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Commissioner Of Income-Tax, West Bengal-Iii, Calcutta v. Panchanan Das

Calcutta High Court
Jan 31, 1978
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Summary of the Opinion (Sen, J.; C.K. Banerjee, J. concurred)

Factual and Procedural Background

This appeal arises from acquisition proceedings under Chapter XX-A of the Income-tax Act, 1961 concerning the transfer of premises No. 55, Malanga Lane, Calcutta, by Anil Charan Law to Panchanan Das (the respondent). The transfer was effected by a registered deed dated 30 May 1973 for a consideration of Rs. 41,000.

The property comprised 6 cottahs 8 chataks of land with a partly two-storeyed and partly three-storeyed building (ground floor covered area 3,700 sq. ft.; first floor 3,177 sq. ft.; second floor 150 sq. ft.). The competent authority under s. 269B, upon receiving information of the transfer, had the property valued; an official valuer reported a fair market value of Rs. 70,400 (report dated 17 November 1973 (sic)).

The competent authority recorded reasons under s. 269C (13 November 1973), issued a notice under s. 269D(1), heard objections from the transferor and transferee, rejected those objections, and with the previous approval of the CIT directed acquisition under Chapter XX-A. The transferee appealed to the Tribunal which allowed the appeal, holding that the fair market value was not more than the consideration stated in the deed and that s. 269C did not apply. The revenue appealed to this court under s. 269H of the Income-tax Act, 1961.

Legal Issues Presented

  1. Whether the appeal to the Tribunal was barred by limitation because the appellant (respondent below) preferred the appeal after first obtaining a certified copy of the competent authority's order — i.e., whether time taken to obtain a certified copy must be excluded when computing limitation under the relevant statutory provisions and rules.
  2. On the merits, whether the correct method to determine the fair market value of the property on the date of transfer was the rental (capitalisation) method or the land-and-building method (and whether the Tribunal erred in applying the rental method in the circumstances of this case).

Arguments of the Parties

Revenue's Arguments (Mr. B.L. Pal)

  • Preliminary limitation point: s. 269G prescribes time for appeal (45 days from date of order or 30 days from service of a copy, whichever expires later). A copy of the order signed and sealed by the competent authority was served on the respondent on the date of the order; therefore it was not necessary to obtain a certified copy and the appeal (preferred after obtaining such certified copy) was time-barred because no condonation application was made before the Tribunal.
  • The Tribunal was wrong to rely on and apply s. 76 of the Indian Evidence Act to define "certified copy" for the purposes of the Income-tax Act; the I.T. Act is a self-contained code and should be understood in its own context.
  • On valuation, the Tribunal erred in treating the rental method as appropriate and in not applying the land-and-building method. Once the Tribunal gave a "go by" to the rental method (since rental method produced a lower value of Rs. 28,500 vs. purchase price Rs. 41,000), it should have valued by other methods, especially the land-and-building method.
  • Reliance on Cooper (Rustom Cavasjee Cooper v. Union of India) — argued that the Tribunal should have ignored rent control legislations and not valued the property on the rental method in view of relevant Supreme Court authority.

Respondent's / Assessee's Arguments (Mr. K. Roy)

