Appeal details
Counselvise Citation
[2010] 135 COUNSELVISE.COM (IT) 3369 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-09-2010
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2005-2006
Appeal Filed On
11-12-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH : 'B , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM ITA NO. 1568/PN/2008 AND 1329/PN/2009 A.Y. 2005-06 AND 2007-08 SATHE BISCUIT AND CHOCOLATE LTD., SATHE MEMORIAL COMPLEX, 820 BHAWANI PETH, PUNE-411 042. PAN AACCT 3593 Q . APPELLANT VS. ITO WARD 2 (CIB) PUNE . RESPONDENT APPELLANT BY : SHRI SUNIL PATHAK RESPONDENT BY : SHRI A.S. SINGH ORDER PER SHAILENDRA KUMAR YADAV JM BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE, S O THEY ARE BEING DISPOSED OFF BY THIS COMMON ORDER FO R THE SAKE OF CONVENIENCE. ITA NO. 1568/PN/2008 FOR A.Y. 2005-06 2. THE A.O FOUND THAT THE ASSESSEE HAS SOLD TWO PROPERTIES DURING THE YEARS UNDER CONSIDERATION AS UNDER: ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 2 SR.NO. PARTICULARS OF THE PROPERTY AREA IN SQ.MTRS. DATE OF SALE CONSIDERATION RS. 1. SURVEY NO. 44 HISSA NO. 1/A 19324 1-4- 2004 72800000 2. SURVEY NO. 44 HISSA NO. 1/A 27298 28-3- 2005 160000000 WITH REGARDS TO ISSUE OF THE CAPITAL GAINS ON SALE OF ABOVE LAND, THE ASSESSEE COMPANY FILED DETAILS WHEREBY LO SSES IN THE YEAR WERE ESTIMATED AT RS. 17,93,93,090 BY T HE ASSESSEE INCLUDING LONG TERM CAPITAL LOSS OF RS. 5,39,25,300/-. ASSESSEE ADOPTED VALUE OF PROPERTY IN QUESTION AT RS. 1230/- PER SQ. MTR AS ON 1-4-1981 F OR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE ASSESSE E WAS ASKED TO FURNISH NECESSARY DOCUMENTARY EVIDENCES IN SUPPORT OF THE VALUE OF THE PROPERTY ADOPTED AS ON 1-4- 1981 AT RS. 1230/- PER SQ.MT. IN RESPONSE TO SAME, THE ASSESSEE COMPANY FILED A COPY OF VALUATION REPORT D ATED 18-12-2003 WHICH WAS PREPARED BY A REGISTERED VALUE R SHRI Y.S. PATHAK WHEREIN FAIR MARKET VALUE HEREINAF TER CALLED FMI AS ON 1-4-1981 WAS TAKEN AT RS. 1230/- P ER SQ. MTR. IN ORDER TO VERIFY THE COST OF ACQUISITIO N OF LAND ADOPTED BY THE ASSESSEE AT RS. 1230/- PER SQ. MTR. AS ON 1-4-1981 THE A.O OBTAINED FROM THE OFFICE OF THE CONCERNED JOINT SUB-REGISTRAR CERTIFIED COPIES OF ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 3 FOLLOWING SALE INSTANCES AT DHANORI REGISTERED IN T HE YEAR 1981. 1. CONVEYANCE DEED DATED 1-2-1980 (REGISTERED IN 1981) BETWEEN SHRI ARUNAK PIYUSH OIWAN (VENDOR) AND SHRI SUBEDAR MAJOR KARAM SINGH, SHRI MANJEET SINGH (VENDEES) WITH REGARDS TO LAND BEARING SURVEY NO. 33/1/3/1/2 PLOT NO. 15, DHANORI ADMEASURING 591.11 SQ. MTRS CONSIDERATION RS. 9000 AT RS. 15.23 PER SQ. MT. 2. SALE DEED DATED 20-8-1979 (REGISTERED IN 1981) BETWEEN MADHAVAN PILLAI (CONSTITUTED ATTORNEY OF SHRI K.G.K. NAIR OWNER OF PLOT) AND SMT. KAMAT BHATTACHARYA (PURCHASER), SURVEY NO. 33/2 PLOT NO. 17 DHANORI ADMEASURING 480 SQ. MTRS FOR RS. 3000 AT RS. 6.25 PER SQ. MTRS. 3. SALE DEED DATED 25-8-1980 (REGISTERED IN 1981) BETWEEN 'SUDHAKAR GANESH GAME (1/4 SHARE) AND OTHERS AND PRABHAKAR CHANGIA KOLI, SURVEY NO. 51, PLOT NO. 173 DHANORI, ADMEASURING 117 SQ. MTRS (OUT OF 468.1 SQ. MTRS) FOR RS. 1000/- AT 8.54 PER SQ. MTRS. ' 3. AS AGAINST THE ABOVE SALE INSTANCES, THE REGISTE RED VALUER IN HIS REPORT DATED 18-12-2003 ADOPTED THE L AND RATE FOR COST OF ACQUISITION AS ON 1-4-1981 AT RS. 1230/- PER SQ. MTR. OBSERVED BY A.O. 4. THE A.O ALSO OBTAINED A COPY OF READY RECKONER A ND CIRCULAR DATED 3-10-1989 FROM THE JT. SUB-REGISTRAR , PUNE AND OBSERVED THAT THE READY RECKONER RATES FOR STAMP VALUATION HAVE BEEN NOTIFIED W.E.F. 1989 ONLY AND AS PER THE CIRCULAR DATED 3-10-1090 THE VALUE OF LA ND IN ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 4 THE YEAR 1981 WILL BE 40% OF THE VALUE IN 1989 I.E. 40% OF RS. 1000/- PER SQ. MTR, WHICH COMES TO RS. 400/- PE R SQ MTR ONLY. THE A.O ALSO OBSERVED THAT IN THE YEAR 19 81 THE RATE OF LAND AT DHONORI VILLAGE WHICH WAS OUTSIDE T HE MUNICIPAL CORPORATION WAS NOT SO HIGH. 5. THE A.O CONCLUDED THAT THAT THE SALE INSTANCES A ND RECKONER RATES CLEARLY INDICATED THE ABNORMAL RATE ADOPTED BY THE VALUER FOR VALUATION OF THE SAID LAN D AS ON 1-4-1981. ON PERUSAL OF THE VALUATION REPORT OF REGISTERED VALUER, THE A.O FOUND THAT THE VALUATION HAS BEEN DONE BY LAND AND BUILDING METHOD WHICH IS NOT APPLICABLE TO THE LAND IN QUESTION. HE ALSO NOTICE D THAT NO COMPARABLE SALE INSTANCES WERE CITED BY THE VAL UER WHILE ESTIMATING THE VALUE OF THE LAND AS ON 1-4-19 81. 6. ON BEING QUESTIONED, THE REGISTERED VALUER SHRI Y.S. PATHAK STATED THAT THAT THE LAND AND BUILDING METHO D FOR VALUATION AS ON 1989 HAS BEEN ADOPTED AS THERE WAS A STRUCTURE ON THE SAID LAND AND THEREFROM THE COST O F CONSTRUCTION HAS BEEN REDUCED T ARRIVE AT THE COST OF LAND IN 1989, WHICH HAS BEEN FURTHER REDUCED TO 40% TO A RRIVE AT THE VALUE OF THE LAND AT RS. 1230/- PER SQ. MTRS AS ON 1-4-1981. AS PER THE REPLY TO QUESTION NO. 3, THE RECKONER RATES FOR RESIDENTIAL FLATS, UPPER FLOOR O FFICE AND COMMERCIAL AREA ON GROUND FLOOR WERE TAKEN AT RS. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 5 3000/- PER SQ. MTR, RS. 5,000/- PER SQ. MTRS AND RS . 6500/- PER SQ. MTRS RESPECTIVELY AND THE AVERAGE RA TE OF BUILDING WAS WORKED OUT TO RS. 4833/- PER SQ. MTRS WHICH WAS ENHANCED AT 15% TO ARRIVE AT THE MARKET R ATE OF RS. 5558 PER SQ. MTRS. FROM THIS AVERAGE RATE, T HE VALUE OF COST OF CONSTRUCTION AT A LUMP SUM RATE OF RS. 2500 PER SQ. MTR WAS REDUCED FROM THE CONSOLIDATED RATE OF LAND AND BUILDING TO ARRIVE AT THE RATE OF LAND AS ON 1989 AT RS. 3058 PER SQ. MTRS THIS RATE WAS REDUCED TO 40% TO ARRIVE AT THE RATE OF LAND AT RS. 1230 PER S Q. MTR AS ON 1-4-1981. 7. THE METHOD OF VALUATION ADOPTED BY THE REGD. VALUER WAS FOUND BY THE A.O TO BE UNREALISTIC AND WITHOUT ANY SCIENTIFIC BASIS FOR THE REASONS SET OU T BELOW. '(A) THE VALUER STATED THAT THE STRUCTURE ON THE LAND WAS IN A DILAPIDATED CONDITION BUT COULD NOT EXPLAIN AS TO WHY THE RATE OF BUILDING HAS BEEN ADOPTED AT RECKONER RATES, WHICH ARE APPLICABLE TO NEW BUILDINGS AND NOT TO DILAPIDATED BUILDING WHICH WAS CONSTRUCTED IN THE YEAR 1959-60 AND WHICH HAD HARDLY ANY VALUE. (B) FOR THE PURPOSE OF ARRIVING AT THE RATE OF LAN D AND BUILDING AS ON 1989, THE VALUER HAD ADOPTED THE LAND AND BUILDING RATES FOR RESIDENTIAL STAFF QUARTERS AND, FACTORY SHED WHOSE AREA IS ONLY 6100.45 SQ. MTRS. AS MENTIONED IN THE ORDER U/S 8(4) OF LAND CEILING ACT DATED 26-3-2004 AGAINST THE TOTAL LAND AREA OF 103750.42 SQ. MTR IN SURVEY NO. 44 AND 45. THUS, THE CONSTRUCTED AREA WAS ONLY 5.87% OF THE TOTAL LAND AREA. MOREOVER ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 6 THE BUILDINGS WERE VERY OLD, DILAPIDATED AND ORDINARY TYPE, CONSTRUCTED IN THE YEAR 1959-60 WHICH HAD HARDLY ANY VALUE. EVEN IN THE SALE AGREEMENT, THERE WAS NO ASSIGNMENT OF ANY SALE CONSIDERATION TO THESE STRUCTURES. THE PURCHASER HAD DEMOLISHED