Shri Areez Pirozsha Khambatta, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 2111/AHD/2011

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2717 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 26-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L MEENA
• Assessee Lawyers: PF JAIN
• Keywords: Capital asset; Gift; Salary income; Cost of acquisition; Fair market value; Valuation report
• Section: 143(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR VICE PRESIDENT AND MS MADHUMITA ROY JUDICIAL MEMBER ./ ITA NO. 2111/AHD/2011 /ASSTT. YEAR: 2008-09 AREEZ PIROZSHAKHAMBATTA PROP. OFJAFEE MFG. CO. B/H. ELLISBRIDGE GYMKHANA ELLISBRIDGE AHMEDABAD 380006 PAN NO.- ABMPK 6322L VS. A.C.I.T CIRCLE 10 AHMEDABAD (APPLICANT) (RESPONENT) ASSESSEE BY : SHRI P. F. JAIN, A.R REVENUE BY : SHRI B. L. MEENA, SR. DR / DATE OF HEARING : 30/11/2018 / DATE OF PRONOUNCEMENT: 25/02/2019 / O R D E R PER MS MADHUMITA ROY, JM: THE INSTANT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER DATED 27.07.2011 PASSED BY THE CIT(A) XVI, AHMEDABAD, ARI SING OUT OF THE ORDER DATED 16.12.2010 PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CICLE-10, AHMEDABAD FOR A.Y. 2008-09. 2. THE ASSESSEE, AN INDIVIDUAL FILED THE RETURN OF INCOME FOR A.Y. 08-09 ON 29.07.2008 DECLARING TOTAL INCOME AT RS. 1,84,900/- . THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. UNDER SCRUTINY A N OTICE UNDER SECTION 143(2) DATED 25.09.2009 WAS ISSUED FOLLOWED BY ANOTHER NOTICE DA TED 08.06.2010 ALONG WITH A ITA NO.2111/AHD/2011 A.Y.2008-2009 2 QUESTIONNAIRE ISSUED ON THE SAME DAY. IT APPEARS TH AT THE ASSESSEE HAS SHOWN SALARY INCOME, INCOME FROM HOUSE PROPERTY, LOSS FROM BUSIN ESS AND PROFESSION, LONG TERM CAPITAL LOSS AND INCOME FROM OTHER SOURCES. THE DIS PUTE RELATING TO THE MATTER IS THIS THAT THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL LOS S OF RS. 86,90,445/- ON THE SALE OF LEASE HOLD LAND MEASURING ABOUT 1891.45 SQUARE METE RS. BY VIRTUE OF A DEED OF LEASE DATED 19.06.1924 REGISTERED WITH THE OFFICE OF THE SUB-REGISTRAR BEING NO. 3185, THE FATHER OF THE ASSESSEE ACQUIRED THE LEASE HOLD RIGH T OF THE SAID PROPERTY FOR A PERIOD OF 51 YEARS ON ANNUAL RENT OF RS. 1601 UPON WHICH A BUILDING AND CHAWL WAS CONSTRUCTED BY THE FATHER OF THE ASSESSEE. AFTER TH E EXPIRY OF THE LEASE AGREEMENT THE SAME WAS EXTENDED FOR A FURTHER PERIOD OF 39 YEARS BY EXECUTING A RENEWAL LEASE AGREEMENT ON 25.01.1958 DULY REGISTERED BY AND UNDE R REGISTRATION NO. 706 OF 1958. THE ASSESSEE HEREIN CLAIMED TO HAVE SOLD THIS PREMISES FOR A CONSIDERATION OF RS. 41,0000/-. THE VALUATION