  • Procedural/formal requirement: r. 9 of the Income-tax (Appellate Tribunal) Rules, 1963 requires that every memorandum of appeal be accompanied by two copies (at least one a certified copy) of the order appealed against. s. 269G(2) and Rule 48F (Form No. 37F) of the Income-tax Rules, 1962 prescribe that the memorandum must be accompanied by a certified copy; therefore it was necessary to obtain a certified copy and the time taken to obtain it should be excluded in computing limitation.
  • On valuation, the Tribunal correctly applied the rental method. The Tribunal's factual findings included: (a) the land was almost entirely built up (little scope for further development); (b) the property was let to a tenant (Ram Hari Shamal) at Rs. 220/month who sublet to several sub-tenants receiving about Rs. 700/month; (c) the building was about 100 years old and dilapidated; and (d) in wealth-tax assessment the official valuer had assessed value at Rs. 28,500 as on 31 March 1972. Given these facts and statutory/tenancy controls, the rental method (as applied in CED v. Radha Devi Jalan) was the proper method.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Suraj Narain v. Seth Jhabbu Lal, [1945] 13 ITR 13 (Allahabad HC) Whether assessment orders/copies constituted "certified copies"; consideration of s. 76 and s. 65 of the Indian Evidence Act and whether departmental seals/endorsements suffice. The court held this decision did not support the revenue's position; on the facts here the initially served copy only bore signature and seal but lacked endorsement that it was a true copy or compared with original, so it was not a "certified copy" for purposes of the rules.
Rustom Cavasjee Cooper v. Union of India, [1970] 40 Comp Cas 325 (SC) Consideration of valuation methods and treatment of "controlled return" and whether statutory controls on rents should be ignored in valuation. The court distinguished Cooper on its facts and explained Cooper must be understood in context; it rejected the revenue's submission that Cooper required ignoring statutory controls in all cases and affirmed that the effect of statutory rent control depends on the factual context.
CED v. Radha Devi Jalan, [1968] 67 ITR 761 (Cal) Principle that where a property is burdened with tenants and income is controlled by statute, the rental (capitalisation) method is the proper method of valuation. The court relied on this authority to support application of the rental method here given the tenancy and control over income.
Commissioner of Income-Tax, West Bengal v. Smt. Ashima Sinha, [1979] 116 ITR 26 (Cal) Consideration of Cooper in the context of valuation cases before this Court. The court noted that in that earlier appeal this Court had considered Cooper and held Cooper's scope must be read in context; this supported the present court's approach to Cooper.
Smt. Tribeni Devi v. Collector, Ranchi, (1972) 1 SCC 480 : AIR 1972 SC 1417 General principles for determining compensation including methods such as comparison with sale deeds, capitalisation of rent, and other approaches; cited authorities including Special Land Acquisition Officer v. T. Adinarayna Setty. The court quoted this passage to explain recognized valuation methods and to emphasise that multiple methods may be used depending on facts; used to explain that there is no single infallible valuation method.
Special Land Acquisition Officer v. T. Adinarayna Setty, [1959] Suppl 1 SCR 404 : AIR 1959 SC 429 Methods of valuation in land acquisition matters (opinion of experts; price paid in bona fide transactions; number of years' purchase of profits) — cited by Tribeni Devi. Cited as part of the matrix of accepted valuation methods that a court/authority may adopt; used to support the proposition that valuation method depends on facts and no single method is conclusive in every case.

Court's Reasoning and Analysis

The court proceeded in two stages: first addressing the procedural limitation issue, then the substantive valuation issue.

On limitation and the meaning of "certified copy":

  • The court examined the statutory provisions and rules: s. 269G (time for appeal), r. 9 of the Income-tax (Appellate Tribunal) Rules, 1963 (what must accompany a memorandum of appeal), and r. 48F (Form No. 37F) of the Income-tax Rules, 1962 which prescribes that the memorandum must be accompanied by a certified copy of the order appealed against.
  • The Tribunal had construed "certified copy" by reference to s. 76 of the Indian Evidence Act (which defines "certified copies" of public documents and the form of certificate required). The court accepted that construction: the Act and rules required a certified copy and the expression has an established meaning in Indian practice; relying on the dictionary meaning of "certify," the court held the term denotes an official declaration that the copy is a true copy.
  • The court rejected the revenue's contention that the I.T. Act is self-contained such that the statutory service of a copy signed and sealed by the competent authority would suffice as a "certified copy." The initially served copy lacked an endorsement that it was a true copy or had been compared with the original, and therefore was not a "certified copy" within the meaning of s. 76.
  • Consequently, the time taken by the respondent to obtain the certified copy had to be excluded in computing limitation. The respondent received the certified copy on 16 September 1975 and filed the appeal on 17 September 1975, within 30 days of receipt; therefore the appeal to the Tribunal was within time and not barred by limitation.

