in 1952-53 in Bhangur Colony, behind Bhangur Hospital. Bhangur Hospital is situate in the north of the present property. The assumption that the land value could be taken at Rs. 3,500 per cottah as on January 1, 1954, is not necessarily correct. On the other hand, it is well known that during the period there was considerable increase in the land values. Assuming the sale in the previous year has taken place at the normal market rates, we would hold that the valuation of the same property in January 1, 1954, will not be more than 75 per cent. thereof. Consequently, we would estimate the capital gains of this property at Rs. 75,000 only as against the Appellate Assistant Commissioner's determination that there was a loss of Rs. 6,000 in respect of the property.'
17. It is in this state of facts that the present question has come up before us for consideration.
18. It will be appropriate at this stage to notice the relevant provisions of the Act bearing on the question of computation of capital gains.
19. Section 45 of the Act which deals with 'capital gains' provides, inter alia, as follows :
'(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in Sections 53 and 54, be chargeable to income-tax under the head 'capital gains', and shall be deemed to be the income of the previous year in which the transfer took place.'
20. Section 53 of the Act, which is referred to in Section 45, deals with capital gains which are exempt from tax. Section 54 which deals with profit on sale of property used for residence provides a special method of computing capital gains.
21. The next relevant provision to be noticed is Section 48 of the Act which deals with the mode of computation and deductions in determining capital gains. Section 48 of the Act is in the following terms;
'The income chargeable under the head 'capital gains' shall be competed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :--
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the capital asset and the cost of any improvement thereto.'
22. As will be noticed, both Sections 45 and 48 take into consideration, (a) capital asset, and (b) the cost of acquisition of the capital asset. The question naturally arises as to what are the definitions of these two concepts.
23. The expression 'capital asset' has been defined in Section 2(14) of the Act in the following terms :
'''Capital asset' means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-
(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession ;
(ii) personal effects, that is to say movable property (including wearing apparel, jewellery and furniture) held for' personal use by the assessee or any member of his family dependent on him ; (iii) agricultural land in India...'
24. Therefore, 'capital asset', according to the definition, would cover property of any kind whether or not connected with the business or profession of the assessee subject to the exceptions mentioned in Section 2(14) of the Act.
25. The 'cost of acquisition' of a capital asset has been dealt within Section 55(2) of the Act which, in so far as is material for our purpose, is set out hereunder:
'55. (2) For the purposes of Sections 48 and 49, 'cost of acquisition', in relation to a capital asset- (i) where the capital asset became the property of the assessee before the 1st day of January, 1954, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee; ...'
26. Therefore, the cost of acquisition of a capital asset is either the actual cost of acquisition of the asset to the assussee or its fair market value as on the 1st January, 1954. In terms of the provisions of Section 55(2) of the Act, the assessee has a choice of deciding which of the two alternatives is to be taken as the 'cost of acquisition' of the capital asset. Needless to say, the assessee would choose the figure which is higher as it would thereby reduce the amount of capital gains which would be liable to income-tax.'
27. It is to be further noticed that Section 55(2)(i) of the Act brings in the concept of the 'fair market value' of the assets as on a date mentioned therein, i.e., the 1st January, 1954. What is the 'fair market value' of of an asset ?
28. The 'fair market value' has been defined in Section 2(22A) of the Act as follows;
''Fair market value', in relation to a capital asset, means-
(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and
(ii) where the price referred to in Sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act.'
29. It will thus be seen that the fair market value of a capital asset in terms of Section 2(22A)(i) is the price which the capital asset would ordinarily fetch if sold in the open market on the relevant date. In the case of computation of capital gains the relevant date is the 1st January, 1954. This concept of fair market value, as is now well-settled in the income-tax law and other cognate fiscal statutes, brings in the question of a hypothetical seller and a hypothetical buyer in a hypothetical market. Section 2(22A)(ii) provides for a contingency when the price in the open market as contemplated in Sub-section (i) cannot be ascertained. In such a case it would be 'such price' as may be determined in accordance with the rules made under the Act. No rules, however, framed under this Act were brought to our notice having a bearing on this question.
30. The valuer's report which was placed by the assessee before the Income-tax Officer and which had been dealt with by all the income-tax authorites may be noticed at this stage. The contentions of both parties principally centered around this valuation report.
31. The report in question is signed by Mr. S. De, chartered surveyor and valuer, and a partner of M/s. Talbot & Company. It is on the letter-head of M/s Talbot & Co., Surveyors and Valuers, arid is dated 11th April, 1959.
32. The report recites in its opening part that under instructions from M/s. Mahmudabad Properties (P.) Ltd., the assessee in this case, the premises No. 57, Russa Road (South) (which was previously known as No. 221, Russa Road (South)) was inspected by the representatives of M/s. Talbot Company for the purpose of assessing its market value as on 1st January, 1954. After describing the situation and the boundaries of the property, it records that the site has an area of 6 bighas, 12 cottahs, 20 chittaks, 3 sq. ft. more or less with a frontage of about 362'-3' on Russa Road (South) and with a return frontage of 206'-6' on Golf Club Road. Then follows a description of some of the structures which were found on the site. The report states that no instructions were received as to the tenure and therefore the property has been valued as freehold or held at a nominal rent.
33. The 'commentary' and the 'valuation certificate' which are to be found in the concluding portion of the report are material for our purposes and are set out hereinbelow :
'Commentary.--It is situated in one of the best parts of Tollygunge being just opposite to Tollygunge Club Ltd. and behind this property there is a good development for middle class people and there is a demand for small plots of land in this area for residential purposes.
Valuation Certificate.--In our opinion, the value of this property as on 1st January, 1954, in the hands of a substantial owner able and willing to wait for realisation was Rs. 3,06,000 (Rupees three lakhs and six thousand only).'
34. Appended to the report is a document which is headed 'Details of valuation'. This appendix to the report starts by saying that the land value is based on the following sale transactions :
(a) Sale dated May 9, 1949, of C.S. Plot No. 364 in Mouza Arakh-pur, having an area of about 4 cottahs at the rate of Rs. 1,600 per cottah. It is stated that this plot is situated on a narrow lane of Prince Anwar Shah Road and is now known as Gulam Mohammad Shah Road.
(b) The Government acquired C.S. Dag Nos. 155, etc., in Mouza Arakhpur and C.S. Dag Nos. 370, etc., in Mouza Selimpur for National Instrument Factory in the year 1950. The area acquired is about 23 bighas at the rate of Rs. 1,860 per cottah average.
