Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 5297 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
9 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-05-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2013-2014
Appeal Filed On
31-07-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.1644/KOL/2018 ( / ASSESSMENT YEAR:2013-14) SURAJIT GHOSH 20/1, SHYAM PUKUR LANE, 2 ND FLOOR, SHYAMBAZAR, KOLKATA- 700004. VS. ITO, WARD-44(1), KOLKATA ./ ./PAN/GIR NO.: ALAPG 4094 M (ASSESSEE) .. (REVENUE) ./ITA NO.1645/KOL/2018 ( / ASSESSMENT YEAR:2013-14) AVIJIT GHOSH 20/1, SHYAM PUKUR LANE, 2 ND FLOOR, SHYAMBAZAR, KOLKATA- 700004. VS. ITO, WARD-44(1), KOLKATA ./ ./PAN/GIR NO.: AHAPG 2552 L (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI MIRAJ D SHAH, AR RESPONDENT BY : SHRI RADHEY SHYAM, CIT DR / DATE OF HEARING : 13/03/2019 /DATE OF PRONOUNCEMENT : 29/05/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED TWO APPEALS FILED BY THE ASSESSEE, PE RTAINING TO ASSESSMENT YEAR 2013-14, ARE DIRECTED BY THE SEPARATE ORDERS P ASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-13, WHICH IN TURN ARISE OUT OF THE SEPARATE TWO ASSESSMENT SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961, ( IN SHORT, THE ACT). 2. SINCE, THE ISSUES INVOLVED IN THESE TWO APPEALS ARE COMMON AND IDENTICAL; THEREFORE, THESE APPEALS HAVE BEEN HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, TH E GROUNDS AS WELL AS THE FACTS NARRATED IN ITA NO.1644/KOL/2018, FOR ASSESSMENT YE AR 2013-14, HAVE BEEN TAKEN INTO CONSIDERATION FOR DECIDING THE ABOVE APPEALS EN MASSE . 3. THE SOLITARY GRIEVANCE OF THE ASSESSEE, AS PER L EAD CASE IN ITA NO. 1644/KOL/2018, FOR A.Y. 2013-14, IS THAT THE LD CI T(A) ERRED IN UPHOLDING THE ADDITION OF RS.4,85,77,093/- ON ACCOUNT OF LONG TER M CAPITAL GAIN ON SALE OF IMMOVABLE PROPERTY, AND REFERENCE TO DEPARTMENTAL V ALUATION OFFICER FOR THE VALUATION OF IMMOVABLE PROPERTY AS ON 01.04.1981 BE HELD TO BE BAD IN LAW. 4. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: THE ASSESSEE ALONG WITH HIS OTHER CO-OWNERS HAD ENTERED INTO AN AGREEMENT FOR SALE WITH M/S BANGABHUMI HOUSING PRIVATE LIMITED FOR SAL E OF A PROPERTY AT 119 PARK STREET KOLKATA MEASURING 2 BIGHA AND 2 CHITTAK AND 2 SQ FT OWNED BY THEM (BY INHERITANCE) WHICH WAS ALREADY LEASED TO PARK CHAMB ERS PRIVATE LIMITED FOR 61 YEARS FROM 24/01/1979, THE LEASE WAS IN FORCE TILL 2040 AND THE MONTHLY LEASE RENT AS ON DATE OF SALE WAS RS.10,000 PER MONTH. THE ASS ESSEE WAS THE CO OWNER OF THE PROPERTY HAVING 1/6 TH SHARE IN THE PROPERTY. THE DETAILS OF ALL CO OWNER S ARE AS FOLLOWS: CO-OWNERS SHARE 1 SRI JYOTIRMOY GHOSH 1/6 TH 2 SRI AVIJIT GHOSH 1/6 TH 3 SRI SURAJIT GHOSH 1/6 TH 4 SMT. JAYEETA SINGHA ROY 1/2 ND TOTAL 100% SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 THE ACTUAL SALE VALUE AS RECEIVED BY THE ASSESSEE F OR THE SALE OF HIS 1/6 TH SHARE WAS CLAIMED TO BE RS.1,50,00,000 IN TERMS OF THE AGREEM ENT FOR SALE DATED 12/05/2010. AS THE TIME OF CONVEYANCE OF THE SALE DEED ON 02/11 /2012, THE FAIR MARKET VALUE BY THE STAMP AUTHORITY WAS DETERMINED AT RS.11,16,5 3,494/-. 