Transfer of property to Relatives-Tips to Investors

Transfer of property to Relatives-Tips to Investors

Special care should be taken by a person while transferring property to his relatives from the point of Income Tax. These aspects are discussed in this tip. The sections referred to are of the Income Tax Act, 1961.

if a person transfers only income from a property and not the property itself, then he continues to be assessable to income tax for the income from such property, despite the transfer, whether revocable or irrevocable. This is as per Section 60. Hence any person interested in a bonafide transfer of property to a relative should transfer it so that, not only the income of the property but the property itself is transferred to the transferee.

It is provided by section 61, that if there is a revocable transfer of assets, then all income arising to any person would be chargeable to income tax as the income of the transferor and be liable to be included in his total income. However, even in respect of a revocable transfer of property, there is an exemption, viz. Where any income arises to the transferee by virtue of transferby way of a trust, which is not revocable durning the lifetime of thebeneficiary or in the case of any other type of transfer, such as by way ofgift, etc., Where it is not revocable buring the lifetime of the trensferee. However, one essential condition to be fulfilled in such a case (u/s 62), is that the transferor should not derive any direct or indirect benefit from such income in either case. It should be noted that, as and when the power to revoke the transfer arises, all income by virtue of such transfer would be chargeable as the income of the transferor and would be included in his income. Yhe expression “transfer” includes any settlement, trust, covenant, agreement or arrangement. The expression “relative” for the purpose of the Income Tax Act, Section 2(41), in relation to an individual, means the husband, wife, brother or sister or any lineal ascendantor descendant of that individual, like father, son, etc.

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Normally the income of any property irrevocably transferred by the transferor to the transferee, should be assessed in the hands of the transferee only. But there are certain exceptions provide in Section 64(1) for the clubbing of income, where the transfer is made to certain close relatives without any adequate consideration, For example, where the transfer is without any adequate consideration, made by way of gift, then the transferor should not make any transfer of a property to his spouse and daughter-in-law, either directly or indirectly. Thus, if a property is gifted to any of the aforesaid persons to any of the aforesaid persons by an individual, then the income from the property transferred, would continue to be includable in the total income of the transferor as per Section 64(1). It may be noted here, that a person can now make gifts of immovable property to one or more persons without any upper limit. But care must be taken to avoid the clubing provissions as mentioned earlier.However, there is a tax planning device by which the clubbing of the income of an asset transferred to a close relative can be avoid. Thus, a married lady should not receive any gift from her husband, father- in-law and mother-in-law. If, however, gifts are received by a lady just before marriage, as pre-nuptial gift of property, it willl not be liable to be included, as held in Philip Thomas vs CIT 49 ITR (SC) 97 by the Supreme Court, where such pre-nuptial gifts are made to an unmarried lady only.

Under the Hindu Law, a copartner can impress his self acquired property eith the character of a joint Hindu property by making a declaration to that effect. However, Section 64(2) provides, that from January 1, 1970, if any person transfers his self-acquired property to his Hindu Undivided Family (HUF), then the income from such transferred property would still be inclded in his own individed in his own individual assessment. Hence, this should be avoided. However, a transfer can still be made to a separate branch of the HUF, i.e. of the married son, grandson or brother, etc., without attracting Section 64(2). In this manner, a separate branch of the HUF of the married son or the married brother, etc. could be created by an individual through a special gift of property.

Sometimes, properties are transferred for the benefit of a future relative, like the would -be wife of a son or would-be husband of a daughter, etc. Such a trust, for the benefit of an unborn or future relative is valid under the Transfer of Property Act. It has also been held by Courts in India, that such trusts for unborn persons are also valid. However, it is provided under Section 164(1), that where such a transfer is made, the income from such a transfer generally made to close relatives, unborn, indeterminate or unknown at the time of transfer, are liable to tax at the maximum rate of tax. But an exception is provided under clause (1) of first proviso to Section 164(1) whereby, if such a trust is the only trust made for the benefit of the unknown person and the beneficiaries do not have any other taxable income, then the income of such a trust is assessable at the normal slab rates applicable to an Association of Persons, that is, like an individual. This is also confirmed by the CBDT circular No. 577, dated September 4, 1990.