REPORT SUBMITTED BY TH E ASSESSEE DETERMINES THE MARKET VALUE AS ON 01.04.1981 AT RS. 23,19,500/-. ON EXAMI NATION OF DETAILS, INCLUDING RELEVANT DOCUMENTS AS FURNISHED DURING THE COURSE O F ASSESSMENT PROCEEDING THE COST OF ACQUISITION AND THE INDEXATION COST FOR WOR KING OUT CAPITAL GAIN HAVE BEEN QUESTIONED BY THE ASSESSING OFFICER AND THE ASSESSE E WAS GIVEN AN OPPORTUNITY TO SUBSTANTIATE ITS CLAIMS FOR DEDUCTION OF INDEX COST FROM THE SALES CONSIDERATION BY ISSUING BY SHOW CAUSE DATED 01.12.2010 WITH THE FOL LOWING CONTENTS. ON PERUSAL OF THE COMPUTATION OF STATEMENT OF TOTAL INCOME FURNISHED WITH THE RETURN OF INCOME, IT IS SEEN THAT YOU HAVE CLAIMED LONG TERM CAPITAL LOSS OF RS. 86,80,445/- ON ASARWA PREMISES. N PERUSAL OF VALUAT ION REPORT DATED 19/04/2007 IT IS SEEN THAT VALUATION IS MADE FOR LEASEHOLD LAND A ND NOT FOR LEASEHOLD RIGHTS HELD BY YOU. FURTHER, IT IS MENTIONED THAT THE LEASE PER IOD OF 39 YEARS HAD ALREADY EXPIRED ON 31/12/1996 AND AFTER EXPIRY OF LEASE PER IOD RENEWAL OF LEASE HAS NOT BEEN TAKEN PLACE AND LEASE PERIOD IS ALSO NOT EXTEN DED. ITA NO.2111/AHD/2011 A.Y.2008-2009 3 3. IN REPLY TO THE SHOW CAUSE DATED 01.12.2010 THE ASSESSEE SUBMITTED THE FOLLOWING ON 14.12.2010. 'ON PERUSAL OF THE COMPUTATION OF STATEMENT OF TOTA L INCOME FURNISHED WITH THE RETURN OF INCOME, IT IS SEEN THAT YOU HAVE CLAIMED LONG TERM CAPITAL LOSS OFRS, 86,80,445/-ON ASANVA PREMISES. N PERUSAL OF VALUATI ON REPORT DATED 19/04/2007 IT IS SEEN THAT VALUATION IS MADE FOR LEASEHOLD LAND A ND NOT FOR LEASEHOLD RIGHTS HELD BY YOU. FURTHER, IT IS MENTIONED THAT THE LEASE PER IOD OF 39 YEARS HAD ALREADY EXPIRED ON 31/12/1996 AND AFTER EXPIRY OF LEASE PER IOD RENEWAL OF LEASE HAS NOT BEEN TAKEN PLACE AND LEASE PERIOD IS ALSO NOT EXTEN DED.' 4. UPON PERUSAL OF THE SUBMISSION MADE BY THE ASSES SEE AND THE VALUATION REPORT AS WELL, THE LEARNED ASSESSING OFFICER CAME TO A FINDING THAT THE ASSESSEE IS NOT ENJOYING A LONG TERM LEASE HOLD RIGHT OF 99 YEA RS BUT ONLY FOR 39 YEARS THAT TOO HAS ALREADY EXPIRED. ACCORDING TO THE LD. AO THE A SSESSEE HAS NOT PAID ANY PREMIUM AND THEREFORE THE COST OF ACQUISITION IS TO BE TAKEN AT NIL. THE CAPITAL ASSETS REPRESENTING LEASE HOLD RIGHTS HAS BEEN ACQU IRED BY THE ASSESSEE WITHOUT PAYMENT OF OWN MONEY AND THEREFORE THE COST OF ACQU ISITION OF LEASE HOLD RIGHT IS NIL. REGARDING THE VALUATION REPORT THE LD. AO FUR THER OPINED THAT THE SAME SPEAKS ABOUT VALUATION OF LEASE HOLD LAND AS ON 01. 