5.THE ASSESSEE OFFERED NIL CAPITAL GAINS IN HIS RET URN OF INCOME. THE COMPUTATION AS ORIGINALLY ADOPTED BY THE ASSESSEE WAS AS FOLLOW S: DEEMED SALE VALUE RS.11,16,53,494 LESS: INDEX COST AS PER REGISTERED VALUERS REPORT RS.14,89,68,295 CAPITAL LOSS RS. 3,73,14,801 IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE CHALLENG ED THE SALE VALUE U/S 50C(2) OF THE ACT AND THE LD AO REFERRED THE MATTER OF VALUAT ION TO THE LD DVO WHO CALCULATED THE VALUE AS FOLLOWS: AS ON 01/04/1981 RS.1,10,61,171 AS ON DATE OF SALE (SEC. 50C(2) ) RS.38,57,03,737 (50% SHARE) THE LD ASSESSING OFFICER (PAGE 6 OF ASSESSMENT ORDE R) COMPUTED THE CAPITAL GAINS AS FOLLOWS: PARTICULARS RS. RS. 1. MARKET VALUE OF THE PROPERTY AS PER DVO ON 2.11. 12 38,57,03,737 2. 1/6 TH THEREOF BELONGING TO THE ASSESSEE 6,42,83,956 3. MARKET VALUE OF THE PROPERTY AS PER DVO ON 1.4.1 981 4,57,13,555 4. MARKET VALUE OF THE LAND AS PER DVO ON 1.4.1981 1,10,61,171 5. 1/6 TH THEREOF BELONGING TO THE ASSESSEE 18,43,529 6. INDEXED COST OF THE PROPERTY [1843529 X 852/100] 1,57,06,863 7. CAPITAL GAIN / LOSS (-) 4,85,77,093 THEREFORE, THE ASSESSING OFFICER MADE ADDITION TO T HE TUNE OF RS. 4,85,77,093/- SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 6. AGGRIEVED, BY THE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A), WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD CIT(A) JUST REITER ATED THE FINDINGS OF THE ASSESSING OFFICER AND MADE ADDITION. AGGRIEVED, BY THE ORDER OF LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT VALUATION OF PROPERTY SHOULD BE DONE AS PER RENT CAPITALIZATION METHOD. T HE LD COUNSEL STATED THAT AS PER SCHEDULE III OF THE WEALTH TAX RULES, THE MANNE R OF CALCULATION FOR THE PURPOSE RENT CAPITALIZATION METHOD HAS BEEN LAID DO WN AND DEFINED, WHICH IS GIVEN BELOW: VALUATION OF IMMOVABLE PROPERTY. 3. SUBJECT TO THE PROVISIONS OF RULES 4, 5, 6, 7 AND 8, FOR THE PURPOSES OF SUB-SECTION (1) OF SECTION 7, THE VALUE OF ANY IMMOVABLE PROPERTY, BEING A BUI LDING OR LAND APPURTENANT THERETO, OR PART THEREOF, SHALL BE THE AMOUNT ARRIVED AT BY MULTIPLY ING THE NET MAINTAINABLE RENT BY THE FIGURE 12.5 : PROVIDED THAT IN RELATION TO ANY SUCH PROPERTY WHICH IS CON STRUCTED ON LEASEHOLD LAND, THIS RULE SHALL HAVE EFFECT AS IF FOR THE FIGURE 12.5, (A) WHERE THE UNEXPIRED PERIOD OF THE LEASE OF SUCH LAN D IS FIFTY YEARS OR MORE, THE FIGURE 10.0 HAD BEEN SUBSTITUTED ; AND (B) WHERE THE UNEXPIRED PERIOD OF THE LEASE OF SUCH LAND IS LESS THAN FIFTY YEARS, THE FI GURE 8.0 HAD BEEN SUBSTITUTED : I) IN VIEW OF THE ABOVE AND APPLYING THE VALUATION MET HOD OF RENT CAPITALIZATION THE VALUATION OF THE PROPERTY SOLD AS ON THE DATE OF SA LE U/S 50C(2) OF THE IT ACT 1961 SHOULD BE AS FOLLOWS: ANNUAL RENT RS.1,20,000 MULTIPLIER 8 FACTOR AS LEASE IS FOR 28 YEARS I.E. LESS THAN 50 YEARS. FAIR MARKET VALUE RS.1,20,000 * 8 = RS.9,60,000 II) THE TOTAL SALE VALUE OF THE PROPERTY WAS RS.12 CROR E AND THE ASSESSEE SHARE WAS 1/6 TH IN THE SAME. THE