A discretionary trust can be created through the provisions of a 'Will' in such a manner, that it is the only trust so declared by the Will, so that it becomes assessable as a separate taxable entity, liable to tax at the slab rates applicable to an AOP or an individual and not at the maximum rate of tax. Such a trust could provide for property to be given to the wife, children, grandchildren, future grandchildren, great grandchildren, etc., of the testator, i.e. the person making the Will.

While making a transfer of immovable property to relatives in general and other taxpayers in particular, a person would derive immense benefit by observing the aforesaid principles of Income Tax Law.

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Why building bye-law violations?

Why building bye-law violations?

Buildingbyelaws are introduced in urban local bodies to prevent indiscriminate buildingactivity affecting ventilation, aesthetics, traffic problems etc. Later, U.S.method of zoning regulations were also introduced in Indian cities for land use control, control of density of population, control of developments around national monuments etc. If building byelaws and zoning regulations are followed, our urban areas would provide better living environment.

Most of ourpeople do not like building byelaws as they feel that they are restrictions forexploitation of their property to the maximum extent. Commercial uses any where, with no parks and open spaces in their lands, narrow roads, and without amenities in their layouts etc., is what many of the land owners and investors like for developing their land. They want freedom for development like it used to be in olden days. With such attitudes they violate building byelaws and zoning regulations meant for good living environment.

TYPE OF DEVIATIONS:

a) High landvalues: Bangalore being a rapidly growing large city with about 60 lakhs populations at present; has very high land values. Majority of the land owners / builders therefore want to exploit their land for more usage and returns. Violators therefore build more area than permitted by the Mahanagar Palike.

b) Setbacks: Set backs are prescribed in the building byelaws to provide for ventilation in the building, privacy from the neighbouring buildings and road, and to be away from the road to avoid dust and traffic noise. Part of front set back will be useful to the B.M.P. for widening of road due to increase in traffic volume. Majority of the owners / builders therefore reduce the setbacks to build more area than permitted by B.M.P. as per byelaws.

c) FloorArea Ratio: In the Building Byelaws, Floor Area Ratio (EAR.) is prescribed separately for intensely developed area, moderately developed area, and sparsely developed area. Earlier, EAR used to be high in more intensely developed central areas in view of land values, and lower EA.R in the suburbs where land values are less. But the approach since the C.D.P. of Bangalore, 1984 is to fix less EA.R. in the central area to enable decongestion and higher EAR in the suburbs to encourage development where the traffic and other problems are less. But owners and builders ignore the FAR prescriptions andutilise more FAR in developed area to cash in on high land values.

d) Staircase: Owners of small sites build staircase outside the building, in the area meant for set back area; and utilize the staircase area within the building; to enable letting out first floor and upper floor of the building if possible, so that separate entrance is available.

e) Balcony: Open Balconies sanctioned by the BMP are converted in most of the cases for extension of the living or bed rooms. Open balcony area is not considered for F.A.R purpose and such conversion of balcony areas will increase the floor area used for self or for sale to get more returns.

f)Multi-dwellingunits: Multi- dwelling units I apartments are not sanctioned by B.M.P. in case of B.D.A. allotted sites whether new or very old. The reason being that persons apply to B.D.A. for allotment of site for building their own house. When such is the case building more than one dwelling unit defeats the purpose for which the site is allotted. When the owner wants to build one dwelling unit in each floor for use by his sons I daughters permission is not considered by BMP. What the owners do is to show the kitchen on first floor I second floor as store room I study etc. and later convert the room to provide kitchen. Some officials in the B.M.P. suggest thisidea to applicants who insist on morethan one kitchen in B.D.A. allotted sites.

