V.N.Chandrasekaran, Vellore V. ITO, Vellore

ITA 1193/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7900 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2016
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Assessee Lawyers: K S B ALAKRISHNAN
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Cost of acquisition; Fair market value; Valuation report
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1193/MDS/2016 * +* /ASSESSMENT YEAR: 2007-08 SHRI V.N.CHANDRASEKARAN, NO.33, II EAST MAIN ROAD, GANDHI NAGAR, KATPADI TALUK, VELLORE-632 006. VS. THE INCOME TAX OFFICER, WARD-I (6), VELLORE-632 001. [PAN: AAEPC 4254 E ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.K.S.BALAKRISHNAN, ADV. ./,- 0 1 /RESPONDENT BY : MR.B. SAHADEVAN, JCIT # 0 2' /DATE OF HEARING : 05.01.2017 34 + 0 2' /DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 18.02.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 13, CHENNAI, IN ITA NO.101/A-13/AY 2007-08 FOR THE AY 2007-08. 2.0 GROUND NO.1 IS GENERAL IN NATURE WHICH DOES NOT RE QUIRE ANY SPECIFIC ADJUDICATION. ITA NO.1193/MDS/2016 :- 2 -: 3.0 GROUND NO.2,3 AND 4 ARE RELATED TO THE ASSESSMENT OF CAPITAL GAINS ADOPTING THE GUIDELINE VALUE AS PER SECTION 50C OF THE INCOME TAX ACT (IN SHORT THE ACT).DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2007-08, THE ASSESSEE SOLD THE FOLLOWING PROPERTIES . THE SA LE VALUE AND THE GUIDELINE VALUES ARE AS UNDER: SL. NO. DOCUMENT NO. & DATE SALE VALUE ADOPTED BY THE ASSESSEE (IN RS.) MARKET VALUE AS PER THE SALE DEED (IN RS.) 1 9439/2006 & 15.11.2006 15,07,500-00 21,75,000-00 2 720/2/2007 & 29.01.2007 316,200-00 325,200-00 3 717/2007 & 29.01.2007 297,600-00 302,600-00 4 719/2007 & 29.01.2007 204,600-00 214,600-00 5 718/2007 & 29.01.2007 204,600-00 214,600-00 6 2171/2007 & 05.03.2007 605,200-00 605,200-00 TOTAL 31,35,700-00 38,38,200-00 THE ABOVE PROPERTIES WERE JOINT PROPERTIES BEARING DOOR NO.27, 27/1 TO 27/8 (NEW NO.2, 2/1 TO 2/8) OFFICERS LINE, VELL ORE, CONSISTING OF VACANT SITE, LODGING HOUSE AND THE SHOPS OWNED BY THE UNDI VIDED FAMILY OF ASSESSEES FATHER. DUE TO DISPUTES IN FAMILY THE AS SESSEE FILED A CASE AGAINST OTHER FAMILY MEMBERS IN THE DISTRICT COURT, VELLORE AND SUBSEQUENTLY A COMPROMISE DEAL WAS SETTLED AMONG TH E FAMILY IN THE COURT. AS PER THE DECREE OF THE LD. DISTRICT COURT, VELLORE, IN IA NO.319/2003 DATED 22.08.2004, THE ASSESSEE AND HIS BROTHER SHRI DHANASEKHARAN HAS TO SHARE THE PROPERTY IN THE RATI O OF 60% & 40%. ACCORDINGLY, THE ASSESSEE SOLD THE PROPERTY AND ADM ITTED THE VALUE OF HIS SHARE AT RS.18,81,420/-(60% OF 31,35,700-00) AS PER THE SALE DEED. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO) ADOPTED THE GUIDELINE ITA NO.1193/MDS/2016 :- 3 -: VALUE WHICH WAS RS.38,38,200/- AND THE ASSESSEE SHA RE OF 60% WORKED OUT TO RS.23,02,920/- AND COMPUTED THE CAPITAL GAIN S AFTER ALLOWING THE INDEXED COST OF ACQUISITION. 