(c) In 1952-53, plots in Tagore Park of Prince Anwar Shah Road were sold at the rate of Rs. 2,500 per cottah. It is noted that these plots are not situated on the main road but on a 22 ft. development road to the north of Prince Anwar Shah Road.
(d) In 1952-53, plots in Bangur Colony behind Bhangur Hospital were sold at the rate of Rs. 2,500 per cottah. This Bhangur Hospital, it is stated, is situated to the north of the property with which we are now concerned.
35. The report thereafter proceeds to state as follows:
'On the basis of the above transactions, I am of opinion that Russa Road (South) being a main road where trams and buses ply, the land value can safely be taken at the rate of Rs. 3,500 per cottah for a plot of land having a depth of 100 ft.'
36. Thereafter the calculation of the price of the different plots by adopting what is known as the 'belting method', taking 100 ft. as the depth of the first belt from Russa Road, is given in terms of units. As mentioned above, Rs. 3,500 has been taken as the price per cottah in the front belt of 100 ft. An addition has been made of 5% in view of the return frontage on Golf Club Road and a deduction of 25% in view of the largeness in area and a tank in the centre.
37. On this basis, the laud value has been estimated to be Rs. 2,84,000 in terms of round figures and the structures have been valued at Rs. 22,000 aggregating to a total value of Rs. 3,06,000.
38. Certain inherent infirmities of this valuation report appear ,to us to stand out. As pointed out by Mr. A.K. Basu, standing counsel, on behalf of the revenue, and as is clear from the scheme of the sections which we have set out hereinabove, what has to be found out for the purpose of computing capital gains is the 'fair market value' of the capital asset as on January 1, 1954, where the assessee has opted out for that date as in the present case. 'Fair market value', as will be seen from the definition which has been set out above, is the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date. This, in our view, postulates the price which is to be paid in the hypothetical open market by the hypothetical buyer. Such a hypothetical buyer would, however, be one who is interested in the enjoyment of the property in Praesenti as on the relevant date, which is in this case January 1, 1954, and a fair return on the investment which he would be making. The valuation report, however, mentions a value to an owner who, in terms of the words used in the report, is able and willing to wait for realisation'. This would ex hypothesi predicate that there is no immediate return on the investment in this property. No period is indicated in the report for which this 'able and willing buyer' is to wait until he sees 'the colour of the money' which would represent his realisation. It seems to us that the report also presupposes that such a 'willing and able owner' would have to spend further amounts for improving the property before he can realise anything out of it. This would be all the more so because in the 'commentary' part of the report, which we have quoted above, the valuation appears to be on the basis that there is a good development for middle class people in the locality and there is is a demand for 'small plots of land in this area for residential purposes'. This would inevitably postulate that a large piece of land measuring over 131 cottahs will have to be divided into small plots of land suitable for the residential needs of the middle class people in the locality. This would inevitably entail certain items of expenditure for the purpose of providing access to the different plots and other consequential facilities. Needless to say, the area available for sale would be somewhat reduced after these provisions are made.
39. These aspects of the matter do not appear to have been considered by the author of the report in question.
40. What is fundamental, however, and a point which cannot be emphasized too strongly in our view; is that this is not the valuation of what will be willingly paid by a hypothetical buyer who is capable of either enjoying this property at the relevant date or obtain a return therefrom. This infirmity in the report makes it practically useless for the purpose of computation of capital gains according to the scheme of the Act noted above.
41. The next infirmity of the report is that there does not appear to be any comparable property either in size or in other amenities which has been taken into consideration. As we have noticed above, the first item of property taken into account is a plot of 4 cottahs. It was sold in 1949, nearly 5 years before the relevant date. The price it had fetched was Rs. 1,600 per cottah. Nothing is indicated as to what was the distance of this small plot of land, which was sold 5 years before the relevant date, from the property in question. In terms of size, it is vastly dissimilar. The price fetched was Rs. 1,600 per cottah which is less than half the price which has been estimated in respect of this property for the front belt. This property is situated on a narrow lane whereas the property in the instant reference is at the crossing of two fairly important roads, viz., Russa Road South and Golf Club Road. The second item of property which is listed in the 'details of valuation' is an area of 23 bighas, nearly 4 times the size of the property in question. It appears to spread over two mouzas, viz., Mouza Arakhpur and Mouza Sclimpur. According to the report, the area was 'acquired' at a rate of Rs. 1,860 per cottah 'average'. Therefore, this is a case of acquisition under the provisions of the Land Acquisition Act, 1894. As will appear from Section 23 of the Land Acquisition Act, 1894, the considerations which are germane in determining compensation in respect of the property under that Act are quite different from the concept of a 'fair market value' on the relevant date under the Income-tax Act. For instance, under Section 23 of the Land Acquisition Act, 1894, the first consideration is the market value of the land at the date of the publication of the notification under Section 4(1) of that Act. The actual acquisition in terms of taking possession is naturally subsequent to that date. To the market value of the land has to be added, in terms of the scheme of Section 23 of the Land Acquisition Act, 1894, the amounts of damage which are sustained by the persons who are interested in the land and the manner of computation of such damage is indicated in the section. There is a further and a rather important addition of 15% to the market value, an amount which is known as solatium, i.e., a compensation awarded to the owner by reason of the compulsory nature of the acquisition.
42. It will thus be seen that the vatue for the purpose of compensation under the Land Acquisition Act is not only at a very different amount because of the addition of the various sums by way of damage and solatium, but the date when the market value is to be computed is the date of the notification under Section 4(1) of the Land Acquisition Act, 1894. In the report there is a bald statement that the area was acquired in 1950. Whether by that is meant the actual taking of possession by the Collector in terms of the Land Acquisition Act or the date of the notification which is relevant for the computation of the market value, i.e., the notification under Section 4(1) of the Act, it is very difficult to comprehend. It is also not clear whether the sum of Rs. 1,860 is the amount of compensation taking all the items in Section 23 of the Act into consideration or represents merely the market value in terms thereof. Thirdly, the report says that it is the average per cottah. This necessarily means that different values must have been assigned to different parts of the area which was acquired. In any case, the date, even according to the report, is 1950, which is four years prior to the relevant date for our purpose. The rate of Rs. 1,860 per cottah is a little over half of what has been estimated as the rate of the front belt in the instant case.
43. The last two items in the list are transactions of 1952-53. The price was Rs. 2,500 per cottah. There is no indication, however, as to what is the area of this property which was sold. None of the two properties according to the statements of the report are situated on the main road.
44. The purpose of this somewhat elaborate analysis of the items of property is to show that none of these properties has either been stated to be properties of comparable size, advantage, etc., nor can they, in our view, be considered to be so. It is significant that not a single instance of a contemporaneous transaction, i.e., a sale deed executed on or about the 1st January, 1954, has been relied upon by the valuer.
