Shri Maneck Keki Dastoor, V. DCIT, Jamshepur

ITA 18/RAN/2013

• Counselvise Citation: 1825114 RSA 2013
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK RAUSHAN SR S C
• Assessee Lawyers: S K PODDAR
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value; Valuation report
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI CIRCUI T BENCH, RANCHI (BEFORE SHRI P.K.BANSAL, HONBLE A.M.& SHRI D,T. GA RASIA, HONBLE J.M .) I.T.A. NO. 18/RAN/2013 : ASSESSMENT YEAR 2008-09 SHRI MANECK KEKI DASTOOR, LUNAVALA -VS- DC IT, CIRCLE-1, JAMSHEDPUR (APPELLANT) PAN :ABFPD 8923M (RESPONDENT) APPELLANT BY : SHRI S.K. PODDAR ADVOCATE RESPONDENT BY: SHRI DEEPAK RAUSHAN, SR.S.C . DATE OF CONCLUDING THE HEARING : 01.05.2013 DATE OF PRONOUNCING THE ORDER : 07.05.2013 ORDER PER BENCH : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), JAMSHEDPUR DATED 29.01.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE COMPUTATION OF THE CAPITAL GAINS ON THE SALE OF THE HOUSE PROPERTY IN WHICH TH E ASSESSEE WAS HAVING LEASEHOLD RIGHT. 3. BRIEF FACTS OF THE CASE RELATING TO THIS CASE A RE THAT THE ASSESSEE SOLD HOUSE PROPERTY AT HOLDING NO.16, C.H.AREA (E), MEASURING 0.380 ACRES FOR A CONSIDERATION OF RS.3 CRORES ON 07.01.2008. THE ASSESSEE CLAIMED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 AT RS.2,68,56,632/- BEING THE INDEXED COST OF ACQUISITION IN ACCORDANCE WITH THE VALUATION REPORT DATED 08.10.2007 TO DETER MINE THE FAIR MARKET VALUE AS ON 01.04.1981 AT RS.31,43,368/-. THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54 OF THE I.T. ACT FOR THE PURPOSE OF HOUSE PROPERTY AT RS.54 ,30,691/-. THE CAPITAL GAIN WAS THUS COMPUTED AT NIL. THE ASSESSING OFFICER DID NOT AC CEPT THE VALUATION REPORT, AS ACCORDING TO HIM, NO CLEAR BASIS WAS ADOPTED BY THE VALUER TO ASCERTAIN THE COST OF THE ACQUISITION OF THE SAID HOUSE PROPERTY. THE ASSESSI NG OFFICER ASKED THE SUB-REGISTRAR, EAST SINGHBHUM ABOUT THE VALUE OF THE SAID PROPERTY AS ON 01.04.1981 BUT THE SUB- REGISTRAR EXPRESSED HIS INABILITY BUT INFORMED THAT CERTAIN RATE IN THE LOCATION OF THE PROPERTY WAS RS.1.64 CRORES PER ACRE FOR LAND AND RS.1100/- PER SQ.FT. FOR SUPERSTRUCTURE FOR THE PURPOSE OF REGISTRATION AS ON 07.01.2008. T HE ASSESSING OFFICER WORKED OUT THE VALUE AS ON THE DATE OF THE SALE AS ON 07.01.2008 A T RS.1,26,61,500/- AND ON THAT BASIS WORKED OUT THE REVERSE VALUE ON 01.04.1981 AT RS.23 ,02,090/- AS PER THE DETAILS GIVEN UNDER PARA 4.8. THUS, THE ASSESSING OFFICER WORKED OUT THE INDEXED COST OF ACQUISITION FOR THE ASSESSMENT YEAR 2008-09 AT RS.1,26,61,500/- AGAINST THE VALUE WORKED OUT BY THE ASSESSEE AT RS.2,68,56,632/-. THUS, THE ASSESSING O FFICER DETERMINED THE CAPITAL GAIN AT RS.1,73,38,500/-. THE NET TAXABLE LONG TERM CAPITAL GAIN WAS WORKED OUT AT RS.1,19,07,809/-, AFTER ALLOWING THE EXEMPTION UNDE R SECTION 54 FOR RS.54,30,691/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT( A) ENHANCED THE CAPITAL GAIN BY TAKING THE COST OF THE ACQUISITION OF LEASEHOLD LAN D AT NIL AND TAKING THE INDEXED COST OF SUPERSTRUCTURE AT RS.24,10,292/-, AFTER ALLOWING TH E EXEMPTION UNDER SECTION 54 OF RS.54,30,691/- THE CAPITAL GAIN WAS COMPUTED AT RS. 2,21,59,017/-. 