1984 PLP 202 (PTD)

"Condition XXVII Right of the Government to resume the land on payment of compensation for buildings. The Local Government may resume the land or any portion thereof at any time after giving one month's notice in writing, and on payment of compensation for such buildings standing on the land or portion thereof as shall have been erected under proper authority. If there shall be any dispute as to the amount of such compensation, the same shall be referred to a committee of arbitration, which shall be constituted as provided in Chapter XX of the Cantonment Code, 1912, and the lessee shall be bound by the decision of the committee of arbitration."

7. It is, therefore, argued that so far as the house in question is concerned the deceased was owner of the structure on Plot No. 110 only and not of the plot which was liable to be acquired by the Cantonment Authority at any time on payment of value of the structure.

8. The main question, therefore, for consideration will be whether the plot on which the house in dispute is constructed also falls within the definition of the 'property' which was passed on the death of the deceased in terms of sections 4 and 6 of the said Act. Section 6 of the said Act lays down that the property which the deceased, was at time of his death competent to dispose of, shall be deemed to pass on his death. From the lease deed it would transpire that the deceased had limited power to dispose of the plot in question alongwith the structure as will be shown later while discussing the effect of Condition No. IV.

9. A perusal of the lease deed produced by the applicant, would show that the plot was granted to the predecessor of the applicant rent free (see Condition III). Again Condition XXV lays down that "so long as the lessee shall observe the conditions hereinbefore specified and on his part to be observed, he may subject to condition XXVII hold the land for ever without interruption by the Secretary of the State". However Condition IV lays down certain restrictions on transfer, sale etc. of the plot. It would be advantageous to reproduce this condition which is as under: ‑‑ "Condition IV. Power to veto transfer of Lessee's interest in certain cases.‑(1) Whenever the Lessee intends to transfer, by sale, gift mortgage or exchange his interest in the land, or in the buildings erected on they land or in any part of the land or buildings he or the intended transferee shall give the Cantonment Magistrate one month's notice in writing before the transfer is completed. (2) The Office Commanding the Division, shall have power within the said period of one month, and within the concurrence of toe Local Government, to impose by order in writing, his veto on any such transfer, and if in any case the Cantonment authority considers it desirable that the said power of veto should be exercised, it shall report the case to such Officer Commanding the Division without delay:? From the above condition it is clear that the deceased had absolute disposing power over the house and she had not been precluded from disposing of d interest in the land as well subject to sanction of the competent authority.

10. So far as the said Act is concerned no particular manner has ban prescribed for determining the value of the property which is deemed to pass. Section 38 of the said Act provides that the principal value of the property shall be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the death of the deceased. The Rules made under the said Act also do not prescribe any method of determining the market value of such property. However, the said Act provides for appointment of valuer and in this case one was appointed at the request of the applicant. Hut the valuer also valued the land and the building separately and added under order the same together to determine the total value of the property in question. The Tribunal approved this method but did not accept his valuation in toto as stated in paragraph 5 above and fixed its own value arbitrarily, of the house and plot separately.

11. In support of his contention that the annual rental vlaue of the hours should have been made the basis for determining the value of the property, Mr. Ali Athar has relied on Gulbai Jehangir Sukia v. Controller of Estate Duty, Karachi 1967 P T D

320. In this case the Tribunal had determined the value of the property at 30 times the net annual rental value of the property. The accountable person made an application under section 59‑A to the High Court for a direction to refer the following questions: ‑ "(i) Had the Appellate Tribunal any evidence before it that properties at Clifton in 1958 were being sold at 30 times of the net annual rents? (ii) Has the Appellate Tribunal acted in accordance with the law in holding that the annual value made for purposes of Municipal assessment represented the annual rent or income of the property and to capitalize the same at 30 times? (iii) Is the valuation made by the Appellate Tribunal in accordance with the provisions of section 38 of the Act and based on any proper evidence? ??????????? It was held by the High Court that the above questions did not involve any substantial question of law. On this view of the matter the application of the accountable person was rejected. This case is not of any help to the applicant's case. Another case cited by Mr. Ali Athar in this connection is Collector of Estate Duty v. Radha Devi Jalan (1970) 22 Taxation