04.1981 AND NOT THE VALUATION OF LEASE HOLD RIGHT. THE ASSESSING OFFICER OBSERVED TH AT SINCE THERE WAS NO RENEWAL OR EXTENSION OF LEASE, THE LEASE HOLD RIGHTS OF THE AS SESSEE CAME TO AN END ON 31.12.1996 UPON THE EXPIRY OF THE EXTENDED PERIOD O F 39 YEARS. IT WAS FURTHER CONTENDED BY THE LEARNED ASSESSING OFFICER THAT THE PROPERTY IF ANY COST CAN BE ALLOCATED TO THE ASSESSEE IT COULD ONLY TO WITH RES PECT TO THE COST OF SUPER STRUCTURE OWNED AND POSSESSED BY THE ASSESSEE VALUATION WHERE OF HAS BEEN ASSESSED AT RS. 1,58,998 AND THE INDEX VALUE WAS CALCULATED AT RS. 8,76,078/-. WITH SUCH OBSERVATION THE TOTAL LONG TERM CAPITAL GAIN WAS WO RKED OUT AT RS. 40,23,822/-. ITA NO.2111/AHD/2011 A.Y.2008-2009 4 5. THE LONG TERM CAPITAL GAIN OF THE ASSESSEE HAS B EEN ASSESSED AT RS. 40,23,822/- AS AGAINST LOSS OF RS. 78,80,545/- AS S HOWN BY THE ASSESSEE IN HIS RETURN OF INCOME. IN APPEAL THE SAID ADDITION WAS CONFIRME D. HENCE, THE INSTANT APPEAL. 6. AT THE TIME OF HEARING OF THE APPEAL THE LD. COU NSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE BEFO RE TRANSFERRING THE RIGHT, TITLE AND INTEREST IN RESPECT OF THE LAND IN QUESTION PAID LE ASE RENT CONTINUOUSLY SINCE THE LEASE HAS NOT BEEN TERMINATED BY THE LESSOR. IT IS THE CA SE OF THE ASSESSEE THAT BY EXECUTING POSSESSION AGREEMENT (KABJA KARAR) ON 5 TH MAY, 2007 THE ASSESSEE TRANSFERRED HIS RIGHTS ON THE LAND AS WELL AS THE CONSTRUCTED PROPE RTIES THEREON FOR A CONSIDERATION OF RS. 41,00,000/-. IT WAS FURTHER SUBMITTED BY THE LD . REPRESENTATIVE OF THE ASSESSEE THAT SINCE THE PROPERTY WAS VERY OLD, FOR THE PURPO SE CAPITAL GAIN, VALUATION REPORT WAS OBTAINED AND THE MARKET VALUE AS ON 1 ST APRIL, 1981 ON THE LAND IN POSSESSION AS WELL AS THE SUPER STRUCTURE THEREON WAS ESTIMATED A T RS. 23,19,500/- ON WHICH INDEXATION COST OF RS. 1,27,80,445/-WAS CLAIMED. TH E LONG TERM CAPITAL ASSET LOSS BECOMES RS. 86,84,445/- IF THE SALE CONSIDERATION O F RS. 41,00,000/- IS DEDUCTED FROM THE SAID TOTAL AMOUNT OF RS. 1,27,80,445/-. SI NCE THE ASSESSEE WAS IN POSSESSION OF THE PROPERTY THE ASSESSEE REMAINED TH E LESSEE AS ALSO ARGUED BY THE LD. AR. FURTHER THAT THE LEARNED AO DID NOT CONSIDE R THE LOSS ON SALE OF THE PROPERTY AS INCURRED BY THE ASSESSEE. ACCORDING TO THE LD. A R THE LD. AO ERRED IN LAW AND IN FACT IN RELYING UPON THE PROVISION OF SEC 52(2)(A) OF THE INCOME TAX ACT BY ADOPTING THE VALUE OF LEASE HOLD RIGHT AS NIL. THE LEARNED AO FURTHER ERRED IN LAW IN NOT ALLOWING THE COST OF INDEXATION OF RS. 1,27, 80,445/- OF LEASE HOLD LAND AS ON 1 ST APRIL, 1981 AS VALUED BY THE GOVERNMENT APPROVED V ALUER AND FURTHER THAT LD. ITA NO.2111/AHD/2011 A.Y.2008-2009 5 AO ALSO FAILED TO ALLOW THE VALUE OF SUPER STRUCTUR E OWNED BY THE TENANTS OF RS. 