4. THE LD. A.R. BEFORE US CONTENTED THAT THE MAJOR PORTION OF THE LAND WAS THE VALUE OF THE LEASEHOLD LAND. THE LEASEHOLD RIGHT DECISION HAS THEIR MARKET VALUE WHERE THE ASSESSEE HAS TRANSFERRED. THE ASSESSEE HAS ALSO TR ANSFERRED THE LEASEHOLD RIGHT FOR THE REMAINING PERIOD. THE ASSESSEE GOT THE EXTENSION FO R THE LEAST FOR 30 YEARS. THE LEASE REMAINED FOR 26 YEARS. THERE WAS NO QUESTION OF TAK ING THE VALUE OF THE LAND AT ZERO. THE COST OF THE LAND MAY BE ZERO. THE FAIR MARKET V ALUE CANNOT BE NIL. WHILE COMPUTING THE CAPITAL GAINS, THE ASSESSEE HAS OBTAI NED THE FAIR MARKET VALUE AS ON 01.04.1981 TO BE THE COST OF ACQUISITION AS DENIED UNDER SECTION 55(2)(B)(II) OF THE INCOME TAX ACT WHERE THE VALUATION OFFICER HAS DONE . HE HAS COMPLETED THE FAIR MARKET VALUE OF THE LEASEHOLD RIGHT OF THE ASSESSEE. THE C IT(A) HAS COMPUTED THE COST AND FAIR MARKET VALUE. BOTH ARE THE DIFFERENT TERMS. COST RE PRESENTS WHAT HAS BEEN ACTUALLY INCURRED BY THE ASSESSEE IN PROCURING THAT PARTICU LAR RIGHT, WHILE THE FAIR MARKET VALUE HAS NOW BEEN CLASSIFIED UNDER THE INCOME TAX ACT UN DER SECTION 2(22B) WHICH MEANS THAT THE PRICE WHAT CAPITAL ASSET WOULD ORDINARILY FETCH ON THE SALE IN THE OPEN MARKET ON THE RELEVANT DATE AND IN CASE THE PRICE IS NOT ASCE RTAINABLE, SUCH PRICE AS MAY BE DETERMINED WITH THE RULES MADE UNDER THIS ACT. THE COST AS ON 01.04.1981 MAY BE DIFFERENT BUT FOR THE PURPOSE OF COMPUTATION OF CAP ITAL GAINS, MARKET VALUE OF THE PROPERTY INCLUDING THE LEASEHOLD RIGHT OF THE LAND TO BE DETERMINED AS ON 01.04.1981. SCCONDLY, IT WAS SUBMITTED THAT THE REVERSE METHOD OF VALUATION IS NOT A RECOGNIZED METHOD. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT-VS- KALAWATI DEVI CHOUDHUR Y VIDE ORDER NO.06 DATED 29.06.2012. IN THIS CASE, THE ASSESSING OFFICER HAS TAKEN THE VALUATION PRESCRIBED BY THE STATE GOVERNMENT AS ON 19.08.1986 FOR THE PURPOSE O F PAYMENT OF STAMP DUTY FOR WORKING OUT THE PROPERTY AS ON 01.04.1981. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS FOLLOWED THE COST INFLATION INDEX IN REVERSE ORDER FOR WORKING OUT THE COST OF LAND AS O N 01.04.1981 WHICH IS NOT IN ACCORDANCE WITH LAW. THIS METHOD, AS PER THE CIT(A) , HAS NOT BEEN FOUND ACCEPTABLE BY THE CALCUTTA HIGH COURT IN THE CASE OF JOGAT MOHAN KAPUR, EVEN THE SPECIAL BENCH OF THE TRIBUNAL, CUTTACK BENCH IN THE CASE OF HIRALAL LOLCHANDANI DID NOT RECOGNIZE THE REVERSE METHOD INDEX METHOD. WHEN THE MATTER WENT B EFORE THE TRIBUNAL, THE TRIBUNAL, AFTER CONSIDERING THE RESPECTIVE CASES OF THE PARTI ES AND THE MATERIALS BROUGHT ON RECORD BY THEM, UPHELD THE FINDING OF THE CIT(A) AND DISMI SSED THE APPEAL. THE REVENUE WENT IN APPEAL BEFORE THE HIGH COURT. THE HONBLE HIGH C OURT, AFTER HEARING AT LENGTH THE COUNSEL OF THE REVENUE, TOOK THE VIEW THAT NO SUBST ANTIAL DECISION OF LAW IS INVOLVED IN THE APPEAL AND DISMISSED THE APPEAL. RELIANCE WAS A LSO PLACED ON THE DECISION OF THIS BENCH IN ITA NO.27/RANCHI/2011 IN THE CASE OF JOGIN DER SUMAR SABARWAL VS- ITO, WARD-1(3), DHANBAD. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF NATRAJ VS- DCIT 30 TAXMANN.COM 40 (AHD. TRIB.) FOR THE PROVISION OF THE LAW THAT EVEN THE LEASEHOLD LAND W ILL HAVE THE SAME VALUE AS ON 01.04.1981. THE LD. D.R., ON THE OTHER HAND, VEHEME NTLY CONTENDED THAT THE ASSESSEE HAS NOT INCURRED ANY COST OF ACQUISITION FOR PROCURING THE LEASEHOLD LAND AND THEREFORE, IN ACCORDANCE WITH THE PROVISION OF SECTION 55(2)(A)(I I) OF THE ACT, THE COST OF ACQUISITION IN RESPECT OF LAND HAS TO BE TAKEN AT NIL. THE CIT(A ) HAS CORRECTLY TAKEN THE COST OF THE LAND TO BE NIL. THE METHOD ADOPTED BY THE ASSESSI NG OFFICER THAT THE COST OF INDEXATION IS A RECOGNIZED MATTER AS THERE WAS NO C OMPARABLE INSTANCES AVAILABLE TO DETERMINE THE COST OF FAIR MARKET VALUE AS ON 01.04 .1981. THUS, IT WAS VEHEMENTLY CONTENDED THAT NO INTERFERENCE MAY BE CALLED FOR IN THE ORDER OF THE CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE PAPERS AND THE DOC UMENTS FILED BEFORE US. THE ASSESSEE IN THIS CASE HAS SOLD THE LAND AND FROM THE SALE CO NSIDERATION RECEIVED HAS REDUCED THE FAIR MARKET VALUE AS ON 01.04.1981 AS WORKED OUT ON THE BASIS OF THE REGISTERED VALUERS REPORT. OUT OF THE CONSIDERATION RECEIVED, THE ASSE SSEE CLAIMED THE EXEMPTION IN RESPECT OF HOUSE PROPERTY PURCHASED BY THE ASSESSEE FOR WHI CH THERE IS NO DISPUTE. THE ONLY DISPUTE RELATES TO THE DETERMINATION OF THE FAIR MA RKET VALUE AS ON 01.04.1981. THE ASSESSING OFFICERS RIGHT TO ASCERTAIN FAIR MARKET VALUE AS ON 01.04.1981 BUT COULD NOT BRING ANY COMPARATIVE MATERIAL FROM THE OFFICE OF T HE REGISTRAR AND THEREFORE THE ASSESSING OFFICER WENT ON ASCERTAINING THE FAIR MAR KET VALUE BY ADOPTING THE REVERSE METHOD COST INDEXATION. THE ASSESSING OFFICER HAS T AKEN THE VALUE OF THE PROPERTY FOR THE PURPOSE OF THE STAMP DUTY AS ON THE DATE OF THE SALE AS PER THE INFORMATION TAKEN FROM THE OFFICE OF THE SUB-REGISTRAR AND TO THIS VALUE, THE ASSESSING OFFICER APPLIED THE COST OF INDEXATION IN THE MANNER AND THUS WHEN THE FAIR MARKET VALUE AS ON 01.04.1981. THIS METHOD OF APPLYING THE COST OF INDEXATION IN A REVE RSE ORDER IS NOT A RECOGNIZED METHOD. EVEN THE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT-VS- KALAWATI DEVI CHOUDHURY VIDE ORDER NO.06 DATED 29.06.2012 HAS NOT RECOGNISE D THIS METHOD AND THEREFORE, DID NOT FIND ANY SUBSTANTIAL POINT OF LAW, WHEN THE APPEAL WAS FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL WHO CONFIRMED THE ORDER OF TH E CIT(A). IN THIS ORDER, EVEN THE DECISION OF THE SPECIAL BENCH OF