1969 PLP 494 (PTD)

ABDUS SATTAR, J.‑This appeal by special leave is from a judgment of the High Court of West Pakistan at Lahore in a reference under section 59 (2) of the Estate Duty Act, 1950. Inayat Khan, father of the appellant, died on the 14th of September 1950. The deceased owned 3471/2 acres of cultivable land and 1101 acres of uncultivable land in villages Kot Khan, Kilcha llayana and Haveli Haji Mahmood. The appellant filed a return under the Estate Duty Act wherein he valued the lands left by his father at Rs. 50,000 and out of it deducted Rs. 400 as funeral expenses. The Central Board of Revenue assessed the value of the cultivable land at Rs. 1,73,750 at Rs.500 per acre and the uncultivable land at Rs. 2,21,600 at Rs. 200 per acre. On this estate duty was charged at the rate of 10% amounting to Rs. 39,

495. As the assessment was not accepted by the appellant the Board made a reference to the High Court under section 59 (2) of the Estate Duty Act, 1950. The High Court, on receipt of the reference, appointed Mr. Ihsan‑ul‑Haq, Advocate, as a valuer. He valued the pro perty at Rs. 2,06,160 on the basis of the net value of produce. Both sides filed objections to this valuation which was ulti mately set aside on the ground that the entire basis of his valua tion was incorrect. He had not included in his estimate the value of the non‑cultivable lands, as according to him those lands were water‑logged areas and there was no reasonable prospect of their reclamation in the near future. These uncultiv able lands were mostly affected by thur. The High Court then appointed Mr. Ghulam Ali Alvi to revalue the lands after visiting them. He fixed the value of the estate at Rs. 1,60,

000. The Department objected to this valuation. Mr. Alvi pointed out that there are three different modes of valuation : (i) on the basis of produce index value as given in the booklet of produce value units used by the Rehabilitation Department and Land Commission; (ii) on the basis of the average price paid in private transactions in the villages in question or in the neighbouring villages as shown in mutations, and (iii) on the basis of net value of the produce of the lands. The valuer gave his estimate of value on the basis of the first two modes and did not value the lands on the basis of the third method as there was no material available in this regard. The High Court found his first and second methods of valuation unacceptable and proceeded to make its own valuation by calculating the value of the lands on the basis of the private sales in or near the villages in which the deceased had left his lands. ‑On this basis it was found that the Department had correctly valued the cultivable lands at Rs. 1,73, 750. 1n regard to the uncultivable lands the High Court valued them at 1/4th of the value of the cultivable lands which was the ratio indicated by Mr. Ghulam Ali Alvi. The total value of the lands thus was fond to be Rs. 3,12,250 and deducting Rs. 400 for funeral expenses the estate duty was found to be payable on Rs. 3,11,

850. Leave to appeal was granted to consider whether the assessment by the High Court had been made on correct principles. This appeal came up for hearing on the 5th of December 1967. It was argued on that day by the learned counsel for the appellant that at one stage the appellant had offered to sell the uncultivable lands to Government at Re. 1 per acre but they refused to take them even at that price as it could not be utilized under the Utilization of Land Act. The learned counsel for the Controller of Estate Duty, however, stated that he had no instructions regarding the offer made by the appellant for the sale of the uncultivable area at Re. 1 per acre or "the present conditions of these lands". The case was adjourned in order to enable him to take instructions regarding these matters particularly the offer of sale at Re. 1 per acre which was repeated in Court by the learned counsel for the appellant. Mr. Abdul Haque has informed us that the Government are not concerned with the offer for sale as they do not enter into private transactions of this type. The learned counsel for the appellant has contended that the decision of the High Court valuing the lands on the basis of prices paid in private transactions in the neighbouring villages cannot be supported as the areas concerned in these sales were small and indicated wide variation in the prices paid. He has also pointed out that these small areas were sold probably as building sites and therefore the prices paid cannot form the basis for calculating the prices of the lands in question. It has also been urged that there is a general tendency amongst purchasers to mention higher amounts than those actually paid in order to avoid proceedings for pre‑emption. The learned counsel has then argued that the system followed by the Rehabilitation authorities and the Land Commission of making calculation of the productivity of the lands in terms of the produce index units should have been considered to be the best method in the facts and circumstances of the instant case. The method of valuation in the statute is given in section 38 of the Estate Duty Act. It reads, as follows:‑ " 38 (1) The principal value of any property shall be estimated to be the price which, in the opinion of Controller, it would fetch if sold in the open market at the time of the deceased's death. (2) 1n estimating the principal value under this section the Controller shall fix the price of the property according to the market price at the time of the deceased's death and shall not make any reduction in the estimate on account of the estimate being made on the assumption that the whole property is to be placed on the Market at one and the same time; Provided that where it is proved to the satisfaction of the Controller that the value of the property had been depreciated by reason of the death of the deceased, the depreciation shall be taken into account in fixing the price." Mr. Ghulam Ali Alvi pointed out in his report that on the basis of sales of lands in villages Kot Khan, Kilcha and two adjoining villages Saijowal and Thatti Pana during the period from 1944 to 1951, the total value of the cultivated area and the uncultivated area would come to Rs. 1,75,

