AJIT INDIA ( MADRAS) P. LTD, MUMBAI V. ITO 6(1)(2), MUMBAI

ITA 1209/MUM/2012

• Counselvise Citation: 120919914 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 22-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: MOHSIN H CONTRACTOR
• Keywords: Fair market value

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM) .. , , ./I.T.A. NO.1209/MUM/2012 ( / ASSESSMENT YEAR : 2001-02) AJIT INDIA (MADRAS)P. LTD. ATUR HOUSE, 1 ST FLOOR, 87, DR.A B ROAD, WORLI NAKA, MUMBAI-400018 / VS. INCOME TAX OFFICER 6(1)(2), AAYAKAR BHAVAN, M K ROAD, CHURCHGATE MUMBAI-400020. ( ! / APPELLANT) .. ( '# ! / RESPONDENT) ./ $% ./PAN/GIR NO. :AAACA8776E ! & / APPELLANT BY : SHRI MOHSIN H CONTRACTOR '# ! ' & /RESPONDENT BY : SHRI PITAMBAR DAS ( ) ' *+ / DATE OF HEARING : 6.8.2014 ,- ' *+ /DATE OF PRONOUNCEMENT : 20.8.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 07.10.2010 PASSED BY LD CIT(A)-14, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2001-02. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE AMOUNT OF THE FAIR MARKET VALUE AS ON 1.4.1981 DETE RMINED BY THE AO FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE STATED IN BRIEF. THE ASSESSEE WAS ALLOTTED A PIECE OF LAND ADMEASURING 0 .50 ACRES IN AN INDUSTRIAL ESTATE LOCATED IN CHENNAI BY TAMILNADU SMALL INDUST RIES DEVELOPMENT I.T.A. NO.1209/MUM/2012 2 CORPORATION LTD IN THE YEAR 1979 AT A COST OF RS.27 ,500/-. THE ASSESSEE OBTAINED ASSIGNMENT OF LAND BY PAYING 50% OF THE CO ST ON 23.02.1979. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD THE ABOVE SAID INDUSTRIAL LAND FOR A SUM OF RS.1.55 CRORES. WHILE COMPUTING THE CAPIT AL GAIN, THE ASSESSEE ADOPTED THE FAIR MARKET VALUE AS ON 1.4.1981 AT RS. 25.00 LAKHS. THE ASSESSEE CLAIMED THAT IT HAD SPENT MONEY ON IMPROVEMENT OF T HE LAND ALSO. HOWEVER, IT DID NOT FURNISH ANY DOCUMENT TO SUBSTANTIATE THE SA ID CLAIM. THE AO MADE ENQUIRIES WITH THE TAMILNADU SMALL INDUSTRIES DEVEL OPMENT CORPORATION LTD TO ASCERTAIN THE MARKET VALUE AS ON 1.4.1981. THE ABO VE SAID COMPANY WROTE A LETTER DATED 04.03.2004 TO THE AO, WHEREIN IT STATE D THAT THE LAND COST AT INDUSTRIAL ESTATE, GUINDY FOR THE YEAR 1981-82 WAS RS.1.35 LAKHS PER ACRE. ACCORDINGLY, THE AO ADOPTED THE FAIR MARKET VALUE OF THE IMPUGNED PROPERTY AT RS.67,500/- AS ON 1.4.1981 AND ACCORDINGLY COMPUTED THE CAPITAL GAIN. THE ORDER OF THE AO WAS CONFIRMED BY LD CIT(A). HOWEVER , IN THE APPEAL FILED BEFORE THE ITAT, THE TRIBUNAL EXPRESSED THE VIEW THAT THE AO SHOULD HAVE REFERRED THE MATTER OF VALUATION TO THE DVO FOR ASCERTAINING THE FAIR MARKET VALUE. ACCORDINGLY, THE TRIBUNAL SET ASIDE THE MATTER TO T HE FILE OF THE AO FOR EXAMINING THE ISSUE AFRESH. 