HANUMANMALL BENGANI v. APPELLATE CONTROLLER OF ESTATE DUTY
[Citation -1985-LL-0215-4]

Citation 1985-LL-0215-4
Appellant Name HANUMANMALL BENGANI
Respondent Name APPELLATE CONTROLLER OF ESTATE DUTY
Court ITAT
Relevant Act Income-tax
Date of Order 15/02/1985
Judgment View Judgment
Keyword Tags appellate controller • commercial building • commercial property • accountable person • immovable property • principal value • rental income • special bench • market value • estate duty • sale price • gift-tax
Bot Summary: The President under s. 63(11) of the ED Act, 1953, r/w s. 5A(7) of the Indian IT Act, 1922, has referred the following question for the decision of the Third Member: Whether the multiple to be adopted for the purpose of computing the market value of the property located at 25A, Khagendra Chatterjee Road, Calcutta, for the purpose of computation of net principal value of the estate of the deceased should be taken to be 8.5 or 12 Smt. Mina Devi Bengani expired on 24th Jan., 1979. The immovable property owned by her included the property of 25A, Khagendra Chatterjee Road, Calcutta. Under the circumstances, the property for which the market value was to be arrived at on the date of the death of the deceased is a commercial property and it is not a residential or partly residential or partly commercial property. As the property in question was a commercial one, the question of application of r. 1BB or the decision of the Special Bench in Biju Patnaik's case does not arise. A prudent investor in real property would expect more yield from the commercial property than the residential building. The cases are only indicative of a fair yield which can be taken while considering the market value, of a property. Accordingly, the question referred to is answered as follows: The multiple for the purpose of computing the market value of the The multiple for the purpose of computing the market value of the property located at 25A, Khagendra Chatterjee Road, Calcutta, for the purpose o f computation of net principal value of the estate of the deceased should be taken at 8.5 times.


President under s. 63(11) of ED Act, 1953, r/w s. 5A(7) of Indian IT Act, 1922, has referred following question for decision of Third Member: " Whether multiple to be adopted for purpose of computing market value of property located at 25A, Khagendra Chatterjee Road, Calcutta, for purpose of computation of net principal value of estate of deceased should be taken to be 8.5 or 12? " Smt. Mina Devi Bengani expired on 24th Jan., 1979. She was owning before her death movable and immovable properties. immovable property owned by her included property of 25A, Khagendra Chatterjee Road, Calcutta. This property consisted of about 44 godowns, which were used for storing raw jute and other materials. gross rent receivable from godowns amounted to Rs. 46,462. ITO after considering outgoings, took net rent of godowns at Rs. 32,965. accountable person declared value of this property on death of deceased at Rs. 3,72,000, which was subsequently revised at Rs. 2,95,933 through letter. value shown by accountable person was not accepted by Asstt. Controller. He capitalized net rent of Rs. 32,965 by applying multiple of 12.5 times. He, therefore, took value of godowns at Rs. 4,12,063. accountable person made various contentions before Appellate Controller. One of contentions of accountable person was that multiplier adopted by Asstt. Controller was excessive. multiplier was reduced to 12 times by Appellate Controller. assessee before Tribunal, inter alia, contended that multiplier adopted by Appellate Controller at 12 times was highly excessive and it should be adopted at 8.5 times. learned Accountant Member found that in WT Appeal No. 770 (Cal.) of 1981 multiple of 8.5 times was applied after considering decision of Supreme Court in Union of India vs. Smt. Shanti Devi AIR 1983 SC 1190. He, accordingly, decided that multiple of 8.5 times should be applied. He also referred to decision in CIT vs. Sint. Vimlaben Bhagwandas Patel 1979 13 CTR (Guj) 27: (1979) 118 ITR 134 (Guj.). learned Judicial Member after commenting upon order of Accountant Member and cases upon which reliance was placed by him, came to conclusion that multiple of at least 12 times should have been adopted in present case following Special Bench decision in Biju Patnaik vs. WTO (1983) 3 ITD 693 (Del) (SB) under r. 1BB of Wealth tax Rules, 1957. As both learned Members did not agree to common factor for capitalizing net rent, issue has been referred by President to Third Member. counsel of accountable person stated facts and urged that all godowns were let out and, therefore, r. 1BB or Special Bench decision in Biju Patnaik's case (supra) is not applicable on facts of case. He further indicated that multiple of 8.5 times was reasonable and he relied on Smt. Vimlaben Bhagawandas Patel's case (supra). He also referred to commentary of learned author, C.A. Gulanikar, at p. 2.66 of Law & Practice of Gift-tax & Wealth tax, 1984 Edn. He further urged that assistance could also be taken from decision in Smt. Shanti Devi's case (supra). counsel further stated that if investments in fixed deposit, National Savings Certificates, debentures, etc., are taken into consideration, yield taken by Accountant Member was fair and, hence, multiple of 8.5 times should be adopted. He further indicated that question of valuation of commercial property was in dispute. It is common knowledge that yield in commercial building is more than residential building. Even if this factor is adopted, multiple adopted at 8.5 times was fair. Das, senior Departmental Representative, stated that r. 1BB technically may not be applicable but rate indicated therein is applicable and, therefore, rate applied by Judicial Member was fair. He referred to para 131 of Estate Duty by Hanson, 10th Edn., and urged that best sale price should be taken into consideration. He distinguished all cases relied upon either by counsel and urged that these decisions were in different context and, therefore, multiplier of 12 times adopted by Judicial Member may be maintained. question of market value at 25A, Khagendra Chatterjee Road, Calcutta, is in dispute. This property was consisted of about 44 godowns and all godowns were let out. Under circumstances, property for which market value was to be arrived at on date of death of deceased is commercial property and it is not residential or partly residential or partly commercial property. This basic fact has been ignored by Judicial Member. Once property is wholly let out, only method is capitalization of net rent and same has been adopted by Asstt. Controller. There is no dispute over this fact. As property in question was commercial one, question of application of r. 1BB or decision of Special Bench in Biju Patnaik's case (supra) does not arise. Therefore, only question is that what is proper multiplier which could be applied for capitalizing net rent for market value of property on death of deceased. valuation is to be made on 24th Jan., 1979. It is to be seen what yield would prudent businessman expect who would like to invest in real estate. Gujarat High Court in acquisition case in Smt. Vimlaben Bhagwandas Patel (supra) has indicated that multiple of 8.5 would be fair. This conclusion is also supported by decision in Smt. Shanti Devi's case (supra). yield of about 12 per cent could not be said to be very high if yield available on National Savings Certificates, fixed deposits in bank and interest on debenture is taken into consideration. Moreover, it was commercial property. prudent investor in real property would expect more yield from commercial property than residential building. If this factor is also taken into consideration, yield which has been taken by Accountant Member could not be said to be very high. Senior Departmental Representative distinguished cases on which reliance was placed by counsel of accountable person. cases are only indicative of fair yield which can be taken while considering market value, of property. Therefore, those cases can at best be taken as guide for determining yield which could be taken while capitalizing net rental income of property. Therefore, after considering arguments of respective parties, case law and yield prevailing on various investments, it appears that multiplier of 8.5 times on facts of present cases is fair. Accordingly, question referred to is answered as follows: " multiple for purpose of computing market value of " multiple for purpose of computing market value of property located at 25A, Khagendra Chatterjee Road, Calcutta, for purpose o f computation of net principal value of estate of deceased should be taken at 8.5 times. " matter is referred back to original Bench for final decision in light of answer. *** HANUMANMALL BENGANI v. APPELLATE CONTROLLER OF ESTATE DUTY
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