1986 PLP (Trib (PTD)

ABRAR HUSSAIN NAQVI (MEMBER).‑‑This is an estate duty appeal filed by the accountable persons in which a number of objections have been taken. Mian Rafiuddin died on 29th April, 1979 and the estate duty proceedings were started against the accountable persons in November, 1979. The deceased left considerable property in the shape of cash, shares defence savings certificates, fixed deposits, Bank accounts. Life insurance policy and immovable property. The Assistant Controller of Estate Duty made various additions, which have been contested in this appeal. However, at the time of arguments the learned counsel for the accountable persons did not press his ground of Appeals Nos. 2, 3 and 4 relating to the defence savings certificate, receivable loans and the value of the Shop No. 85, The Mall, Lahore. The other objections are discussed below:‑‑ "M Mansion L.‑‑This property is situated on The Mall Road, Lahore in which the deceased had 1/5th share. The total area of the land is 22 Marlas and the construction on this land was completed in 1977. Originally the Controller of Estate Duty had, proposed the value of this building at Rs.25,00,000 but in the revised proposal the value was fixed at Rs. 54,00,

000. Ultimately, at the time of assessment the value was adopted at Rs. 40, 00,

000. It may be stated that this property is leased out to American Express Bank, Lahore and advance rent of Rs.1,08,000 had also been received on 29th April, 1979. The Controller of Estate Duty in view of the location of the area, type of construction and annual rental income estimated the market value of the property at Rs.40,00,000 and 1/5th share of the deceased was worked out to Rs.8,00,000

2. The learned ‑counsel raised a number of objections in regard to the adopted. value of this building. It was contended that under section 38 of the Estate Duty Act, the Controller of Estate Duty had to estimate the principal value of the property if sold in open market at the time of the death of the deceased. It was contended that in order to make a hypothetical estimate of value of a property number of factors had to be kept in view. These factors are, the location, the type of construction, the taxes on immovable property the taxes on its income, and whether the property is vacant or rented out. It was contended that annual letting value is certainly not the criterion for valuation which is in fact a misleading factor. It is possible that a property is rented out to a good tenant on higher rent while another property worth much more can be rented out on much lower rent. It was thus submitted that the assessing officer had fallen in error in considering rental value of the property as the basis of the principal value of the property. It was argued that the learned Controller appears to have been influenced by the fact that the property in question had been rented out to American Express Bank on a considerably high figure of rent. It was submitted that as a matter of fact this was a liability on the property in that the deceased had received advance rent and the property was under lease for a fixed period. It was further contended that in view of the heavy taxation on property and income therefrom, a property like this does not attract investors. It was lastly submitted that the method adopted by the learned Controller of Estate Duty of adopting the value of the property was not correct. Proper method, it was argued, was to fix the value of the land and the cost of construction separately as has been done by the Income‑tax authorities, who had estimated the value of the land at Rs.2,00,000 and working out the cost of construction at Rs.100 per sq. ft., the value was adopted at Rs.14,33,

000. It was; therefore, con tended that one Wing of the Government tax collector had estimated the value at Rs.16,33,000 as late as on 30th June, 1979 i.e. after the death of the deceased on 29‑4‑1979. This valuation by the Income tax authorities was, if not to be adopted, was a relevant factor to be considered having been arrived at about two months after the death of the deceased.

3. The learned D.R. on the other hand contended that the property in question is situated at The Mall which is the central commercial place and having been rented out to American Express Bank, the value adopted by the Controller is certainly reasonable.

4. We have considered the arguments of both the parties. There is considerable force in the argument of the learned counsel for the assessee that a possible purchaser would keep certain factors in mind while making investment oil purchase of a property. It is true that considerable taxes are imposed on property and its income and the valuable property like the one under consideration is not easily available in the market as it attracts fewer customer. The fact that the property has already been leased out and its vacant possession is not to be delivered is also a relevant factor which would be considered by a hypothetical purchaser, There is no doubt that the land on The. Mall is valuable and the value adopted by the income‑tax authorities at Rs.200,000 (which was the purchase price) could not be accepted in 1979 when the deceased had died. The value of the land had considerably not raised by 1979. At the same time it has to be kept in mind that the Controller of Estate Duty was himself uncertain about the value of this property, He first estimated the value at Rs.25,00,

000. Then he proposed the value at Rs.54,00,000 and finally adopted it at Rs.40,00,000 He would feet that seeping in view the location of the property, cost of land could be adopted at Rs.12,00,

000. However the cost of construction adopted the I.‑T.O. at Rs.100 per sq. ft. in 1979 was certainly reasonable inasmuch as the value of the property is because of the location of the land and the cost of construction is not effected by the location. Therefore, the value of the property could be worked out as under: Cost of Land Rs.12,00,000 Cost of constructions Rs.14,33,000 Total:‑‑ Rs. 26,33,000

5. However, some margin has to be given for the fact that the property is not vacant and the fact that a hypothetical purchaser, before making a huge investment for the purchase of such property would also consider the high rate of tax and the Income‑tax to be paid on rental income of the property. Thus, a margin of about Rs.2,00,000 has to be given which would reduce the value of the property by the amount. By deducting this amount of depreciation, the value of the property is worked out to Rs.24,33,

000. The order of the Controller of Estate Duty is modified to this extent.

6. The next objection of the learned counsel is in regard to curtailment of claim of the assessee out of the liability on account of tax. The accountable persons had claimed liability of tax at Rs.2,28,

960. The Controller, however, accepted the liability to the extent of 69,593 on the ground that accountable persons had showed the evidence for the payment of property tax and income tax on behalf of the deceased to the extent of this amount only. The order of the Controller is legally incorrect inasmuch as the liability of the deceased is not necessarily to the extent of actual payment of taxes it could be possible that liability was as claimed by the payment had been made to the extent of Rs.69,

593. Mere fact that full payment had not been set aside could not diminish the actual liability of the deceased. We, therefore, direct that whole of the tax liability of the deceased should be accepted subject to verification. M . Y . H . Order accordingly.