ORDER
VIMAL GANDHI, J. M. :
The grounds of appeal challenging valuation of jewellery not pressed and question of deduction of liabilities of taxes admittedly fully settled by Hon able Supreme Court in the case upheld in CWT vs . Vimlaben Vadilal Mehta : [1984]145ITR11(SC) . We are left with common question relating to valuation of same properties on different valuation dates. By this common order all the appeals are being disposed of.
The assessed-HUF on the valuation dates relevant for the asst. yrs. 1976-77 to 1979-80 held the following immovable properties.
(1) 229/640 shares in property situated at Municipal 6926 Jaipuria Mills Clock Tower; Subji Mandi, Delhi (also known as Jaipur Spinning Mill). The property with total area measuring 91,640 sq. yds. houses mills, offices, shops, workshops, godowns and some residential quarters. It is a freehold property fully occupied by tenants numbering about 250.
(2) Property No. 6943/3 situated at Kohlapur Road, Delhi. The property, comprising of residential building and godown, is built on freehold land measuring 650 sq. yds. The residential portion is under self-occupation while godown is rented to different parties.
(3) 6/16 share in property No. 38/339 situated at Katra Gauri Shanker, Chandni Chowk, Delhi.
This property is constructed on freehold and measuring 39 sq. yds. and has ground, first and second floors. It is partly tenanted and partly under self-occupation.
(4) Property No. 336/337 Katra Gauri Shanker, Chandni Chowk, Delhi.
This property comprises of a building constructed on 202 sq. yds. having ground, first and second floors. It is fully tenanted. There being a dispute between the assessed and the Department the question of valuation of above properties was referred to the Valuation Officer under S. 16A of the WT Act for all the assessment years. The WTO adopted the value as suggested by the Valuation Officer and completed the assessments. The assessed challenged the valuation in appeal before the CIT(A) but without much success. Except for relief of Rs. 668 out of the value fixed for property at Katra Gauri Shanker, the CIT(A) confirmed the assessments.
3. Being aggrieved, the assessed brought the issue in appeals before the Tribunal. During the course of hearing of appeals, the assessed moved an application to raise an additional ground seeking valuation of properties as per method provided in Sch. III of the WT Act introduced by Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1st April, 1989. E-Bench of the Tribunal as per its order dt. 29th Aug., 1989 allowed the assessed to raise the additional ground of appeal. In the course of further hearing of appeals, the Bench felt that the question raised in the additional ground was vexatious and of considerable importance and be heard by a Special Bench consisting of three or more members of the Tribunal. The Bench accordingly sent its recommendations to the Hon able President who agreed and constituted a Special Bench to hear the appeals.
The additional question to be considered was framed as follows :
'Whether, the provisions of Sch. III of the WT Act, introduced w.e.f. 1st April, 1989 would be applicable in all the matters pending in appeal proceedings for valuation of properties?'
This is how the appeals were posted for hearing before the Special Bench.
4. Shri Anil Kumar Chopra appearing for the assessed drew attention of the Bench to the background of the case. After giving history of the case, he submitted that all the four properties were subject-matter of reference under S. 16A of WT Act to the Valuation Officer in this very case for the asst. yrs. 1967-68 to 1973-74. The matter relating to similar valuation ultimately came before the Tribunal and was disposed of by ITAT E-Bench, Delhi as per order dt. 24th Aug., 1982 in WTA Nos. 678 to 683/Del/1991. In the aforesaid decision, the learned Bench took detailed account of the value returned, the value taken by the Departmental authorities, the basis of assessment and the relevant case law. After a thorough discussion the Bench issued directions for valuation of each of the properties.
5. In respect of property known as Jaipuria Spinning Mill, the Tribunal in principle upheld application of rent capitalisation plus reversionary value of land adopted by the Valuation Officer subject to the observations that land rates applied by the valuation cell were high and not rateable to any comparable case. The Bench directed that land rates suggested by assesseds registered valuer be applied.
6. As regards property situated in Katra Gauri Shanker, the Bench directed that valuation as suggested by the valuation cell be adopted and assessment completed accordingly. The WTO was held to be wrong in refusing to adopt the value suggested by the valuation cell as the said figure was lesser than the value returned by the assessed.
7. As regards property situated at 333-337 Katra Gauri Shankar the Bench directed that the said property be assessed by capitalising the rent after allowing deduction @ 25% for the outgoings and by applying multiple of 12.
8. In respect of property situated at Kohlapur Road, the Bench directed that the value of residential portion be determined under r. 1BB of WT Rules. The value of let out portion be taken at by rent capitalisation method to be worked out on the basis suggested in respect of property at Katra Gauri Shanker.
Shri Chopra, learned counsel for the assessed pointed out that the facts and circumstances in the assessment years now before the Bench were similar to facts prevailing in the years disposed of by the Tribunal as per order dt. 24th Nov., 1982 except that addition on account of reversionary value of land upheld by the Tribunal in respect of Jaipuria Spinning Mills property was not maintainable in view of binding decision of jurisdictional High Court in the case of CWT vs . R. S. Tandon & Ors. : [1992]195ITR397(Delhi) . Shri Chopra thus opposed the addition of reversionary value of land. He further submitted that in case his aforesaid submissions were accepted he would not press the additional ground relating to application of Sch. III to the WT Act.
