JUDGMENT Aravind Kumar, J.— The above appeal is filed by the revenue challenging the orders passed by the Tribunal, Bangalore Bench 'C' in Misc. Petn. No. 104/Bang/2003 and in ITA No. 864/Bang/1996, dated 13-11-2003 and 17-4-2003 respectively. The above appeal came to be admitted by this court on 12-7-2004 and the substantial question of law formulated for consideration by this court at the time of admission is as follows: Whether the appellate authorities were correct in holding that the valuation as adopted by the assessee should be accepted which was not based on any comparative sale instances or any accepted method of valuation adopted by ignoring the various materials and circumstances under which the assessing officer had correctly valued per square feet of property at Rs. 332.335 and consequently recorded a perverse finding. 2. One N. Srirama Reddy had filed original return of income on 6-2-1982 in respect of the assessment year 1981-82 and the assessment came to be completed on 13-3-1983. The said assessment proceedings was reopened under Section 147 after issuing of notice under Section 14 In pursuance to the said notice the assessee filed revised return of income on 31-10-1993 and declared the income from capital gains amounting to Rs. 11,00,615 out of transfer of land at No. 20, Palace Cross Road, Bangalore. The assessee Sri N. Srirama Reddy had purchased property bearing No. 20, Palace Cross Road, Bangalore measuring 84,758,500 s.q. ft. with old building under two independent sale deeds dated 30-11-1957 and 30-12-195' The said property came to be leased out by the said Sri N. Srirama Reddy in favour of S.V. Properties under a perpetual lease agreement dated 27-11-1980. The assessee under the said lease was being paid annual rent of Rs. 3,000 from 1-6-1986 and as consideration towards lease and 16,525 sq. ft. of the built-up area of the residential flats together with Rs. 6 lakhs non-refundable security deposit was paid to the assessee by the lessee, i.e., S.V. Properties. It seems that the construction of the flats was extended by number of years. 3. The assessing officer while carrying out the recomputation found that capital gains had been computed by the assessee by adopting admitted consideration of Rs. 17.33 lakhs for transfer of the land. From out of this consideration, the assessee had reduced fair market value of the land as on 1-4-1994 by Rs. 6,32,385. 3. The assessing officer while carrying out the recomputation found that capital gains had been computed by the assessee by adopting admitted consideration of Rs. 17.33 lakhs for transfer of the land. From out of this consideration, the assessee had reduced fair market value of the land as on 1-4-1994 by Rs. 6,32,385. The said valuation by the assessee was on the basis of the valuer's report dated 17-10-1992 who had estimated the value for 16,525 sq. ft. built-up area at Rs. 318 per sq. ft. in the year 1988-89. The valuer seems to have further bifurcated the value in respect of the built-up area only as the land was owned by the assessee. The assessee claims to be the owner of the entire land in spite of the perpetual lease. 4. The assessing officer proceeded to hold that as the sale transaction though took place for the year 1988 the original agreement had been entered into in November, 1980 and as per the directions of the Commissioner, the capital gains had to be taxed for the assessment year 1981-82 by discounting the actual sale consideration to that on 27-11-1988, the date on which the property was leased out. Consequently the assessing officer adopted actual sale consideration for the 10 flats sold at Rs. 46,61,000 and added to it, the value of the unsold flat (valuing the same at the average sale consideration for the above 10 flats) at Rs. 8,33,837 and the total of the two being Rs. 54,94,837 and came to the conclusion that the actual sale consideration for the total built-up area received by the assessee as on 1-7-1998' The assessing officer by multiplying this by variable discounting to the value of the fiats as on 27-11-1980 arrived at Rs. 28,81,767 and came to the conclusion that the sale consideration for 11 flats including the unsold flat would be Rs. 46,61,000 and the average sale consideration for each square feet was arrived at Rs. 332.335 by adopting the said value. Further the assessing officer also added the interest-free advance received by the assessee for the entire period of perpetual lease in computing the capital gains tax and accordingly passed the assessment order on 31-3-1994. 5. 46,61,000 and the average sale consideration for each square feet was arrived at Rs. 332.335 by adopting the said value. Further the assessing officer also added the interest-free advance received by the assessee for the entire period of perpetual lease in computing the capital gains tax and accordingly passed the assessment order on 31-3-1994. 5. The assessee being aggrieved by the same filed an appeal before Commissioner (Appeals), the said appeal resulted in success and the said order of the Commissioner (Appeals) which came to be challenged by the revenue before the Tribunal also resulted in success to the assessee. The civil miscellaneous petition filed by the revenue resulted in dismissal on the ground that there is no error apparent on the face of the record. Thus the revenue is in appeal and seeks to answer the substantial question of law in its favour. 6. We have heard Sri M.V. Seshachala, learned Counsel for the appellants and Sri Parthasarathy, learned Counsel for the respondent assessee. 