VALUE AS PER SECTION 50C OF THE IT ACT 1961 AS COMPUTED UNDER THE VALUATION METHOD OF RENT CAPITALIZATION WHICH IS TO BE APPLIED IN THIS CASE COME TO RS.9,60,000. AS THE SALE VALUE IS HIGHER THEN THE F AIR VALUE THUS THE SALE VALUE OF RS.1,50,00,000 IS TO BE ADOPTED. THUS, THE LD AO BE DIRECTED TO RECOMPUTE THE CAPITA L GAINS ADOPTING THE SALE VALUE AS RS.1,50,00,000 AND THE VALUE AS ON 01/04/1981 SH ALL BE THAT AS DETERMINED BY THE LD DVO IN HIS REPORT. SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS P RIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREA DY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD.AT THE TIME OF HEARING BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS RAISED A LIMITED ISSUE THAT WHILE DETERMINING THE FAIR MARKET VALUE OF THE ASSESSEE'S PROPERTY, THE VALUATION OF THE PROPERTY, SHOULD BE DETERMINED BY APPLYING THE RENT CAPITALIZATION METHOD TAKING THE RENT ACTUALLY RECEIVED BY THE ASS ESSEE AND NOT THE FAIR MARKET RENT AS DONE BY THE DVO. HENCE, THE PRIMARY DISPUTE IS REGARDING THE MANNER AND METHOD OF VALUATION AS ADOPTED BY THE DVO. WE ARE O F THE VIEW THAT LD DVO WAS NOT JUSTIFIED IN VALUING THE BUILDING, AS BECAUSE T HE ASSESSEE WAS OWNER OF THE LAND ONLY AND THE BUILDING WAS NOT CONSTRUCTED OR OWNED BY ASSESSEE. THE BUILDING WAS CONSTRUCTED BY THE LESSEE, M/S PARK CHAMBERS PRIVAT E LIMITED. FURTHER, WE NOTE THAT LD. DVO HAS FAILED TO APPRECIATE THAT THE PROP ERTY BEING SOLD BY THE ASSESSEE WAS ON LEASE TILL 2040 AND THE ASSESSEE AND THE OTH ER CO OWNERS WERE ONLY ENTITLED TO RECEIVE A SUM OF RS.10,000 PER MONTH AS RENT. TH US, THE VALUATION OF THE PROPERTY HAD TO BE MADE AS PER RENT CAPITALIZATION METHOD. FOR THISWE RELYON THE JUDGMENT OF THE HON`BLE PUNJAB AND HARYANA HIGH COU RT IN THE CASE OF CIT VS. INDERJIT SINGH, (1985) 153 ITR 372 (P & H), WHEREIN THE HONBLE HIGH COURT HELD AS FOLLOWS: 6. WE HAVE DULY CONSIDERED THE ARGUMENT OF THE LEA RNED COUNSEL. HOWEVER, WE AGREE WITH THE SUBMISSION OF MR. SHARMA. IT IS WELL SETTLED THAT RENTAL METHOD FOR EVALUATING THE PROPERTIES WHICH ARE ON RENT AT THE TIME OF SALE IS A WELL-RECOGNISED METHOD FOR DETERMINING THE FAIR MARKET PRICE OF SUC H BUILDINGS. THE METHOD HAS BEEN GIVEN RECOGNITION BY THE LEGISLATURE EVEN UNDE R THE W.T. RULES. ACCORDING TO RULE 1BB OF THE SAID RULES, THE VALUATION OF THE RE SIDENTIAL BUILDINGS CAN BE DETERMINED BY MULTIPLYING THE NET MAINTAINABLE RENT BY 100/8. THE METHOD IS ALSO APPROVED BY JUDICIAL PRECEDENTS. 7. THE SUPREME COURT IN STATE OF KERALA V. HASSAN K OYA, AIR 1968 SC 1201, OBSERVED THAT WHEN THE PROPERTY SOLD IS LAND WITH B UILDING, IT IS OFTEN DIFFICULT TO SECURE RELIABLE EVIDENCE OF INSTANCES OF SALE OF SI MILAR LANDS WITH BUILDINGS PROXIMATE IN TIME TO THE DATE OF THE NOTIFICATION U NDER SECTION 4. THEREFORE, THE METHOD WHICH IS GENERALLY RESORTED TO IN DETERMININ G THE VALUE OF THE LAND WITH BUILDINGS ESPECIALLY THOSE USED FOR BUSINESS PURPOS ES, IS THE METHOD OF CAPITALIZATION OF RETURN ACTUALLY RECEIVED OR WHICH MIGHT REASONABLY BE RECEIVED SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 FROM THE LAND AND THE BUILDINGS. NO DOUBT THAT CASE RELATED TO THE ACQUISITION UNDER THE LAND ACQUISITION ACT, BUT THE PRINCIPLES CAN BE APPLIED IN OTHER CASES TOO. THE AFORESAID CASE WAS FOLLOWED BY THIS COURT IN CIT V. PREM NATH ANAND [1977] 108 ITR 549. THERE, THE TRIBUNAL HAD F IXED THE FAIR MARKET VALUE ON THE BASIS OF MULTIPLYING THE ANNUAL RETURN BY 12. I T WAS HELD BY THE LEARNED DIVISION BENCH THAT THE METHOD ADOPTED BY THE TRIBU NAL WAS NOT OPEN TO CHALLENGE IN VIEW OF THE OBSERVATIONS IN HASSAN KOYA'S CASE, AIR 1968 SC 1201. SIMILAR VIEW WAS EXPRESSED IN WENGER AND CO. V. DISTRICT VA LUATION OFFICER [1978] 115 ITR 648 (DELHI), CIT V. SMT. VIMLABEN BHAGWANDAS PA TEL AND SMT. KAMLABEN KANJIBHAI PATEL [1979] 118 ITR 134 (GUJARAT), PRODY UT KUMAR DUTTA V. COMPETENT AUTHORITY, IAC [1982] 134 ITR 42 (CAL) AN D CIT V. PREAM NARAIN TANDON [1984] 145 ITR 359 (ALL). 8. NOW, WE ADVERT TO THE FACTS OF THIS CASE. THE PR OPERTY WAS SOLD ON DECEMBER 4, 1972. AT THE TIME OF SALE, IT WAS ON LEASE AND THE TENANT WAS PAYING RENT AT THE RATE OF RS. 500 PER MENSEM. THREE DAYS THEREAFTER, THE P ROPERTY WAS GIVEN ON LEASE BY THE RESPONDENT AT THE RATE OF RS.780 PER MENSEM. TH E PROVISIONS OF THE EAST PUNJAB URBAN RENT RESTRICTION ACT, HAD BEEN MADE AP PLICABLE TO CHANDIGARH BEFORE THE DATE OF SALE. WHILE DETERMINING THE ANNU AL RENT, THE AMOUNTS SPENT ON REPAIRS AND PAID AS TAXES BY THE OWNER ARE TO BE DE DUCTED FROM THE GROSS ANNUAL RETURN. NORMALLY TWO MONTHS' RENT IS CONSIDERED REA SONABLE FOR THE PURPOSE OF REPAIRS. IN CHANDIGARH, NO LOCAL TAX ON PROPERTY HA D BEEN IMPOSED THEN AND, THEREFORE, IN THE PRESENT CASE, NO AMOUNT IS TO BE DEDUCTED ON THAT SCORE. IF THE RENT OF THE BUILDING AT THE TIME OF SALE IS TAKEN A S RS.780 PER MENSEM, THE ANNUAL RENTAL VALUE COMES TO RS.7,800. MULTIPLYING THE AMO UNT BY 12 WILL GIVE THE FAIR MARKET PRICE OF THE PROPERTY. ACCORDING TO THE SAID PRINCIPLE, THE PRICE COMES TO RS. 93,600. 9. THE TRIBUNAL WHILE ACCEPTING THE APPEAL HAS NOT GIVEN ANY FINDINGS AS TO WHAT IS THE FAIR MARKET VALUE OF THE PROPERTY. IT APPEAR S FROM THE TENOR OF THE JUDGMENT THAT IT ACCEPTED THE VALUATION BY THE VALUER OF THE RESPONDENT AND REJECTED THAT WORKED OUT BY THE EXECUTIVE ENGINEER (VALUATION). H OWEVER, IT DID NOT SAY SO. BEING A COURT OF APPEAL, IT WAS INCUMBENT ON IT TO RECORD A FIRM FINDING IN THIS REGARD. THE VALUATION GIVEN BY THE VALUER OF THE RE SPONDENT IS RS. 80,000 WHICH IS MUCH LESS THAN THE CONSIDERATION PAID. THE VALUATIO N DETERMINED BY US ON THE BASIS OF RENT CAPITALIZATION METHOD IS ALSO LESS TH AN THE SAID CONSIDERATION. 10. FOR THE AFORESAID REASONS, WE DO NOT FIND ANY M ERIT IN THE APPEAL AND DISMISS THE SAME WITH COSTS. 10. