1. The assessee is the owner of premises bearing door No. 13, Rundalls Road, Vepery, Madras, The building in that premises covers a plinth area of 53 x 90 sq. feet and it stands on a site of the total extent of 18 grounds. The premises was purchased by the assessee in court auction in the year 1952 for a sum of Rs. 75,500. According to the assessee the entire property is let out to the Government of Madras on a rent of Rs. 600 per month for locating their sales tax offices. In the wealth-tax return for 1962-63 the assessee valued the property at Rs. 93,560 on the basis of 20 times the annual rental value of the premises. The Wealth-tax Officer was of the view that the capital value returned by the assessee represented only the value of the building and five grounds of land which was necessary for the convenient occupation and enjoyment of the building and that the balance of 13 grounds of land should be treated as surplus vacant site and that the appreciated market value of the said excess extent should be added to the capital value returned by the assessee. The Wealth-tax Officer, valued the alleged excess land of 13 grounds at Rs. 52,000 at the rate of Rs. 4,000 per ground, and determined the total value of the premises at Rs. 1,45,360.

2. The assessee took the matter In appeal to the Appellate Assistant Commissioner and contended that the value returned by him represented the rental value of the entire property including the vacant site and that there was no justification for separately valuing the vacant site alleged to be in excess of the land required for the convenient occupation and enjoyment of the building and adding the value of such vacant site to the value returned by him. The Appellate Assistant Commissioner accepted the said contention of the assessee and held as follows:

"In a property let out along with the vacant land which is appurtenant to the property, it must be assumed that the rent includes ground rent also unless it is shown that the rent is confined to the use of the building alone. There is no such evidence in this case and consistent with the principles of valuation generally followed in this case, I think the addition is uncalled for."

3. He, therefore, reduced the value of the premises as determined by the Wealth-tax Officer by Rs. 52,000.

4. The revenue thereafter filed an appeal to the Appellate Tribunal and contended that the annual rental value of the property is not the sole criterion for determining the value of a property, that the real criterion is the fair market value of the property as on the valuation date, that the Wealth-tax Officer was not, therefore, bound to determine the value of the property only on the basis of the rental value, that it is legitimate to adopt the denial value so far as the building and a portion of the site is concerned, and to estimate the market value as regards the remaining portion of the site, and that the valuation of the building and its surrounding area of five grounds at Rs. 93,560 on the basis of the rental value and of the excess vacant site at Rs. 4,000 per ground on the basis of market value was quite reasonable. The assessee, however, contended before the Tribunal that the value as returned by him represented the value of the entire property including the vacant site, and that there was no justification for valuing a portion of the site separately and adding it to the value returned by him. The Tribunal felt that it was legitimate for the revenue to adopt the rental value so far as the building and a portion of the site is concerned, and to estimate the fair market value for the remaining portion of the site, and observed :

"It is no doubt permissible to estimate the value on the basis of 20 times the annual rental value of the property. But that does not mean that where such a method is adopted, it is no longer open to the Wealth-tax Officer to take into consideration the fair market value of the property also. That both methods can be adopted for the valuation of a single property can be inferred from the commentary on Section 7 by Sampath Iyenger at page 141 of his book, The Three New Taxes. Further, such recourse appears to be quite reasonable if one comes to the conclusion that the rental value on the basis of which the assessee had valued the property represents the rental value only of the building and it does not represent the rental value of the entire vacant site on a portion of which the building stands. Although it is the assessee's case that he has let out not only the building but also the entire site to the Government on a monthly rental of Rs. 600 he has, however, not produced any evidence to prove that it was not only the building that was let out to the Government, but also the entire vacant site. The fact that the assesses himself does not derive any benefit from the vacant site is not a relevant consideration. Since the Government has taken the building for housing one of its offices, namely, the sales tax office, it would be reasonable to conclude, in the absence of evidence to the contrary, that it was only the building that the Government had taken on lease. The annual rental value calculated on the basis of the monthly rent of Rs. 600 paid by the Government cannot obviously represent the annual rental value of the entire property including the vacant site."

5. From the extracts given above, it is clear that the Tribunal has proceeded on the basis that the lease by the assessee in favour of the Government was only in relation to the building, and that the entire premises was not the subject-matter of the lease.

6. Aggrieved against the order of the Tribunal, the assessee has sought a reference under Section 27(1) of the Wealth-tax Act and the question referred to this court for decision is as follows :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in determining the value of the property in question at Rs. 1,45,560 on the basis of the rental value for a portion of the property and of the market, value for the remaining portion of the property ?"