45. Even assuming that these properties, a list whereof has been set out in the details of valuation and the sale price thereof can be said to be relevant or cogent pieces of evidence in estimating the value of the property with which we are concerned, all that can be said in respect of those properties is that in 1952-53 such properties were being sold for Rs, 2,500 per cottah. The jump from Rs. 2,500 per cottah to Rs. 3,500 per cottah which is the value estimated for the front balt of the property in the instant case does not appear to have any cogent or understandable basis or foundation. It has been characterized by Mr. Basu for the revenue as a 'wild guess' and we are inclined to agree with that contention. Although Rs. 3,500 per cottah is not the value for the entire property but, as has been pointed out by learned counsel on behalf of the revenue, it covers a large area of 55.50 cottahs which is the front belt of a depth of 100 feet. This guess and the arbitrary jump from Rs. 2,500 per cottah, which is the highest figure in terms of actual sales to Rs. 3,500 per cottah for the property in question stamps the report with another serious infirmity.
46. Coming to the question of adopting the 'belting method' it is to be noticed that there is no indication of the depth of the second and the third belt.
47. It will be appropriate at this stage to notice certain observations in the well-known treatise of Principles and Practice of Valuation, fourth edition, by J. A. Parks. At pages 103-4 of the book the following observations appear:
'This first item in 'belting' is to decide what shall be the depth of the first belt, A local inspection usually solves this quite easily. In shopping areas it varies from 50 to 80 feet in depth, but the boundary line between the first and second belt is usually clearly defined, there being a sharp fall in the rents of the rear portions. It may be, if the plot is very deep, that you will find still lower rents further away from the main road; this will indicate a third belt. The difficulty in belting is to estimate the correct value of one belt in relation to another and in shopping areas you will very rarely find the rents of second belt more than 50 per cent. of the first belt, there being only a slight difference between the third belt and the second belt......
There is no hard and fast rule that the second belt is one and half times the depth, of the first belt, although the courts invariably follow this rule of thumb method. There must be a reason for everything. If back land irrespective of depth was capable of commanding a certain rent, then there would be no question as to the depth of the second belt, the whole would be second belt. If, however, it was found that the rent fell steadily in accordance with the distance from the main road, then there would be some justification for adopting the second belt one and half times the depth of the first belt.... The depths that are generally adopted are second belt one and half times the depth of the first belt, third belt one and half times the depth of the second belt.'
48. The purpose of quoting the above observations is to indicate the various considerations which have to be kept in mind in deciding whether there should be more than one belt and if so how many and in determining the comparative valuation of one belt in relation to another. Connected with it is UK; QUESTION as to the depth of the second and third bolts, if any, in relation to the first bell. As pointed out by Mr. Parks in the passage quoted, above, there is no hard and fast rule about that.
49. In the report before us there does not appear to be any material to throw any light on these considerations mentioned above. Even the depths or The second and the third belts have not been indicated. There is nothing to indicate as to why a particular ratio was adopted in this case with regard to the price of the second and the third belts in relation to the first belt expressed in terms of units. This question becomes more complicated when It is kept in mind that this is not a piece of property which was actually let out at the date of the valuation but which, in terms of the report, has to be put in a state where it can be let out and thereby fetch a rent. The absence of these considerations and the necessary materials is another infirmity of the report in question.
50. Another infirmity of the report and which was strongly commented upon by Mr. Basu for the revenue is that there is no clear indication of any basis of the valuation arrived at by the valuer. It is stated in the 'commentary' portion of the report that the property is situated in one of the best parts of Tollygunge and is opposite to Tollygunge Club Ltd., and there is a good development for middle-class people and a demand for small plots. This, in our view, is not enough to arrive at the specific computations of the value of the land per cottah as has been done in the present case. In our view Mr. Basu is right in his comment, that is not a 'valuer's valuation'.
51. Another aspect of the valuation report in the present case which was strongly commented upon by Mr. Basu appearing for the revenue may also be noticed. According to the contention on behalf of the revenue, if the valuation report is true and correct, the curious result would follow that a property which had a 'fair market value' of Rs. 3,06,000 on the 1st January, 1954, actually fetched a sum of Rs. 3 lakhs, a lower value when sold in the market on the 11th April, 1961. There is no suggestion that the sum of Rs. 3 lakhs which the property fetched in April, 1961, represents anything but the result of a free bargain between a willing buyer and a willing seller. In other words, there is no suggestion that the sale in April; 1961, for Rs. 3 lakhs was at an undervalue. In fact, Mr, Mitra for the assessee sought to rely on the observations of the Income-tax Appellate Tribunal in paragraph 6 of the statement of the case to the following effect I--'It was common ground that these properties were sold at the proper market values in the previous year.'
52. In our view, the contention on behalf of the revenue is sound. The inherent improbability of a property having a higher market value on the 1st January, 1954, than its actual sale price in April, 1961, stamps the report of the valuer with a very serious infirmity.
53. It may be noticed in this connection that the Tribunal in dealing with this aspect of the matter in its appellate order made the following observations in paragraph 6:--'On the other hand, it is well known that during the period 1954 to 1962, there was considerable increase in land values.''
54. This was one of the reasons why the Tribunal came to the conclusion that the valuation of the property made by Talbot and Co. was not correct.
55. An interesting controversy was raised before us on the question as to whether judicial notice could be taken of the fact that there had been a steady increase in land values during the period with which we are concerned, that is, from the year 1954 to the year 1961. Mr. Mitra for the assessee submitted that to take notice of such a fact would amount to importing the personal knowledge either of the members of the Tribunal or of the judges of this court, as the case may be. Such a procedure is not permissible in law. The revenue's contention on the other hand was that the rise in land values between 1954 and 1961 is a notorious fact which could be taken judicial notice of. Both parties relied on certain authorities of English and Indian courts.
56. Mr. Mitra for the assessee relied on a decision of the Court of Appeal in England in the case of Forest Side Properties (Chingford) Ltd, v. Pearce,  39 T.C. 665 (C.A.). The appeal came up from a decision of Danckwerts, J. given in the Chancery Division. Both the judgments of Danckwerts J. and the Court of Appeal are reported in the same volume.
57. Reliance was first placed on a portion of the judgment of Danckwerts J. where an extract from the report of the Commissioners, who heard the income-tax appeal in question, has been set out. Danckwerts J. observes as follows at page 672 of the report:
'Then the Commissioners, unfortunately, say 'From our specialised knowledge we were aware that flats or maisonettes at that time were not a good selling proposition locally. We accordingly found that the intention expressed in the minute, to hold the properties as an investment, was put on record with the taxation position in mind and was not intended to obtain when circumstances changed.''