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HO N`BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. ASHA DEVI AGARWAL 169 ITR 400, WHEREIN, ON SIMILAR FACTS, THE HONBLE CALCUTTA HIGH COURT HELD AS FOLLOWS: WE NEXT TAKE UP FOR CONSIDERATION WHETHER THE TRIB UNAL ERRED IN LAW IN ACCEPTING THE CONTENTIONS OF THE RESPONDENT IN RESPECT OF THE VALUATION OF THE SAID PROPERTY AND REJECTING THE VALUATION AS MADE BY THE VALUER F OR THE DEPARTMENT. IN THE ORDER UNDER APPEAL, THE TRIBUNAL HAS NOTED THE FOLLOWING CONTENTIONS OF THE RESPONDENT: SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 (A) ONLY THE RENT RECEIVED BY THE VENDORS AT THE TI ME OF THE SALE SHOULD BE TAKEN INTO ACCOUNT ; (B) THERE WERE PERSONS IN UNAUTHORISED OCCUPATION O F THE SAID PROPERTY WHO DID NOT PAY RENT TO THE VENDORS; (C) TENANTS IN THE PROPERTY HAD SUBLET PORTIONS IN THEIR OCCUPATION TO OTHERS WITHOUT SURRENDERING THEIR OWN TENANCY; (D) THERE WERE SEVERAL TITLE SUITS PENDING IN RESPE CT OF THE SAID PROPERTY FOR A LONG TIME ; (E) THE PROPERTY IN QUESTION WAS A JOINT PROPERTY; (F) THE ITEMS OF DEDUCTIONS FROM THE RENT RECEIVED ON ACCOUNT OF REPAIRS, MUNICIPAL RATES AND COLLECTION CHARGES WERE NOT COMPUTED OR E STIMATED BY THE INSPECTING ASSISTANT COMMISSIONER. THE TRIBUNAL HAS RECORDED IN ITS ORDER THAT IT HAD CONSIDERED THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AFTER WHICH IT CAME TO THE CONCLUSION THAT THE VALUATION OF THE SAID PROPERTY AS URGED BY THE RESP ONDENT SHOULD BE ACCEPTED. WE NOTE THAT THE ORDER OF THE TRIBUNAL IS SILENT ON THE QUESTION WHETHER IN ESTIMATING THE VALUE OF A PROPERTY ON RENTAL BASIS, ONLY THE RENT WHICH IS PAYABLE BY THE TENANTS TO THE OWNERS OF THE PROPERTY AS THE LANDLORD SHOULD BE TAKEN INTO ACCOUNT OR WHETHER THE RENT WHICH WAS BEING COLLECT ED BY TENANTS OF THE SAID PROPERTY FROM THEIR SUB-TENANTS SHOULD ALSO BE TAKE N INTO ACCOUNT. IF WE ASSUME THAT THE TRIBUNAL PROCEEDED ON THE BASIS THAT THE R ENT PAID BY THE SUB-TENANTS IN THE SAID PROPERTY TO THE TENANTS IN SUCH PROPERTY S HOULD NOT BE TAKEN INTO ACCOUNT IN COMPUTING THE VALUE OF SUCH PROPERTY ON RENTAL B ASIS, IT CANNOT BE SAID THAT THE TRIBUNAL'S APPROACH WAS ERRONEOUS. THE PROPERTY INV OLVED IN THE INSTANT CASE IS, ADMITTEDLY, A TENANTED PROPERTY. IN LAW, THE OWNER IS ENTITLED TO COLLECT ONLY THE RENT PAYABLE BY THE TENANTS. THE OWNER HAS NO RIGHT OR CLAIM OVER THE RENT PAID BY THE SUB-TENANTS TO THE TENANTS. ONLY IF A TENANT IS EVICTED UNDER DUE PROCESS OF LAW, THE QUESTION OF A SUB-TENANT BECOMING A DIRECT TENA NT OF THE OWNER MIGHT ARISE. PURCHASER OF SUCH A TENANTED PROPERTY WOULD BE IN T HE SAME POSITION AS THE VENDOR, THE ORIGINAL OWNER. A PURCHASER WOULD ALSO BE RESTRICTED TO COLLECTION OF RENT ONLY FROM THE TENANTS AND NOT FROM THE SUB-TEN ANTS AND THE VALUE OF SUCH PROPERTY IN THE HANDS OF THE OWNER OR TRANSFEREE, I F CALCULATED ON THE RENTAL BASIS, WOULD HAVE TO BE DETERMINED BY THE RENT WHICH IS AV AILABLE TO THEM FOR COLLECTION AND NOT ON THE RENT WHICH IS BEING COLLECTED BY THE TENANTS ON THEIR OWN FROM THE SUB-TENANTS. NO AUTHORITY WAS CITED ON BEHALF OF TH E APPELLANT FOR THE PROPOSITION THAT IN VALUING A TENANTED PROPERTY ON RENTAL BASIS , THE RENT COLLECTED BY THE TENANTS FROM THEIR SUB-TENANTS WOULD HAVE TO BE TAK EN INTO ACCOUNT. APART FROM THE AFORESAID, THE