139. In this case Calcutta High Court observed as under: ‑ "In case of buildings which are in the possession of tenants and the tenants cannot either be evicted or the rent payable by them enhanced, except in accordance with the provisions of the Rent Control Acts, the only appropriate method of valuation is to capitalise the annual rent by a certain number of years' purchase. The method of valuing the land and the building separately and adding up the values would be improper in such cases, because that would ignore the impact of the Control Acts on the land and the building. If there had been no rent restriction law in operation, the Controller could make a fair and an objective estimate of the rent which the property might lave fetched if a willing lessor wanted to let out the property to a willing lessee ; but if the property is subject to rent restriction Acts, in estimating the rent at which the property was capable of being let out, the Controller is bound to take into account the restrictions imposed by the rent restriction Acts and to arrive at the figure of fair rent accordingly.? The above case supports the plea of the learned counsel that the valuation of the land and its structure should not be made separately. From the underlined portion of the above observations it would appear that annual rental method may be applied‑ for determining valuation of even those properties to which rent restriction laws do not apply or which are not in possession of tenants. The property in question also was not subject to any rent restriction law in the year 1951 when the landlady had died. Cantonment Rent Restriction Act came into force for the first time in 1963. Again the property is dispute s rot reported to ire in notion of any tenant. Notwithstanding these facts rental method could have been appropriately applied by the Controller in this case.

12. Mr. Ali Athar hat next relied on Bhartiya Vydag v. Competent Authorities (1979) 120 I T R

129. In this case the question of determination of value of a house which was purchased by an accountable person, was under consideration of the Income‑tax Authorities, who had appointed valuer for the purpose. The valuer determined the market value of the land and the house by applying what is called the "development method". On a writ petition being filed by the accountable person the Allahabad High Court disapproved of the method adopted by the valuer with following observations: - "Though it is well settled that the present use of the land is not the sole criterion for determining its fair market value and its potentiality can be taken into consideration, where a land was already a building site with buildings standing on it and as such it was not a case where the land was put to agricultural use or might have been a waste land so that its potentialities as building site could be valued and added to its current value the development method of valuation of land adopted by the valuer in valuing a house on the date of sale would not be permissible in law. The development method, even if permissible, will not permissible at all in respect of a site whir's is already Ding used for building purposes. The fact that the purchaser does not intend to use the property for the purpose for which it is used at the time of the purchase and intends to demolish it or use it for other purposes is irrelevant." The ratio of the above decision appears to be that land and the building standing thereon should not be valued separately.

13. In the present case in which the deceased was full owner of the house, but bad limited ownership or had only lease hold rights over the plot on which the house stands, with limited power to transfer it, the only proper method to determine the value of the property would have been the annual rental method. While determining annual rental value due consideration is, given to the location and size of the building, nature of its construction, amenties provided and title of the landlord in respect of the land and the structure. The annual rental value thus ascertained shall, in our view form the most appropriate basis for determining the value of immovable properties in cases where the landlord is full owner of the structure, but has limited ownership over its plot.

14. In the case of Pathnamasari v. Secretary of State A I R 1923 Mad. 332, which involved question of determining value of immovable property acquired under the Land Acquisition Act, following observations were made: ‑ "The applicant's next contention is that the 8? acres of land on which the building stand should be valued separately and that the buildings should also be valued separately and the two added together to get the total market value of the plots with the buildings standing thereon. That is hardly the way in which property consisting of a house and garden is valued in the market. We think that a plot consisting of a house and a garden is much more satisfactorily valued in the manner in which the District Judge has done by capitalising the rental in the absence of other evidence which would give a more satisfactory value. Taking the annual rental in this case, viz. Rs. 750 and making allowance for the municipal tax payable on the land Rs. 20 a year, charged upon this land, and deducting also what one of the claimants who gave evidence in the case says he spent for the repairs and upkeep of this building, viz. Rs. 50 we get a net annual rent of Rs.

680. The learned District Judge has taken a month's rental as the cost of repairs. That will ordinarily be so, but here we have special evidence and there is nothing to contradict it, that Rs. 40 or Rs. 50 were spent for repairs. Taking therefore Rs. 680 as the net annual rental and taking twenty years purchase, which we think is a fair figure to adopt and a figure which is ordinarily adopted to most cases, the value of these two plots with the buildings on them will come to Rs. 13,

600. This we think may well be accepted as the total value of these two plots." ???????????

15. We are inclined to agree with the views taken in the above decision that annual rental value method would give fair value of the property for the purpose of estate duty in the facts and circumstances of the present case. ?

16. In view of the above discussion our answers to the questions referred to us are as under: ‑ Question No. 1.‑?? In the negative. Question No. 2. ‑ In the affirmative. Question No. 3. ‑ In the negative. Question No. 4. ‑ Does not arise. M.A.K???????????????????????????????????????????????????????????????????????? Reference‑ answered accordingly.