On merits — valuation method:

  • The court reviewed the factual findings recorded by the Tribunal: (a) the land was almost entirely built up (little scope for further development); (b) the property was subject to long-term tenancy and subletting (tenant in possession for about 30 years; tenant received Rs. 220/month but sub-tenants paid about Rs. 700/month); (c) the building was old (about 100 years) and dilapidated; (d) an earlier official wealth-tax valuation (31 March 1972) valued the property at Rs. 28,500.
  • The court considered competing valuation approaches and authorities, including Cooper and Tribeni Devi (which in turn cites Adinarayna Setty), and academic commentary (Parks). It emphasised that no single method is infallible; the correct method depends on facts and circumstances of each case.
  • The court found errors in alternative valuation approaches used by other valuers: (a) the attempt by a valuer to use land-and-building method while deducting estimated ejectment expenses lacked supporting authority; (b) the official valuer's approach of adding a capitalised rental component for ten years to a "deferred value" figure was described as incomprehensible and improper where one must assess present value; there was no basis for adding a rental-derived value to a deferred land-and-building value.
  • Given the tenant burden, statutory/regulatory controls affecting the income from the property, the dilapidated state and the practically built-up land, the court concluded the rental (capitalisation) method was the appropriate method to determine fair market value in this case. The fact that the respondent had paid a higher price (Rs. 41,000) than the rental-based valuation did not, by itself, require abandoning the rental method — evidence suggested the purchaser paid a premium based on optimistic prospects and assurances which did not change the valuation basis on the date of sale.

Holding and Implications

HOLDING: The court rejected the Revenue's appeal. It held (1) the copy of the competent authority's order initially served on the respondent was not a "certified copy" within the meaning adopted by the Tribunal (and consistent with s. 76, Indian Evidence Act), and therefore time taken to obtain the certified copy must be excluded in computing limitation; the appeal to the Tribunal was not barred by limitation; and (2) on the merits, the Tribunal was correct to apply the rental method to determine the fair market value; other methods applied by valuers were unsatisfactory in the circumstances.

Implications:

  • Direct effect: The Tribunal's order allowing the respondent's appeal (cancelling the competent authority's acquisition direction) stands; the revenue's appeal is dismissed and the respondent is entitled to costs.
  • Broader implications: The court emphasised that the choice of valuation method depends on facts and circumstances; where statutory controls and tenancy significantly affect income, the rental/capitalisation method may be the appropriate basis. The opinion does not indicate that it establishes any new binding principle beyond its application of established authorities to the facts before the court.

Agreement of another judge: C.K. Banerjee, J. concurred ("I agree").

Show all summary ...

Sen, J.:— This appeal arises out of acquisition proceedings taken under Chapter XX-A of the Income-tax Act, 1961, initiated in respect of transfer of premises No. 55, Malanga Lane, Calcutta, by one Anil Charan Law to Panchanan Das, the respondent in these proceedings. The transfer was effected by a registered deed dated 30th May, 1973, and the consideration therefor was Rs. 41,000.

2. It is not in dispute that the premises No. 55, Malanga Lane, Calcutta (hereinafter referred to as “the said property”) consisted of 6 cottahs 8 chataks of land with a partly two-storeyed and partly three-storeyed building thereon. The covered area on the ground floor of the building was 3,700 sq. ft., the area on the first floor was 3,177 sq. ft. and on the second floor 150 sq. ft. On receiving information of the aforesaid transfer the competent authority appointed under s. 269B of the I.T Act, 1961, felt that the apparent consideration for the said transfer was less than the fair market value of the said property. Thereupon the competent authority got the property valued by the official valuer who determined the fair market value of the said property as at the date of sale at Rs. 70,400. The official valuer submitted this valuation in his report dated 17th November, 1973 (sic).

3. On receipt of the said report, the competent authority recorded its reasons under s. 269C of the said Act on the 13th November, 1973, and initiated proceedings under s. 269C for acquisition of the said property.

4. Thereafter a notice under s. 269D(1) of the I.T Act, 1961, also dated the 13th November, 1973, was issued to the transferor, the transferee and the persons in occupation of the property so that objections, if any, could be made against the said acquisition. Both the transferor and the transferee submitted their objections and appeared in the proceedings.

5. After the hearing of the objections, the competent authority was satisfied that the immovable property, the subject-matter of these proceedings, was of a market value exceeding Rs. 25,000 and that such fair market value exceeded the apparent consideration therefor by more than 15% and the consideration for such transfer as agreed to between the parties had not been truly stated in the instrument of transfer within the meaning of s. 269D. The objections submitted, accordingly, were rejected and with the previous approval of the CIT the competent authority directed that the property be acquired under the provisions of Chap. XX-A of the said Act.