TRIBUNAL HAS TAKEN IN TO ACCOUNT THE OTHER FACTS AND CIRCUMSTANCES RELEVANT TO THE QUESTION OF VALUATION AS ALSO THE VARIOUS DISADVANTAGES PERTAINING TO THE SAID PROPERTY AND H AS ARRIVED AT ITS OWN CONCLUSION. IT CANNOT BE SAID THAT THE DECISION OF THE TRIBUNAL IS PERVERSE OR BASED ON NON-RELEVANT EVIDENCE. ON THE SAME FACTS, IT MAY BE POSSIBLE FOR US TO COME TO A DIFFERENT CONCLUSION BUT WE SHOULD NOT BE CALLED UP ON TO DO SO IN AN APPEAL ON A QUESTION OF LAW. SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 8 88 8 11. HON`BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION CO. 123 ITR 68, HAS HELD AS FOLLOWS: HOWEVER, THE FAIR MARKET VALUE OF THE PROPERTY ON THE BASIS OF COST OF LAND AND BUILDING METHOD WOULD HAVE BEEN RELEVANT IF IT WAS SELF-OCCUPIED BY THE TRANSFEROR AND HE WAS IN A POSITION TO HAND OVER VACANT POSSES SION THEREOF TO THE TRANSFEREE. INSTEAD THERE WERE THREE OLD TENANTS RESIDING IN TH E PROPERTY, AND IT WAS ALSO SUBJECT TO THE RENT CONTROL RESTRICTIONS AGAINST EJ ECTMENT. IN THIS RESPECT, WE ARE IN AGREEMENT WITH THE TRIBUNAL THAT THE VALUE OF SUCH PROPERTIES CANNOT BE MEASURED BY THE VALUES OF THOSE PROPERTIES WHICH ARE SELF-OC CUPIED. OF COURSE, EVICTION PROCEEDINGS WERE PENDING AGAINST THE TENANTS AT THE TIME OF THE SALE. HOWEVER, THERE WAS NO CERTAINTY THAT THEY WOULD ESSENTIALLY RESULT IN THE TRANSFEREE OBTAINING VACANT POSSESSION. THAT TRANSFEREE IN FACT TOOK A B IG RISK WHILE EFFECTING PURCHASE OF THE PROPERTY, AS IT COULD AS WELL BE THAT THE EV ICTIONS DID NOT FRUCTIFY. EVEN ULTIMATELY WHAT BROUGHT SUCCESS IN THAT DIRECTION W AS NOT THE FAVOURABLE CULMINATION OF EVICTION PROCEEDINGS, BUT THE TRANSF EREE OBTAINING POSSESSION AFTER ENTERING INTO SETTLEMENTS WITH THEM WHERE UNDER RS. 35,000 WERE PAID TO EACH OF THE TENANTS. THIS COURT IN THE CASE OF WENGER AND C O. [1978] 115 ITR 648 TOO RECOGNIZED THE CAPITALIZATION OF THE RENTAL VALUE F OR PART OF THAT PROPERTY WHICH WAS IN THE POSSESSION OF THE TENANTS. THE SUPREME C OURT HAD ALSO IN THE CASE OF STATE OF KERALA V. HASSAN KOYA [1968] 3 SCR 459; AI R 1968 SC 1201, OBSERVED THAT THE METHOD WHICH IS GENERALLY RESORTED TO IN D ETERMINING THE VALUE OF THE LAND AND BUILDING SPECIALLY THOSE USED FOR BUSINESS PURP OSES IS THE METHOD OF CAPITALIZATION OF THE RETURN ACTUALLY RECEIVED OR W HICH MIGHT REASONABLY BE RECEIVED FROM THE LAND AND BUILDING, THOUGH IT WAS RECOGNIZED THAT THIS METHOD COULD NOT BE LAID DOWN AS A GENERAL RULE APPLICABLE TO ALL SITUATIONS AND CIRCUMSTANCES. NOW, IN THE PRESENT CASE, IF THE METHOD OF CAPITALI ZATION OF THE RENTAL VALUE BY MULTIPLYING A NUMBER OF YEARS' YIELD WAS ADOPTED, T HE VALUE OF THE PROPERTY IN THE YEAR OF SALE WAS EVEN LESS THAN RS.1 LAKH. IN THIS CONTEXT, IT COULD NOT BE SAID THAT THE SALE CONSIDERATION OF RS.2,20,000 DID NOT REPRE SENT A FAIR VALUE. FROM THE SIDE OF THE RESPONDENTS IN THIS REGARD REFERENCE HAS BEE N MADE TO THE VALUATION ADOPTED BY THE DEPARTMENT'S VALUATION OFFICER OF PROPERTY K NOWN AS HOTEL MARINA BUILDING, NEW DELHI. IT WAS COMPUTED