Law:

Section:

Section 8 of the Gift-tax Act, 1958 - Valuation of gifts - Assessee gifted certain property under occupation of tenants - Tribunal, while determining value of gift, made no allowance for fact of tenancy - Whether, in circumstances of case, 15 per cent redaction because of property being tenanted, should be made in value returned by the Tribunal - Held, yes Facts The assessed gifted a certain property which was occupied by tenants. For the purposes of assessment, the assessee valued the gifted property at Rs. 75,000. The GTO felt that the value returned was very low and, therefore, after considering the prevailing market rate in the area in which the aforesaid property was situated, the age of the building, the type of construction and the amenities provided, he fixed the value of property gifted at Rs. 1,50,000. On appeal, the Tribunal held that land and building method adopted by the GTO was proper. However, the Tribunal, by allowing depreciation on the building and adopting certain rate of land given by the assessee's valuer, reduced the value of the property to Rs. 99,000 from that fixed by the GTO. The Tribunal did not accept the assessee's contention that the only method by which the aforesaid property could be valued was by capitalising on the rent. On reference: Held By adopting the land and building method the Tribunal had overlooked a relevant and important matter to be taken into account before fixing the value of the property. It was not disputed that a tenant occupied the building. Whether there was a tenant of the building only or of the building and the land together, the fact that there was an occupation of the building was sufficient to detract any purchaser from paying the full value thereof if it was sold in the open market. It is common knowledge that it is very difficult to dislodge a tenant and take vacant possession of the property. Undoubtedly, the property occupied by a tenant would not fetch same value as a vacant property which was similar in every other aspect. Any purchaser of a tenanted property would insist on a discount for the expenditure which he might be obliged to incur either by way of payment of compensation to the tenant…

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