THE SAID BUILDING TO DEVELOP THE LAND, WHICH FURTHER SUGGESTED THAT THE STRUCTURE, WAS OF NO VALUE. THE BUILDING WAS THEREFORE, INSIGNIFICANT IN TERMS OF AREA AS WELL AS VALUE AND APPLYING THE AVERAGE RATES OF BUILDINGS TO LAND AS PER SE WOULD GIVE AN UNREALISTIC AND DISTORTED VALUATION OF LAND. HENCE, THE LAND AND BUILDING METHOD ADOPTED BY THE VALUER WAS UNREALISTIC AND INCORRECT AND THE REGD. VALUER DID NOT DIFFERENTIATE BETWEEN OLD STRUCTURES AND NEW STRUCTURES WHILE APPLYING THE RECKONER RATES. (C) THE VALUER ADOPTED RECKONER RATES FOR LAND AND BUILDING OF GROUND FLOOR, UPPER FLOOR COMMERCIAL AND RESIDENTIAL QUARTERS FOR TAKING AVERAGE RATE BUT IN THE STATEMENT, HE ADMITTED THAT THERE WAS NO UPPER FLOOR. HENCE THE RATES ADOPTED BY VALUER WERE ON HYPOTHETICAL BASIS I.E. FOR BUILDING ON UPPER FLOOR THAT WAS NEVER IN EXISTENCE. MOREOVER, AS MENTIONED ABOVE, THE RECKONER RATES OF 1989 WERE FOR NEW BUILDINGS AND NOT FOR THE CONSTRUCTIONS MADE AS OLD AS ON 1959. (D) THE BUILDINGS WERE SITUATED IN VILLAGE DHANORI, WHICH WAS OUTSIDE PMC LIMITS IN 1981 WHEREAS THE RATES APPLIED BY THE VALUER WERE FOR LAND AND BUILDING CONSTRUCTED WITHIN MUNICIPAL LIMITS. (E) THE VALUER HAD ADOPTED THE COST OF CONSTRUCTION AT RS. 2500/- PER SQ. MTRS WHILE DEDUCTING THE VALUE OF THE BUILDING FROM THE ESTIMATED VALUE OF THE PROPERTY BY LAND AND BUILDING METHOD. THERE WAS NO BASIS FOR ADOPTING COST OF CONSTRUCTION AT RS. 2500/- PER SQ. MTRS PARTICULARLY WHEN THE BUILDING WAS STATED TO BE OLD FACTORY BUILDING AND RESIDENTIAL QUARTERS CONSTRUCTED IN THE YEAR 1959 TO 1962 AND IN A DILAPIDATED CONDITION. (F) THE A.O ALSO NOTED THAT THE RATES ADOPTED BY THE VALUER WERE FOR THE NEW COMMERCIAL RCC BUILDINGS WHEREAS THE BUILDING IN THE CASE OF ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 7 THE ASSESSEE WAS MERELY A FACTORY SHED WITH AC SHEET ROOFING WHICH BY NO MEANS WAS COMPARABLE. (G) THE VALUER ALSO INCREASED THE AVERAGE RATE, WHICH ITSELF AS MENTIONED ABOVE WAS UNREALISTIC BY ANOTHER 15% ON THE GROUND THAT GENERALLY THE MARKET RATES ARE SLIGHTLY HIGHER THAN THE RATES OF READY RECKONER. FOR THIS ALSO, THERE WAS NO BASIS IN THE VALUATION REPORT NOR DID THE VALUER REFER TO ANY COMPARABLE CASES TO ARRIVE AT SUCH CONCLUSION. ACCORDING TO THE A.O, IT WAS AN ARBITRARY FIGURE TO NOTIONALLY ENHANCE THE VALUE OF THE PROPERTY. (H) THE VALUER WAS ALSO INFORMED BY THE A.O ABOUT THE SALE INSTANCES COLLECTED BY THE DEPARTMENT AND WAS ASKED WHY HE HAD NOT TAKEN INTO CONSIDERATION THE SALE INSTANCES OF NEARBY LAND FROM OFFICE OF SUB-REGISTRAR BEFORE, ARRIVING AT THE LAND VALUE AT RS. 1230/- PER SQ. MTRS AS ON 1-4-1981. IT WAS ADMITTED BY THE VALUER THAN HE DID NOT REFER TO ANY ACTUAL SALE INSTANCE EITHER OF 1981 OR OF 1989 TO SUPPORT THE VALUATION OF LAND DONE BY HIM BY LAND AND BUILDING METHOD APPLYING RECKONER RATES. (I) THE A.O WAS OF THE VIEW THAT THE LAND AND CONSTRUCTED AREAS SHOULD HAVE BEEN VALUED SEPARATELY. IN HIS OPINION, THE BETTER OPTION TO KNOW THE COST OF CONSTRUCTION OF RESIDENTIAL AND FACTORY BUILDINGS WOULD HAVE BEEN TO KNOW THE WDV OF THE BUILDING FROM THE BOOKS OF THE ASSESSEE COMPANY AND ONLY THE LAND SHOULD HAVE BEEN VALUED AS PER THE GOVT. RATES OR ACTUAL SALE INSTANCES INSTEAD OF ADOPTING THE LAND AND BUILDING METHOD. ' IN VIEW OF THE ABOVE FACTS, THE A.O HELD THAT THE VALUATION HAS BEEN DONE BY THE VALUER WITHOUT PROPE R BASIS AND BY METHODS, WHICH DO NOT YIELD REALISTIC VALUE OF LAND AS ON 1-4-1981 SO DETERMINED WAS GROSSLY O VER STATED. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 8 8. DURING ASSESSMENT PROCEEDINGS, THE CERTIFIED COP IES OF THREE SALE INSTANCES REGISTERED 1981 IN RESPECT OF LAND AT DHANORI OBTAINED BY THE A.O FROM THE JT. SUB- REGISTRAR HAVELI 2, PUNE WERE GIVEN TO THE ASSESSEE COMPANY ON FOR ITS EXPLANATION/COMMENTS THEREON IN RESPONSE TO WHICH THE ASSESSEE COMPANY RAISED FOLLO WING CONTENTIONS VIDE ITS LETTER DATED 11-12-2007. THE INSTANCES OF SALE TRANSACTIONS QUOTED AND REFERRED BY YOUR OFFICE ARE NOT AT ALL COMPARABLE T O OUR CASE AND HENCE CAN NOT BE RELIED. 1. THE INSTANCES QUOTED BY YOU ARE RELATED TO VERY SMALL SIZE OF PLOT. 2. THE PLOTS ARE UNDEVELOPED AND UNSANCTIONED; 3. PLOTS ARE SUBJECT TO PERMISSIONS UNDER ULCA TOWN PLANNING. 4. SANCTION LAYOUT / PLAN IS NOT AVAILABLE 5. PLOTS ARE NOT DEMARKED, ZONING NOT MENTIONED. 6. CONVEYANCE DOCUMENTS ARE EXECUTED IN HAPHAZARD MANNER WITHOUT CLARIFY REGARDING PLOT LOCATION, PLOT IDENTIFICATION NUMBER, LENGTH, AND WIDTH SIZE, ACCESS ROAD AND LAKH OF WATER DRAINAGE, ELECTRICITY AND OTHER INFRASTRUCTURES FACILITIES. 7. THE PLOTS ARE NOT SPECIFICALLY SUB DIVIDED BUT HAS BEEN APPORTIONED FROM THE LARGER LAND AREA HELD BY THE VENDOR AND HENCE THE EXACT LOCATION IS UNCLEAR. 8. ZONING OF PLOT IS NOT CLEAR (I.E. WHETHER AGRICULTU RE, RESIDENTIAL, INDUSTRIAL ZONE). IN COMPARISON, THE LAND OWNED BY COMPANY IS FULLY DEVELOPED, FALLING UNDER RESIDENTIAL, COMMERCIAL AN D INDUSTRIAL ZONE, TOTALLY CONVERTED LAND, ALL. SANCT IONS, PERMISSIONS ARE IN PLACE, ALL THE AMENITIES LIKE DRAINAGE, WATERLINE, ELECTRICITY, DEMARCATIONS, AND ACCESS ROADS ARE IN PLACE. THE TOTAL AREA OF THE LA ND IS ABOUT 26 ACRES AVAILABLE FOR RESIDENTIAL AND ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 9 COMMERCIAL DEVELOPMENT. THERE ARE NO COMPARABLE SALE INSTANCES AND HENCE THE METHOD OF VALUATION ADOPTED BY THE VALUER IS THE ONLY CORRECT AND PROPE R METHOD TO ARRIVE AT THE FAIR MARKET VALUE OF THE LA ND AS ON 1-4-1981 (I.E. VALUATION RATE QUOTED UNDER READY RECKONER FOR THE YEAR 1989 FOR THE PURPOSE OF VALUA TION OF DEVELOPED PLOT WITH REFERENCE TO VALUATION FOR RESIDENTIAL AND COMMERCIAL BUILDING). THE COMPETENT AUTHORITY ISSUED A CIRCULAR FOR VALUI NG THE FAIR MARKET VALUE AS ON 1-4-1981WITH REFERENCE TO READY RECKONER VALUATION FOR 1989. THE COMPETENT AUTHORITY REALIZED THE DIFFICULTIES TO ARRIVE AT TH E FAIR MARKET VALUE OF THE PROPERTIES AS ON 1-4-1981 FOR W ANT OF COMPARABLE INSTANCES. HENCE TO VALUE THE PROPER TY RELYING ON THE INCOMPARABLE INSTANCES IS NOT CORREC T. THE INSTANCES QUOTED AND REFERRED BY YOU ARE OF NO VALUE AND NOT AT ALL COMPARABLE AND HENCE CANNOT BE RELIED TO ARRIVE AT THE FAIR MARKET VALUE OF THE LA ND AS ON 1-4-1981. VALUATION METHOD THE REGISTERED GOVERNMENT VALUER CORRECTLY VALUED T HE LAND AS ON 1-4-1981 BY DISCOUNTING AT 60% THE FAIR VALUE OF DEVELOPED, SANCTIONED AND CLEARED PLOT AS PER THE READY RECKONER OF 1989. THE COMPETENT AUTHORITY WERE ALSO OF THE OPINION TH AT THE FAIR MARKET VALUE OF THE LAND WERE NOT UNIFORML Y AVAILABLE AND THERE WAS TOTAL AMBIGUITY AND UNCERTAINTY TO ARRIVE AT THE FAIR MARKET VALUE AS O N 1- 4-1981 HENCE THE COMPETENT AUTHORITY CAME OUT WITH THE CIRCULAR TO COMPUTE THE FAIR MARKET VALUE AS ON 1- 4-1981 BASED ON VALUATION WITH REFERENCE TO READY RECKONER FOR THE YEAR 1989. AS PER THE READY RECKONER CHART 1989 THE FAIR MARKE T VALUE OF THE RESIDENTIAL BUILDING WAS RS. 3000/- PE R SQ. MT AND COMMERCIAL PREMISES RS. 5,000/- AND 6500/- PER SQ.MT. FLOOR WISE. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 10 THE AVERAGE OF THE ABOVE COMES TO RS. 5515/- PER SQ . MT, AFTER TAKING INTO CONSIDERATION MARKET PRICE IS ABOUT 15% HIGHER THAN THE READY RECKONER RATES. THE AVERAGE COST OF CONSTRUCTION WAS RS. 2500/- (I. E. RS. 2000 TO 3000 PER SQ. MT) IN THE YEAR 1989. THE FAIR MARKET VALUE OF THE SANCTIONED CLEARED AND DEVELOPED LAND IN THE YEAR 1989 COMES TO RS. 3075/- PER SQ. MT (RS. 5575-2500). AS PER THE CIRCULAR, THE FAIR MARKET VALUE OF THE SANCTIONED, CLEARED AND DEVELOPED LAND AS ON 1-4- 1981 WILL BE RS. 1230/- PER SQ. MT (40% OF RS. 3,075/). THE FAIR MARKET VALUE OF THE SANCTIONED, CLEARED AN D DEVELOPED LAND IS TO BE DECIDED ON THE BASIS OF THE FAIR MARKET VALUE OF RESIDENTIAL FLAT COMMERCIAL BUILDIN G IN RESPECTIVE AREA. THE REGISTERED GOVERNMENT VALUER HAD CORRECTLY APPLIED THE SAME METHOD BASED ON READY RECKONER 1989 VALUATION FOR RESIDENTIAL FLAT AND COMMERCIAL BUILDING TO ARRIVE AT THE FAIR MARKET VALUE OF DEVE LOPED, CLEANED AND SANCTIONED LAND. WE WISH TO BRING TO YOUR KIND ATTENTION THE ABSURDI TY IN THE RATES AS MENTIONED IN THE READY RECKONER PREPARED FOR STAMP DUTY PURPOSE AND THE ACTUAL CONSIDERATION RECEIVED ON SALE OF THE LAND. SALE DEED DATED MARKET VALUE(SALE CONSIDERATION RS. VALUE AS PER STAMP DUTY READY RECKONER (RS) 28-3-2005 16,00,00,000 9,82,94,151 1-4-2004 7,28,00,000 3,09,34,941 THE ABOVE TABLE HIGHLIGHTS THE ABSURDITY IN THE VALUATION AS MENTIONED IN READY RECKONER AND ACTUAL SALE CONSIDERATION RECEIVED BY THE COMPANY. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 11 THE LEGISLATURE WERE AWARE OF THE FACTS ABOUT THE DIFFICULTY IN ARRIVING AT THE FAIR MARKET VALUE OF THE PROPERTY ON A PARTICULAR DATE AND HENCE WHILE INTRODUCING THE SECTION 50C SPECIAL PROVISIONS FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES UNDER THE INCOME-TAX ACT KEPT OPEN THE OPTION TO TAKE THE VAL UE WHICH IS HIGHER FOR COMPUTING THE CAPITAL GAIN TAX ON TRANSFER OF CAPITAL ASSET BEING LAND OR BUILDING OR BOTH.' 9. THE SUBMISSIONS MADE BY THE ASSESSEE WERE CONSIDERED BY THE A.O. WITH REFERENCE TO DETAILS FU RNISHED BY THE ASSESSEE AND MATERIAL GATHERED BY THE DEPARTMENT. HE DEALT WITH THE CONTENTIONS RAISED B Y THE ASSESSEE AS FOLLOWS: 'THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE INSTANCES REFERRED TO BY THE DEPARTMENT RELATE TO LAND OF VERY SMALL SIZE, WHICH ARE UNDERDEVELOPED AND UNSANCTIONED WITHOUT PROPER LAYOUT/PLAN AND ZONING, WHEREAS IN THE CASE OF THE SUBJECT LAND, TH E LAND IS ABOUT 26 ACRES, FULLY DEVELOPED AND CONVERTED WITH ALL SANCTIONED AND PERMISSIONS AND AMENITIES AND, THEREFORE, THE SALE INSTANCES QUOTED BY THE DEPARTMENT ARE NOT AT ALL COMPARABLE TO THE LAND IN QUESTION. THE CONTENTION OF HE ASSESSEE THAT THE SALE INSTANCES ARE INCOMPARABLE CANNOT BE ACCEPTED BECAUSE THE SALE INSTANCES REFERRED TO BY THE DEPARTMENT ALSO PERTAIN TO AREAS IN AND AROUND RESIDENTIAL, COMMERCIAL AND INDUSTRIAL ZONE OF THE AREA, WHERE NECESSARY PERMISSIONS AS REQUIRED UNDER VARIOUS LAWS WERE OBTAINED SUCH AS PERMISSION FROM THE AUTHORITIES OF THE URBAN LAND CEILING ACT ETC. FURTHER THE PLOTS ARE BOUND ON AL L SIDES BY OTHER PLOTS AND ROADS IMPLYING PROPER ZONING AND PLOTTING WHICH CLEARLY DEMONSTRATE THAT THE SALE INSTANCES WHICH THE DEPARTMENT IS RELYING ARE ALSO LOCATED IN WELL DEVELOPED AREAS WHICH ARE VERY WELL COMPARABLE TO THAT OF THE ASSESSEE. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 12 ANOTHER CONTENTION OF THE ASSESSEE THAT THE DOCUMENTS ARE EXECUTED WITHOUT ANY SPECIFICATIONS LIKE PLOT LOCATION, PLOT IDENTIFICATION NUMBER, LEN GTH AND WIDTH SIZE, ACCESS ROAD AND LACK OF WATER DRAINAGE, ELECTRICITY AND OTHER INFRASTRUCTURES FACILITIES IS NOT CORRECT. AS COULD BE SEEN FROM T HE SALE INSTANCES WHICH ARE REFERRED BY THE DEPARTMENT, THERE IS PROPER MENTION OF PLOT LOCATIO N, PLOT IDENTIFICATION NUMBER, LENGTH AND WIDTH SIZE AND ACCESS ROAD IN THE SCHEDULE OF THE CONVEYANCE DEED. THE OTHER CONTENTION OF THE ASESSEE THAT THE PLOTS ARE NOT SPECIFICALLY SUB-DIVIDED BUT HAS BEEN CARVED OUT OF LARGER LAND, IS ALSO NOT CORRECT. AS SEEN FROM THE CONVEYANCE DEEDS OF THE SALE INSTANCES, THE PLOTS ARE SUB-DIVIDED, PROPERLY NUMBERED AND BOUNDED BY OTHER PLOTS WITH SPECIFIC PLOT NUMBERS. THE NEXT CLAIM OF THE ASSESSEE THAT SMALL PROPERTY SHALL FETCH MUCH LESS VALUE COMPARED TO LARGE PROPERTIES IS DEVOID OF ANY MERIT AS IT IS A KNOWN FACT IN URBAN AREAS THE PLOTS OF SMALLER DIMENSION WOULD FETCH HIGHER VALUE IN TERMS OF RATE PER SQ. MT. AS THERE ARE MANY WILLING BUYERS IN CASE OF SMALLER PLOTS. IT IS ALSO A KNOWN FACT THAT BIGGER PLOTS ARE NORMALLY GIVEN FOR JOINT DEVELOPMENT WHERE THE CONSIDERATION IS CONSTRUCTED AREA TO BE GIVEN BY THE DEVELOPER AND THE MARKET VALUE PER SQ. MT. IS ALWAYS LESS IN CASE OF BIGGER PROPERTIES AS COMPARED TO PROPERTIES OF SMALLER DIMENSION. IN ANY CASE, EVEN IF THE LAND HAS COMMERCIAL VALUE AS IT IS CLAIMED TO BE ADJACENT TO THE MAIN ROAD IN THE YEAR 1981, THE PRICE DIFFERENC E BETWEEN THE SMALLER PLOTS AND THE LAND IN QUESTION CANNOT BE 80 TIMES AS CONTENDED BY THE ASSESSEE. THE NEXT SUBMISSION OF THE ASSESSEE IS THAT FMV DEPENDS ON VARIOUS OTHER FACTORS, SUCH AS LOCATION, AREA, COMMERCIAL POTENTIAL ETC. THE SALE INSTANCES OBTAINED FROM SRO RELATE TO THE PROPERTIES FROM THE ADJOINING AREA AND BECAUSE OF SIMILARITIES IN LOCATION AND PROXIMITY WITH THE LAND IN QUESTION, THE TRANSACTION IN QUESTION IS COMPARABLE WITH THE SALE INSTANCES CITED BY THE DEPARTMENT. IN THIS REGARD, REFERENCE CAN BE MADE TO THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF VIDARBHA ENGINEERING INDUSTRIES AND OTHERS REPORTED IN 271 ITR 229 WHEREIN IN THE JURISDICTIONAL HIGH COURT IN THE CONTEXT OF PROVISIONS OF CHAPTER XXC, HELD THAT THE SALE INSTANCE WHICH WAS MADE THE BASIS TO SHOW ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 13 THE FAIR MARKET VALUE WAS FROM THE ADJOINING AREA AND BECAUSE OF SIMILARITY IN LOCATION AS WELL AS PROXIMITY WITH THE LAND IN QUESTION, THE AUTHORITIE S WERE RIGHT IN HOLDING THAT THE TRANSACTION IN QUESTION COULD BE COMPARED WITH THE SAID SALE INSTANCE. THE NEXT CONTENTION OF THE ASSESSEE IS THAT IN CASE OF INSTANT PROPERTY, THERE IS VAST DIFFERENCE BETWE EN THE STATED CONSIDERATION IN THE DOCUMENTS AND THE MARKET VALUE AS PER READY RECKONER WHICH HIGHLIGHTS THE ABSURDITY IN THE VALUES AS MENTIONED IN THE READY RECKONER. EVEN IF THE ASSESSEE'S CONTENTION WERE TO BE ACCEPTED, THE DIFFERENCE BETWEEN THE CONSIDERATION SHOWN IN THE DOCUMENTS AND THE GUIDELINE RATES IS AT BEST TWICE THE VALUE OF THE RATES SHOWN IN THE READY RECKONER. BUT WHEREAS IN THE VALUER'S REPORT, HE VALUE TAKEN BY THE VALUE R IS RS. 1230/- PER SQ. MT WHICH IS ABOUT 80 TIMES THE CONSIDERATION SHOWN