AT RS. 27,54,5 00. IT WAS SITUATED ON 6,400 SQUARE YARDS OF LAND AND WAS LYING LET OUT. IF THAT VALUATION WAS TAKEN INTO CONSIDERATION, THE VALUE OF 400 SQUARE YARDS OF LAN D OF THE PROPERTY IN DISPUTE WOULD JUST COME TO ABOUT RS.1,50,000. ANOTHER INSTA NCE HAS BEEN CITED FROM THE SIDE OF THE RESPONDENTS OF THE VALUATION OF A QUEEN SWAY PROPERTY BY THE DEPARTMENTAL VALUER AT RS.1,54,000 IN THE YEAR 1972 -73. THIS COVERED 800 SQUARE YARDS WITH 2 STOREYED BUILDING ON IT. IT WAS, HOWEV ER, LYING ENTIRELY LET OUT. THESE INSTANCES, OF VALUATIONS OF THE PROPERTIES ARE RELE VANT FOR THE PRESENT CASE AS THEY WERE IN SIMILAR CIRCUMSTANCES LYING LET OUT TO TENA NTS. THE REVENUE HAS, HOWEVER, VEHEMENTLY ASSERTED THAT THE METHOD OF CAPITALISATION OF RENTAL VALUE WAS NOT EVEN ADOPTED BY THE TRANSFE ROR'S VALUER. INSTEAD HE TOOK SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 9 99 9 INTO ACCOUNT THE METHOD OF COMPUTING THE MARKET VAL UE OF THE LAND AND THE BUILDING. HE IN THIS REGARD COMMITTED GRAVE ERROR I NASMUCH AS THE VALUE OF THE LAND WAS TAKEN AT RS. 300 PER SQUARE YARD WHILE IT WAS ABOVE RS.3,000. SECONDLY, HE DID NOT TAKE INTO ACCOUNT THE POTENTIALITIES OF THE PROPERTY FOR FUTURE. WE IN THIS REGARD FIND THAT THE VALUER HAD OF COURSE REFERRED TO THE VALUATION OF THE PROPERTY BY THIS LAND AND BUILDING METHOD AND HAD GROSSLY UN DER-VALUED THE LAND AND NOT TAKEN INTO CONSIDERATION THE FUTURE POTENTIALITIES OF THE PROPERTY. HOWEVER, WHERE WE DO NOT AGREE WITH THE REVENUE IS WHETHER, IN THE CIRCUMSTANCES OF THE PRESENT CASE,WHERE THE ENTIRE PROPERTY WAS LYING LET OUT TH AT METHOD COULD PROVIDE A SAFE GUIDE FOR DETERMINING THE FAIR MARKET VALUE? IN OUR OPINION, THE PROPER COURSE WAS TO HAVE RESORTED TO THE METHOD OF CAPITALIZATIO N OF THE RENTAL VALUE BY MULTIPLYING A NUMBER OF YEARS' YIELD. IN ITS CONTEX T THE VALUE ADOPTED BY THE TRANSFEROR'S VALUER, AND THAT SHOWN IN THE SALE DEE D COULD NOT BE TREATED AS UNDER- VALUATION WHICH COULD HAVE JUSTIFIED RESORT TO ACQU ISITION PROCEEDINGS. WE ARE, THEREFORE, UNABLE TO INTERFERE WITH THE ORDER OF TH E TRIBUNAL QUASHING THE ACQUISITION. 12. WE NOTE THAT COORDINATE BENCH OF ITAT KOLKATA I N THE CASE OF PRAFULLA KR. BHOSE VS. ITO IN I.T.A. NO. 316/KOL/2015, FOR ASSESSMENT YEAR 20 07-08, DATED 18.11.2015 HAD HELD AS UNDER: 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS RAISED A LIMITED ISSUE THAT WHILE DETERMINING T HE FAIR MARKET VALUE OF THE ASSESSEE'S PROPERTY, THE VALUATION OF THE PORTION O CCUPIED BY TENANT SHOULD BE DETERMINED BY APPLYING THE RENT CAPITALIZATION MET HOD TAKING THE RENT ACTUALLY RECEIVED BY THE ASSESSEE AND NOT THE FAIR MARKET RE NT AS DONE BY THE DVO. IT IS OBSERVED THAT THIS CLAIM OF THE ASSESSEE IS DULY SU PPORTED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AS HA DEVI AGARWAL (SUPRA), WHEREIN IT WAS HELD BY THEIR LORDSHIPS THAT WHILE E STIMATING THE VALUE OF A PROPERTY ON RENTAL BASIS, ONLY THE RENT, WHICH IS A CTUALLY PAYABLE BY THE TENANTS TO THE OWNERS OF THE PROPERTY, AS THE LANDLORDS SHOULD BE TAKEN INTO