8,15,517/- AS ON 1 ST APRIL, 1981 AS ALSO SUBMITTED BY THE LEARNED AR. I N FACT, THE LD. AR ARGUED THAT THE LONG TERM CAPITAL LOSS OF RS. 78 ,80,545/- OUGHT TO HAVE BEEN ACCEPTED BY THE AUTHORITIES BELOW ON BASIS OF THE W ORKING MADE BY THE VALUER. TAKING INTO CONSIDERATION OF THE PROVISION SEC. 48 OF THE ACT FAIR MARKET VALUE AS ON 01.04.1981 AS DETERMINED BY THE VALUER OUGHT TO HAV E BEEN CONSIDERED BY THE LD. AO. HE FURTHER RELIED UPON THE JUDGMENT PASSED BY THE COORDINATE BENCH IN ITA NO. 3063/AHD/2010 (NATRAJ VS. DCIT). 7. ON THE OTHER HAND THE LEARNED REPRESENTATIVES OF THE DEPARTMENT SUBMITTED BEFORE US THAT SINCE THE ASSESSEE FAILED TO EXTEND THE LEASE AGREEMENT BY THE LESSOR UPON EXPIRY OF THE SAME AFTER 39YEARS IN THE YEAR 1 998 THE ASSESSEE HAS LOST THE LEASE HOLD RIGHT. HE THEREFORE, RELIED UPON THE OR DER PASSED BY THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RESPECTIVE PARTIES AND PERUSED THE RELEVANT MATERIALS ON RECORDS. AS IT APPEARS FROM THE RECORDS THAT THE AS SESSEE IS ENJOYING THE LEASE HOLD RIGHT BY VIRTUE OF A LEASE DEED INITIALLY EXECUTED ON 19.06.1924 REGISTERED WITH THE OFFICE OF THE SUB-REGISTRAR BY AND UNDER REGISTRATI ON NO. 3185 ON ANNUAL RENT OF RS. 1601/- UPON WHICH THE FATHER OF THE ASSESSEE CONSTR UCTED THE BUILDINGS AND CHAWALS AS MENTIONED IN THE SUBSEQUENT LEASE DEED EXECUTED ON 25.01.1958 WHEREBY AND WHEREUNDER THE LEASE WAS EXTENDED FOR A FURTHER PER IOD OF 39 YEARS; THE ANNUAL RENT HAS BECOME FIXED AT RS. 1800/-. ON 05.05.2007 THE ASSESSEE TRANSFERRED ALL HIS LEGAL RIGHTS ON THE PROPERTY TO A THIRD PARTY FOR A CONSI DERATION OF RS. 41,00,000/-. THE ITA NO.2111/AHD/2011 A.Y.2008-2009 6 CLAIM OF THE ASSESSEE TOWARDS CAPITAL LOSS OF RS. 8 6,80,445/- IN HIS RETURN OF INCOME HAS BEEN DISALLOWED AND HENCE THE CASE BEFORE US. 9. THE MOOT POINT INVOLVED IN THIS MATTER TO BE CON SIDERED BY US FIRSTLY AS TO WHETHER THE ASSESSEE WAS HAVING ANY LEASE HOLD RIGH T ON THE PROPERTY IN QUESTION AT THE TIME OF TRANSFERRING HIS RIGHT, TITLE AND INTER EST OF THE PROPERTY BY WAY OF SALE AGREEMENT TO THE THIRD PARTY ON 05.05.2007. IF THE QUESTION IS AFFIRMATIVE MEANING THEREBY THAT THE ASSESSEE WAS IN POSSESSION OF THE LEASE HOLD RIGHT OVER THE PROPERTY IN QUESTION THEN WHETHER THE AUTHORITIES BELOW HAS FOLLOWED THE PREVAILING RULE IN DETERMINING THE CAPITAL GAIN OF THE ASSESSEE CLAIME D IN THE RETURN. 