IN THE THREE COMPARABLE SALE INSTANCES OBTAINED BY THE DEPARTMENT FROM THE SRO. AS COULD BE SEEN FROM THE SALE DEEDS, THE LAND IN QUESTION WAS SOLD AT RS. 3767/- PER SQ. MT AND AT RS. 5861/-ER SQ. MT IN APRIL 2004 AND MARCH 2005. THE VALUER IN HIS REPORT ADOPTED THE RATE AT RS. 1230/- PER SQ. MT AS ON 1-4-1981 AND IF ONE GOES BY THIS RATE, THE VALUE OF THE LAND IS APPRECIATED ONL Y THREE TIMES AND FIVE TIMES RESPECTIVELY IN 13 AND 1 4 YEARS WHICH IS ABSURD CONSIDERING THE APPRECIATION IN THE LAND RATES IN PUNE CITY PARTICULARLY IN UP COMING AREAS IN AND AROUND DHANORI. IT IS ALSO INTERESTING TO NOTE THAT THE FIRST SALE WAS MADE IN APRIL 2004 AT RS. 3767 PER SQ. MT AND THE SECOND SALE WAS MADE IN MARCH 2005 AT RS. 5861/- PER SQ. MT WITH AN APPRECIATION OF ABOUT 80% IN LAND PRICE WITHIN ONE YEAR. THIS SHOWS THAT LAND PRICES HAVE SHOT UP MAINLY DURING THE PERIOD 2002-2005 IN THE CITY AND THE LAND PRICES IN THE YEAR 1981 IN DANORI , WHICH WAS NOT IN MUNICIPAL LIMITS AT THAT TIME WERE HOVERING IN THE RANGE OF RS. 6/- TO RS. 15/- PER SQ . MT. THUS, THE RATE ADOPTED BY THE VALUER AT RS. 1230/- PER SQ MT IS ARBITRARY, UNREALISTIC AND DOES NOT REFLECT THE FAIR MARKET VALUE OF THE LAND IN 19 81. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 14 ANOTHER SUBMISSION MADE BY THE ASSESSEE IS THAT TO OVERCOME THE DIFFICULTY IN ARRIVING AT THE FMV OF T HE PROPERTY ON A PARTICULAR DATE, SEC. 50-C WAS INTRODUCED IN THE STATUTE. THE ASSESSEE HAS REFERRE D TO SEC. 50-C IN A VAGUE MANNER. THE SECTION 50-C DOES NOT COME INTO OPERATION IF THE MARKET VALUE IS MORE THAN THE RECKONER RATES. IT COMES INTO OPERATION ONLY IF THE STATED CONSIDERATION IS LESS THAN RECKONER RATES. EVEN OTHERWISE THE SALE INSTANCES RELIED UPON BY THE DEPARTMENT DO NOT INDICATE ANY DIFFERENCE BETWEEN THE STATED CONSIDERATION AND MARKET VALUE OF THE PROPERTY. IN VIEW OF THIS, THE REFERENCE OF THE ASSESSEE TO SEC. 50- C IS MISPLACED AND OF NO RELEVANCE IN SO FAR AS FMV AS ON 1-4-1981 IS CONCERNED. WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT THE VALUER HAD CORRECTLY APPLIED THE LAND AND BUILDING METHOD BASED ON RECKONER RATES, THE DEFICIENCIES IN THE VALUER'S REPORT HAVE ALREADY BEEN HIGHLIGHTED I N THE PRECEDING PARAS AND THE REPORT CANNOT BE RELIED UPON TO ARRIVE AT FMV OF THE PROPERTY AS ON 1-4- 1981.' 10. IN VIEW OF THE AFORESAID THE A.O DETERMINED THE FMV AS ON 1-4-1981 AFTER ADOPTING THE HIGHEST RATE OUT OF THE FOLLOWING COMPARABLE SALE INSTANCES. 1. CONVEYANCE DEED DATED 1- 2-1980 (REGISTERED IN 1981) RS. 15.23 PER SQ. MT. 2. SALE DEED DATED 20-8-1979 (REGISTERED IN 1981) RS. 6.25 PER SQ. MT. 3. SALE DEED AT 25.8.1990 (REGISTERED IN 1981) RS. 8.54 PER SQ. MT. ACCORDINGLY, THE A.O WORKED OUT THE LONG TERM CAPIT AL GAIN IN THE FOLLOWING MANNER. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 15 SALE CONSIDERATION OF TWO PROPERTIES SOLD ADMEASURING 46622 SQ. MTRS RS.23,28,00,000/- COST OF ACQUISITION AS ON 1-4-1981 @ OF RS. 15.23 PER SQ.MT. RS. 7,10,053/- INDEXED COST OF ACQUISITION RS. 34,08,254/- --------------------- RS.22,93,91,745/- --------------------- 11. THE ASSESSEE AGITATED THE ACTION OF THE A.O IN REJECTING THE ASSESSEE'S CLAIM REGARDING FMV AT RS. 1230/- PER SQ. MT AS ON 1-4-1981 AND ADOPTING FMV @ 15.23 PER SQ. MT BY MAKING A DETAILED SUBMISSIONS W HICH ARE REPRODUCED IN PARA 3.9 OF CIT(A)'S ORDER. HAVIN G CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE CIT(A) AGREED WITH THE FINDING OF TH E A.O THAT THE VALUATION HAS BEEN DONE BY THE ASSESSEES VALUER WITHOUT PROPER BASIS AND BY METHODS WHICH DO NOT YI ELD REALISTIC VALUATION. THEREFORE, HE HELD THAT THE VA LUE OF THE LAND AS ON 1-4-1981 SO DETERMINED ON BEHALF OF ASSESSEE, WAS GROSS OVERSTATED. SAME HAS BEEN OPPOS ED BEFORE US. DETAILED ARGUMENTS WERE RAISED IN THIS R EGARD. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 12. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THE MAIN ISSUE INV OLVED IN THIS APPEAL IS WITH REGARDS TO COMPUTATION OF FM V AS ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 16 ON 1-4-1981 OF THE LAND IN QUESTION FALLING IN SURV EY NO. 44 AT DANORI, PUNE. THE ASSESSEE HAS SOLD THE LAND AT DHANORI PARTLY IN A.Y. 2005-06 AND PARTLY IN 2008-2 009. THE A.O HAS TAXED THE CAPITAL GAIN IN A.Y. 2005-06 AND HAS HELD THAT THE CAPITAL GAIN IN RESPECT OF THE BA LANCE PORTION OF THE LAND IS TAXABLE IN A.Y. 2007-08 AS A GAINST IN A.Y. 2008-99 AS OFFERED BY THE ASSESSEE. 13. AS DISCUSSED ABOVE, THE ASSESSEE HAS SOLD THE L AND AT DHANORI, PUNE, IN TWO PARTS AS UNDER: SR.NO. PARTICULARS OF THE PROPERTY AREA IN SQ.MTRS. DATE OF SALE CONSIDERATION RS. 1. SURVEY NO. 44 HISSA NO. 1/A 19324 1-4- 2004 72800000 2. SURVEY NO. 44 HISSA NO. 1/A 27298 28-3- 2005 160000000 FOR THE PURPOSE OF SECTION 48 ASSESSEE HAS ADOPTED THE FMV OF THE SAID LAND AT RS. 1230/- PER SQ. MT AS ON 1-4- 1981 ON THE BASIS OF THE REPORT OF THE REGISTERED V ALUER. THE COPY OF THE SAID REPORT DATED 18-12-2003 HAS BE EN PLACED BY THE ASSESSEE ON PAGES 1 TO 6 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. AS AGAINST THE CL AIM OF THE ASSESSEE, THE A.O IN THE COURSE OF ASSESSMENT PROCEEDINGS CONSIDERED THREE SALE INSTANCES AND ON THE BASIS OF THE SAID INSTANCES COMPUTED THE FMV OF THE SAID ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 17 LAND AS ON 1-4-1981 AT RS. 15.23 PER SQ. MTR. AS DISCUSSED IN PRECEDING PARA. 14. BEFORE PROCEEDING FURTHER LET US GO IN BACKGROU ND OF ASSESSEE COMPANY. THE ASSESSEE COMPANY WAS A PUBLIC LIMITED COMPANY AND WAS CARRYING OUT ITS BUSINESS A T DHANORI. THE LAND IN QUESTION WAS PURCHASED BY THE ASSESSEE IN 1949. IN THE COURSE OF HEARING, IT WAS EXPLAINED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING CHOCOLATES AND BISCUITS. THERE WERE LOT OF LABOUR PROBLEMS AND ALSO DUE TO SUBSTANTIAL LOSSES, THE ASSESSEE CLOSED ITS BUSINES S ACTIVITY IN THE YEAR 1996. SUBSEQUENTLY, THE ASSES SEE- COMPANY'S CASE WAS ALSO REFERRED TO BIFR. THE ASSE SSEE COMPANY HAD FILED THE RETURN OF INCOME UPTO A.Y. 19 98- 99 AND THEREAFTER, THE ASSESSEE HAD NOT FILED ANY R ETURN UPTO A.Y. 2006-07. 15. AS STATED ABOVE IN F.Y. 2004-05 THE ASSESSEE COMPANY PARTLY SOLD ABOVE LAND IN TWO LOTS. THE FIR ST SALE DEED WAS ENTERED ON 1-4-2004, COPY OF WHICH HAS BEE N PLACED AT PAGES 18 TO 57 OF THE PAPER BOOK FILED ON BEHALF OF ASSESSEE. THE SECOND TRANSACTION WAS CARRIED OUT ON 28-3-2005, A COPY OF WHICH IS PLACED AT PAGES 59 TO 91 OF THE PAPER BOOK FILED ON BEHALF OF ASSESSEE. FURTHE R, THE BALANCE PORTION WAS SOLD BY THE ASSESSEE BY ENTERIN G INTO ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 18 A DEVELOPMENT AGREEMENT WITH REGHULEELA BUILDERS PV T. LTD. A COPY OF WHICH HAS BEEN PLACED AT PAGES 304 T O 323 OF THE PAPER BOOK FILED BY THE ASSESSEE. FOR CALCU LATING THE CAPITAL GAINS ON THE SALE OF THE ABOVE LANDS, T HE ASSESSEE COMPUTED THE FMV OF THE SAID LAND AT RS. 1230/- PER SQ. MT. AS ON 1-4-1981. 