9. After discussion with representatives of parties and deliberation and on finding that facts and circumstances in the assessment years before us were identical and same basis of valuation was applied by the Valuation Officer in appeals before us, we permitted Shri Chopra to address us only on his alternate claim. Accordingly both the parties addressed us on the question of inclusion of reversionary value of land.
10. Shri Chopra, the learned counsel for the assessed as already mentioned, relied upon the decision of Hon able Delhi High Court in the case of R. S. Tandon & Ors. (supra) and submitted that addition on account of reversionary value of land was unjustified and unmaintainable. Shri P. K. Kohli, District Valuation Officer who was heard along with the Departmental Representative for the Revenue, contended that under S. 7(1) the market value of the property is to be assessed. It is generally seen that consideration shown on actual sale is more than value of any property worked out by the rent capitalisation method. The difference found represents reversionary value of land taken into account by the intending seller/purchaser of the property. The property is purchased with expectation that after economic life of the building is over, the land would revert back to the owner without encumbrance. Thus, in case of a tenanted property, addition on account of reversionary value of land is a must. Shri Kohli, in this connection, relied upon the decision of Hon able Punjab & Haryana High Court in the case of Dina Nath vs . CED . Shri Kohli stressed that the property Jaipuria Spinning Mill is old and dilapidated property having limited life. It has large area of open land. A prospective buyer of this property, can reasonably expect to have soon the possession of vacant land and thus would take reversionary value of the land into account. In the above background addition of reversionary value of land was justified. Shri Chopra in rejoinder submitted that the whole property was in the occupation of tenants who were well protected under rent control laws. There was, thereforee, no question of property reverting back to the owner. Shri Chopra in this connection referred to decision in the case of CIT vs . New India Construction Co. : [1980]123ITR68(Delhi) . Shri Chopra emphasised that no provision on rule is available to justify separate addition of reversionary value of land in the value determined through the rent capitalisation method. He argued that even under r. 1BB of WT Rules or Sch. III which represent legislative acceptance of rent capitalisation method, no provision is made to separately add reversionary value of land. Shri Chopra accordingly opposed addition of reversionary value.
11. We have given careful and anxious thought to the rival submissions of the parties. In the case of R. S. Tandon (supra) the jurisdictional High Court has considered the question of addition of reversionary value of land in the value of property determined through the rent capitalisation method. The Revenue in the case before the Hon able High Court justified addition of reversionary value with similar plea that the land would revert back to the land owner. The Hon able High Court repelled this contention and held that reversionary value of land was not a factor to be considered while determining the fair market value of property. The Court held that it is impossible to pull down a building which is partly occupied by tenants. The applicability of rent control legislation makes it difficult, virtually impossible to get rid of tenants. The Court approvingly referred to decision of Calcutta High Court in the case of CIT vs . Ashima Sinha : [1979]116ITR26(Cal) wherein it is observed that when a property is valued on the rental basis, the resulting value is value of land and building taken together. The value of land cannot be added again by adding the 'reversionary' value of the land because the building is very old. Reference is then made to another decision of Calcutta High Court in the case of CIT vs . Anup Kumar Kapur : [1980]125ITR684(Cal) . The Hon able High Court further referred to the decision of Hon able Allahabad High Court in the case of CWT vs. Ram Saran Kajiwal (1968) 68 ITR 485 and concluded as under :
'We are fully in agreement with the view expressed in the aforesaid judgments. As noticed earlier, the property in question has tenants. It is subject to rent control legislation. thereforee, it is incorrect to add the reversionary value of the land while valuing the said property. The reversionary value is an imaginary value which is related to the potential of the land if it is an open and vacant piece of land. When there is a property standing on the piece of land which has tenants occupying it and which is subject to rent control legislation, there is no scope for including an imaginary reversionary value.'
The aforesaid decision, in our view, is complete answer to the arguments raised on behalf of the Revenue. The property Jaipuria Spinning and Weaving Mill is fully tenanted and let out for commercial purposes is not disputed. There is further no material to show that any portion of the property had fallen down and its economic life is/was over. On the contrary, the valuer has estimated the further life of the buildings at 25 years. The reversionary value of land is added on the assumption that economic life of the superstructure has come to an end or is likely to come to an end in near further which is not true in this case on the admitted facts. Thus, there is no justification for aforesaid presumption when property continues to remain in the occupation of the tenants protected under Rent Control Act and there is no reference to any order or instance of reverting back of land to owner in the valuation report or other material. We fully agree with Shri Chopra and hold that addition on account of reversionary value of land is not justified. Subject to the above observation, the value of different properties in all the years in appeals be taken as directed by the Bench of the Tribunal in their order dt. 24th Aug., 1982.
12. In the result, the appeals are allowed in terms state above.