10. IT APPEARS FROM THE RECORDS AT PAGE 90 OF THE P APER BOOK THAT CLAUSE 4 OF THE LEASE DEED STIPULATES THAT UPON COMPLETION OF THE P ERIOD OF LEASE THE LESSOR WILL BE ENTITLED TO TAKE OVER POSSESSION OF THE LAND AND TH E LESSEE WOULD REMOVE ALL THE CONSTRUCTIONS MADE BY HIM AT HIS OWN COST. IN THE EVENT THE LESSOR WISHES TO PURCHASE THE CONSTRUCTION MADE BY LESSEE AT THE MAR KET VALUE THEN FOR AGREED SALE PRICE SALE DEED WOULD BE EXECUTED AND EACH OF THE P ARTIES WOULD BARE 50 PER CENT EXPENSES THEREON. OTHERWISE THE LESSEE WOULD HAND OVER POSSESSION OF VACANT LAND TO THE LESSOR BY EXECUTION OF CANCELLATION DEED OF LEASE ON THEIR OWN EXPENSES. CLAUSE 11 OF THE SAID LEASE DEED FURTHER STIPULATES THAT DURING THE TENURE OF LEASE PERIOD THE LESSEE, THAT IS THE ASSESSEE HEREIN WOUL D BE ENTITLED TO MAKE ANY CONSTRUCTION AND TO USE THE OPEN LAND AND TO SUBLET THE PROPERTY TO THIRD PARTY WITHOUT BEING OBJECTED/PROTESTED BY THE LESSOR. FU RTHER THAT THE MUNICIPAL TAXES AND THE LAND REVENUE WAS AGREED TO BE PAID BY THE ASSES SEE IN RESPECT OF THE LAND IN QUESTION DURING THE LEASE PERIOD. IT IS NOT IN DIS PUTE THAT EVEN AFTER THE EXPIRY OF THE ITA NO.2111/AHD/2011 A.Y.2008-2009 7 LEASE DEED EXTENDED ON 1958 FOR A PERIOD OF 39 YEAR S THE ASSESSEE WAS IN POSSESSION OF THE PROPERTY. THE RENT RECEIPTS ISSUED BY THE L ESSOR INCLUDING THE RECEIPT DATED 04.09.2001 WHICH IS AFTER THE EXPIRY OF THE LEASE P ERIOD, IS ALSO BEING PART OF THE RECORDS BEFORE US. WE HAVE ALSO BEEN INFORMED BY THE LD. AR AT THE TIME OF HEARING OF THE INSTANT APPEAL THAT NO SUIT OF EVICT ION AGAINST THE LESSEE PENDING BEFORE ANY COURT OF LAW, IN FACT, NO SUCH SUIT WAS EVER FILED BY THE LESSOR AGAINST THE ASSESSEE. IF THAT BE SO, THEN THE LEASE BECOMES A PERPETUAL LEASE IN THE ABSENCE OF ANY OBJECTION RAISED BY THE LESSOR TOWARDS THE LEAS E HOLD RIGHT OF THE ASSESSEE OR EXECUTION OF CANCELLATION DEED OF LEASE IN TERMS OF CLAUSE 4 OF THE LEASE DEED. THE ASSESSEE IS THUS THE DEEMED LESSEE AT THE TIME OF S ALE OF THE PROPERTY AS ON 05.05.2007. THE FIRST QUESTION HAS BEEN THUS ANSWE RED IN AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE. 11. IN THAT VIEW OF THE MATTER THE DENIAL OF ACCEPT ING THE VALUATION OF THE SUPER STRUCTURE OWNED BY THE TENANTS UNDER THE LESSEE TO THE TUNE OF 8,15,516.80/- IS NOT SUSTAINABLE PARTICULARLY WHEN RIGHT TO SUBLET HAS B EEN CONFERRED BY THE ORIGINAL LEASE DEED UPON THE LESSEE. THE MAIN CONTENTION OF THE L D. AO WHILE REJECTING THE CLAIM OF THE ASSESSEE IS THIS THAT THOUGH THE ASSESSEE CL AIMED TO REMAIN IN POSSESSION OF THE PROPERTY IN QUESTION AS LESSEE, THE LESSOR WAS THE ACTUAL OWNER OF THE LAND AT THE TIME OF SALE OF THE PROPERTY. THE VALUATION REPORT SUBMITTED BY THE ASSESSEE SPEAKS ABOUT THE VALUATION OF LEASE HOLD LAND AS ON 01.04. 