3.1 THE PROPERTY SOLD VIDE DOCUMENT NO.9439 RELATES TO DOOR NO.27/5 TO 27/8 CONSISTING OF LAND AND BUILDING FOR A CONSIDER ATION RS.15,07,000/- AND STAMP VALUATION AUTHORITIES VALUED THE PROPERTY AT RS.21,75,000/- WITH BREAKUP OF RS.18,63,032/- FOR LAND AND RS.3,1 1,968/- FOR THE BUILDING. THE ASSESSEE OBJECTED FOR ADOPTING THE G UIDELINE VALUE SINCE THE PROPERTY WAS UNDER OCCUPATION OF THE TENANTS FOR DE CADES AND THE ASSESSEE COULD NOT VACATE THE TENANTS AND ULTIMATEL Y THE PROPERTY WAS SOLD TO SUB-TENANTS. THE ASSESSING OFFICER DID NO T ACCEPT THE OBJECTIONS AND COMPUTED THE CAPITAL GAINS ADOPTING THE VALUE A S PER SECTION 50C. 3.2 DURING THE APPEAL, LD.CIT(A) DIRECTED THE AO TO RE FER THE VALUATION OF PROPERTY TO THE VALUATION CELL U/S50C(2) OF INCO ME TAX ACT. THE A.O REFERRED THE VALUATION OF PROPERTY TO THE VALUATION CELL AND THE D.V.O SUBMITTED THE VALUATION REPORT VALUING THE PROPERTY AT RS.18,95,544/- (LAND AT RS.15,83,576/- AND BUILDING AT RS.3,11,968 /-) AGAINST THE GUIDELINE VALUE OF RS.21,75,000/-. THE ASSESSEES S HARE OF 60% WORKED OUT TO RS.11,37,326/-. THE LD. CIT(A) DIRECTED THE AO TO COMPUTE THE CAPITAL GAINS ADOPTING THE FMV AT RS.18,95,544/- AS PER THE DVO REPORT. AGGRIEVED BY THE ORDER THE ASSESSEE IS IN APPEAL BE FORE US. ITA NO.1193/MDS/2016 :- 4 -: 3.3 DURING THE OF APPEAL, THE LD.AR SUBMITTED THAT TH E ASSESSEE HAS OBTAINED VALUATION REPORT OF THE BUILDING IN TS NO. 581, BLOCK NO.12, OFFICERS LINE, VELLORE TALUK, SOLD VIDE DOCUMENT NO .9439/2006 CONSISTING OF LAND AND BUILDING AND FURNISHED BEFORE THE AO DU RING THE REMAND PROCESS. THE AO AND THE LD.CIT(A) ADOPTED THE VALU E OF THE BUILDING AS VALUED BY THE DEPARTMENTAL VALUATION OFFICER (DVO) INSTEAD OF THE FAIR MARKET VALUE ESTIMATED BY THE REGISTERED VALUER, SH RI I.M. GOVINDA RAJAN FROM WHOM VALUATION REPORT WAS SUBMITTED. ACCORDIN G TO THE REGISTERED VALUER, THE MARKET VALUE OF THE BUILDING WAS RS.1,0 6,000/- AGAINST THE VALUATION OF DVO RS.3,11,960/-. THERE WAS A DIFFE RENCE OF RS.2,05,960/- WHICH IS AGITATED BY THE ASSESSEE IN THIS APPEAL. A CCORDING TO THE LD.COUNSEL, THE PROPERTY WAS IN LITIGATION AND ENCU MBERED WITH LOT OF PROBLEMS, MOREOVER THE BUILDING IS VERY OLD. ACCORD ING TO THE A.R. BUILDING VALUATION MADE BY THE REGISTERED AT RS.1,06,000/- I S CORRECT AND THE SAME SHOULD BE ADOPTED FOR CAPITAL GAINS. ON THE OT HER HAND THE LD.D.R RELIED ON THE LOWER AUTHORITIES ORDERS. 3.4 WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL PLACED BEFORE US. WE HAVE ALSO SEEN THE VALUATION REPORT ISSUED BY THE REGISTERED VALUER. THE PROPERTY WAS SOLD ON 15.11. 