6. From this order of the competent authority an appeal was preferred by the transferee. The Tribunal accepted the contentions of the respond-dent and held that the fair market value of the property on the date of the transfer was not more than the consideration disclosed in the sale deed. The Tribunal concluded that the conditions necessary for acquisition of the said property were not satisfied, and, therefore, the provisions of s. 269C of the said Act were not applicable. The order of the competent authority directing the acquisition of the property was cancelled and the appeal of the respondent was allowed.

7. From this order of the Tribunal, the present appeal has been preferred to this court under s. 269H of the I.T Act, 1961.

8. Mr. B.L Pal, learned counsel for the revenue, has reiterated the two main points which were urged before the Tribunal. The first is a preliminary point of limitation. It is a matter of record that the competent authority passed its order on the 24th July, 1974. On the same day, a copy of the order signed by the competent authority and bearing his seal was served on the respondent. The respondent applied for a certified copy of the very same order from the competent authority and after obtaining the same preferred the appeal to the Tribunal annexing the certified copy of the order appealed from. This appeal was preferred on the 17th September, 1975. It is not in controversy that if the time taken for obtaining the certified copy is excluded then the appeal is within time, otherwise the appeal would be barred.

9. The argument advanced on behalf of the revenue has been that s. 269G which provides for appeal against the order for acquisition of the competent authority is clear and the time provided for preferring an appeal under the said section is 45 days from the date of such order or a period of 30 days from the date of the service of a copy of the order on the person concerned whichever period expires later. It is submitted that this section does not direct that an appeal should be preferred after obtaining a certified copy. In particular, it is submitted, that in the present case, a copy of the order signed by the competent authority himself bearing his seal was duly served and, therefore, it was not necessary for the respondent to proceed to obtain a certified copy of the same order for the purpose of preferring an appeal. It is contended that the respondent did not apply for condonation of the delay before the Tribunal and as such the appeal is clearly barred by time.

10. On the other hand, it was contended on behalf of the respondent that under r. 9 of the Income-tax (Appellate Tribunal) Rules, 1963, it was necessary to annex a certified copy of the order appealed from to every memorandum of appeal. The said r. 9 reads as follows:

“9. What to accompany memorandum of appeal.—(1) Every memorandum of appeal shall be in triplicate and shall be accompanied by two copies (at least one of which shall be a certified copy) of the order appealed against and two copies of the order of the Income-tax Officer.

(2) The Tribunal may in its discretion accept a memorandum of appeal which is not accompanied by all or any of the documents referred to in sub-rule (1).”

11. It was further contended that s. 269G(2) provided that every appeal under this section to the Tribunal must be in a prescribed form and this form was prescribed as Form No. 37F under r. 48F of the I.T Rules, 1962. In this form, it was prescribed that the memorandum of appeal must be accompanied by a certified copy of the order appealed against. The relevant statutory provisions may be noted as hereunder:

“269G(2). Every appeal under this section shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by a fee of one hundred and twenty-five rupees.”

“Income-tax Rules, 1962—Rule 48F:

Form of appeal to the Appellate Tribunal.— An appeal under section 269G to the Appellate Tribunal shall be in Form No. 37F and the form of appeal, the grounds of appeal and the form of verification appended thereto shall be signed by the person specified in sub-rule (2) of rule 45.”

“Note 1 under Form No. 37F:

The memorandum of appeal must be in triplicate and should be accompanied by two copies (at least one of which should be a certified copy) of the order appealed against.”

The Tribunal noted that the words “certified copy” remained undefined in the I.T Act or the Rules framed thereunder. The Tribunal also noted that s. 269F provided for service of a copy of an order on the person who has raised an objection against acquisition and s. 269F provided for the period within which an appeal should be filed. In view of the fact that sub-s. (2) of s. 269G required an appellant to file an appeal in a prescribed form the Tribunal construed that the provision of sub-ss. (1) and (2) must be read harmoniously and in the absence of any definition in the Act or the Rules thereunder certified copy must be understood as defined in s. 76 of the Indian Evidence Act. The said section reads as follows:

“76. Every public officer having the custody of a public document, which any person has a right to inspect, shall give that person on demand a copy of it on payment of the legal fees therefor, together with a certificate written at the foot of such copy that it is a true copy of such document or part thereof, as the case may be, and such certificate shall be dated and subscribed by such officer with his name and his official title, and shall be sealed, whenever such officer is authorised by law to make use of a seal, and such copies so certified shall be called certified copies.