1981 AND NOT THE VALUATION OF LEASE HOLD RIGHT. THE ASSESSEE WHILE COMPUTING CAP ITAL GAIN ON SALE OF LAND DEDUCTED INDEX COST OF ACQUISITION BASED ON THE FAI R MARKET VALUE AS ON 01.04.1981. BUT THE AUTHORITIES BELOW WAS OF THE OPINION THAT S INCE NO COST OF ACQUISITION WAS ITA NO.2111/AHD/2011 A.Y.2008-2009 8 INCURRED BY THE ASSESSEE IN TERMS OF THE PROVISION OF SEC. 55(2)(A)(II) COST OF ACQUISITION WAS TO BE TAKEN AT NIL. BUT IT IS A SE TTLED PRINCIPLE OF LAW THAT AS PER THE SCHEME OF SEC 48 THE ASSET HOLD BY THE ASSESSEE PRI OR TO BEGINNING OF 01.04.1981 FAIR MARKET VALUE OF ASSET ON 01/04/1981 HAS TO B E TAKEN AS COST OF ACQUISITION OF ASSET AND FURTHER THAT BENEFIT OF INDEXED COST O F ACQUISITION HAS TO BE ALLOWED TO THE ASSESSEE WHILE DETERMINING LONG TERM CAPITAL GA IN. EVEN IF THE ASSESSEE HAS ACQUIRED THE LAND FOR NIL VALUE PRIOR TO 01.04.1981 SEC 48 SHALL BE APPLICABLE AND FAIR MARKET VALUE OF LEASE HOLD LAND AS ON 01.04.19 81 ALONG WITH INDEXED COST OF ACQUISITION HAS TO BE DETERMINED IN ORDER TO COMPUT E LONG TERM CAPITAL GAIN. IT IS RELEVANT TO MENTION THAT THE LEGISLATURE HAS INTENT IONALLY NOT ADDED THE WORD LAND IN THE EXHAUSTIVE LIST OF CAPITAL ASSET MENTIONED IN S EC. 55(2)(A) AND THEREFORE APPLICATION OF SEC. 55(2)(A)(II) WHILE VALUING COS T OF ACQUISITION OF LAND FOR COMPUTING LONG TERM CAPITAL GAIN OF THE ASSESSEE AS DONE IN THE CASE IN HAND IS NOT SUSTAINABLE IN THE EYE OF LAW. WE REPEAT THAT THE VALUE OF LEASE HOLD RIGHT IN THE PROPERTY INCLUDING THE LAND OF ASSESSEE HAS TO BE D ETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 48 BY VALUING FAIR MARKET VALUE OF LAND AS ON 01/04/1981 AND INDEXED COST OF ACQUISITION HAS TO BE DETERMINED IN ORDER TO ASSESS LONG TERM CAPITAL GAIN AND TO BE ALLOWED. IN THIS PARTICULAR CASE IN HAND BEFORE US THE INDEX COST WAS ALSO DETERMINED ON THAT BASIS. SUCH PROPOSITION OF LAW HAS BEEN AFFIRMED BY THE J UDGMENT PASSED BY THE COORDINATE BENCH IN THE CASE OF THE NATRAJ VS. DCIT BY THE COORDINATE BENCH IN ITA NO. 3063/AHD/2010 HAS ALSO BEEN CAREFULLY CONSI DERED BY US RELEVANT PORTION IS WHEREOF:- ITA NO.2111/AHD/2011 A.Y.2008-2009 9 NATRAJ VS. DEPUTY COMMISSIONER OF INCOME TAX ITA NO.3063/AHD/2010 'CAPITAL GAINSLEASEHOLD LANDASSESSEE ACQUIRED LEA SE HOLD RIGHTS IN A PROPERTY FOR 98 YEARS IN 1966 AND CONSTRUCTED A CINEMA HALL AT MINIMUM COST OF RS,4 LAKHS- SAID LAND WAS SOLD IN 2006 ASSESSEE IN COMPUTING CAPITAL GAIN ON SALE OF LAND DEDUCTED INDEXED COST OF ACQUISITION BASED ON THE F AIR MARKET VALUE OF LAND AS ON I APRIL 1981 AO AND CIT(A) HELD THAT NO COST OF ACQ UISITION WAS INCURRED BY ASSESSEE AS PER TERMS AND CONDITIONS