2006 AND IN THE SALE DEED, THE VALUE OF THE BUILDING WAS ADOPTED AT RS.3 ,94,568/- AS STATED BY THE ASSESSEE. THE SAME VALUE WAS ADOPTED BY THE DE PARTMENTAL VALUER FROM VALUATION CELL. THE DVO HAS INSPECTED THE PRO PERTY AND FOUND ALL ITA NO.1193/MDS/2016 :- 5 -: THE STRUCTURES WERE DEMOLISHED. THEREFORE, HE ESTIM ATED THE VALUE AS PER GUIDELINE VALUE IN SALE DEED. IN THE CASE OF APPROV ED REGISTERED VALUER MR.E.GOVINDA RAJAN VALUED THE PROPERTY ON THE BASIS OF THE DOCUMENTS AND GUIDELINE VALUE OF STATE PWD AND REDUCING THE D EPRECIATION BY STRAIGHT LINE METHOD. ACCORDING TO THE REGISTERED VALUER, GROUND FLOOR WAS CONSTRUCTED IN 1941 WITH ACC ROOF IN 25 SQ.MTRS . AND ON WHICH ANOTHER FLOOR WAS MADE IN 1968 WITH RCC ROOF IN 45 SQ.MTRS. IT APPEARS THAT THERE WAS A BLATANT MISTAKE IN THE REGISTERED VALUER REPORT SINCE RCC ROOF CANNOT MADE ON ACC ROOF AND THE REGISTERED VALUER HAS NOT SEEN THE BUILDING AND ONLY ESTIMATED THE VALUE AS P ER PWD RATES WITHOUT INSPECTING THE BUILDING THEREFORE WE ARE UNABLE TO ACCEPT THE REPORT OF THE APPROVED VALUER. THE ASSESSEE AND VENDOR HAVE ACCE PTED THE VALUE OF THE BUILDING AT RS.3,11,968/- AS PER THE SALE DEED. THE SALE DEED IS UNDISPUTED EVIDENCE TO ESTABLISH THE CORRECT AMOUNT OF THE VALUATION OF THE BUILDING, SINCE, BOTH THE PARTIES HAVE AGREED FOR PURCHASE AND SALE OF THE BUILDING WHICH WAS ADOPTED BY THE SUB-REGISTRAR FOR THE PURPOSE OF STAMP VALUATION, WE DO NOT FIND ANY ERROR IN ADOPTI NG THE BUILDING VALUE AT RS.3,11,968/- AGAINST THE CLAIM OF THE ASSESSEE RS. 1,06,000/-AND WE UP HOLD THE ORDER OF THE LD.CIT(A). 3.5 THE NEXT OBJECTION OF THE ASSESSEE WAS VALUATION O F THE LAND. AS PER SECTION 50C(2) THE VALUATION OF THE LAND WAS REFERR ED TO THE VALUATION CELL AND THE DVO VALUED THE FMV OF LAND AT RS.15,83,576 /- CONSIDERING ALL THE OBJECTIONS AND EVIDENCES PRODUCED BY THE ASSESSEE. NO OTHER EVIDENCE ITA NO.1193/MDS/2016 :- 6 -: FURNISHED BY THE ASSESSEE TO SHOW THAT REPORT SUBMI TTED BY THE DVO IS ERRONEOUS OR THE FMV OF THE LAND IS LESSER THAN THE VALUATION MADE BY THE DVO. ACCORDINGLY, WE HOLD THAT THE LD.CIT(A) HAS R IGHTLY DIRECTED THE AO TO ARRIVE THE FAIR MARKET VALUE AS VALUED BY THE VA LUATION OFFICER AND THE ORDERS OF THE LD.CIT(A) IS CONFIRMED. GROUND NO.2 T O 4 OF APPEAL ARE DISMISSED. 4.0 GROUND NOS.5 TO 8 ARE RELATED TO THE DISALLOWANCE OF COMPENSATION PAID TO HIS BROTHER MR.V.DHANASEKHARAN AMOUNTING TO RS.3,12,945/-. THE ASSESSEE AND MR.V.DANASEKHARAN ARE BROTHERS AND THE LEGAL HEIRS OF THE PROPERTY.. THE DISTRICT COURT VELLORE BY COURT ORD ER DATED 22.08.2004 HAS SETTLED THE PROPERTIES IN THE RATIO OF 60% & 40% IN FAVOUR OF THE ASSESSEE AND HIS BROTHER MR.DHANASEKHARAN, SUBJECT TO PAYMEN T OF RS.10.00 LAKHS FROM THE SALE PROCEEDS OF THE ABOVE PROPERTY. THE R ELEVANT PART OF THE JUDGMENT OF COURT WAS CITED BY THE A.R. IN PAPER BO OK PAGE NO.41 WHICH IS EXTRACTED AS UNDER: PAGE 32 PARA 1: THAT THE PROPERTY DESCRIBED IN SCHEDULE A HEREUNDE R (1 ST ITEM OF THE SUIT PROPERTY), THAT IS THE VACANT SITE, LODGING HOUSE