ITAT, CUTTACK BENC H IN THE CASE OF HIRALAL LOLCHANDANI WAS ALSO NOTED BY THE HIGH COURT AS CIT ED BY THE CIT(A), EVEN THE DECISION OF THE JURISDICTION HIGH COURT WAS FOLLOWED. WE ACC ORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND HOLD THAT THE ASSESSING OF FICER WAS NOT CORRECT IN LAW IN VALUING THE COST OF INDEXATION IN A REVERSE MANNER, WHILE VALUING THE PROPERTY AS ON 01.04.1981. WHEN THE MATTER WENT BEFORE THE CIT(A), WE NOTED THAT THE CIT(A) GOT INFLUENCE WITH THE FACT THAT THE ASSESSEE DID NOT I NCUR ANY COST IN RESPECT OF LEASEHOLD LAND WHICH WAS SOLD BY THE ASSESSEE FOR SUPERSTRUCT URE ON WHICH THE CAPITAL GAIN WAS BEING COMPUTED. 6. THEREFORE, THE QUESTION BEFORE US IS WHETHER THE PROVISIONS OF SECTION 55(2)(A)(II) ARE APPLICABLE SO THAT THE COST OF THE ACQUISITION IN RESPECT OF LEASEHOLD LAND CAN BE TAKEN TO BE NIL. IF WE GO TO THE PROVISIONS OF SECTION 55(2)(A), THE SECTION MANDATES THAT FOR THE PURPOSE OF SECTION 48 AND 49, THE COST OF ACQUI SITION SHALL BE TAKEN AT NIL, IN THE CASE NOT FALLING UNDER PROVISIONS OF SECTION 55(2)( A)(II) OR IN THE CASE NOT BEING FALLEN UNDER SUB-CLAUSE (I) TO (IV) OF SUB-SECTION 1 OF SE CTION 49 AND SHALL APPLY ONLY IN RELATION TO CAPITAL ASSETS, SUCH AS GOODWILL, TRADE MARKET BRAND NAME, ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY A RTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, THE CASE FALLING UNDER SUCH (I) TO (IV). THE PROVISIONS OF SECTION 49(1) A RE WITH REGARD TO THE CASES WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE O N THE DISTRIBUTION OF THE ASSETS OF A BUSINESS OF OR UNDER A GIFT OR WILL OR BY SUCCESSIO N INHERITANCE OR DEMOLITION OR IN DISTRIBUTION OF ASSETS ON THE DISSOLUTION OF FIRM, BODY OR INSTITUTION OR OTHER CONCERNS WHERE SUCH DISSOLUTION HAD TAKEN PLACE AT ANY TIME BEFORE THE FIRST DAY OF APRIL, 1987 OR ANY DISTRIBUTION OF ASSETS ON THE LIQUIDATION OF TH E COMPANY AND TRANSFERRED TO A REVOCABLE OR IRREVOCABLE TRUST OR UNDER SUCH A TRAN SFER AS IS REFERRED TO IN CERTAIN CLAUSES OF SECTION 47 OR IN THE CASE OF HUF BY THE MODE REF ERRED TO IN SUB-SECTION (2) OF SECTION 64 AT ANY TIME AFTER THE 31 ST DECEMBER, 1969 AND IN THIS TYPE OF CASE, THE COST OF ACQUISITION OF THE ASSETS WOULD BE THE COST FOR WHI CH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT AS INCREASED BY THE COST IN IMPROVEMENT OF THE ASSETS. THE CAPITAL ASSETS MENTIONED IN SECTION 55(2)(A) ARE EXHAUSTIVE AND AL L ARE INCLUSIVE OF CAPITAL ASSSETS. THE PROVISIONS OF SECTION 55(2)(A) ARE NOT APPLICABLE I N THE CASE OF ANY OTHER CAPITAL ASSETS, SUCH AS LAND. THERE IS NO AMBIGUITY. THE LANGUAGE I S VERY SIMPLE. THE LEGISLATURE, IN OUR OPINION, HAS INTENTIONALLY NOT ADDED WORD LAND IN THE PROVISION OF SECTION 55(2)(A) AND THEREFORE, THE PROVISIONS OF SECTION 55(2)(A)(II) W ILL NOT BE APPLICABLE, WHILE VALUING THE COST OF THE ACQUISITION OF THE LAND FOR THE PURPOSE OF COMPUTATION