OF REGISTERED LEASE DEED, AND THEREFORE IN ACCORDANCE WITH PROVISION OF SECTION 55(2)(A)(II), COST OF ACQUISITION WAS TAKEN AT NIL-HELD, AS PER SCHEME OF SECTION 48, FOR ASSET HE LD BY ASSESSEE PRIOR TO BEGINNING OF 1ST DAY OF APRIL, 1981, FAIR MARKET VA LUE OF 'ASSET' ON FIRST DAY OF APRIL, 1981 HAS TO BE TAKEN AS 'COST OF ACQUISITION ' OF ASSET AND BENEFIT OF INDEXED COST OF ACQUISITION HAS TO BE ALLOWED TO THE ASSESS EE WHILE DETERMINING LONG TERM CAPITAL GAININ A CASE WHERE ASSESSEE HAS ACQUIRED LAND FOR NIL VALUE PRIOR TO 1.4.1981, EVEN THEN SECTION 48 SHALL BE APPLICABLE AND FAIR MARKET VALUE OF LEASE HOLD LAND AS ON 1.4,1981 ALONG WITH INDEXED COST OF ACQUISITION HAS TO BE DETERMINED IN ORDER TO COMPUTE 'LONG TERM CAPITAL G AIN' EXHAUSTIVE LIST OF CAPITAL ASSETS ARE MENTIONED IN SECTION 55(2)(A) AN D LEGISLATURE HAS INTENTIONALLY NOT ADDED WORD 'LAND', THEREFORE, SECTION 55(2)(A)( II) WOULD NOT BE APPLICABLE WHILE VALUING 'COST OF ACQUISITION' OF LAND FOR COM PUTING 'LONG TERM CAPITAL GAIN' OF ASSESSEE VALUE OF LEASE-HOLD RIGHTS IN LAND OF ASSESSEE HAS TO BE DETERMINED IN ACCORDANCE WITH PROVISION OF SECTION 48 BY VALUING 'FAIR MARKET VALUE' OF LAND AS ON 1.4.1981 AND INDEX COST OF ACQUISITION HAS TO BE DETERMINED IN ORDER TO ASSESS LONG TERM CAPITAL GAINSAPPROVED VALUER HAS ESTIMAT ED FAIR MARKET VALUE OF LAND AS ON 1.4.81 AT RS. 1,200/- PER SQUARE YARD WITHOUT MAKING SUITABLE DEDUCTION ON ACCOUNT OF ASSESSEES RIGHT IN LAND BEING ONLY THAT OF 'LESSEE' FOR 98 YEARS SINCE ASSESSEE HAD ACQUIRED LEASEHOLD RIGHTS ONLY FOR 98 YEARS AND ASSESSEE NOT BEING OWNER THEREOF, FAIR MARKET VALUE IS DETERMINED AT R S.800/PER SQUARE YARDAO IS DIRECTED TO DETERMINE 'LONG TERM CAPITAL GAIN' AFTE R TAKING VALUE OF LEASE HOLD RIGHTS OF ASSESSEE AT RS. 800/- PER SQUARE YARD AS ON 01.04.81-APPEAL FILED BY ASSESSEE IS ALLOWED PARTLY'. 5. 'WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PERU SED THE ORDERS OF THE AO AND THE CIT(A) AND COPIES OF THE VARIOUS DOCUMENTS FILED IN THE COMPILATION BEFORE US INCLUDING THE COPY OF THE LEASE DEED DATED 15.09 .1966 AND ALSO COPY OF THE VALUATION REPORT DATED 11.09.2006 FOR FAIR MARKET V ALUE AS ON 1.4.1981. WE FIND THAT THE REVENUE AUTHORITIES IN THIS CASE HAVE BEEN INFLUENCED AND HAVE BASED THEIR DECISION ON THE FACT THAT THE ASSESSEE HAS NOT PAID ANY 'CASH' AT THE TIME OF EXECUTION OF LEASE DEED ON 15.09.1966 AND HAS ONLY COMMITTED TO INVEST IN THE CONSTRUCTION OF CINEMA BUILDING AT A MINIMUM COST O FRS.4 LAKHS. WE FIND THAT IN ACCORDANCE WITH THE SCHEME OF THE ACT AND IN PARTIC ULAR THE PROVISION OF SECTION 48, FOR THE