A ND THE SHOPS DOOR NO.27, 27/1 TO 27/8 (NEW NO.2, 2/1 TO 218) OFFICERS LINE, VELLORE IS HE REBY ALLOTTED TO THE PETITIONER/PLAINTIFF MR. V.N. CHANDRASEKARAN AND THE 2 ND RESPONDENT / 2 ND DEFENDANT MR. V. N. DHANASEKARAN IN THE RATIO OF 60% AND 40% RESPECTIVELY AND THE SA ME SHALL BE SOLD IMMEDIATELY FOR A PRICE NOT LESS THAN THE PREVAILING MARKET PRICE AND THE SALE PROCEEDS SHALL BE DIVIDED ,BETWEEN MR V. N. CHANDRASEKARAN AND MR V. N. DHANA SEKARAN IN THE ABOVE SAID RATIO OF 60% AND 40% RESPECTIVELY. PAGE 33 PARA 4: THAT THE HOUSE BEARING DOOR NO.33 2 ND EAST MAIN ROAD, GANDHI NAGAR, VELLORE 6, ADMEASURING ABOUT 8 GROUNDS WAS ALREADY SETTLED IN FAVOUR OF MR.V.N. CHANDRASEKARAN. SINCE THE MARKET VALUE OF THE SAID HOUSE IS MORE TH AN THE VALUE OF THE HOUSE NOW ALLOTTED TO MR V.N.DHANASEKARAN, MR V.N.CHANDRASEKARAN SHALL PAY A SUM OF RS. 10,00,000/- (RUPEES TEN LAKHS ONLY) TO MR V.N.DHANASEKARAN TOWA RDS THE DIFFERENTIAL COST. THE SAID AMOUNT SHALL BE PAID BY MR V.N.CHANDRASEKARAN AT TH E TIME OF EXECUTION AND REGISTRATION OF SALE DEED IN RESPECT OF THE A SCHEDULE MENTIONED PROPERTY FROM OUT OF HIS SHARE OF 60% OF THE SALE PROCEEDS. ITA NO.1193/MDS/2016 :- 7 -: 5.0 THE COURT HAS DIRECTED THAT THE LAND AND PROPERTY TO BE SHARED BETWEEN HIS BROTHERS IN THE RATIO OF 60% & 40%. WH ILE FIXING THE SHARE OF THE ASSESSEE AT 60% THE COURT HAS DIRECTED THE ASSE SSEE TO PAY A SUM OF RS.10.00 LAKHS OUT OF SALE PROCEEDS TO HIS BROTHER MR.V.N.DANASEKHARAN AT THE TIME OF EXECUTION AND REGISTRATION OF SALE D EED. ACCORDINGLY, THE ASSESSEE HAS MADE THE PAYMENT OF RS.3,10,045/- FROM THE SALE PROCEEDS TOWARDS THE COMPENSATION TO HIS BROTHER AS PER THE COURT ORDER AND CLAIMED AS DEDUCTION FROM THE LONG TERM CAPITAL GAI NS. THE AO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE STATING THAT, AS PER THE JUDGMENT THE COMPENSATION WAS ONLY A DIFFERENTIAL COST OF O THER PROPERTIES ALLOTTED BETWEEN THE ASSESSEE AND HIS BROTHER AND HENCE THE COMPENSATION PAID TO HIS BROTHER HAS NO RELATION, OTHER THAN TIME FRAME FIXED BY THE HONBLE COURT TO CONFIRM THE PAYMENT. 6.0 ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND D ID NOT SUCCEED BEFORE LD.CIT(A). THEREFORE, THE ASSESSEE FILED AP PEAL BEFORE THIS TRIBUNAL. APPEARING FOR THE ASSESSEE THE LD.COUNSEL ARGUED T HAT THE PAYMENT IS MADE AS PER THE COURT ORDER. THE COURT HAS DIREC TED TO MAKE THE PAYMENT FROM THE SALE OF THE PROPERTY MENTIONED IN SCHEDULE A (WHICH IS SOLD BY THE ASSESSEE) AND AT THE TIME OF EXECUTION OF SALE DEED AND REGISTRATION OF THE DOCUMENT. THE RELEVANT PARAGRA PHS OF THE COMPROMISE DEAL IN THE DISTRICT COURT OF VELLORE IS RE-PRODUCE D AS UNDER: ITA NO.1193/MDS/2016 :- 8 -: THAT THE HOUSE BEARING DOOR NO.33, 2 ND EAST MAIN ROAD, GANDHI NAGAR, VELLORE.6, ADMEASURING ABOUT 8 GROUNDS WAS ALREADY SETTLED IN FAVOUR OF MR.V.N.CHANDRASEKARAN. SINCE