Explanation.— Any officer who, by the ordinary course of official duty, is authorised to deliver such copies, shall be deemed to have the custody of such documents within the meaning of this section.”

12. The Tribunal held that the copy served on the respondent in the instant case could not be stated to be a certified copy within the meaning of s. 76. The respondent received the certified copy on the 16th September, 1975, and filed the appeal next day, that is on the 17th September, 1975, within a period of 30 days from the receipt of the certified copy. Reading the provisions of sub-ss. (1) and (2) the Tribunal held that the appeal had been preferred within time.

13. Mr. B.L Pal has contended before us that the approach of the Tribunal in relying on and applying s. 76 of the Indian Evidence Act was erroneous. He submitted that the I.T Act, 1961, was a self-contained Act and had to be understood in its own context. We are unable to accept this contention of Mr. Pal. It is quite clear that as prescribed by the Act and the Rules framed thereunder it was necessary for the respondent to submit his memorandum of appeal with certified copy of the order appealed from and, therefore, the respondent had to obtain a certified copy. The expression “certified copy” has come to acquire a definite meaning in our country. The practice of asking for and obtaining certified copies of orders is not unknown in the income-tax department itself. Therefore, it is too late in the day for Mr. Pal to argue that a certified copy within the meaning of the I.T Act, 1961, is not the same as the meaning given to a certified copy by the Indian Evidence Act. The dictionary meanings of the word “certify” are: (a) “attested formally”, (b) “declare by certificate”, (c) “officially declare” and connotes a declaration by somebody and, therefore, the words “certified copy” mean a copy which should contain some sort of declaration.

14. Mr. Pal next contended that the copy of the order which was furnished to the respondent on the same day, that is the date of the order, bore the signature of the officer passing the order and his seal and, therefore, that copy could be treated as a certified copy. He submitted that the respondent would have complied substantially with the form if he had preferred his appeal with this copy. In support of his contention Mr. Pal cited a decision of the Allahabad High Court in the case of Suraj Narain v. Seth Jhabbu Lal, [1945] 13 ITR 13. In this Division Bench of the Allahabad High Court held, inter alia, that an income-tax assessment order was a public document within the meaning of s. 74 of the Indian Evidence Act and a certified copy of such an order would be admissible under s. 65 of the same Act. The High Court also considered whether copies filed in those proceedings were certified copies or not. In determining that question the Allahabad High Court considered s. 76 of the Indian Evidence Act and held that under that section no particular form of certificate had been prescribed. It further held that all that was required under s. 65 of the Indian Evidence Act was that a certified copy must be a true copy of the original and there must be something to denote that it was so. The High Court took note of the fact that in different departments a different set of rules are provided for the purpose of recording whether a copy was a true copy or not. The High Court held in the facts of the case before it that as the assessment orders bore the seal of the income-tax department and also bore an endorsement that they had been duly copied and compared they would be held to be certified copies.

15. In our opinion, this decision does not support the case of the revenue, on the contrary supports the case of the respondent. In the instant case, the copy which was made over to the respondent only bore the signature and the seal of the officer concerned and it did not denote any endorsement as to its correctness. There was no endorsement that it was a true copy or that it had been compared with the original.

16. For the reasons above, we hold that the copy which was furnished to the respondent initially by the officer concerned was not a certified copy. We further hold that it was necessary for the respondent to obtain a certified copy in order to prefer an appeal in the prescribed form. Therefore, the time required for the respondent to obtain the certified copy must be excluded in computing the period of limitation. Consequently, we hold that the appeal preferred by the respondent to the Tribunal was not barred by limitation.