g) Land use: Zoning Regulations of the C.D.P. of Bangalore prescribe land uses like; residential, commercial, public uses etc. for all the areas covered by the Plan. This sort of restriction on the land use are imposed by BDA for proper living conditions. Existing residential buildings are converted to commercial use along main roads, approach roads to localities, which are nearer to commercial area, nearer to public use I industrial area etc. Service industries also come up in such areas. Residential buildings are built in public use zone I park zone I industrial zone etc. Such violations also take place in other zones and Green Belt etc.

h)Better Returns: Violations are made to get more returns. Open areas in bungalows in the central areas are converted in to shadhi mahals I Kalyana mantaps, halls for reduction sale etc. Such conversions are observed on Infantry Road, Bowring Hospital Road etc. Acute parking and traffic problems are observed at these buildings. Many of factory buildings in the West of Chord Road industrial area which were incurring losses are converted into kalyana mantaps and as a result the service roads and other roads where such buildings are located are experiencing traffic problems.

i) Road Margins: Road margins are prescribed in the C.D.P. for congested roads to enable widening at a later date. Majority of the owners of sites encroach on road margins enforced by B.M.P. It becomes very difficult to widen the roads at a later stage to ease traffic problems.

j)Overheads: Some owners of properties are not willing to pay the overheadsdemanded by officials for sanction of building plans. They take up constructions without obtaining sanctions. Such constructions are mostly not in conformity with the byelaws.

k) FurtherSanctions: If a sanctioned building is constructed with deviations, the applicants hesitate to approach B.M.P. for sanction for additional construction. In such cases when they come to know that deviations will be identified during inspections by officials, they do not make application or advised by the concerned not to do so for further sanctions. They will have theblessing of the area officials without sanctions for additional constructions.

l) Collusion of concerned:

Deviations in considerable number of buildings take place in collusion with area officials and politicians. Only when neighbours complain; notice is served by some officials for deviations with wrong advice in many cases to obtain stay orders from the courts. The matter is not pursued later and the applicants utilize the deviated constructions as they want.

m) StandingCommittee for Appeals: The Standing Committee for Appeals blatantly issue stay orders against any legal action on identified deviated portions of buildings both residential and commercial as per the statement of the Urban Development Secretary to the Press on 14.08.2003. Number of buildings are built liberally violating buildings sanctions / byelaws with the confidence that they will approach Standing Corrunittee and forget any actions by the Mahanagar Palike.It was stated by the Urban Development Secretary that the Act is proposed to beamended to put in place ajudicial body as an alternative to the StandingCommittee.

According to a press report dtd. 05.09.2003, the State Government amended Rules under KMC ACT 1976 and issued circulars to the city Corporation Commissioner that appeals against building demolisation order will now come under the purview of the KAT in Bangalore and District Courts concerned in other corporation area. All appeals pending with the BMP standing corrunittee on appeal will be transferred to the KAT.

SITE BUYERS BEWARE

SITE BUYERS BEWARE

Agricultural lands cannot be directly used for residential purpose. They need to be converted for using them for residential purposes by paying conversion charges. The Special Deputy Commissioner is the competent authority to permit conversion of agricultural land for non-agricultural purpose. No building can be constructed on agricultural land without obtaining conversion and other approvals from the concerned authorities. Residential sites are to be formed only in the residentially converted land and such a land should be in the residential zone as per zonal regulations for getting approval for such conversion. 

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As per zonal regulation of comprehensive development plan, the green belt area is meant only for agricultural activities. Non converted land continues to be agricultural land. There are various restrictions on sale and purchase of agricultural land. In Bangalore, only the Bangalore Development Authority (BDA) is the competent authority to approve the layout plan and to get this approval the layout should have specified road width, residential area, civic and other amenities. The Bangalore Metropolitan Regional Development Authority (BMRDA) is the competent authority to approve sites on the outskirts of Bangalore. It is very common that people in Bangalore buy house sites popularly known as “revenue sites” which are formed on the agricultural land without the approval of the competent authority for changed of land use from agricultural to non-agricultural purposes under the relevant provisions of Karnataka Land Reforms Act, Karnataka Land Revenue Rules and regulations without knowing the hassles involved in buying such sites. Local agents aided by certain landlords misguide the buyers and market their revenue sites. Middlemen ride Middlemen and the local brokers who have mastered the art of marketing motivate the innocent people to buy the revenue sites keeping them in dark of the hassles involved in the purchase of revenue sites. These middlemen normally pay a nominal sum as a token advance to the landlord and a general power of attorney is obtained from them to deal with such properties. Thereafter, they search for the prospective purchasers. The middle men, like double edged razors, hike the price of the land depending upon the situation while, at the same time, they do not finally settle the account of the land owners. These middlemen who consider themselves as above the law form layouts on agricultural lands without land conversion, approved layout plan, from the competent authority. 