58. With reference to the above portion of the Commissioners' report, Danckwerts J. goes on to observe as follows :
'Those statements have been severely criticised, and I have been referred to an Irish case, Regina v. Justices of Co. Antrim,  2 Ir. Rep. 603, in which a very famous law lord was held by the Irish court to have made a mistake in acting as a magistrate upon his own local and particular knowledge. It seems to me that a fair criticism is that the Commissioners were not entitled to use any specialised knowledge which they had about the flats or maisonettes at a particular time. It may be that that particular sentence must be dismissed as a misdirection, and it may be that no attention should be paid to it.'
59. According to Mr. Mitra the principle laid down by Danckwerts J. would apply to the facts of the present case where the members of the Income-tax Appellate Tribunal have imported their specialised knowledge with regard to increase in land values which amounts to a misdirection and vitiates their finding.
60. As we have said, the matter went up before the Court of Appeal and one of the judgments was delivered by Lord Evershed M. R. The pertinent observations of Lord Evershed on this aspect of the matter are to be found at pages 678-680 of the report and may be set out :
'I return, therefore, to this phrase; 'From our specialised knowledge', etc. We were referred by Mr. Tolstoy to a number of cases, including one in this court, Reynolds v. Llanelly Associated Tinplate Co. Ltd.,  1 All E.R. 140 (C.A.), where my predecessor. Lord Greene M.R., considered at some length the limits to which someone appointed with local jurisdiction can rely upon his own local knowledge. That he can do so to some extent is not is doubt; but there does undoubtedly come a point at which it would be no longer legitimate for the local judge (or tribunal), to rely upon something known to him as an individual. Examples were given by Lord Greene in the course of his judgment, and the one to which I will allude is the case in which that distinguished judge, Scrutton L.J., made this statement in the course of his judgment in the case of Mothersdale v. Cleveland Bridge and Engineering Co.,  99 L.J. (K.B.) 261, 263, 264:
'If the learned county court judge had properly directed himself, and was referred to Tannoch v. Brownieside Coal Co.,  Sc. 99 ;  A.C. 642 and had read it, and using his local knowledge, and his knowledge as a man, as he is entitled to do, of the condition of things in Durham, he has found that the failure to obtain employment is largely due to the state of the labour market in Durham, and not wholly or mainly due to the consequences of the injury, I cannot possibly say that he is wrong in coming to that view when it is a matter of fact for him whether in the evidence, plus his local knowledge, there is evidence on which he could find that it was the state of the labour market in Durham which causes the man to be unemployed.' . From that I conclude that it is legitimate for a local tribunal to avail itself of the Tribunal's own knowledge of employment conditions in the locality. But the question here is whether what is stated in the paragraph I have read does not, or may not, involve something else. It was suggested that this specialised knowledge might be of this nature : that one or other of the Commissioners might have been himself, during the period now some years past, concerned or engaged in business which gave him particular knowledge about the property with which we are concerned; and that knowledge could not fairly be called local knowledge, that is, knowledge generally in the possession of persons in the locality, or, at least, of persons who were intelligently concerned in the relevant local affairs. If the right conclusion is that some such special knowledge was implicit in this sentence, I am bound to say that I should feel that, in the interests of justice it would not be right to allow the conclusion to stand....
I think the case is not one which it is possible to improve upon by elaboration. I repeat that I have felt concern about it, because whatever view one might take as to the justification of the conclusion, it is a very important matter that, in the interests of justice and its true administration the court should not overlook a conclusion which appeared to be based, or might be based, at least in a material part, on something which was not properly admissible ; and Mr. Hey worth Talbot indeed conceded that if this phrase 'From our specialized knowledge' might fairly mean the sort of thing I have mentioned, something more than local knowledge, then he would not wish to press the point that the case could be treated none-the-less as incapable of disablement. In other words, he conceded that if the conclusion was based on something which was not admissible, or might not be admissible, the court's duty, however regrettably, would be to direct a re-hearing of the case. Rut, for the reasons I have stated, I have not felt satisfied that this somewhat unhappy phrase means any more than follows from the stated consequence, namely, that as a matter of local knowledge, fiats and maisonettes at the time were not a good selling proposition.'
61. From the above illuminating observations of Lord Evershed M.R., it is patent that a clear and firm distinction is being drawn between matters which may be said to be a matter of local knowledge for judges or tribunals having a local jurisdiction. This is a knowledge which is derived by such judges or members of the tribunals as having come to their possession as persons in the locality or to quote the words of Lord Evershed 'of persons who were intelligently concerned in the relevant local affairs'. This 'local knowledge' is, however, quite distinct from what has been described as 'specialised knowledge' or 'personal specialised knowledge' which is an individual knowledge of the person himself and which may have been derived by him as a result of some association of a specialised nature with that particular branch of human affairs. The above decision is a clear authority for the proposition that if a particular finding is based on 'local knowledge' it is not vitiated as having taken into consideration something which is inadmissible. If the finding is, however, based on specialised personal or individual knowledge it would be taking into account something which is not admissible.
62. In the facts of the instant case the Tribunal has, as already noticed, found that it is well known that during the period from 1954 to 1962 there was considerable increase in land values. This in our view is clearly a matter of local knowledge which the members of the Tribunal derived as persons having been in the locality, which is Calcutta in the instant case, or having an intelligent concern with the local affairs to adopt the formulation of Lord Evershed M.R. There is nothing to suggest that either of the members of the Tribunal, Mr. Srinivasan or Mr. Tewari, had any individual personal knowledge or specialised knowledge about land values in view of their personal association with this particular aspect of the matter. As such on the authority of the decision in the case of Forest Side Properties (Ching-ford) Ltd. v. Peance we are of the opinion that the Tribunal was fully justified in importing this local knowledge with regard only to the question of rise in prices of land between 1954 and 1962 in their finding as they have done.
63. We shall now turn to the next aspect of this controversy, namely, whether this court can take judicial notice of the fact of rise in prices of land between 1954 and 1961, without there being any formal evidence on record in that behalf. Certain decisions of different courts were cited in this connection. In Bryant v. Foot,  3 Q.B. 497, 505, Kelly C.B. observed as follows :
'The true principle of the law applicable to this question is that where a fee has been received for a great length of time, the right to which could have had a legal origin, it may and ought to be assumed that it was received as of right during the whole period of legal memory, that is, from the rsign of Richard I, to the present time, unless the contrary is proved. In this case the right to these fees may have had a legal origin before the time of memory; and the evidence that they have been taken in modern times, during a period of nearly 50 years, leads to the presumption that they were lawfully taken in the time of Richard I, unless the payment at that time be disproved. That we are of opinion that, considering the difference in the value of money in 1189 and the present time, of which the court will take judicial notice, it is impossible that a payment of such an amount upon every marriage in this parish can have been made at that period ; that the objection of rankness therefore applies; that the claim is negatived: and that the plaintiff, who seeks to recover back this fee which he has paid, is entitled to the judgment which he has obtained.'