17. On the merits, Mr. B.L Pal submitted that the Tribunal had erred in holding that the appropriate method for determination of the fair market value of the property concerned would be the rental method and that the Tribunal further erred in holding that there was no justification to determine the fair market value of the suit property on the other method, i.e, the land and building method. Mr. Pal contended that the Tribunal itself had given a go by to the rental method. On the rental method, the value of the property came only to Rs. 28,500 whereas the respondent had paid a sum of Rs. 41,000. The Tribunal noted this and held that because the property was capable of further development, therefore, the respondent had paid the extra amount. Mr. Pal contended that once having given a go by to the rental method the Tribunal should have abandoned it altogether and valued the property by other methods in particular the land and building method. Mr. Pal finally submitted that, in the facts of the present case, the decision of the Supreme Court in the case of Rustom Cavasjee Cooper v. Union Of India, [1970] 40 Comp Cas 325 (SC) applied and following the said decision the Tribunal should have ignored the rent control legislations and should not have, valued the property on the rental method.

18. Mr. K. Roy, learned counsel for the assessee, contended on the other hand, that in the facts of this case, no method of valuation other than the rental method could be applied. He drew our attention to the following facts which have been found by the Tribunal:

(a) The total land area of the said property is 6 cottahs 8 chataks and the covered area, i.e, the built up area and the ground floor area is about 3,700 sq. ft., i.e, a little over 5 cottahs. Therefore, the entire available land had been built up and there was little scope for further building or development of the property.

(b) At the time of the sale, the property had been let out to a tenant, namely, Ram Hari Shamal, at a monthly rent of Rs. 220 who in turn had sublet the said property to a number of sub-tenants. The said Shamal was a tenant for about 30 years. The sub-tenants were paying about Rs. 700 per month to the tenant, i.e, to Ram Hari Shamal.

(c) The building was about 100 years old and dilapidated.

(d) In the wealth-tax assessment the said property had been valued by the official valuer at Rs. 28,500 on the 31st March, 1972.

19. Mr. Roy contended that the fact that there was a decree passed by the City Civil Court, Calcutta, on August 9, 1974, that is more than one year after the purchase, whereby the tenant was ejected was of no consequence. Similarly, the fact that when the respondent purchased the property he was assured by the people of the locality and the broker that the tenant would be ejected was also of no relevance because the property had to be valued on the date of the purchase when the tenant and the sub-tenant were very much in possession of the said property.

20. There can be no comparison of the transaction in the present case with the transaction in respect of another property at 4, Akrur Dutta Lane, as was relied upon by the official valuer. In that case, the fair market value of the property was found to be over Rs. 62,000. But no particulars are available of the said property, except that the value of the land was assessed at Rs. 20,000 per cottah and the life of the building was taken as 15 years. It is not known what the total area of land in the property was, nor is it known what the size of the building was and how much rent was being realised, also whether the said building Was fully tenanted or not.

21. Mr. Roy contended on the facts as aforesaid that the proper method of valuation to be applied was the rental method as has been laid down by this court in the case of CED v. Radha Devi Jalan, [1968] 67 ITR 761 (Cal). It has been clearly laid down in that case that if a property is burdened with tenants and the income from the property is controlled by the statute, such control was bound to react on the value of the property and the application of land and building method would not be a proper method to apply.

22. We have already had occasion to consider the case of Cooper, [1970] 40 Comp Cas 325 (SC) in another appeal, i.e, Income-tax Appeal No. 5 of 1976 in the case of Commissioner Of Income-Tax, West Bengal v. Smt. Ashima Sinha reported in [1979] 116 ITR 26 (Cal)]. We held that Cooper's case had to be understood in the context of the facts before the Supreme Court. In that case, the Supreme Court was considering the compensation payable under a particular statute and which statute laid down the basis for arriving at the figure of such compensation. The Supreme Court considered the statutes and the legislation restricting rents and giving statutory protection to tenants. When the Supreme Court spoke of “a controlled return” or “return depreciated on account of special circumstances” the Supreme Court did not have in mind the statutory controls, but the controls voluntarily imposed by the parties concerned. Normally commercial income of the property must be understood in that sense if the prevalent statutes control the return from the property, then normal commercial return must be held within the framework or within the control of such statute and not return unfettered by such statutes.