16. IN THE COURSE OF HEARING, THE ASSESSEE HAD REF ERRED TO VALUATION REPORT AS STATED ABOVE WHICH IS PLACED AT PAGES 1 TO 6 OF THE PAPER BOOK. THE STAND OF THE A SSESSEE WAS THAT THE LAND OWNED BY THE ASSESSEE WAS WITHIN THE LIMITS OF PUNE MUNICIPAL CORPORATION (REFERRED TO A S PMC FOR SHORT). SECONDLY, IT WAS SUBMITTED THAT THE SA ID LAND WAS A NON-AGRICULTURAL LAND AND COULD BE USED FOR COMMERCIAL OR RESIDENTIAL PURPOSES AS SAME WAS PERMITTED TO BE USED EARLIER. THIS FACT HAS NOT BE EN DISPUTED BY THE REVENUE. THE VALUER CONSIDERED THE RATE OF RESIDENTIAL UNITS, COMMERCIAL UNITS ON THE GROUN D FLOOR AND UPPER FLOOR ARRIVED AT AN AVERAGE RATE OF RS. 5 575/- PER SQ. MTR. FROM THE SAID AMOUNT, THE VALUER REDU CED THE COST OF CONSTRUCTION OF RS. 2500/- PER SQ. MT. AND ARRIVED AT AN AVERAGE LAND RATE OF RS. 3075/- PER S Q. MT. THESE WERE THE RATES OF 1989. IN VIEW OF THE CIRCUL AR ISSUED BY THE CONCERNED TOWN PLANNING VALUATION ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 19 DEPARTMENT THE SAID RATE WAS REDUCED TO 40% IN ORDE R TO ARRIVE AT THE RATE OF RS. 1230/- PER SQ. MT. 17. AS PER THE SAID CIRCULAR ISSUED BY TOWN PLANNIN G DEPARTMENT NUMBERED AS A-5 MULYANKAN /PK.257/6516. 6616 OF 1989 ISSUED UNDER MAHARASHTRA STAMP DUTY ACT PLACED AT PAGES 7 TO 13 OF THE PAPER BOOK. THE DEPARTMENT HAD STARTED ESTIMATING THE FAI R MARKET RATES OF THE PROPERTIES IN VARIOUS LOCALITIE S FOR THE PURPOSES OF LEVY OF STAMP DUTY FROM 1989 ONWARDS. T ILL 1989, THERE WERE NO SUCH SEPARATE MARKET RATES FOR THE PURPOSES OF STAMP DUTY LEVY AND THE STAMP DUTY WAS PAYABLE ON THE BASIS OF THE CONSIDERATION AGREED BE TWEEN THE PARTIES AS STATED IN THE CONVEYANCE DEED. THIS WAS DONE TO TAKE CARE OF BLACK MONEY ELEMENT IN THE TRANSACTION. AS PER THE SAID CIRCULAR, IT WAS STAT ED THAT IF THE MARKET VALUE WAS RS. 1000/- IN 1989, THE SAME W AS TO BE DISCOUNTED TO 40% IN ORDER TO ARRIVE AT THE R ATE IN 1981. AS STATED ABOVE UPTO 1989 THE STAMP DUTY WAS LEVIED ON THE BASIS OF SALE CONSIDERATION AGREED BE TWEEN THE PARTIES AT THE TIME OF REGISTRATION OF CONVEYAN CE DEED. THIS LED TO WIDE SPREAD EVASION OF THE STAMP DUTY BY UNDER VALUATION OF CONSIDERATION AS WELL AS INCREASED THE SCOPE OF BLACK MONEY IN THESE TRANSACTIONS. IN ORDER TO GET OVER THIS PROBLEM, ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 20 THE GOVT. ADOPTED A SYSTEM OF ESTIMATING THE FAIR MARKET VALUES OF THE PROPERTIES BY THE EXPERTS IN VARIOUS AREAS. DIFFERENT RATES WERE PRESCRIBED FOR DIFFERENT AREAS CONSIDERING THE MARKET VALUE OF THE PROPERTIES THEREIN. AS PER SECTION 2(NA) OF THE BOMBAY STAMP ACT, 1958, THE TERM 'MARKET VALUE' WAS DEFINED AS THE PRICE WHICH SUCH PROPERTY WOULD FETCH IF SOLD IN THE OPEN MARKET ON THE DATE OF EXECUTION OF THE INSTRUMENT OR THE CONSIDERATION STATED IN THE INSTRUMENT WHICHEVER IS HIGHER. AS PER RULE 4(2) OF BOMBAY STAMP (DETERMINATION OF TRUE MARKET VALUE OF PROPERTY) RULES, 1995 IT WAS PROVIDED THAT FOR DETERMINING THE STAMP VALUATION RATES, THE RESPECTIVE AUTHORITIES WOULD DIVIDE THE AREAS DEPENDING UPON THE POPULATION, TYPE OF LAND, LOCATION, ETC. AND THE RATES WOULD BE DECIDED CONSIDERING THE ESTABLISHED PRINCIPLES OF VALUATION. 18. IN THIS BACKGROUND, THE STAND OF THE ASSESSEE WAS THAT AS PER THE RATES SPECIFIED BY THE TOWN PLANNING DEPARTMENT IN 1989 IN RESPECT OF VILLAGE DHANORI, THE RATE FOR OPEN LAND WAS RS. 1000/- PER SQ. MT WHICH HAS NOT BEEN DISPUTED BY ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 21 REVENUE. THE RATE OF RESIDENTIAL UNIT WAS RS. 3,000 /- PER SQ. MT THE RATES OF COMMERCIAL UNITS ON THE UPPER FLOOR AND THE GROUND FLOOR WAS RS. 5,000/- AND RS. 6,500/- PER SQ. FT. RESPECTIVELY. ACCORDINGLY, WITHOUT PREJUDICE THE STAND OF THE ASSESSEE WAS THAT CONSIDERING THE OPEN LAND ONLY, THE MINIMUM LAND RATE WAS RS. 1,000/ - PER SQ. MTR. IN 1989 AND DISCOUNTING THE SAME CONSIDERING THE ABOVE SAID CIRCULAR ISSUED BY THE TOWN PLANNING DEPARTMENT, THE MINIMUM RATE OF THE SAID LAND AS ON 1981 WAS 400/- PER SQ. MTR. 19. WE FIND IT UNDISPUTED THAT THE ASSESSEE'S LAND WAS A NON-AGRICULTURE LAND WITHIN THE PMC LIMITS AND COULD BE UTILIZED FOR CONSTRUCTION OF RESIDENTIAL, COMMERCIAL/INDUSTRIAL UNITS AS PER MASTER PLAN AND BUILDING BYE LAWS THEREUNDER APPLICABLE IN THE SAID AREA AT RELEVANT POINT OF TIME. WE FIND THAT THE ASSESSEE HAS REFERRED TO SALE OF CONVEYANCE DEED EXECUTED BY ASSESSEE PART OF SAME AT PAGE 307 OF THE PAPER BOOK BACKSIDE, READS AS UNDER: 'AND WHEREAS THE VENDOR WANTED TO GIVE FOR DETERMENT THE PROPERTY MENTIONED IN SCHEDULE A HEREUNDER WRITTEN TO THE INTERESTED PARTY AND HAVING COME TO LEARN ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 22 ABOUT THE SAID INTENTIONS OF THE VENDOR, HEREIN ABOUT THE SAME, THE DEVELOPER HEREIN, WHO WAS THEN ON LOOK OUT SUITABLE LAND FOR AVOCATION OF DEVELOPMENT OF PROPERTIES, APPROACHED THE VENDOR AND REQUESTED THE VENDOR HEREIN TO GRANT TO THE DEVELOPER HEREIN THE CONTRACT OF CONSTRUCTION OF THE PROPOSED RESIDENTIAL/ COMMERCIAL HOTEL/IT PART/MULTIPLEX ETC.' IT SHOWS THAT THE LAND IN QUESTION WAS POTENTIAL FOR DEVELOPMENT OF RESIDENTIAL / COMMERCIAL/ HOTEL /IT PARK ETC. AT RELEVANT POINT OF TIME. THUS, THE LAND WAS MUCH SUPERIOR AS FAR AS FAIR MARKET VALUE IS CONCERNED AT RELEVANT POINT OF TIME. AS PER THE MAP PLACED ON PAGE 14 OF THE PAPER BOOK THE LAND IN QUESTION WAS ON THE PUNE ALANDI ROAD WHICH WAS A MAIN ROAD AT THE RELEVANT POINT OF TIME IN PMC LIMIT. AS DISCUSSED ABOVE, IN THE LIGHT' OF THE ABOVE CIRCULAR, THE MINIMUM LAND RATE WAS RS. 400/- PER SQ. MT FOR THE ENTIRE DHANORI AREA AS THE RATE OF RS. 1,000/- PER SQ. MT. WAS ADOPTED FOR THE PURPOSE OF STAMP DUTY ACT FOR ALL THE LANDS IN DHANORI AREA AS DISCUSSED ABOVE. IT IS NOT IN DISPUTE THAT THE ASSESSEE'S LAND IN QUESTION WAS IN THE PMC LIMIT. THIS FACT HAS ALSO NOT BEEN DISPUTED BY THE REVENUE AT ANY STAGE. THE LAND SITUATED IN PMC LIMITS FETCHES MORE VALUE THAN THE LAND SITUATED OUTSIDE ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 23 LIMITS BECAUSE OF INFRASTRUCTURE IS PROVIDED BY THE PMC IN THE FORM OF WATER SUPPLY, ELECTRICITY, SEWERAGE, DEVELOPED ROADS, TRANSPORTATION FACILITIES AND OTHER CIVIL AMENITIES IN ITS PMC LIMITS ONLY. IT IS PERTINENT TO MENTION THAT DHANORI LAND FALLS IN PMC AND OUTSIDE PMC LIMITS AS WELL. SUCH FACILITIES ARE NOT PROVIDED OUTSIDE THE PMC LIMIT. STAMP DUTY AUTHORITIES HAD FIXED MINIMUM MARKET RATE OF RS. 400/- PER SQ. FOR ALL LANDS IN DHANORI AREA INCLUDING LAND OUTSIDE THE PMC LIMITS. SO THE LAND OF DHANORI IN PMC AREA WILL CERTAINLY HAVE HIGHER MARKET VALUE. SO WAS THE CASE WITH ASSESSEE'S LAND BECAUSE IT FALLS WITHIN PMC LIMITS. 