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To increase the saleable area of sites in these layouts, they will narrow down the width of the roads. These layouts are formed without civic amenities and other infrastructural facilities To attract the customers, these people make colourful brochures with photographs of certain parts of Bangalore and paint an attractive picture. Some of them even download the foreign photographs of houses from internet for their brochures. After the sale transaction is complete, the purchaser will have bitter experience. In certain cases, the land owners in league with brokers will register some imaginary sites formed on the agricultural land using their clout and influence.

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Ancestral Property In the recital of a sale deed, it is customary to mention how the seller has acquired his title, interests and rights over the immovable property from origin to the end. In case of revenue sites, the brokers have devised a very ingenious method to hide this fact. They merely mention in the recital that the property is an “ancestral property” of the seller. In this way the property passes on from the GPA holder to the purchaser. There are several instances where the land notified for acquisition and the land granted for schedule caste people have been converted into sites, where the purchaser of such a site would not get any title of the property. Then the law stipulates that certain lands, when granted to the schedule castes, will revert to them if purchased by others.

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GPA transaction

Generally, brokers will take GPA from the landowner for the entire land and register in favour of the purchaser; Most of the revenue sites are registered on the strength of GPA. Very few people will take care to check the legality of the GPA executed by the original vendor. Nobody bothers to find out whether the GPA is registered or not, whether the executor of the GPA is alive or not. If the executor of the GPA is not alive the GPA transaction is totally invalid. A joint GPA executed by two owners becomes invalid if one of them dies.

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Form 9 and Form 10

Originally, a property falling under the village Panchayath area alone has the genuine site status. Form No.10 is for a house coming under the Gramathana village Panchayat area and Form No.9 is for a vacant site coming under the Gramathana village panchayat area. The middlemen and some of the revenue officials make bogus Forms No.9 and 10 and register immoveable properties in favour of innocent purchasers. Earlier, when the Urban Land Ceiling Act was in force, thousands of revenue sites were registered by merely mentioning in the sale deed the description as one square asbestos sheet house’. This was so done just to avoid application of the Urban Ceiling Act. After the Urban Land Ceiling Act was abolished the term ‘one square asbestos sheet house’ was also removed from the real estate agents’ dictionary. It is illegal to form layouts and sell sites in the agricultural land/green belt area,, Even after selling all the sites, RTC (Record of Rights, Tenancy and Crop Inspection) will be in name of the original landowner. Agent being a GPA holder will sell the sites formed in agricultural lands to the innocent purchaser. The numbers assigned to the sites by the agent will never match with the survey numbers assigned by the government to these lands. What is purchased is an imaginary site only and the purchaser of the revenue site will not get the title of the property. If the owner is a thorough gentleman then the purchaser can enjoy the property till the government regularizes such revenue sites. 

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Difficult to get loans

If the title deeds are not clear and does not establish marketable title, it is very difficult to obtain bank loans for construction by mortgaging these sites. Generally, these sites are situated on the city outskirts. There will be no proper roads, electricity or water supply. There is no scope for immediate development and after all this, if the prices of the sites appreciate over a period of several years, the original landowner will appear from nowhere and start cultivating the area. He will remove all the boundary stones laid by the broker. The purchaser will then find it difficult to identify his property. In certain cases the GPA holder sells the same sites to several persons and collects the money from all of them. Consequently, marathon litigation awaits the purchaser. The laws are so complex that they give rise to multiple interpretations. 