4. IN THE SET ASIDE PROCEEDINGS, THE AO REFERR ED THE MATTER OF VALUATION TO THE DVO, WHO DETERMINED THE FAIR MARKET VALUE AT RS .44,000/-. ACCORDINGLY, THE AO RECOMPUTED THE CAPITAL GAIN BY ADOPTING THE FAIR MARKET VALUE AS ON 1.4.1981 AT RS.44,000/-. THE LD CIT(A) CONFIRMED T HE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. I.T.A. NO.1209/MUM/2012 3 5. THE LD COUNSEL APPEARING ON BEHALF OF THE AS SESSEE SUBMITTED THAT THE DVO HAS DETERMINED THE FAIR MARKET VALUE WITHOUT DU LY CONSIDERING THE VARIOUS MATERIALS PLACED BEFORE HIM AND ALSO WITHOUT CONSID ERING THE SUBMISSIONS MADE BEFORE HIM. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD OBTAINED A VALUATION CERTIFICATE FROM A REGISTERED VALUER, WHO HAD DETER MINED THE FAIR MARKET VALUE OF THE IMPUGNED PROPERTY AS ON 1.4.1981 AT RS.21,60,00 0/-. HE SUBMITTED THAT THE REGISTERED VALUER HAS CONSIDERED THE NATURE OF THE LAND, ITS ADVANTAGES, THE GUIDE LINE VALUE FIXED BY THE STATE GOVERNMENT FOR COLLECTING STAMP DUTY ETC. AND ACCORDINGLY DETERMINED THE FAIR MARKET VALUE. HE FURTHER SUBMITTED THAT THE DVO, ON THE CONTRARY, DID NOT FURNISH ANY BASIS FOR DETERMINING THE FAIR MARKET VALUE AS ON 1.4.1981 AT RS.44,000/-. HE SUBMITTED THAT THE GUIDE LINE VALUE FIXED BY THE STATE GOVERNMENT FOR THE PURPOSE OF CO LLECTING STAMP DUTY WAS RS.1,20,000/- PER CENT AS ON 1.4.1981. HE FURTHER SUBMITTED THAT THE PREVAILING MARKET VALUE OF THE IMPUGNED PROPERTY WAS MORE THAN THE ABOVE SAID AMOUNT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS CARRIED OUT IMPROVEMENT IN THE LAND BY WAY LEVELING, FORMING APPROACH ROAD, MAKING DRAI NAGE AND WATER SUPPLY ARRANGEMENTS, INSTALLATION OF ELECTRICITY POLLS AND CONSTRUCTION OF COMPOUND WALL. HE SUBMITTED THAT THE DVO DID NOT TAKE INTO ACCOUNT THE IMPROVEMENTS MADE BY THE ASSESSEE. ACCORDINGLY, THE LD A.R SUBMITTED TH AT THE VALUE DETERMINED BY THE REGISTERED VALUER BE ADOPTED AS THE FAIR MARKET VALUE AS ON 1.4.1981. 6. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSING OFFICER HAS ADOPTED THE VALUE DETERMINED BY THE DVO AND THE DVO HAS DETERMINED THE FAIR MARKET VALUE AS ON 1.4.1981 AT RS.44,000/- BY CONDU CTING INSPECTION OF THE PROPERTY AND MAKING NECESSARY ENQUIRIES. HE FURTHE R SUBMITTED THAT THE DVO I.T.A. NO.1209/MUM/2012 4 HAS ALSO CONSIDERED THE OBJECTIONS OF THE ASSESSEE. ACCORDINGLY, THE LD D.R CONTENDED THAT THE LD CIT(A) WAS JUSTIFIED IN CONFI RMING THE ASSESSMENT ORDER, WHEREIN THE VALUE DETERMINED BY THE DVO HAS BEEN AD OPTED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE H AD PURCHASED THE IMPUGNED LAND PRIOR TO 1.4.1981 AND HENCE IT IS ENTITLED TO ADOPT THE FAIR MARKET VALUE AS ON 1.4.1981 (HEREINAFTER FMV) AS ITS COST FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAD ADOPTED THE FMV AT RS.67,500/-. HOWEVER, IN THE IMPUGNED SET ASIDE PR OCEEDINGS, THE AO ADOPTED THE RATE OF RS.44,000/- DETERMINED BY THE DVO. HOW EVER, A PERUSAL OF THE REPORT GIVEN BY THE DVO WOULD SHOW THAT THE SAID RE PORT IS VERY MUCH BALD WITHOUT