OF THE LONG TERM CAPITAL GAIN IN THE CASE OF THE ASSESSEE. WE NOTED IN RESPE CT OF OTHER CAPITAL ASSETS, THE COST OF ACQUISITION HAS TO BE TAKEN IN ACCORDANCE WITH SECT ION 55(2)(B). THIS SECTION CONSISTS OF THREE SUB-CLAUSES, FIRST TWO SUB-CLAUSES GIVE AN OP TION TO THE ASSESSEE TO TAKE EITHER THE COST OF ACQUISITION IN CASE THE ASSET IS ACQUIRED B EFORE THE 1 ST OF APRIL, 1981 OR TO TAKE THE FAIR MARKET VALUE OF THE ASSET AS ON 01.04.1981. WE NOTED IN THIS CASE WHAT THE CIT(A) HAS DONE. HE WENT ON DETERMINING THE COST AS ON 01. 04.1981, NOT THE FAIR MARKET VALUE. THE FAIR MARKET VALUE IS DIFFERENT FROM THE COST OF ACQUISITION. SECTION 2(22)(B) DEFINES THE FAIR MARKET VALUE IN RELATION TO CAPITAL ASSETS TO MEET (I) THE PRICE THAT CAPITAL ASSETS WOULD ORDINARILY FETCH ON THE SALE IN THE OPEN MARK ET ON THE RELEVANT DATE AND (II) WHERE THE PRICES REFERRED TO SUB-SECTION (I) IS NOT ASCER TAINABLE, SUCH PRICE AS MAY BE DETERMINED IN ACCORDANCE WITH RULES MADE UNDER THIS ACT. WE DO AGREE THAT THE COST REPRESENTS THE ACTUAL COST INCURRED BY THE ASSESSEE , WHILE THE FAIR MARKET VALUE, IN VIEW OF SECTION 2(22)(B) WILL MEAN THE PRICE WHICH THE C APITAL ASSETS SOLD BY THE ASSESSEE WOULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET A S ON 01.04.1981. THE RIGHT OF LEASEHOLD LAND AND THE SUPER-STRUCTURE BOTH HAD PRI CE IN THE OPEN MARKET. WE CANNOT SAY THAT THE LEASEHOLD LAND WAS NOT HAVING ANY PRICE, I T MAY NOT HAVE ANY COST. WE NOTED THAT NO RULES FOR ASCERTAINING THE PRICE ARE AVAILABLE. WE ALSO NOTED THAT NO COMPARATIVE INSTANCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE WHICH MAY PROVE AT WHAT PRICE THE CAPITAL ASSET SOLD BY THE ASSESSEE COULD HAVE FETCH ED AS ON 01.04.1981. THE ONLY METHOD, THEREFORE, BEFORE US, IS THE ESTIM ATION OF THE MARKET PRICE. THE REGISTERED VALUER IS AN EXPERT. MARKET VALUE DETERM INED BY HIM AS ON 01.04.1981, IN OUR OPINION, IS THE BEST EVIDENCE. THE REVENUE HAS NOT GOT THE MARKET VALUE ESTIMATED BY THE DEPARTMENTAL VALUER TO COUNTER THE MARKET VALUE AS HAS BEEN DETERMINED OR ESTIMATED BY THE REGISTERED VALUER. UNDER THESE FACTS OF THE CAS E AND THERE BEING NO CONTRARY EVIDENCE TO COUNTER THE MARKET VALUE AS DETERMINED BY THE RE GISTERED VALUER, WE ARE OF THE VIEW THAT FAIR MARKET VALUE AS ESTIMATED BY THE REGISTER ED VALUER SHOULD BE ADOPTED FOR THE PURPOSE OF COMPUTATION OF THE CAPITAL GAIN. WE, THE REFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION MADE BY THE ASSESSIN G OFFICER AND ENHANCED BY THE CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 7 TH MAY, 2013. SD/- SD/- [D.T.GARASIA] [P.K. BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 7 TH MAY, 2013 COPY OF ORDER FORWARDED TO: L SHRI MANECK KEKI DASTOOR, LUNAVALA 2. DCIT, CIRCLE-1, JAMSHEDPUR 3. C.I.T.(A), 4. THE C.I.T., 5. THE D.R., I.T.A.T., TRUE COPY, BY ORDER, SR. PRIVATE SECRETARY (ON TOUR) ITAT, RANCHI [MST, SR.PS]