20. LET US DISCUSS THE VALUE OF ASSESSEES LAND IN THIS BACKGROUND. THE LAND OF ASSESSEE WAS BEING USED AS INDUSTRIAL/COMMERCIAL UNIT AND SITUATED IN PRIME LOCATION. THE ASSESSEE'S LAND WAS BOUND TO FETCH A MUCH HIGHER PRICE COMPARED TO THE OTHER NON-PMC LANDS IN DHANORI AREA. WITHOUT PREJUDICE TO THE ABOVE, THE RATE OF RS. 400/- PER SQ. MT. WAS THE MINIMUM LAND RATE AND CONSIDERING THE ABOVE FACTORS, THE SAID LAND OF THE ASSESSEE OUGHT TO ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 24 HAVE BEEN VALUED AT MUCH HIGHER RATE AS ON 1- 4-1981 BEING IN PMC LIMITS AND HAVING BENEFITS OF ALL INFRASTRUCTURES AND ALL CIVIL AMENITIES. 21. COMING TO THREE SALE INSTANCES RELIED UPON BY T HE A.O., THE STAND OF THE ASSESSEE WAS THAT THE LANDS RELIED BY A.O WERE NOT COMPARABLE TO THE LAND OWNED BY THE ASSESSEE, HENCE THERE WAS NO QUESTION OF DETERMININ G THE FMV ON THE BASIS OF THOSE LANDS. THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS TO BRING OUT DISTINCTION BETWEEN THE THREE INSTANCES AND THE ASSESSEES CASE IN ITS REPLY PLACED AT PAGES 146 TO 150 AS DISCUSSED A BOVE WHICH WAS NOT DULY CONSIDERED BY THE A.O. THE A.O HAS NOT DISPUTED THE FACT THAT THE COMPARABLE CASES REL IED UPON BY THE A.O WERE OUTSIDE THE PMC LIMIT. UNEQUA L SHOULD NOT BE TREATED EQUALLY. THE VALUE OF LAND S ITUATED IN PMC LIMIT IS CERTAINLY HIGHER THAN ONE OUTSIDE MUNICIPAL LIMITS IN DHANORI AREA. THE LAND IN MUNI CIPAL LIMIT HAS BENEFIT OF INFRASTRUCTURE SUCH AS SEVERAG E, WATER, ELECTRICITY ROAD SECURITY ETC. SO ITS VALUE HAS TO BE HIGHER. A.O HAS DISCUSSED THE SALE INSTANCES OF RS . 247/- BUT IGNORED THE SAME WHILE REACHED TO CONCLUS ION WHEREBY VALUE OF LAND @ 15.23 PER SQ. MTR AS ON 1=- 4- 1981. THIS REFLECTS THE APPROACH OF A.O AS WELL AS CIT(A). ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 25 22. WE ALSO FIND THAT THE SAID COMPARED PLOTS WERE SMALL IN SIZE AND UNDEVELOPED, ZONING WAS NOT AVAIL ABLE AND WERE AROUND 3 TO 4 KMS AWAY FROM THE ASSESSEES LAND. THE SAID PLOTS WERE IN INTERIOR PART OF DHAN ORI VILLAGE AND NOT HAVING BENEFIT OF DEVELOPMENT IN TE RMS OF WATER, DRAINAGE, ELECTRICITY AND OTHER INFRASTRUCTU RE FACILITIES BEING OUTSIDE PMC LIMITS. THE A.O HAS N OT JUSTIFIED ITS STAND AS TO HOW THE SAID THREE LANDS WERE COMPARABLE WITH THE ASSESSEES LAND. COPIES OF THE SALE DEEDS OF THE SAID THREE COMPARABLE INSTANCES WERE P LACED IN THE PAPER BOOK. ACCORDING TO THE SAID SALE DEED S, IT IS CLEAR THAT THE SAID LANDS WERE WITHIN THE GRAM PANC HAYAT OF DHANORI VILLAGE ONLY WHILE THE ASSESSEES LAND I N QUESTION WAS ALREADY IN CONCERN MUNICIPAL LIMITS AT RELEVANT POINT OF TIME. IN VIEW OF ABOVE COMPARISO N BETWEEN BOTH WAS NOT JUSTIFIED FOR PURPOSE OF VALUA TION AT RELEVANT POINT OF TIME. EQUAL SHOULD BE TREATED EQ UALLY AND UNEQUAL SHOULD NOT BE TREATED EQUALLY. 23. FURTHER, THE SALE INSTANCES OF THE PROPERTIES IN ALL FOUR DIRECTIONS SHOULD BE TAKEN INTO CONSIDERATION TO ARRIVE AT CONCLUSION OF THE AVERAGE VALUE OF THE PR OPERTY. HOWEVER, IN THIS CASE THE COMPARABLE CASES HAVE BE EN TAKEN WHICH ARE SITUATED IN ONLY ONE SIDE OF ASSESS EES PROPERTY AND THAT TOO AWAY FROM THE CENTER OF PUNE ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 26 MUNICIPAL CORPORATION. IT IS AGAINST THE PRINCIPLE S OF NATURAL JUSTICE. WE FIND THAT IN THE CASE OF MRS. KAILASH SUNEJA AND OTHERS REPORTED AS 231 ITR 318 (DEL) THE HONBLE DELHI HIGH COURT HELD AS UNDER: 'HELD, ACCORDINGLY, THAT THE APPROPRIATE AUTHORITY HAD ACTED IN AN ARBITRARY FASHION IN ARRIVING AT THE FAIR MARKET VALUE IN ALL THE CASES. SALE INSTANCES OF PROPERTIES COMPARABLE WITH THE SUBJECT PROPERTIES HAD NOT BEEN TAKEN INTO ACCOUNT AND PROPERTIES SITUATE FAR AWAY FROM THE SUBJECT PROPERTIES HAD BEEN TAKEN INTO CONSIDERATION AND THE ADDITIONS AND DEDUCTIONS WERE MADE WITHOUT ANY PROPER BASIS. NO REASONABLE BASIS HAD BEEN ADOPTED IN ANY OF THE CASES IN FIXING THE FAIR MARKET VALUE. IN SOME OF THE CASES COULD BE APPROPRIATE AUTHORITY DISCHARGE THE INITIAL BURDEN. IN ALL THE CASES THERE WAS NO DIFFERENCE IN THE CONSIDERATION OF THE MATERIALS BY THE APPROPRIATE AUTHORITY AT THE TIME OF THE ISSUE OF NOTICE AND THE PASSING OF FINAL ORDERS. ALL THE ORDERS WERE LIABLE TO B QUASHED. THE APPROPRIATE AUTHORITY HAD TO ISSUE N OBJECTION CERTIFICATES TO THE PARTIES IN ALL THE CASES, AS REQUESTED BY THEM IN THE APPLICATION IN FORM N~. 37-1. THIS STRENGTHENS OUR VIEW THAT THE THREE SALE INSTANCES RELIED BY THE A.O WERE NOT COMPARABLE WITH THE ASSESSEE'S LAND AND HENCE THE ADOPTING THE RATES AS PER THESE INSTANCES FOR DETERMINING FAIR MARKET VALUE OF PROPERTY IS NOT JUSTIFIED AND CONTRARY TO THE FACTS ON RECORD. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 27 24. WITHOUT PREJUDICE TO THE ABOVE, WE FIND THAT THERE WAS NOT MUCH OF A DEVELOPMENT OUTSIDE THE PUNE CORPORATION LIMITS AND THE BASIC FACILITIES INFRASTRUCTURE LIKE ROADS, DRAINAGE, DRINKING WATER SUPPLY, ETC. WERE ABSENT OUTSIDE PMC LIMIT THOUGH FALLING IN SAME REVENUE ESTATE I.E. DHANORI. SO SAME COULD NOT BE COMPARED WITH THE ASSESSEES LAND FOR THE PURPOSE OF ADOPTING FAIR MARKET VALUE AS ON 1-4- 1981 SO AS TO COMPUTE CAPITAL GAIN WITH REGARDS TO PROPERTY IN QUESTION. WE ALSO FIND THAT ON PAGE 17 OF THE ASSESSMENT VIDE PARA 8.2 THE A.O OBSERVED AS UNDER: 'FURTHER; IN VIEW OF THE CLAIM OF THE ASSESSEE THAT THE LAND IN QUESTION IS 26 ACRES FULLY DEVELOPED AND SANCTIONED ETC. THIS OFFICE HAS MADE AN ATTEMPT TO OBTAIN SALE INSTANCES OF BIGGER PROPERTIES FROM THE SRO OF THE AREA CONCERNED. THE DEPARTMENT COULD LAY HAND ON A COPY OF AGREEMENT OF SALE DATED 2010- 1990, WHICH WAS SUBSEQUENTLY REGISTERED ON 19-3-1999. THIS INSTANCE WAS OBTAINED AS IT WAS DEVELOPED BY A SOCIETY ON BIGGER LAND. THIS AGREEMENT IS EXECUTED ON 20-10-1990 BETWEEN SHRI RAJKUMAR JITRAM AGARWAL (PURCHASER THROUGH PARTNER OF M/S. SHREE GURUKRIPA DEVELOPERS) AND SMT. SHEELA SHAM PARANJAPE (SELLER) FOR ONE PLOT OF LAND (IN A BIG LAYOUT) ADMEASURING 469 SQ. MTRS FOR A CONSIDERATION OF RS. 2,90,000/- AT RS. 618 PER SQ. MT. THE AGREEMENT IS REFERRED IN THE FINAL REGISTERED DOCUMENT DATED 19-3- 1999 GOING BY THE GUIDELINES IN READY RECKONOR AND CIRCULAR DATED 3-10-1989 THE RATE PER SQ. MT WILL WORK OUT TO RS. 247/- FOR ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 28 THE YEAR 1981. THUS THE RATES SHOWN IN READY RECKONER AND CIRCULAR DATED 3-10-1989 AT RS 1000/- IN THE YEAR 1989 ARE ALSO ON THE HIGHER SIDE. A COPY OF THE SALE INSTANCE WAS ALSO MADE AVAILABLE TO THE ASSESSED COMPANY ON 24-12-2007 FOR ITS COMMENTS/EXPLANATION THEREON.' AS DISCUSSED EARLIER THIS IS ONE OF THE INSTANCES DISCUSSED BY THE A.O BUT NOT TAKEN INTO CONSIDERATION BY HIM. IT SHOWS THAT THREE INSTANCES REFERRED TO ABOVE DID NOT CONSTITUTE PROPER COMPARABLES. FROM THE ABOVE WE FIND THAT THE A.O OBTAINED AN AGREEMENT FOR SALE OF BUILDING WHICH WAS DATED 20-10-1990 AND THE SAME WAS REGISTERED ON 19-31999. AS PER THE SAID AGREEMENT, THE CONSIDERATION WAS FIXED AT RS. 2,90,000/- IN 1990 WHICH WORKED OUT TO RS. 618/- PER SQ. MTR. 1990. THE A.O APPLIED THE PROVISIONS OF THE CIRCULAR ISSUED BY THE TOWN