7. Whether the assessing officer was correct in valuing the property at Rs. 332.335 or the value adopted by the assessee and confirmed by the appellate authority which was at Rs. 200 per sq. ft. requires examination on the basis of the documents namely the perpetual lease. The first appellate authority while accepting the submissions of the assessee has given a finding that the land in proportion to 11 flats given to the appellants, i.e., 10.3 per cent of the total land was not transferred during the relevant assessment year, either by way of lease or otherwise. Hence, the cost of the land which was ultimately sold in 1998 would not form part of consideration for the purpose of lease and only the cost of construction of the superstructure duly discounted as on the date of transfer by way of lease, i.e., 7-11-1980 is the only cost which will have to be taken into consideration and accordingly the first appellate authority directed the assessing officer to substitute the figures of Rs. 17,33,307 as capital gains as against the amount of Rs. 28,81,767 determined by the assessing officer. A perusal of the lease deed dated 27-11-1980 would show that the lessor will be absolute owner of the built-up area. 17,33,307 as capital gains as against the amount of Rs. 28,81,767 determined by the assessing officer. A perusal of the lease deed dated 27-11-1980 would show that the lessor will be absolute owner of the built-up area. Clause (iv) of the said agreement would be of relevance to consider the rival legal contentions and consider the substantial question of law that is framed in this appeal. Hence, it is extracted hereinbelow : The lessor shall be the full and absolute owner of the aforesaid built-up area and is at perfect liberty to sell, lease, mortgage or deal with it in any manner he likes. 8. In the said lease deed it is nowhere mentioned that the proportionate land pertaining to 11 flats has been retained with the lessor. In this view of the matter, the only conclusion that can be arrived at by us is that the said proportionate area is also leased out by the lessor to the lessee for putting up construction and handing over the super built-up area together with the proportionate land to the lessee. This view of ours is fortified by noticing certain aspects mentioned in the supplementary lease deed dated 22-10-1986, whereunder the area to be given to the lessor by the lessee is mentioned in Clause (2)(a) of the lease deed which reads as follows: 2. The area to be given to the lessor in the: (a) Basement as per the modified plan is 10.3 per cent of the entire parking area in the basement and excluding the common areas like lobby, electrical room, passage etc. 9. The other mitigating factor to be taken into consideration to answer the question of law in favour of the revenue is that the assessing officer for the purpose of valuation of the property had taken both the sold as well as the unsold flats into consideration which fact had been lost sight of by both the appellate authorities. 9. The other mitigating factor to be taken into consideration to answer the question of law in favour of the revenue is that the assessing officer for the purpose of valuation of the property had taken both the sold as well as the unsold flats into consideration which fact had been lost sight of by both the appellate authorities. What weighed in the mind of the second appellate authority i.e., Tribunal is that construction for leasehold right could be only the cost of construction of the flats allotted to the assessee and the Tribunal has arrived at actual value of consideration of flats before November, 1980 and to arrive at this conclusion it has lost sight of the fact that proportionate land had also been given by the lessor to the lessee and what was conveyed back was also proportionate land of 11 flats. Hence, the contention of the assessee that the undivided share in the land was not belonging to the lessee and has continued to belong to the assessee does not hold water as is seen from the lease deed dated 27-11-1980 which is perpetual lease and particularly Clause 20 which reads as follows: In the event of the lessor desiring to sell the residuary right, title and interest in the schedule property, he shall offer the right of pre-emption to the lessee or its assignees or nominees including the private limited company or society that may be incorporated and registered under the Companies Act, 1956 or the Societies Registration Act, as the case may be, in conformity with the existing Karnataka Apartment Ownership Act, 1972 and rules thereunder, and the Karnataka Ownership Flats (Regulation of Promotion, Sale, Management and Transfer) Act, 1972 and rules thereunder or any statutory modification of the said Acts and rules. 10. When Clauses in lease deed and supplementary deeds are read in conjunction, it clearly demonstrates that it is only the residuary right, title and interest in the schedule property that is vested with the lessor and the pre-emption Clause has been inserted which gave right to the lessee to pre-empt any sale by lessor to the third parties without selling the same to lessee. This clearly goes to show that the entire land was transferred by the lessor to the lessee. 11. This clearly goes to show that the entire land was transferred by the lessor to the lessee. 11. In the light of the aforesaid discussions, we have no hesitation to hold that both the appellate authorities have committed an error in determining the value of the property as declared by the assessee. Thus the said orders deserves to be set aside and accordingly we hereby set aside the same and restore the order of assessing officer. 12. The appeal is allowed. The substantial question of law is accordingly answered in favour of the revenue and against the assessee.