7. The assessee's case is that the entire property including the house and the entire vacant site had been let out on a monthly rent of Rs. 600, that he does not and could not derive any other income or benefit from the vacant site surrounding the building, that the building itself is very old, that the value of Rs. 93,560 returned by him does not represent the value of the building alone but represents the value of the building and the vacant site surrounding it, and that the department having accepted the basis of the valuation adopted by him for the building and the vacant site in ail the preceding years cannot adopt a different basis of valuation. The assessee contends that the Tribunal is in error in assuming that the lease was only in relation to the building and that the capitalised value on the basis of the rent received from the Government did not represent the value of the entire property. The assessee also refers to his objections filed before the Tribunal at the stage of the reference application, wherein he has complained that the correspondence between him and the Government and the counterfoils of the receipts issued by him to the Government for the rents paid produced by him to prove that the lease was of the entire property have not been referred to by the Tribunal in its order and that the statement of the Tribunal in its order that no evidence has been produced on the question as to whether the lease was of the entire property was not correct. Whether the assessee's grievance that the documents produced by him were not considered by the Tribunal while rendering its judgment is justified or not, is not necessary to be considered in view of the order we propose to make in this case.

8. In this case the Wealth-tax Officer did not go into the question as to whether the lease in favour of the Government of Madras was in relation to the entirety of the premises. He proceeded to consider, without reference to the subject-matter of the lease, the question as to whether the entire extent of 18 grounds is necessary for the convenient enjoyment of the building and held that the land on which the building stands and the land immediately appurtenant to the building of an extent of five grounds is sufficient for the convenient occupation of the building and that the remaining thirteen grounds of vacant site should be treated as a separate unit and assessed on the basis of its market value. According to the Wealth-tax Officer the capitalised value being 20 times of the annual rental value should be taken to relate only to the building and the five grounds of land appurtenant thereto, and the remaining vacant site of thirteen grounds should be separately valued on the basis of its market value. The Appellate Assistant Commissioner, however, proceeded to assume that the rent received by the assessee was in respect of the entire premises as the revenue has not shown that the rent is confined to the use of the building alone. The Appellate Tribunal has in its turn assumed that, in the absence of evidence showing that the lease in favour of the Government was of the entire premises, it could be only in relation to the building and the appurtenant land of five grounds and not the entire premises. It is, therefore, seen that both the Appellate Assistant Commissioner and the Tribunal did not actually go into the relevant and basic question whether the lease in favour of the Government was in relation to the entirety of the premises. The assessee's specific case was that the entire premises including the vacant land of eighteen grounds has been leased out to the Government at Rs. 600 per month, that it is only on this basis he valued the premises in the preceding years also, and that such value has been accepted by the department. The Tribunal has not, in fact, considered that case and given a finding on that basic question but proceeded to decide the question of valuation on the basis of assumption that the rents received by the assessee was in relation to the building alone. According to the assessee as the rents received by him was in relation to the entirety of the property it is not open to the revenue to treat the rents as having been paid only in respect of the building and five grounds of land for purpose of valuation, and if the revenue is of the view that the value of the premises calculated on the basis of 20 times of the annual rental value does not represent the fair market value of the entire property, it should have ascertained the market value of the land and the building separately, and added up the same without adopting the basis of capitalisation in respect of a portion of the premises and the basis of market value in respect of the other portion. Thus, the contention of the assessee is that the revenue can adopt either the basis of capital value or the market value taking the premises as a whole, and that it is not open to the revenue to cut up the property into two imaginary units for purpose of valuation under the Wealth-tax Act when the property is actually enjoyed by him only as one unit. In support of that contention, the learned counsel for the assessee, referred to Section 7 of the Wealth-tax Act and to certain rulings touching on the question of valuation.