THE MARKET VALUE OF THE SAID HOUSE IS MORE TH AN THE VALUE OF THE HOUSE NOW ALLOTTED TO MR.V.N.DHANASEKARAN, MR.V.N..CHANDRANEKARAN SHAL L PAY A SUM OF RS.10,00,000/ (RUPEES TEN LAKHS ONLY) TO MR.V.N.DHANASEKARAN TOWA RDS THE DIFFERENTIAL COST. THE SAID AMOUNT SHALL BE PAID BY MR VN.CHANDRSEKARAN, AT THE TIME OF EXECUTION AND REGISTRATION OF SALE DEED IN RESPECT OF THE A SCHEDULE PROPERTY F ROM AND OUT OF HIS SHARE OF 60% OF THE SALE PROCEEDS. VELLORE DISTRICT, VELLORE TALUK, VELLORE TOWN, REVE NUE WARD NO.5, IN OFFICERS LINE, MEASURING EAST TO WEST 324 FEET, ON THE NORTHERN SI DE AND 314 FEET ON THE SOUTHERN SIDE, NORTH TO SOUTH 88 FEET ON THE EASTERN SIDE AND 87 F EET ON THE WESTERN SIDE, TOTALING 27, 912 SQ. FEET OF LAND AND THE NON-RESIDENTIAL PREMIS ES CONSTRUCTED THEREIN, BEARING DOOR NOS.2, 2/1, 2/2, 2/3, 2/4, 2/5, 2/6, 2/7 AND 2/8 (O LD DOOR NOS.27, 27/1 TO 27/8) WITH ALL FIXTURES, FITTINGS, ELECTRICAL SERVICE CONNECTIONS AND WATER CONNECTIONS, ETC., BOUNDED ON THE EAST BY OFFICERS LINE, WEST BY SRI VENKATESWARA HIGH ER SECONDARY SCHOOL BACKSIDE, SOUTH BY OPEN PLAY GROUND BELONGING TO VOORHEES HIGHER SE CONDARY SCHOOL AND NORTH BY SRI VENKATESWARA HIGHER SECONDARY SCHOOL (VALUE RS.25,0 0,000/-). 7.0 ACCORDING TO THE LD.AR, THE AMOUNT PAID TO MR.DANA SEKHARAN IS PAYMENT BY OVERRIDING TITLE WHICH SHOULD BE ALLOWED AS DEDUCTION. ON THE OTHER HAND, THE LD.DR RELIED ON THE LOWER AUTHORITI ES ORDERS. 8.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. AS PER THE ORDER OF THE DISTRICT JUDGE, VELLORE, I N IA NO.319/03, THE COURT HAS DIRECTED THE ASSESSEE TO MAKE THE PAYMENT OF RS.10.00 LAKHS FROM THE SALE PROCEEDS OF A SCHEDULE PROPERTY AT THE TIME OF EXECUTION AND REGISTRATION OF SALE DEED FROM AND OUT OF HIS S HARE OF 60% OF THE SALE PROCEEDS. AS PER THE COURT ORDER, THE PROPERTIES WERE SHARED BETWEEN MR.CHANDRASEKHARAN & MR.DHANASEKHARAN @ 60% & 40% S UBJECT TO PAYMENT OF RS.10.00 LAKHS BY THE ASSESSEE TO HIS BR OTHER MR.V.DANASEKHARAN. SINCE, THE COURT HAS DIRECTED T O MAKE THE PAYMENT FROM THE A SCHEDULE PROPERTIES (MENTIONED IN SCHE DULE A I.E. THE PROPERTY WHICH WAS SOLD) THE PAYMENT, DUE TO MR.DAN ASEKHARAN REQUIRED ITA NO.1193/MDS/2016 :- 9 -: TO BE MADE AS AND WHEN THE PROPERTY WAS SOLD FAILIN G WHICH THE ASSESSEE MAY BE CONTEMPTING THE COURT ORDER. THEREFORE, TH E PAYMENT MADE TO MR.DHANASEKHARAN FROM THE SALE PROCEEDS REQUIRED TO BE ALLOWED AS A DEDUCTION IN THE HANDS OF THE ASSESSEE. ACCORDINGL Y, WE HOLD THAT THE PAYMENT MADE TO MR.DHANASEKHARAN AMOUNTING TO RS.3, 10,945/- IS ALLOWABLE DEDUCTION AND THE ADDITION MADE BY THE AO IS DELETED AND THE ORDER OF THE LD.CIT(A) IS SET ASIDE. GROUND NOS.5 T O 8 OF THE ASSESSEE ARE ALLOWED. 9.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 31 ST JANUARY, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. '* < /GF