To add to his woes, the Court fees, which are very high, drain his already depleted resources to forget everything and be done with it. Only a fraction of the deceived purchasers feel that the laws are helpful under such circumstances. It is hoped that people will exercise utmost care and restraint, when they go about purchasing “revenue sites”. A little caution in time will save lots of botheration in future. Instead of purchasing a 60 x 40 revenue site a purchaser can as well go for a smaller one within the city limits or BDA formed sites or BDA approved site. Moreover, all the sites formed in and around Bangalore must have BDA or BMRDA approval. The buyers, therefore, are advised to consult qualified legal experts before investing their hard earned money instead of wasting their hard earned money on revenue sites and spending sleepless nights.

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Caveat Emptor - Buyer Beware

Caveat Emptor - Buyer Beware

he transfer of property Act 1882 deals with the various kinds of transfer of immovable property, like sale, mortgage, lease, exchange etc. Section 55 of the acts refers to the rights and obligations of the seller and purchaser of immovableproperty.

The obligations of seller are:

1. To disclose any material defect in theproperty of sellers and title to the buyer.

2. To produce the documents of title for theverification s of the buyer on his request.

3. To answer all relevant questions of thebuyer

4. To execute proper conveyance deed on fullpayment of the consideration.

5. To take care of the property and the documents in the period between agreement to sell and

handingover the possession of the property

6. To give possession of the property

7. To pay all taxes, charges, rents uptodate and discharge any encumbrance on property.

The seller has some rights; they are:

I. To receive the rents and profits of theproperty till the ownership passes on to the purchaser.

 2. Wherethe ownership has passed on to the purchaser before payment of fullconsideration, the seller will have a charge on the property for the amount ofpurchase money and interest on such amounts.

The obligations of the buyer are:

1. To inform the seller any fact which mayincrease the value.

2. To pay the consideration amount to the seller as agreed.

Where the ownership has passed on to the purchaser, to bear the loss on account of destruction, inflery or decrease in the value of the property not caused by seller.

4. To pay all taxes, charges, rents etc. where the ownership has passed.

5. The purchaser may retain the amount of any un-cleared encumbrance, out of consideration amount payable.

The purchaser is entitled to thefollowing rights:

1.       Where the ownership has passed on to thepurchaser any benefit of any improvement increase in the value of the property,rents, profits.

2.       A charge on the property as against seller and all persons claiming under him for the amounts paid by the purchaser with interest.

The above referred rights and obligations of both the seller and purchaser are binding on both. But the section 55 of transfer of property Act provides an exemption. If the parties to the deal have any contract contrary to the rights and obligations as envisaged in the act the contracted obligations and rights revail, to that extent. The obligations and rights have relevance only where there is a valid binding contract of sale between the parties.

In-case, thepurchaser of property declines to accept the possession of the property, he has charge on the property with regard to earnest money paid and any costs awarded to him of a suit.

The rightsof the purchaser is subject to certain limitations. These rights are applicable as long as the matter is in the stage of agreement and when the deal is finalized, conveyance deed is executed; the deal will come to an end. But the case is different where the conveyance is brought on account of fraud practised by the vendor.

 It is also necessary that the purchaser shall avail himself of knowledge or means of knowledge open to him or his agents to verify the credentials of the vendor, his interest, title to the property. He has to exercise due care and diligence by exercising reasonable care and then only the purchaser can claim the protection of law for any mischief played on him.

Decision on Under Valuation of property

Decision on Under Valuation of property

The Hon'bleHigh Court of Madras in its judgment dated 07-01-2009 in Government of TamilNadu, Commercial Taxes (JI Department), and two others versus S. Jayalakshmiand others has, inter alia, made the following observations while deciding theissue of under valuation of property for purposes of payment of stamp duty :

In AIR 1982 (Mad.) l38 - Collector of Nilgiris at Ootacamund vs. MIs. Mahavir Plantations Pte. Ltd., ithas been held that:

          "        The valuation guidelines prepared by the Revenue Officials at theinstance of the Board of Revenue were avowedly intended merely to assist theSub-Registrars to find out, prima facie, whether the market value set out inthe instruments had been set forth correctly "

The learned Judge in the said decision has taken into consideration the judgment of a Division Bench of the Madras High Court reported in AIR 1974 (Mad.) 117 - State of Tamil Nadu vs. Chandrasekharan, which considered rationale behind Section 47-Aofthe Stamp Act.