9. In Kanagasabapathy Pillai v. Commissioner of Wealth-tax, [1964] 51 I.T.R. 146 (Mad.) this court considered the scope of Section 7(1) of the Wealth-tax Act and also the Circular No. 3 W.T. of 1957, dated September 28, 1957, of the Central Board of Revenue directing the Wealth-tax Officer to determine the actual value by multiplying the annual value by 20 times and expressed the view that the formula of multiplying the annual value by 20 times can be resorted to only if the market value is not easily ascertainable by other methods or where sufficient materials are not available to make a proper determination and that this mode of valuation should be the last resort and should not be the first to be adopted in preference to every other mode of valuation. It was also held in that case that as the Wealth-tax Act levies a tax only on the net wealth of an assessee, to be determined according to the provisions of the statute, the burden is on the taxing department to find out the true net value assessable and that even if the assessee has over-valued, the department must make an effort to determine the true market value. In Commissioner of Wealth-tax v. V.C. Ramachandran, [1966] 60 I.T.R. 103 (Mys.) the question of valuation of houses let out to tenants in the city of Bangalore where the Rent Control Act applied was considered, and it was expressed that the only appropriate method of valuation is to capitalise the annual rent by certain number of years' purchase and that the method of valuing the site and the building separately and adding up the values would be improper in such cases. Controller of Estate Duty v. Radha Devi Jalan, [1968] 67 I.T.R. 761 (Cal.) was also a case where the valuation of buildings which were in possession of tenants who were entitled to the benefits of the Rent Control Act was considered and the court had expressed the view that the method of valuing the building and the land separately and adding up the value would be improper because that would ignore the impact of the Rent Control Act on the value of the land and the building. In State of Kerala v. P.P. Hassan Koya, while determining the compensation payable in respect of land with -buildings, the Supreme Court expressed the view that when the property acquired is a land with building it is often difficult to secure reliable evidence of instances of sale of similar lands with buildings proximate in time to the date of acquisition and that, therefore, the method which is generally resorted to in such cases is the method of capitalisation of return actually received or which might reasonably be received from the land and the buildings.

10. In this case the assessee does not take up the stand that the capitalisation method alone should be adopted for valuing the premises. But, what he states is that, if the capitalisation method is found to be inappropriate for ascertaining the fair market value of the property having regard to the extensive vacant land surrounding the building, they could ignore the capitalisation method and proceed to ascertain the market value of the land and the building separately by adopting the conductors' method or otherwise, but that the revenue cannot cut up the property into two units, one the building with a reasonable portion of the vacant site and the other the remaining vacant land, and resort to a hybrid method of having two separate basis of valuation for a single property. The Tribunal has proceeded on the basis that it is permissible for the revenue to treat the property as two units, and that the lease in favour of the Government can only be in respect of the building, and not in respect of the building and entire vacant site. We are not in a position to say that the inference drawn by the Tribunal that as the lease is in favour of the Government it should be a lease of building alone is correct. As has been expressed in Kanagasabapathy Pillai v. Commissioner of Wealth-tax the burden is on the revenue to find out the true net value assessable and the revenue has to make an effort to determine the true market value irrespective of the stand taken by the assessee. In this case, the assessee has contended that the lease is of the entire premises. The Wealth-tax Officer did not advert to that question but proceeded on the basis that five grounds of land is sufficient for the proper and reasonable enjoyment of the building and the rest should be treated as a separate unit for the purpose of valuation. The appellate authority, however, said that in the absence of any evidence that the lease was restricted to the building, it must be taken that the lease was in respect of the entire premises. The Tribunal, however, inferred that the lease should be only of the building from the mere fact that the lease was in favour of the Government, If the assumption of the Tribunal that the lease was in relation to the building alone and that the rent received by the assessee was only in relation to the building is correct, its ultimate decision that the value of the premises can be ascertained by adding the capitalised value of the building to the market value of the land could be accepted. The decisions referred to above merely laid down that in respect of a property with land and buildings, the land and the building cannot be separately valued and that if it is possible its capitalised value should be adopted based on the annual income yielded. But, if the property has been treated and enjoyed as two units as has been assumed by the Tribunal, it is possible for the revenue to adopt different methods of valuation in respect of those units. Therefore, the basic fact to be found by the Tribunal is whether the lease was in respect of the whole premises or only in respect of the building with the appurtenant area of five grounds. As the Tribunal's finding that the lease was in respect of the building alone is based merely on the fact that the lease was in favour of the Government, we are not able to accept the inference drawn by the Tribunal as correct. We, therefore, feel, that the Tribunal has to consider the matter afresh, after giving a specific finding on the question whether the lease was in respect of the entire property or not. If the lease was in relation to a portion of the property, then the revenue may be justified in valuing the portion leased out on the basis of the capitalisation method and the other portion not covered by the lease on the basis of the market value. But, if the lease is found to be of the entire property, then the revenue has to either adopt the capitalised value for the entire property or adopt the market value if the capitalisation method is found to be inappropriate having regard to the large extent of vacant site surrounding the building.

11. The question, therefore, is answered technically in favour of the assessee and against the revenue. The result is, the Tribunal will have to consider the matter afresh in the light of what has been observed above after giving an opportunity to either of the parties to adduce further evidence in the matter. No costs.