Law:

Section:

Section 7 of the Wealth-Tax Act, 1957 - Valuation of assets - Assessment years 1976-77 and 1977-78 - Whether where property in question has tenant and is subject to rent control legislation, it is incorrect to add reversionary value of land while valuing property - Held, yes FACTS The assessee purchased a house property. Before the purchase, the assessee was occupying a part of the said property as a tenant and there were six other tenants in the property. For the assessment years 1976-77 and 1977-78, the assessee disclosed the net value of the entire property but the WTO, on the basis of the Departmental Valuation Officer's report, valued the property at a higher figure which included a sum on account of reversionary value of the land. On appeal the Commissioner (Appeals) directed deletion of the amount added on account of reversionary value of the land. On further appeals, the Tribunal upheld the order of the Commissioner (Appeals) deleting the amounts added on account of reversionary value of the land. On reference : HELD The existence of tenants in a property and other restrictions or limitations imposed by the local authorities regarding the nature of construction that can be raised in the event of existing property being pulled down, are all relevant factors to be taken into consideration for the purposes of valuation of a property. In such circumstances it is not possible to add reversionary value of the land as a factor in determining the fair market value of the property. 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 the tenants in commercial premises. In the instant case the property in question had tenants and was subject to rent control legislation. Therefore, it was incorrect to add reversionary value of land while valuing the said property. The reversionary value is an imaginary value which is related to the potential of the land as 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…

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