23. Apart from Cooper's case, [1970] 40 Comp Cas 325 (SC), Mr. Pal has relied on the decision of the Supreme Court, which we proceed to consider now. This is the case of Smt. Tribeni Devi v. Collector, Ranchi, (1972) 1 SCC 480 : AIR 1972 SC 1417. Mr. Pal cited this decision for the following observation (page 1419):

“The general principles for determining compensation have been set out in ss. 23 and 24 of the Act. The compensation payable to the owner of the land is the market value which is determined by reference to the price which a seller might reasonably expect to obtain from a willing purchaser, but as this may not be possible to ascertain with any amount of precision, the authority charged with the duty to award compensation is bound to make an estimate judged by an objective standard. The land acquired has, therefore, to be valued not only with reference to its condition at the time of the declaration under section 4 of the Act but its potential value also must be taken into account. The sale deeds of the lands situated in the vicinity and the comparable benefits and advantages which they have, furnish a rough and ready method of computing the market value. This, however, is not the only method. The rent which an owner was actually receiving at the relevant point of time or the rent which the neighbouring lands of similar nature are fetching can be taken into account by capitalising the rent which according to the present prevailing rate of interest is 20 times the annual rent. But this also is not a conclusive method. This court had in Special Land Acquisition Officer v. T. Adinarayna Setty, [1959] Suppl 1 SCR 404 : AIR 1959 SC 429 indicated at page 412 the methods of valuation to be adopted in ascertaining the market value of the land on the date of the notification under s. 4(1) which are: (i) opinion of experts, (ii) the price paid within a reasonable time in bona fide transactions of purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages; and (iii) a number of years' purchase of the actual or immediately prospective profits of the lands acquired. These methods, however, do not preclude the court from taking any other special circumstances into consideration, the requirement being always to arrive as near as possible at an estimate of the market value. In arriving at a reasonable correct market value, it may be necessary to take even two or all of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in respect of the situation or the extent or the potentiality nor is it possible in all cases to have reliable material from which that valuation can be accurately determined.”

24. Mr. Pal also cited the following passage from Parks' Principles and Practice of Valuation, 4th edn., at p. 93:

“The principles laid down in the above case are very important and must be borne in mind in valuing lands with buildings particularly business premises. It is, however, submitted that the Supreme Court in the above decision has not-laid down any hard and fast principle that all lands with buildings must be valued as one unit by capitalizing the rent actually received or which might be reasonably received from the lands and the buildings. The other method of valuation of lands with buildings is to find out the value of the land and then add to it the value of the building which is commonly known as the land and building method, has not been completely ruled out and can be adopted in a proper case.”

25. We had also occasion to consider the observation of Parks, at page 37, as follows:

“When land is fully developed by buildings erected thereon; when the property is let at a rent from which the fair rent can be ascertained; and when the rent has been proved and is likely to be maintained for years to come, then the rental method of valuation should be applied to determine the market value of the premises.”

26. In the facts and circumstances of the instant case, it appears to us that the rental method is correct to apply. All the other methods applied by the other valuers appear to be misconceived. An attempt has been made by M/s. B.K Chandra to find out the value of the property by land and building method and deducting the estimated expenses for ejectment of tenants and occupiers. We do not find any authority which approves of such method. The official valuer has added up 2 items, one capitalised value for 10 years on rental method—Rs. 11,948 and the other is deferred value of the land and old building at Rs. 66,320. This method is equally-incomprehensible to us. We are concerned with the present value of the property. This present value may be calculated on the basis of the property as it stands today or it can be calculated in appropriate circumstances to be the future value as estimated today. There is no question of adding up the valuation arrived at by rental method with any deferred value.

27. The fact that the respondent paid more than the amount which could be arrived at by valuing the rental method is a relevant consideration, but cannot determine the matter finally one way or the other. The observation of the Tribunal that the extra amount was paid by the respondent on the basis of prospects for further development is an observation which is based on little evidence. We have already noted, the available land was almost entirely built up and there was little scope for further development. It may be that the respondent was an optimistic purchaser and on the assurance of the broker that the tenants would be ejected had agreed to pay a price more than the amount calculated on the basis of the rental method. That does not mean that the property should not be valued on the basis of the rental method. But that fact cannot change the method of valuation of this particular property. In our opinion; the method to be followed is the rental method.

28. As the Supreme Court has observed, there is no infallible method. The method would depend on the facts and circumstances of each case and ultimately on the property itself and the surrounding circumstances, advantages and disadvantages which would govern the factor in the determination of the value. For the reasons given above, we do not find any merit in the contentions of the appellant. Accordingly we reject the appeal. The respondent will be entitled to costs.

C.K Banerjee, J.:— I agree.