64. In this decision, Kelly C.B. took judicial notice of the fact that there has been a difference in the value of money from the year 1189 which was the time of Richard I, aad the year 1868 when the judgment of the court was delivered.
65. In the case of Dennis v. A.J. White & Co.,  2 K.B. 1 (C.A.), a workman who in course of his employment was required to ride a bicycle belonging to his employes through the streets of London on an average once a day was knocked down and injured by a motor-car in course of one of his trips. In an appeal on the question of compensation which was awarded by the judge, Westminster County Court, sitting as an arbitrator under the Workmen's Compensation Act, 1906, Sargant J., at page 5 of the report, observed as follows:
'The test which is always applied is the test that was laid down by Collins M.R. in Andrews v. Failsworth Industrial Society,  2 K.B. 32 (C.A.), as to whether there is, in a particular vocation, some risk appreciably and substantially beyond the ordinary normal risk which ordinary people run. I have to ask myself whether, having regard to the known conditions of traffic 'in London, with large numbers of motor-cars and motor buses about the streets, a matter of which the court can of course take judicial notice, there was any appreciable extra danger incurred by this boy when he was sent on a bicycle through the streets of London once a day on an average. In my opinion that question must be answered in the affirmative, assuming for the moment, as I do, that the question can be dealt with and by this court, and is not one for the learned county court judge, a matter I will deal with later.'
66. This decision is clearly an authority for the proposition that an English court can take judicial notice of the crowded condition of London streets, in view of the large number of motor-cars and buses plying thereon.
67. In a decision of this court in the case of Ram Tarak Singha v. Salgram Singha, : AIR1944Cal153 , Pal J., at page 155 of the report, made the following observations :
'The learned subordinate judge in this case has taken judicial notice of the notorious fact of the world economic depression and has accepted the defendant's case that this depression is the cause of the fall in prices. It is not disputed that the judge was entitled to take judicial notice of such a notorious fact- Theoretically the need of the court for information as to such notorious facts is met by the doctrine of judicial notice and this doctrine is recognised in Section 57, Evidence Act. Very little formality need be resorted to in the process of theoretically reminding the court of what it already knows or of what it is presumed to know.'
68. The facts of the case just quoted above seem to bs the converse of the case before us. In that case, the question was whether the great economic depression had led to a fall in prices of staple food crops. The learned subordinate judge in that case bad taken judicial notice of this fact that prices had so fallen. This court approved of the procedure adopted by the learned subordinate judge and held that such a fact could be taken judicial notice of under Section 57 of the Evidence Act, 1872.
69. The learned commentators of Phipson on Evidence, 11th edition, at page 59 or the book, have dealt with the various facts which the court can judicially take notice of as 'notorious facts'. According to the learned commentators :
'The court will take judicial notice of facts which are notorious, e.g., the ordinary course of nature, the standards of weight and measure ; the public coin and currency and its difference of value in early and modern times ; . . . . the meaning of common words and phrases, e.g., of 'nominal rent' in a modern statute, or that beans are a species of pulse; the existence of the Universities of Oxford and Cambridge, and the fact that they are national institutions for the advancement of learning and religion; the difference of time in places east and west of Greenwich; the Almanac annexed to the Common Proper Book as being part of the law of the land, e.g., a number of days in a given month or that a certain day of a month was a Sunday, though not, it has been said matters therein contained, e.g., the time of sunset or sunrise on a particular day, but an almanac is prima facie evidence of the time of the moon's rising . . . .
The courts have also found that the streets of London are crowded and dangerous; that boys are naturally reckless and mischievous; that the cats are ordinarily kept for domestic purposes; that people who go to hotels do not like having their nights disturbed ; that venereal disease may lie dormant for a long time ; that gestation ordinarily lasts for particular periods, but not what are the limits for extraordinary periods of gestation ; that television was a common feature of domestic life and almost entirely for recreational purposes.'
70. Having regard to the long list of various facts which the English courts have taken judicial notice of as mentioned above and also having regard to the decisions which we have discussed above, we are of the opinion that this court can take judicial notice of the fact that there has been a steady rise in prices of land between 1954 and 1961, the period with which we are concerned in the instant case as a 'notorious fact'.
71. Mr. Mitra for the asssessee contended that the valuation report of Messrs. Talbot & Co. was the valuation of an expert or at least a man of skill having considerable experience in the particular field. The Tribunal, according to Mr. Mitra, was in error in ignoring the report of Talbot & Co. or, at least, in not assigning to it proper probative value. It was further submitted that the Tribunal has not really recorded any evidence in support of its finding. The finding of the Tribunal was a mere speculation based on no tangible evidence. Mr. Mitra also submitted that the Tribunal has acted on its own specialised personal knowledge which was inadmissible, a contention which we have already dealt with above.
72. Welfare unable to accept the contentions of Mr. Mitra. In our view, it is not correct to say that the Tribunal has ignored the report of Messrs. Talbot & Co. It has to be remembered that this report was placed in the first instance before the Income-tax Officer. The Income-tax Officer, as will appear from the observations which we have recorded above, did not accept the valuation report of Messrs. Talbot & Co. as it was not based on verifiable data but was based on certain estimates. On appeal, the Appellate Assistant Commissioner had accepted the valuation report of Messrs. Talbot & Co. When the matter came up before the Tribunal, the Tribunal observed in this connection that:
'The assumption that the land value would be taken at Rs. 3,500 per cottah (which was the valuation taken by Messrs. Talbot & Co. for the front belt of a 100 ft. depth) as on January 1, 1954, is not necessarily correct.'
73. Therefore, it will be seen that the Income-tax Appellate Tribunal was fully aware of the report of Messrs. Talbot & Co, and had, for the reasons given in its appellate order, came to the conclusion that it was not 'necessarily correct'. Having regard to the various infirmities of the valuation report, which we have fully discussed hereinabove, we are of the view that the Tribunal was fully justified in coming to the conclusion that it did about the valuation report.