PLANNING DEPARTMENT AND DISCOUNTED THE RATE TO ARRIVE AT THE RATE OF RS. 247/- PER SQ. MTR. AS IN 1981 FOR THE SAME LAND. IT IS IMPORTANT TO NOTE THAT THE FOURTH SALE INSTANCE WHICH WAS POINTED OUT BY THE A.O. HIMSELF WAS OF RS. 247/- PER SQ.MTR. IT INDICATE THAT THE EARLIER THREE INSTANCES CONSIDERED BY THE A.O WERE NOT AT ALL COMPARABLE AND OUGHT TO HAVE BEEN ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 29 REJECTED. THE FOURTH SALE INSTANCE WAS AROUND 1.5 KMS. AWAY FROM THE ASSESSEE'S LAND IN DHANORI VILLAGE OUTSIDE THE PMC LIMIT WHILE THE OTHER THREE INSTANCES WERE ABOUT 3-4 KMS FROM THE ASSESSEE'S LAND AS COULD BE MADE OUT FROM SITE PLAN SUBMITTED ON BEHALF OF ASSESSEE AND PLACED AT PAGE NO. 14 OF PAPER BOOK. THE FOURTH SALE INSTANCE NOTED BY THE A.O INDICATED THAT IN DHANORI VILLAGE ITSELF, THE DEVELOPMENT WAS BETTER TOWARDS THE ASSESSEE'S LAND. THIS IS PROVED FROM THE FACT THAT WITHIN 1.5 KMS FROM THE EARLIER THREE SALE INSTANCES, THE LAND RATES COULD INCREASE FROM RS.15/-PER SQ. MTR. TO RS. 247/- PER SQ. MTR. I.E. ABOUT 16 TIMES AND IF THAT BE SO, THE ASSESSEE'S LAND WAS FURTHER 1.5 KMS FROM THIS LAND HAVING THE MARKET RATE OF RS. 247/- PER SQ. MTR. IN THIS WAY, THE FMV OF THE ASSESSEE'S LAND COULD BE ABOUT AT LEAST 15 TIMES OF RS. 247/-. IN VIEW OF THE ABOVE, THE RATE ADOPTED BY THE A. O. CANNOT BE ACCEPTED BECAUSE IT IS DEVOID OF CONCEPT OF EQUALLY WHICH IS BASIS F PRINCIPLES OF NATURAL JUSTICE. PRINCIPLE OF NATURAL JUSTICE IS STRENGTH OF PROGRESSIVE SOCIETY. WITHOUT PREJUDICE TO ABOVE, EVEN THE FOURTH SALE INSTANCE OF RS. 247/ - PER SQ. MTR. ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 30 WAS FOR LAND OUTSIDE PMC LIMIT IN 1981 IN DHANORI VILLAGE AND IT CANNOT BE CONSIDERED TO BE COMPARABLE WITH THE ASSESSEE'S LAND. AT THE SAME TIME WE FIND THAT THE ESTIMATE OF FMV AS MADE BY THE REGISTERED VALUER ON BEHALF OF ASSESSEE AT RS. 1230/- PER SQ. MTR. IS ALSO ON HIGHER SIDE. 25. REGARDING BUILT UP STRUCTURE, WE FIND IT UNDISP UTED THAT LAND IN QUESTION HAD OLD BUILT UP AREA AS WELL . WE FIND THAT IN CASE OF G.R. RADHAKRISHNAN VS. APPROPR IATE AUTHORITY (249 ITR 690 (MAD), THE HONBLE MADRAS HI GH COURT HAS HELD AS UNDER. 'HELD, THAT WHEN TWO THINGS ARE SOUGHT TO BE COMPARED, IT IS NECESSARY THAT THE THINGS ARE IN FACT COMPARABLE. WHEN PLOTS WITH BUILDINGS THEREON ARE COMPARED, THE BUILDINGS CANNOT BE TREATED AS SCRAP, IRRESPECTIVE OF THEIR AGE, THE AMOUNT INVESTED IN PUTTING UP THE CONSTRUCTION, THE PRESENT DEPRECIATED VALUE AND THE POTENTIAL FOR FURTHER USE OF THE BUILDING. FOR THE PURPOSES OF ASCERTAINING THE VALUE OF THE LAND ON WHICH THE BUILDING HAD BEEN PUT UP, NORMALLY THE DEPRECIATED VALUE OF THE BUILDING IS REQUIRED TO BE DEDUCTED FROM THE TOTAL CONSIDERATION PAID FOR THE PROPERTY. THE EXCEPTION WOULD BE CASES WHERE IT IS CLEARLY ESTABLISHED THAT THE PRICE PAID FOR THE PROPERTY IS IN FACT THE PRICE PAID FOR THE LAND AND SCRAP VALUE OF THE BUILDING. THE APPROPRIATE AUTHORITY ACTED PERVERSELY IN TREATING THE VALUE OF THE BUILDING ON THE AUCTIONED PROPERTY AS SCRAP FOR THE PURCHASE OF VALUING THE LAND, ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 31 EVEN IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE PERSONS WHO BOUGHT THE PROPERTY BOUGHT IT WITH AN INTENTION OF COMPLETELY DEMOLISHING THE BUILDING. THE ORDER WAS NOT VALID AND WAS LIABLE TO BE QUASHED. ' IN THIS BACKGROUND WE FIND THAT VALUE OF PROPERTY HAVING STRUCTURE, EVEN THOUGH OLD ONE SHOULD BE VALUED HIGHER THAN VACANT LAND FOR THE PURPOSE OF CONCLUDING FMV FOR COMPUTATION OF CAPITAL GAINS. IT SHOWS THAT PROPERTY HAVING LEGAL CONSTRUCTION IS POTENTIAL FOR RAISING RESIDENTIAL OR COMMERCIAL CONSTRUCTION AS THE CASE MAY BE. THIS ADVANTAGE WAS NOT AVAILABLE T LAND OF DHANORI REVENUE ESTATE SITUATED OUTSIDE THE PMC LIMITS AT RELEVANT POINT OF TIME. S COMPARISON OF RATE INSTANCES OF LAND OF DHANORI REVENUE ESTATE FALLING OUTSIDE THE PMC LIMITS IS NOT JUSTIFIED. WE ALSO FIND THAT I N THE CASE OF VIJAY KUMAR M. SHAH VS. DCIT (126 TTJ 910) THE ASSESSEE HAD ADOPTED THE FMV AT RS. 2200/- PER SQ.FT. AS ON 1-4-1981 ON THE BASIS OF REGISTERED VALUER'S REPORT AS AGAINST RS. 1,154/ - PER SQ.FT. BY DEPARTMENTAL VALUER. IT WAS HELD THAT WHEN THE GAP IS UNBRIDGEABLE, THE AVERAGE OF THE TWO I.E. RS. 2200 + 1154 / 2 = 1677 WAS HELD REASONABLE. THE A.O SHOULD MAKE REFERENCE ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 32 TO THE VALUER WHEN HE DISAGREES WITH THE VALUATION OF THE ASSESSEE. IN THIS VIEW, OF ABOVE LEGAL DISCUSSIONS, HE A.O WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE'S CLAIM OF FMV AS ON 1-4- 1981 AT RS. 1,230/- PER SQ.MTR. WE ALSO FIND THAT UNDER THE STAMP DUTY ACT IN VIEW OF SECTION 2(NA) THE STAMP DUTY VALUATION AS ADOPTED HAD TO BE CONSIDERED AS MINIMUM FMV BECAUSE CONSIDERATION AS PER THE AGREEMENT IS HIGHER THAN THE STAMP DUTY VALUATION, THE SAME IS THE MARKET VALUE AS PER SECTION 2(NA). IN THE PRESENT CASES, THE LAND BEING IN PMC LIMIT ALTHOUGH IN REVENUE ESTATE OF DHONORI VILLAGE HAD TO BE CONSIDERED AS MUCH BETTER LOCATED LAND THAN THE OTHER LANDS IN DHANORI VILLAGE WHICH ARE OUTSIDE PMC LIMIT AS THEY WERE AWAY FROM THE MAIN ROAD I.E. PUNE ALANDI ROAD. ACCORDINGLY, IF THE STAMP DUTY AUTHORITIES HAD FIXED RS. 400/- PER SQ. MTR. AS MINIMUM FMV IN 1981 FOR LAND IN GENERAL IN REVENUE ESTATE OF DHANORI VILLAGE, THE ASSESSEES LAND HAD TO BE VALUED AT MUCH HIGHER A PRICE. THIS VIEW IS SUPPORTED BY THE FACT THAT IN 2004-05 WHEN THE ASSESSEE SOLD ITS PIECES OF LAND, THE MARKET VALUE WAS ALMOST DOUBLE THE STAMP DUTY VALUATION AT THE ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 33 RELEVANT TIME WHICH IS EVIDENT FROM FACT THAT THE CIT(A) ON PAGE 12 OF HIS ORDER NOTED THAT THE ASSESSEE RECEIVED RS. 7.28 CRORES AS AGAINST RS. 3.09 CRORE STAMP VALUATION IN SALE DEED DATED 1- 4-2004 AND RS. 16 CRORES AS AGAINST RS. 9.82 CRORES STAMP VALUATION AS PER SALE DEED DATED 28-3-2005 THIS SHOWS THAT THE MINIMUM FMV OF RS. 400/- PER SQ.MTR. AS ON 1-4-1981 AS PER STAMP DUTY VALUATION COULD BE INCREASED IN SAME PROPORTION FOR ARRIVING REASONABLE FMV OF ASSESSEES LAND AT RELEVANT POINT OF TIME. TAKING OF ALL FACTS AND CIRCUMSTANCES FMV OF LAND IN QUESTION WOULD BE REASONABLE AT @ RS. 665/- PER SQ. MTR. AS ON 1-4-1981. A.O IS DIRECTED TO COMPUTE THE CAPITAL GAIN ACCORDINGLY. 26. THE NEXT ISSUE IS WITH REGARDS TO SET OFF OF BROUGHT FORWARD LOSSES OF RS. 96,40,670/-. AT THE OUTSET OF HEARING, THE LEARNED AR DID NOT PRESS THIS ISSUE. SO, THE SAME IS DISMISSED AS NOT PRESSED. 