GIVING ANY BASIS OR AUTHORITY. FOR THE SAK E OF CONVENIENCE, WE EXTRACT BELOW RELEVANT OBSERVATIONS MADE BY THE DVO IN HIS REPORT:- ..THE PROPERTY WAS INSPECTED BY THE THEN DISTRICT VALUATION OFFICER ON 10.3.2008 & 15.5.2008 AND INSPECTED BY ME ON 3-9-20 09 MARKET ENQUIRIES WERE MADE ON VARIOUS DATES. WHEREAS A PRELIMINARY ORDER WAS ISSUED TO M/S AJIT INDIA (MADRAS) PVT LTD, HAMID BUILDINGS, NO.191, MOUNT ROAD, CHENNAI 6 00 006 VIDE F NO. DVO/MDS/CG(27)/2008-09 DATED 9.6.2009, ASSESSEE BY THE THEN DISTRICT VALUATION OFFICERS PROPOSAL TO ESTIMATE THE FAIR M ARKET VALUE OF THE PROPERTY AT RS.44,000/- (RUPEES FORTY FOUR THOUSAND ONLY) AS ON 01-04- 1981 IN RESPECT OF THE ABOVE PROPERTY. THE ASSESSEE HAS SUBMITTED HIS OBJECTION VIDE LETTE R NO. NIL DATED 7.7.2009 FOR THE PRELIMINARY ORDER ISSUED BY THIS O FFICE. HAVING CONSIDERED THE OBJECTIONS AND EVIDENCES PROD UCED BY THE ASSESSEE AND TAKING INTO ACCOUNT ALL RELEVANT MATERIALS GATH ERED BY ME, THE FAIR MARKET VALUE OF THE PROPERTY AT PLOT NO.45 (NP), SI DCO DEVELOPED PLOT ESTATE, GUINDY, CHENNAI 32, MAMBALAM, GUINDY TALU K, ADAYAR VILLAGE AT RS.44,000/- AS ON 1.4.1981 AS PER ANNEXURE A ENCL OSED. I.T.A. NO.1209/MUM/2012 5 ANNEXURE PROPERTY:- SITUATED AT PLOT NO.45, GUINDY INDUSTRI AL ESTATE, CHENNAI. ASSESSEE : M/S AJIT INDIA (MADRAS) PVT LTD, HAMID BUILDINGS, NO.191, MOUNT ROAD, CHENNAI 600 006. LAND COST OF 21780 SQ. FT. @ RS. 2/SQ.FT. = RS .43,560/- SAY RS.44,000/- IT IS PERTINENT TO NOTE THAT THE SIDCO, WHICH DEVEL OPED THE INDUSTRIAL ESTATE, ITSELF HAS WRITTEN TO THE ASSESSING OFFICER, VIDE I TS LETTER DATED 04-03-2004, THAT THE LAND COST FOR THE YEAR 1981-82 WAS RS.1.35 LAKH S (I.E. RS.67,500/- FOR THE IMPUGNED LAND). HENCE THE MARKET VALUE OF RS.44,00 0/- DETERMINED BY THE DVO IS LIABLE TO BE REJECTED, SINCE THE DVO HAS FAILED TO GIVE ANY BASIS AND FURTHER THE SAID VALUE IS VERY MUCH LOWER THAN THE VALUE ADOPTE D BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THAT TOO ON THE BASIS OF LE TTER GIVEN BY SIDCO. 8. THE PLOTS DEVELOPED BY SIDCO HAS BEEN ALLOT TED TO THE ASSESSEE AND IT IS IN THE COMMON KNOWLEDGE THAT THE PLOTS ALLOTTED UND ER GOVERNMENT SCHEMES ENJOY HIGHER MARKET VALUE, SINCE THE PRICE OF SUCH KIND OF PLOTS ARE FIXED AT A LOWER RATE TO ACHIEVE THE GOVERNMENTS OBJECTIVES. THIS FACT IS VERY MUCH EVIDENT WHEN WE CONSIDER THE GUIDE LINE VALUE FIX ED BY THE STATE GOVERNMENT FOR THE PURPOSE OF COLLECTING STAMP DUTY UNDER THE REGISTRATION ACT. THE ASSESSEE HAS WRITTEN A LETTER DATED 01-11-2004 TO T HE CONCERNED SUB REGISTRAR SEEKING THE AMOUNT OF GUIDE LINE VALUE FIXED FOR TH E IMPUGNED PROPERTY. THE SUB-REGISTRAR HAS CERTIFIED THAT THE GUIDE LINE VAL UE AS ON 1.4.1981 FOR THE IMPUGNED PROPERTY WAS RS.1,20,000/- PER GROUND. ON E GROUND CONSISTS OF 2400 SQ. FT. THE IMPUGNED PROPERTY IS HAVING AN EXTENT OF 21780 