In the above said decision, the observations made are as follows:-

" ... we are inclined to think that the object of the Amending Act being to avoidlarge scale evasion of stamp duty, it is not meant to be applied in a matter of fact fashion and in a haphazard way. Market value itself as we already mentioned, is a changing factor and will depend on various circumstances and matters relevant to the consideration. No exactitude is, in the nature of things possible. In working the Act, great caution should be taken in order that it may not work as an engine of oppression.

Having regard to the object of the Act, we are inclined to think that normally the consideration stated as the market value in a given instrument brought for registration should be taken to be correct unless circumstances exists which suggest fraudulent evasion         "

In (1994)4 SCC 595 - Jawajeenagnatham vs. Revenue Divisional Officer, Adilabad, A.P. and others, it has been held by the Supreme Court that in respect of market value to be computed under Section 23 of the Land Acquisition Act, Basic ValuationRegister maintained by the Registering Authority for collection of stamp duty, has no statutory foundation to determine the market value and the evidence of price fetched in comparable sale transaction, is generally accepted as the best method to determine the market value.

In 1999 (2) L. W. 231 - M.Ponnusamy and others vs. The District Collector, Erode and others, the act of reference made to the Collector under Section 47-A(2) of the Indian Stamp Act after lapse of two years and retention of the sale deeds after completion of registration came up for consideration and it has been held as follows:-

          "        .It is essential to point out that before registration, the Registering Authority has to record that he has reasons to believe that the value of the property has not been duly set forth in the instrument. Only after recording such reasons, the Registering Authority has to complete registration of the instrument in question and thereafter alone, he could refer the same to the Collector under Sub-Section (1) of Section 47-A of the Indian Stamp Act. Such is not the case of the respondents term.

          "        To this extent, the function of the Registering Authority is quasi judicial in nature and he has to come to a conclusion that the market value of the property dealt under the document had not been truly set forth and after completion of registration, he could make a reference     At least some reasons should be recorded and immediately after completion of registration or sooner thereafter, a reference has to be made under Sub-Section (1) of Section 47-Aofthe said Act."

"What is required under Sub- Section (1) of Section 47-A of the Indian Stamp Act is that the Registering Authority had to come to a conclusion before registration that the market value of the property, dealt under the instrument of conveyance or release, has been under-valued and he should have entertained reasonable belief in this respect and also, he should have recorded such a reason. Immediately after recording such reason, he has to complete the registration and thereafter refer the instruments to the Collector in terms of Sub-Section (1) of Section 47-A of the Indian Stamp Act."

Further, in another case a Division Bench of Madras High Court has taken into consideration the decision reported in S.P. Padmavathi vs. The State of Tamil Nadu, [1997(II) CTC 617 (DB)] (cited supra) and held " In the absence of document or material produced to show that the documents in question have been undervalued, the Registering Officer cannot decide the same and apply provisions under  Section 47 -A of the Indian Stamp Act without forming an independent decision"

In 2006(4) L.W. 695 - The Sub Registrar, Adayar, Chennai vs. Canara Bank, Saidapet Branch and another, the question came up for consideration with regard to the calculation of stamp duty in respect of value of properties which were subject matter of a compromise decree as fixed and directed by the Court.

In the said decision it was held that market value is always a changing factor depending on various circumstances and no exactitude is, in the nature of things possible and that normally the consideration stated as market value in a given instrument brought for registration should be taken to be correct unless circumstances exist which suggest fraudulent evasion. On a consideration of the principles laid down in those decisions, it is clear that the term market value itself is vague, uncertain and a matter of guesswork.