74. A comment was made by Mr. Mitra for the assessee in this connection to the effect that the Tribunal had wrongly read and understood the valuation report of Talbot & Co. This comment is based on the fact that in the order of the Tribunal the valuation in the report is stated as Rs. 3,500 per cottah whereas, as a matter of fact, the valuation adopted by the valuers at Rs. 3,500 per cottah was only for the front belt of the first 100 ft. depth. Although the language used by the Tribunal is somewhat cryptic with regard to this valuation, we are unable to agree with Mr. Mitra that the Tribunal was not alive about this particular aspect of the matter.
75. We are also unable to accept the contention of Mr. Mitra that there was no material before the Tribunal and it acted on mere speculation. As we have already noticed, the Income-tax Officer in the course of the assessment primarily relied on the assessee's own valuation with regard to the Russa Road property in the wealth-tax assessment. The valuation shown by the assessee in the wealth-tax proceedings was accepted by the Wealth-tax Officer for the assessment years 1957-58, 1958-59 and 1959-60. This was, therefore, a sort of admitted valuation in the wealth-tax proceedings in so far as this property is concerned. The Income-tax Officer took this value for the respective assessment years in the wealth-tax proceedings for which they were shown and after making the necessary adjustments, having regard to the rise in the valuation of real properties between January 1, 1954, and December 31, 1956, he estimated the value of the Russa Road property as on January 1, 1954, at Rs. 1,60,000. This significant admission by the assessee in the wealth-tax proceedings and the valuation arrived at by the Income-tax Officer for the relevant date after making necessary adjustments were before the Income-tax Appellate Tribunal as a piece of evidence. It is true that the Tribunal does not advert to this aspect of the order of the Income-tax Officer in so many words. But, there can be no doubt that these records were before the Tribunal and the findings of the Income-tax Officer must have been in the minds of the learned members of the Tribunal.
76. Mr. A.K. Basu, standing counsel, on behalf of the revenue drew our attention to a decision of the Supreme Court in the case of Hooghly Trust (Put.) Ltd. v. Commissioner of Income-tax : 73ITR685(SC) . The relevant observations which are to be found at page 691 of the report are as follows:
'The conclusion of the Tribunal on these findings was that the transactions in cloth were part and parcel of a single business carried on by the appellant and did not constitute a distinct business for the purpose of Section 24(2). The Tribunal does not appear to have discussed the entire evidence on which the findings were based but the order of the Appellate Assistant Commissioner and his findings as also the entire record were before it and there is nothing to suggest that all the material facts were not present to its mind except that they are not mentioned in detail.'
77. In the present case also, in our view, although the order of the Income-tax Tribunal does not mention or discuss the findings of the authorities below in detail, we have no doubt that this aspect of the finding of the Income-tax Officer with regard to the valuation declared by the assessee in the wealth-tax proceedings and the valuation made by the Income-tax Officer on the basis thereof were very much in the minds of the members of the Income-tax Appellate Tribunal.
78. It must be mentioned that the Income-tax Appellate Tribunal had before it the evidence of the sate of the assessee's other property, viz., premises Nos. 14 and 14/1, Arif Road.
79. The premises Nos. 14 and 14/1, Arif Road, was sold by the assessee on the 30th October, 1961, a few months after the sale of the Russa Road property. It was a large property as would appear from the fact that it fetched a price of Rs. 1,05,000 on its sale. It is admitted that the property is situate in Calcutta although in a different part. The Tribunal recorded the fact that the Arif Road property fetched on its sale in October, 1961, a sum which was 25 per cent. in excess of what was estimated to be the 'fair market value' of the Arif Road property as on the 1st January, 1954. ' This valuation of 'fair market value' of the Arif Road property was made by Messrs, Talbot & Co. and was accepted by the Income-tax Appellate Tribunal in that case. This fact of the property fetching 25 per cent. in excess of its fair market value as on 1st January, 1954, on its sale in October, 1961, was taken by the Tribunal to afford a proof of the fact of the rise in prices of landed properties in Calcutta as also an index of the measure of such rise. The Tribunal adopted the same yardstick as to the measure of the index of the rise of the price of Russa Road property as between 1954 and 1961, In our view, the Tribunal was entitled to rely on this piece of evidence of the sale of the Arif Road property in coming to its conclusion.
80. Needless to say, it would be almost impossible to find out properties which will be exactly identical in all its characteristics in order to make comparison of land value. But then all valuation is necessarily an estimate. It would be more so when the fair market value has to be determined on a particular date mentioned in the statute having regard to a hypothetical buyer, a hypothetical seller and a hypothetical market. Bearing this in mind, it will not be correct to say, as has been sought to be submitted on behalf of the assessee, that in considering the measure of increase between the fair market value and the sale price of the Arif Road property the Tribunal was indulging in mere speculation or guess. It was a cogent piece of evidence which the Tribunal was entitled to consider in arriving at its own estimate of capital gains for the Russa Road property.
81. The view taken by the Tribunal on the evidence before it, is, in our opinion, a possible view. The possibility that this court on the same materials and on the same evidence might have come to a different view is, in our opinion, no warrant for setting aside the finding of the Tribunal on the ground that there is no valid or legal basis for the Tribunal's finding.
82. Before we conclude, we shall notice an interesting question which was mooted before us Is the valuer an 'expert' as understood in the Indian Evidence Act, 1872? Section 45 of the Indian Evidence Act which is relevant for this question provides as follows :
'When the court has to form an opinion upon a point of foreign law, or of science or art, or as to identity of handwriting or finger impressions, the opinions upon that point of persons specially skilled in such foreign law, science or art, or in questions as to identity of handwriting or finger impressions are relevant facts.
Such persons are called experts.'
83. It would, therefore, be seen that Section 45 of the Evidence Act engrafts an exception to the general rule of evidence and makes the opinion of certain persons relevant facts. Such persons have been described as 'experts' in Section 45 of the Evidence Act.
84. The opinions which are 'relevant facts' within the meaning of Section 45 of the Evidence Act are the opinions of persons who are 'specially skilled' and are limited to the matters which are mentioned therein, namely, (a) foreign law, (b) science, (c) art, (d) identity of handwriting, and (e) identity of finger impressions.
85. It was submitted on behalf of the revenue that Section 45 of the Evidence Act is exhaustive and not illustrative in so far as the points on which opinions of persons skilled therein may be received in evidence. Since 'valuation' is not one of the matters mentioned in Section 45 of the Indian Evidence Act, it was submitted that a valuer cannot be an 'expert' within the meaning of that section.
86. Mr. Mitra on behalf of the assessee, however, laid stress on the expression 'specially skilled' in Section 45 of the Indian Evidence Act and submitted that a valuer being a person of special skill and experience, his opinion should have the same evidentiary value as the opinion of an 'expert' under Section 45 of the Indian Evidence Act.