SQ. FT. HENCE THE GUIDE LINE VALUE OF THE IMPUGNED PROPERTY IS RS.1,2 0,000 X 21780/ 2400 = RS.10,89,000/-. I.T.A. NO.1209/MUM/2012 6 9. THERE SHOULD NOT BE ANY DISPUTE THAT THE FAIR MARKET VALUE HAS TO BE DETERMINED BY CONSIDERING VARIOUS FACTORS. TO PUT IT IN SIMPLE TERMS, THE FAIR MARKET VALUE IS NOTHING BUT A PRICE THAT MAY BE AGR EED BETWEEN A WILLING PURCHASER AND A WILLING SELLER. THE FAIR MARKET VAL UE IS NOT A CONSTANT FIGURE. IT MAY DIFFER DEPENDING UPON THE CIRCUMSTANCES AND FAC TORS WHICH ARE NECESSARILY TO BE CONSIDERED. IT IS WELL SETTLED PRINCIPLES OF LAW THAT THE FAIR MARKET VALUE WOULD DEPEND UPON VARIOUS FACTORS SUCH AS LOCATION OF THE PROPERTY, EXTENT OF THE PROPERTY, INFRASTRUCTURES AVAILABLE AROUND THE LOCALITY, ACCESS TO THE INFRASTRUCTURE FROM THE LAND IN QUESTION, THE GUIDE LINE VALUE FIXED BY THE GOVERNMENT FOR SALE OF THE PROPERTY, COMMERCIAL IMP ORTANCE, ETC. 10. IN THIS CASE, THE ASSESSING OFFICER HAS SIM PLY ADOPTED THE VALUE DETERMINED BY THE DVO. WE HAVE ALREADY NOTICED THA T THE REPORT GIVEN BY THE DVO IS LIABLE TO BE REJECTED. ON THE CONTRARY, WE HAVE SEEN THAT THE GUIDE LINE VALUE AS ON 1.4.1981 FIXED BY THE STATE GOVERNMENT FOR THE IMPUGNED PLOT WAS RS.10,89,000/-. THE OTHER FACTORS SUCH AS AVAILAB LE INFRASTRUCTURE, ACCESS TO THE INFRASTRUCTURE, COMMERCIAL IMPORTANCE ETC. ALSO NEE D TO BE TAKEN INTO CONSIDERATION. THE ASSESSEE HAS ALSO CLAIMED TO H AVE CARRIED OUT CERTAIN IMPROVEMENTS, WHICH WILL INCREASE THE COMMERCIAL VA LUE OF THE LAND. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE FAIR MARKET VALUE FIXED BY THE ASSESSING OFFICER AT RS.44,000 IS VERY LOW. WE NOT ICE THAT THE REGISTERED VALUER HAS DETERMINED ALMOST THE DOUBLE THE AMOUNT OF GUID E LINE VALUE, WHICH ALSO APPEARS TO BE ON THE HIGHER SIDE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AFTER TAKING INTO CONSIDERATION THE COMMERCIAL IMPO RTANCE OF THE PROPERTY AND I.T.A. NO.1209/MUM/2012 7 THE INFRASTRUCTURES AVAILABLE, THE ENDS OF JUSTICE WOULD BE MET IF THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 IS ADOPTED BY INCREASING THE GUIDE LINE VALUE BY 25% AND THE SAME WORK OUT TO RS.13,61,250/ - (RS.10,89,000/- X 1.25). ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ESTIMATE THE FAIR MARKET VAL UE OF THE IMPUGNED PROPERTY AS ON 01-04-1981 AT RS.13,61,250/- AND COMPUTE THE CAP ITAL GAIN ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20TH AUG , 2014. ,- ( . / 0 20TH AUG, 2014 - ' 1) 2 SD SD ( / VIVEK VARMA) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( ) MUMBAI: 20TH AUG,2014. . . ./ SRL , SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. ( 4* ( ) / THE CIT(A)- CONCERNED 4. ( 4* / CIT CONCERNED 5. 51 '* 6 , + 6 , ( ) / DR, ITAT, MUMBAI CONCERNED 6. 17 8) / GUARD FILE. 9 ( / BY ORDER, TRUE COPY : $ (ASSTT. REGISTRAR) + 6 , ( ) /ITAT, MUMBAI