The said issue also came up for consideration in the judgment reported in 2001 Supp. CTC page. 1 J.Jayalalitha and five others vs. State and the High 

Court has held as follows:

The term "Market value" itself is vague, uncertain and a matter of guesswork. It is also not defined in the Indian Stamp Act. Explanation to Section 47- A of the said Act reads as follows:

"For the purpose of this Act, market value of any property shall be estimated to be the price which, in the opinion of the Collector or the Chief Controlling Revenue Authority of the High Court as the case may be, such property would have fetched or would fetch, if sold in the open market on the date of execution of the instrument of conveyance, exchange, gift, release of benarni right or settlement. "

Manohar N. Dange in his book titled 'Valuation of Immovable Properties' has stated that the price that a willing purchaser pays to a willing seller for a property having due regard with its existing conditions, with all its existing advantages and with its potential possibilities when laid out with most advantageous manner, excluding any disadvantages due to the carrying out of the scheme for the purpose for which the property is transacted.

He has quoted the judgment rendered by Justice Eve in South Eastern Rail Company v. L.C.C., that the value to be ascertained is the value to the vendor, and not its value to the purchaser and that in fixing the value to the vendor all restrictions imposed on the user and enjoyment of the land in his hand are to be taken into account but the possibility of such restrictions being modified or removed for his benefit is not to be overlooked and that the market price is not a conclusive test of real value.

According to the author, the concept of market value has to be understood in the light of what has been explained for the purpose of land acquisition and that the market value of a property may be different in practice for different angles.

The term "Market value" itself is vague, uncertain and a maner of guessworllt is also not defined in the Indian Stamp Act According to him, the market value for a purpose is to be decided with due relations to laws and purpose of the concerned valuer and the market value, though appears to be a very simple term, is very difficult to decide under particular circumstances.

The author went on to add that a proper research is necessary which could determine the market value since in one case, there can be heavy demand for smaller tenements with inadequate supply and in another case, the supply may be more than adequate but without any demand. According to the author, the size of the plot has got a direct bearing on the willing purchasers in the market.

The market value of a land can be fixed only by taking into consideration several factors, like potentiality of a plot for development, shape of the plot, frontage and depth, modification for depth, value in the sense of value of additional cost less depreciation and the most important factors which a valuer should study in respect of a property are

(1) advantages to the property and (2) disadvantages to the property.

J.A. Parks in his book, 'Principles and Practice of Valuation' (Fifth Edition by D.N. Banerjee) has referred to the judgment of the Supreme Court of British Columbia (Canada) in Rowan vs. City of Vancouver, wherein it was held

1] "A recent market price is not the best test of actual value. The whole evidence surrounding the transaction, the condition of market and other factors have to be weighed carefully" ,

2] Valuation of immovable property is not an exact science and it is an inquiry relating to a subject abounding in uncertainties where there is more than ordinary guesswork and where it would be unfair to require an exact exposition of reasons for the conclusions arrived at.

The learned author has relied on the following observations of Bhagwati J., as he then was, in  Administrator-General W.B. v. Collector, 1988 (2) SCC 150.

3]" .... We are conscious that this process of determination of market value adopted by us may savour of conjecture or guess, but the estimation of market value in many cases must depend largely on evaluation of many imponderables and hence, it must necessarily be to some extent a matter of conjecture or guess."

The author has also relied on the observations of the Supreme Court in Prithvi Raj Taneja v. State of M.P., 1977 (1) SCC 694, wherein the Supreme Court held that there is an element of guesswork inherent in most cases involving determination of the market value.

In G. Loganathan v. S. Chenniya Chettiar, 1995 (2) CTC 492, this Court observed that the Supreme Court and other courts including Madras High Court have held that guideline value is not market value and it will be dangerous to value a property according to the guideline value because there is no guarantee of truth or correctness of the data given in the guideline value.

It is clear that the guideline value cannot be the market value of the property as the guideline value is intended for the collection of revenue and market value is the criteria to value the suit. When we consider the above principles, it is clear that guideline and market value are two different concepts and that the term "Market value" is vague, uncertain and a matter of guesswork.The market value does not lie in the property contemplated to be purchased butlies in the mind of the person contemplating to purchase the said property.