87. In this connection Mr. Mitra sought to rely on an old English decision of the Chancery Court in the case of the Attorney-General v. Edward Cross,  3 Mer. 524. In that case certain leases of charity estates had been valued by the surveyors appointed by the Corporation of Exeter. The question arose whether it can be said that the leases had been under-valued. Dealing with this question, Sir William Grant, Master of the Rolls, at page 541 of the report, observed as follows:
'As to the second point in this case, viz., the allegation that the estates have been let for an insufficient consideration, I have always understood that leases of charity estates might be set aside on the mere ground of under-value. But it must be an under-value satisfactorily proved and considerable in amount. It is not enough to show that a little more might have been got for the estate than has been actually reserved. Still less is it sufficient to infer the under-letting from the value at some subsequent period. In this case the Corporation of Exeter took the precaution of having the lands surveyed and valued by an experienced surveyor, upon whose estimate they set the fine. The imputed motive for partiality to the lessee is negatived. He is not a corporator, nor in any way connected with the Corporation.'
88. At page 542 of the report the learned Master of the Rolls goes on to observe as follows:
'The surveyor of the Corporation could have no motive for undervaluing the land, and so diminish the fine to be received by his employer. Neither his skill, nor his integrity, is in any way impeached.'
89. Although the surveyor of 'the Corporation of Exeter has in the above decision been described as 'experienced' having skill and integrity, the question as to whether such a surveyor or valuer is an 'expert' as understood in the law of evidence does not appear to have fallen for consideration or decided in the above case. This decision, therefore, is of no assistance to the question before us.
90. Another question was raised as to whether the valuer could be called a person ' specially skilled in a science or an art' within the meaning of Section 45 of the Indian Evidence Act. This is a highly debatable question. Although this matter may have to be considered and decided in an appropriate case, in our view, in the facts and circumstances of the instant case it is not necessary to express any final opinion on this question.
91. For the reasons given above, we answer the question in the affirmative and hold that there was a valid and legal basis for the Tribunal's conclusion that capital gain arising out of the sale of the property at No. 221, Russa Road, Calcutta, would be Rs. 75,000 instead of a loss of Rs. 6,000 as claimed by the assessee.
92. The answer is, therefore, in the affirmative and in favour of the revenue.
93. The Commissioner is entitled to the costs of this reference.
P.B. Mukharji, C.J.
94. I entirely agree.
95. Many legal apparitions have appeared in the course of the arguments on this income-tax reference. They have haunted three special fields of their choice, viz., (1) the fact and law controversy, (2) valuers and their methods of valuation, and (3) the doctrine of judicial notice. It is only on these three points that I wish to add a few words.
96. In this branch of the income-tax law, the controversy between fact and law is assuming strange qualities. Since a reference to the High Court lies only on a question of law, the Tribunal is the final fact-finding authority as will be clear from the provisions of Section 254 of the Income-tax Act, 1961, which applies to this case. Agitation of facts being barred, and agitation of law being necessarily limited, the present tendency appears to be to convert questions of fact into law. A glance at the question makes it apparent in this present reference. The main point of the question asked in this reference is : Whether there was a valid and legal basis for the Tribunal's conclusion that the capital gains arising out of the sale of 221, Russa Road, Calcutta, would be Rs. 75,000 instead of a loss of Rs. 6,000, as claimed by the assessee.
97. Valuation ordinarily is a question of fact. It does not mean that it can never be a question of law. The question here is whether it is so or not. By no test it is really a question of law in the facts and circumstances of this case.
98. But, as I have said, the modern tendency is to convert many questions of fact into questions of law. The attempt here is to suggest in the question whether there is any valid and legal basis for the Tribunal's conclusion. The controversy is whether the loss of Rs. 6,000, as claimed by the assessee, should have been allowed or whether the capital 'gain in respect of 221, Russa Road, should have been estimated at Rs. 75,000. Neither of these two figures, viz., the loss of Rs. 6,000 or the gain of Rs. 75,000, is really a matter of fact in the sense that ordinarily a fact is understood but they are matters of opinion. The assessee's grievance is that, according to the report of the valuer, Messrs. Talbot & Co., estimating value of this property at Rs. 3,06,000 and the actual sale which fetched only Rs. 3,00,000 the loss of Rs. 6,000 instead of any gain is established beyond doubt. The fallacy of this argument is that while the sale on April 11, 1961, at Rs. 3,00,000 is a fact of the market, the estimated valuation by the valuer at Rs. 3,06,000 of this property is not a fact of the market but an opinion of the valuer. That opinion may be correct or may be wrong. The Income-tax Officer rejected that opinion of the valuer. The Appellate Commissioner relied on it. The Tribunal rejected the valuer's estimate. As indicated by my learned brother, the estimate in the report of Rs. 3,500 per cottah on January 1, 1954, is only an assumption based on no facts and is only a matter of opinion which has been vitiated by many considerations inherent in the valuer's report and exhaustively dealt with by my learned brother. The Tribunal says that this estimate of Rs. 3,500 per cottah is not necessarily correct. This court in its advisory jurisdiction is not in a position to say that the Tribunal is wrong or to spell out a question of law by saying that there is no valid and legal basis for the Tribunal's conclusion There is some basis for the Tribunal's conclusion about the rise in prices and that it will not be more than 75%, That will be the end of the advisory jurisdiction of this court and it will be inappropriate to enter into further speculation in the exercise of the reference jurisdiction in these cases to go into the respective merits and demerits of these figures.
99. That is why the question of fact or law becomes so important. There is no fact as such unless it is relevant to the law under consideration. There can be no question of law equally unless the relevant facts give rise to that question of law. Much of the subtler legal attempts to separate fact from law is therefore a pursuit after the impossible and naturally the doctrine developed of mixed question of law and fact. That is a strange mixture. Whether that mixture is a mechanical mixture or a chemical compound has been debated in some of the cases on authorities. The better view is to treat it almost in the nature of a chemical compound in the sense that fact and law are inseparable.
100. Naturally to separate the inseparable produces many difficulties. It certainly has produced one in the present income-tax reference. The question shows that the assessee says, rely on the valuation report to establish the assessee's claim for loss of Rs. 6,000. Equally, the Tribunal says, rely on the valuation report to prove the rise of 75 per cent. in the prices and get another estimate equally arising from the valuer's report. There is, therefore, no question of law but of fact in the ultimate analysis in this reference. I would not, therefore, interfere in the advisory jurisdiction with the decision of the Tribunal in this case. One way of boring the hole in the otherwise impregnable boat of facts is to suggest in every question of fact, is there any legal material to support the fact found? Every simple question fact can be attempted to be opened up by a question like that suggesting whether there is any legal material for coming to such a conclusion. Some limit, therefore, has to be drawn somewhere. I would prefer to draw the limit in the particular facts of this reference by saying that there is really and fundamentally no question of law although it is made to wear the garb of law.