27. THE NEXT ISSUE IS WITH REGARDS TO ALLOWABILITY OF SET OFF OF UNABSORBED DEPRECIATION OF RS. 16,69,233/-. THE A.O DID NOT ALLOW THE SAME BECAUSE THE RETURN OF ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 34 INCOME WAS NOT FILED FOR THE CURRENT YEAR. BEFORE US, THE LEARNED AR POINTED OUT THAT THE ASSESSEE HAS BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 16,69,233/-. THE DETAILS OF THE SAME IS CLAIMED TO HAVE BEEN PLACED AT PAGE 154 OF THE PAPER BOOK. IT WAS SUBMITTED THAT THE BROUGHT FORWARD DEPRECIATION WAS ALLOWED TO BE CARRIED FORWARD AS PER SECTION 32(2) AND THERE WAS NO REQUIREMENT THAT SUCH UNABSORBED DEPRECIATION SHOULD BE SET OFF ONLY AGAINST BUSINESS INCOME. IT WAS SUBMITTED THAT THE UNABSORBED DEPRECIATION SHOULD BE SET OFF AGAINST THE INCOME UNDER ANY OTHER HEAD. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT. LTD. AND OTHERS REPORTED AS (1995) 216 ITR 607 (SC) WHEREIN HONBLE SUPREME COURT HAS HELD THAT THE UNABSORBED DEPRECIATION CAN BE SET OFF AGAINST INCOME UNDER ANY OTHER HEAD. SIMILAR WAS ALSO TAKEN IN THE FOLLOWING DECISIONS: I) BARODA SPINNING & WEAVING MILLS (238 ITR 231 (GUJ) II) FABRIQUIP PVT. LTD. (260 ITR 207 (GUJ) III) ESCORTS ELECTRONICS LTD. (258 ITR 23 (DEL). ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 35 REGARDING THE LIMIT FOR THE CARRY FORWARD OF UNABSORBED DEPRECIATION IT WAS SUBMITTED THAT UNABSORBED DEPRECIATION WAS ALLOWED TO BE CARRY FORWARD U/S 32(2) AND FOR THIS YEAR, THERE WAS NO PROVISION WHICH PROVIDED THE TIME LIMIT TO CARRY FORWARD THE DEPRECIATION, SUBMITTED ON BEHALF OF ASSESSEE. IT WAS ALSO SUBMITTED THAT THE UNABSORBED DEPRECIATION COULD BE CARRIED FORWARD WITHOUT ANY LIMIT. IT WAS ALSO SUBMITTED THAT WITH EFFECT FROM A.Y. 1997-98 TO 2001-02, A TIME LIMIT WAS PLACED FOR CARRY FORWARD OF DEPRECIATION UPTO 8 YEARS. HOWEVER, SUBSEQUENTLY, W.E.F. A.Y. 2002-03, SUCH RESTRICTION WAS REMOVED AND THE DEPRECIATION PERTAINING TO ANY EARLIER YEAR COULD BE CARRIED FORWARD WITHOUT ANY RESTRICTION. IT WAS SUBMITTED THAT THE LAW AS ON THE FIRST DAY OF THE ASSESSMENT YEAR IS TO BE CONSIDERED AND SINCE FOR A.Y. 2005-06 THERE WAS NO TIME LIMIT ON CARRY FORWARD OF DEPRECIATION, THE CLAIM OF THE ASSESSEE WAS JUSTIFIED. IN THIS BACKGROUND, IT WAS SUBMITTED THAT THE CLAIM OF UNABSORBED DEPRECIATION BE ALLOWED. ON THE OTHER HAND, ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 36 THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 27.1 AFTER GOING THROUGH THE ORDERS OF THE AUTHORITIES AND HEARING THE SUBMISSIONS OF BOTH THE PARTIES, WE FIND THAT LOWER AUTHORITIES HAVE NOT APPRECIATED THE FACT AS LOW AS DISCUSSED ABOVE, PERHAPS, BECAUSE THEY WERE NOT HAVING BENEFIT OF THE SAME AT RELEVANT POINT OF TIME. IN ANY CASE, ASSESSEE CAN RAISE LEGAL CONTENTION AT ANY STAGE. SO INTEREST OF JUSTICE, THIS ISSUE IS RESTORED TO A.O WITH DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 28. THE ASSESSEE CLAIMED BUSINESS LOSS OF CURRENT YEAR OF RS. 7,90,67,790/- WHICH INCLUDED EXCISE DUTY, INTEREST ON BANK LOANS, SALES TAX DUES, LABOUR DUES, ETC. IT WAS OBSERVED BY THE LOWER AUTHORITIES THAT THE RETURN OF INCOME WAS FILED UPTO A.Y. 1999-00 ONLY. EVEN IN THE YEAR UNDER CONSIDERATION THE RETURN WAS FILED SO AS TO VERIFY GENUINENESS OF THE EXPENDITURE. IT WAS OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 37 WHATSOEVER TO VERIFY THE EXPENDITURE CLAIMED UNDER VARIOUS HEADS. CONSEQUENTLY, IT WAS NOT CLEAR FROM THE DATA FURNISHED BY THE ASSESSEE WHETHER THE LIABILITY RELATES TO THE YEAR UNDER CONSIDERATION, PARTICULARLY, SOME OF THE EXPENSES ARE STATUTORY LIABILITIES AND COVERED BY SECTION 43B. THE ASSESSEE HAS NOT FURNISHED EVIDENCE THAT LIABILITY RELATES TO THIS YEAR AND IF IT RELATES TO EARLIER YEAR WHETHER THE SAME WAS DISALLOWED IN EARLIER YEAR. FURTHER, IT WAS OBSERVED THAT PROVISO TO SECTION 43B OF THE ACT CLEARLY STATES THAT NOTHING CONTAINED IN SECTION SHALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE IN RESPECT OF PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID. THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WITH THE RETURN ARE TAKEN INTO CONSIDERATION. AS THE ASSESSEE HAS FAILED TO FILE RETURN OF INCOME FOR A.Y. 2005- 06. THE ASSESSEES CLAIM FOR SAID DEDUCTION WAS NOT ENTITLED. THUS IN THE ABSENCE OF RETURN OF INCOME FOR CURRENT YEAR AND ANY OTHER EVIDENCE TO PROVE THE EXPENDITURE THE BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE FOR ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 38 COMPUTATION OF CAPITAL GAIN WOULD NOT BE ALLOWED TO BE SET OFF AGAINST THE EARLIER YEAR. THESE FACTUAL FINDINGS NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM. ITA NO. 1329/PN/2009 29. THE FIRST ISSUE IS WITH REGARDS TO YEAR OF LEVY OF CAPITAL GAIN. THE ASSESSEE HAS ENTERED INTO TRANSACTION OF SALE IN QUESTION THROUGH DEVELOPMENT AGREEMENT DATED 19-3-2007 AND THEREFORE, THE TERMS AND CONDITIONS LAID DOWN UNDER THE DEVELOPMENT AGREEMENT PLAY AN IMPORTANT ROLE IN DECIDING THE ISSUE WHETHER THE TRANSFER OF LAND TOOK PLACE IN PREVIOUS YEAR RELEVANT TO THE A.Y. 2007-08 OR THAT TO A.Y 2008-09. HOWEVER, AS PER CLAUSES OF THE AGREEMENT IT WAS CLEAR THAT PASSING OF OR TRANSFERRING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER AS ON THE DATE OF AGREEMENT I.E. ON 19-3-2007. IT IS ONLY EXECUTION OF DEED OF CONVEYANCE WHICH WAS DEFERRED TILL THE DISCHARGE OF FULL CONSIDERATION AS PER THE AGREEMENT AND NOT THE TRANSFER OF ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 39 DEVELOPMENT RIGHTS, WHICH HAD TAKEN PLACE ON THE DATE OF DEVELOPMENT AGREEMENT I.E. 19-3- 2007 AND THEREFORE, THE CAPITAL GAIN ON THE TRANSFER OF PROPERTY IS CHARGEABLE TO TAX FOR THE A.Y. 2007-08. THIS REASONED FINDING IS SUPPORTED BY THE RATIO OF JURISDICTIONAL HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT (2003) 260 ITR 491 (BOM) WHEREIN THE HONBLE HIGH COURT OBSERVED THAT ONCE UNDER SOME CLAUSE OF THE AGREEMENT A LIMITED POWER OF ATTORNEY IS INTENDED TO BE GIVEN TO THE DEVELOPER TO DEAL WITH THE PROPERTY, THEN THE DATE OF AGREEMENT WOULD BE THE RELEVANT DATE TO DECIDE THE DATE OF TRANSFER U/S 2(47_(V) OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES, THE LOWER AUTHORITIES WERE JUSTIFIED IN HOLDING THAT THE CAPITAL GAIN ON SALE OF LAND IS CHARGEABLE TO TAX FOR A.Y. 2007=-08 BECAUSE THE AGREEMENT COUPLED WITH POSESSION TOOK PLACE ON 19-3-2007. SAME NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 30. THE NEXT IS WITH REGARDS TO ADOPTION OF FAIR MARKET VALUE AS ON 1-4-1981 OF THE LAND IN QUESTION FOR COMPUTATION OF CAPITAL GAINS. THIS ITA 1568/PN/08 AND 1329/PN/09 SATHE BISCUIT & CHOCOLATE A.Y. 2005-06 AND 2007=08 40 ISSUE HAS BEEN DISCUSSED AND DECIDED IN GROUND NO. 1 IN ITA NO. 1568/PN/2008 FOR A.Y. 2005-06 IN PRECEDING PARAGRAPHS OF THIS YEAR. FOLLOWING THE SAME REASONING, THIS ISSUE IS DECIDED ACCORDINGLY. 31. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER IS PRONOUNCED IN THE OPEN COURT ON 6-9-2010. SD/- SD/- (D. KARUNARAKA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 6 TH SEPTEMBER 2010 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A) III PUNE 4. THE CIT IV PUNE 5. THE D.R. ITAT B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCH, PUNE.