918. He, ho Never, observed "that the prices in private sales are often misleading". The learned fudges of the High Court rejected the valuation made by Mr. Ghulam Ali Alvi according to the first two modes of calculation simply because the calculations under those modes were found to be incorrect. No other ground was given for rejecting them. With regard to the valuation on the basis of private sales it has been stated that this in their view is "a satisfactory basis for calculating the value of the lands". After hearing learned counsel for the parties we are of the view that in the facts and circumstances of this case the best way for valuing the lands is on the basis of produce index value. The sales on which reliance was placed by the learned Judges of the High Court could not form the basis for calculating the value of the lands in question. They relate to small areas and the prices vary widely. From these sales it is difficult to come to a definite finding as to the average price. Mr. Alvi, after inspection, found that the total cultivable area including banjar jadid area came to 362 acres and 8 kanals. He found banjar qadim area to be 2081 acres and 2 kanals and ghair mumqin area to be 40 acres and 1 kanal. Taking into account the instructions given in the index produce booklet, he found 9072 produce index units for the cultivable lands. Coming to the banjar qadim and ghair mumqin lands he observed that the banjar qadim lands were not better than ghair mumqin lands and as according to the instructions given in the booklet the produce units for banjar qadim lands are to be calculated at half the rate of barani lands and for ghair mamqin at 1/4th of the barani lands, he thought "it would be more appropriate and proper to calculate produced units for these two kinds of lands at 7 units per acre". Calculating at this rate the total produce units for the cultivable and uncultiv able lands were calculated to be 17,

922. We have found no reason to discard the above calculation particularly when the Department failed to produce before us any papers such as jamabandi to show that any portion of the uncultivable area has been brought under cultivation. Time for production of these papers was given to the learned counsel for the Controller of Estate Duty but no such papers have been produced. The learned Commissioner has fixed the price on produce units basis at the rate of Rs. 10 for each unit. He has, in this connection, observed:‑-- "As regards the fixation of price of the land on produce units basis, it would be fair to take the value of one unit at Rs.

10. This is the rate which the Rehabilitation Authorities have decided to sell land held under allotment by mortgagees and also for the area held in excess by the refugees of non agreed areas. Similarly Government is selling land to retired and retiring Government servants at Rs. , 10 per unit if the price is paid at lump sum and at Rs. 15 if paid in instalments. The lands resumed under the Land Reforms Regulation is being sold to tenants at Rs. 8 per unit. The land owners are being paid for such lands at less than Rs. 8 per unit. In view of the inferior nature of the land both cultivated and uncultivated, it would be equitable and proper that the value per unit for this land be taken as Rs. 8." We have not been able to accept the argument advanced by the learned valuer in this regard. He has already, in calculat ing the produce units for banjar qadim and ghair mumqin, given sufficient allowance in consideration of the nature of these lands. After having calculated the produce units of these lands at 1/4th of the barani lands there was no justification for deviating from the rate which has been fixed by the Government for sale to retired and retiring Government servants. We, therefore, think that the total of the produce units, namely, 17,922 should be valued at the rate of R5. 10 per unit. Total value of the lands thus workout to be Rs. 1,79,220 and deducting Rs. 400 as funeral expenses the estate duty is payable on Rs. 1,78,

820. In the result the appeal is accepted in part and is disposed of on the above terms. The parties will bear their own costs. K. B. A. Appeal partly accepted.