101. The second point is the character and quality of valuation and the weight of a valuer's report. My learned brother has discussed the point, how far a valuer is an expert having regard to the language used in Section 45 of the Indian Evidence Act. When a valuer values a property, is he embarking on a subject which is science or art, is a very central problem. Valuation is certainly not an exact science like the physical sciences. I am aware that many inexact sciences like comparison of handwritings or finger impressions or economics can come within the category recognised as subjects for expert opinion under Section 45 of the Evidence Act. The latest edition of Phipson on Evidence quoted by my learned brother does not recognise valuation as a science or art. Whether pseudo-sciences can also come within the expression of science in Section 45 of the Evidence Act may perhaps have to be determined in an appropriate case. In any event, even if the valuer was an expert, he is not a witness of fact but a mere witness of opinion. That opinion, therefore, cannot bind the court or the tribunal or the income-tax authorities. It certainly can be considered as a piece of relevant consideration and perhaps evidence. The scheme of the Income-tax Act illustrated by Section 254 of the Income-tax Act, as distinguished from the provisions of the other statutes like Section 63(6) of the Estate Duty Act, Section 24(6) of the Wealth-tax Act and Section 23(6) of the Gift-tax Act does not compel the taxing authorities to accept a valuation by a valuer except in the solitary instance of a case under Section 52 of the Income-tax Act as recognised in the new amendment in Section 254(1)(a) inserted by Section 39 of the Finance Act of 1964 with effect from 1st April, 1964. Admittedly, this is not a case coming within that exception.
102. The weight and the probative value of a valuer's report, whether he is an expert or not, depends fundamentally on two basic facts, viz.;--(1) the reasons given by the valuer, and (2) whether he has been able to stand the test of cross-examination. The test of cross-examination is not available here because the Evidence Act in its rigidity does not apply to these proceedings. It was only a report of a valuer considered by the Income-tax Officer as being produced by the assessee. The valuer never came to give evidence nor was he subjected to any cross-examination. To find, therefore, the weight or truth or the correctness or even reasonableness of such an opinion, the method of cross-examination was not available. That is one handicap in this case. The other handicap is the reasons. My learned brother has shown by a close scrutiny of the report that the valuer in this report has valued it with conditions and assumptions which are not legal to determine the capital gain within the meaning of Sections 45, 48 and 50 of the Income-tax Act read with the fair market value concept stated in Section 45 of the Income-tax Act. At best, therefore, the report of Talbot & Co., the valuer in this case, is an unverified estimate which suffers from many self-contradictions indicated by my learned brother. The wholesome safeguard relating to an expert's evidence in the first proviso to Section 60 of the Evidence Act is that even an expert's opinion must be formally given and unless the expert is dead or cannot be found or is incapable of giving evidence or cannot be called as a witness, the opinion of the experts expressed in treatises may be proved by the production of such treatises. That shows that the law of evidence is careful to insist on verifying and checking the expert opinion. If courts of law where the Evidence Act applies have to act under such safeguards, it is all the more necessary for the income-tax authorities where the Evidence Act does not strictly apply to be extremely cautious and careful in weighing the untested, uncross-examined report of an expert produced ex parte at the instance of an assessee who employed the valuer.
103. I can do no better than conclude these few observations not by quoting Parks on Valuation which my learned brother has done but by quoting a still more ancient authority, a great Master of Equity, Jessel M.R. in Lord Abinger v. Ashton,  17 Eq. 358 at pp. 373-74, where the following celebrated observations are to be found :
'As to this, I may say what I think I have often said before, that in matters of opinion I very much distrust expert evidence, for several reasons. In the first place, although the evidence is given upon oath, in point of fact the person knows he cannot be indicted for perjury, because it is only evidence as to a matter of opinion. So that you have not the authority of legal sanction. A dishonest man, knowing he could not be punished, might be inclined to indulge in extravagant assertions on an occasion that required it. But that is not all. Expert evidence of this kind is evidence of persons who sometimes live by their business, but in all cases are remunerated for their evidence. An expert is not like an ordinary witness, who hopes to get his expenses, but he is employed and paid in the sense of gain, being employed by the person who calls him.
Now it is natural that his mind, however honest he may be, should be biassed in favour of the person employing him, and accordingly we do find such bias. I have known the same thing apply to other professional men, and have warned young counsel against that bias in advising on an ordinary case. Undoubtedly there is a natural bias to do something serviceable for those who employ you and adequately remunerate you. It is very natural, and it is so effectual, that we constantly see persons, instead of considering themselves witnesses, rather consider themselves as the paid agents of the person who employs them......Suppose a person wants to sell a house, and as he wants a very high value put upon it, he sends to ten valuers, and out of these he selects the three who have put the highest value on the house. The purchaser wants a very low value, and selects out of a number of valuers three of the lowest. Each set of valuers values high or low, according to the requirements of the person who employs them. I have known the same sort of thing done even as regards medical evidence. The consequence is, you do not get fair professional opinion, but an exceptional opinion by evidence selected in this way.'
104. The third point is about judicial notice. The criticism of the Tribunal's decision is that the Tribunal had no evidence about the rise in prices in land values in Calcutta. The further submission is that rise in prices is not a subject-matter of judicial notice. The reason behind this argument is that the judge should not import any knowledge except through evidence. The judge, in order to avoid the bias, is pictured as blind. Ideal justice is supposed to be stone blind. The little screen through which knowledge might creep in by the doctrine of judicial notice is said to be severely limited by the words of Section 57 of the Evidence Act. My learned brother has shown from authorities that in spite of limitations of the judge he is still able to take judicial notice of a notorious fact. Steep rise in the land values in Calcutta is more than a notorious fact at the relevant time considered by the valuer and by the Tribunal. I should not like to narrow the opening of notorious facts by closing their categories and thereby closing the door of justice. I agree with my learned brother that this court can take judicial notice of the fact of the steep rise of land values in Calcutta in the relevant time in the facts and circumstances of this case and the Tribunal having taken notice of that did not commit any illegality which would justify our interference with its decision. In any case this court, in my view, can take judicial notice of the notorious fact of steep rise in the land values in Calcutta at the relevant time.
105. With these observations, I agree with the answers proposed by my learned brother to the questions raised in this reference.