ACCOUNT. IT WAS HELD THAT WHEN THE PROPERTY IS A TENANTED PROPERTY, THE OWNER IS ENTITLED TO COLLECT ONLY THE RENT PAYABLE BY THE TENANTS AND A PURCHASE R OF SUCH TENANTED PROPERTY WOULD BE IN THE SAME POSITION AS THE VENDOR, I.E. O RIGINAL OWNER. IT WAS HELD THAT A PURCHASER, THEREFORE, WOULD BE RESTRICTED TO COLLEC TION OF RENT ONLY FROM THE TENANTS AND THE VALUE OF SUCH PROPERTY IN THE HANDS OF THE OWNER OR TRANSFEREE, IF CALCULATED ON THE RENTAL BASIS, WOULD HAVE TO BE DE TERMINED BY THE RENT, WHICH IS AVAILABLE TO THEM FOR COLLECTION. AT THE TIME OF HE ARING BEFORE US, NO AUTHORITY HAS CITED ON BEHALF OF THE DEPARTMENT TAKING A CONTRARY VIEW ON THIS ISSUE. WE, THEREFORE, RESPECTFULLY FOLLOW THE RATIO OF THE DEC ISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASHA DEVI AGARWAL AND DIR ECT THE ASSESSING OFFICER/DEPARTMENTAL VALUATION OFFICER TO COMPUTE T HE FAIR MARKET VALUE OF THE LET OUT PORTION OF THE ASSESSEE'S PROPERTY BY TAKING IN TO CONSIDERATION THE RENT ACTUALLY RECEIVABLE BY THE ASSESSEE FROM THE TENANTS. LD. CO UNSEL FOR THE ASSESSEE HAS ALSO SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 CONTENDED THAT IF THE VALUATION OF THE LET OUT PORT ION OF THE ASSESSEE'S PROPERTY IS DONE BY TAKING INTO CONSIDERATION, THE ACTUAL RENT RECEIVABLE BY THE ASSESSEE FROM THE TENANTS, THE TOTAL FAIR MARKET VALUE OF THE PRO PERTY OF THE ASSESSEE AS PER SUCH REVISED ESTIMATION WOULD BE LESS THAN THE SALE CONS IDERATION OF RS.1,30,00,000/- SHOWN BY THE ASSESSEE AND THERE WOULD BE NO CASE OF MAKING ADDITION ON ACCOUNT OF CAPITAL GAIN. WE DIRECT THE ASSESSING OFFICER TO VERIFY THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE AND IF IT IS FOUND AFTER R ECOMPUTATION OF THE VALUATION OF THE ASSESSEE'S PROPERTY THAT THE FAIR MARKET VALUE IS LESS THAN THE SALE CONSIDERATION SHOWN BY THE ASSESSEE, NO ADDITION SH ALL BE REQUIRED TO BE MADE ON THIS ISSUE'. 13. RESPECTFULLY FOLLOWING THE ABOVE NOTED PRECEDEN TS, WE NOTE THAT THE ASSESSING OFFICER OUGHT TO HAVE DETERMINED THE VALUE OF PROPE RTY BASED ON RENT CAPITALIZATION METHOD. THEREFORE, WE DIRECT THE LD. ASSESSING OFFICER TO RE- COMPUTE THE CAPITAL GAINS AND DECIDE ACCORDINGLY. A CCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEES, ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 29.05.2019 SD/- ( A.T.VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 29/05/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. SURAJIT GHOSH & AVIJIT GHOSH 2. ITO, WARD-44(1), KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES SURAJIT GHOSH & AVIJIT GHOSH ITA NOS.1644 & 1645/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1
Other Referred Cases
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Laws Referred To
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1:1 Consultation on FEMA Compliance
₹1
1:1 Consultation on Business Development
₹1
Guide to Charitable Trusts: Formation, Benefits, and Compliance
₹0
Non-Compete Agreement
₹0
Initial LLP Agreement
₹0
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