ASSET HELD BY THE ASSESSEE FOR THE YEAR PRIOR TO BEGINNING OF 1ST DAY OF APRIL, 1981, THE FAIR MARKET VALUE OF THE 'ASSET' I N QUESTION AS ON THE FIRST DAY OF APRIL, 1981 HAS TO BE TAKEN AS 'COST OF ACQUISITION ' OF THE ASSET AND THE BENEFIT OF INDEXED COST OF ACQUISITION HAS TO BE ALLOWED TO TH E ASSESSEE WHILE DETERMINING THE LONG TERM CAPITAL GAIN OF THE ASSESSEE. IN THIS CAS E, THE ASSESSEE HAS ACQUIRED LEASE HOLD RIGHTS FOR A LONG TERM PERIOD OF 98 YEARS IN T HE YEAR 1966, WHICH IS CLEARLY PRIOR TO 01.04.1981, AND THEREFORE FOR THE PURPOSE OF DETERMINING THE 'LONG TERM CAPITAL GAIN', THE FAIR MARKET VALUE OF THE LEASEHO LD RIGHTS OF THE ASSESSEE IN THE LAND AS ON 01.04.1981 HAS TO BE CALCULATED AND THE INDEXED COST OF ACQUISITION HAS ITA NO.2111/AHD/2011 A.Y.2008-2009 10 TO BE DETERMINED. IN THIS CASE, PLEA OF THE ASSESSE E WAS THAT IT WAS BOUND BY THE TERMS OF LEASE DEED DATED 15.09.1996 TO SPEND A SUM OFRS.4 LAKHS IN THE CONSTRUCTION OF CINEMA HALL, AND THIS AMOUNT SHOULD BE TAKEN AS COST OF ACQUISITION OF THE PLOT OF LAND. THIS PLEA OF THE ASSESSEE IN O UR CONSIDERED OPINION, IS NOT ACCEPTABLE FOR THE REASON THAT BUILDING OF CINEMA H ALL AS PER TERMS OF THE LEASE DEED DATED 15.09.1966 HAD TO REMAIN WITH THE OWNERS HIP OF THE ASSESSEE (LESSEE) AND ALSO FOR THE REASON THAT THE CINEMA BUILDING IT SELF WAS DEMOLISHED BEFORE THE DATE OF SALE OF LEASEHOLD RIGHTS IN THE PLOT OF LAN D. HOWEVER HAVING REJECTED THIS PLEA OF THE ASSESSEE AS NOT ACCEPTABLE AND THE VALU E OF THE LAND IN QUESTION AS ON THE DATE OF EXECUTION OF LEASE AGREEMENT I.E. 15.09 .1966 IS NOT TAKEN AT RS.4 LAKHS, THE FAIR MARKET VALUE OF THE LAND AS ON 01.04.1981 OF THE LEASEHOLD RIGHTS OF THE ASSESSEE IN THE LAND STILL HAS TO BE DECIDED AND DE TERMINED. IN A CASE WHERE THE ASSESSEE HAS ACQUIRED SOME LAND FOR NIL VALUE PRIOR TO A YEAR STARTING FROM 1.4.1981, EVEN THEN THE PROVISION OF SECTION 48 SHA LL BE APPLIED AND THE FAIR MARKET VALUE OF THE LAND IN QUESTION AS ON 1.4.1981 ALONG WITH THE INDEXED COST OF ACQUISITION HAS TO BE DETERMINED IN ORDER TO ARRIVE AT THE FIGURE OF 'LONG TERM CAPITAL GAIN'. IN OUR CONSIDERED VIEW, THE VALUE FO R WHICH THE ASSESSEE HAS ACQUIRED THE LAND IN QUESTION PRIOR TO 1.4.1981 IS NOT RELEVANT FOR THE DETERMINATION OF THE 'FAIR MARKET VALUE' OF THE LAND AS ON 1.4.19 81. ' 6. WE FIND THAT THE IMPORTANT ISSUE BEFORE US FOR ADJU DICATION IS WHETHER THE PROVISION OF SECTION 55(2)(A)(II) OF THE ACT RELIED UPON BY THE REVENUE IS APPLICABLE TO THE CASE OF THE ASSESSEE TO VALUE THE LAND IN QU ESTION AS ON 1.4.1981, EVEN THOUGH THE LAND WAS ACQUIRED BY THE ASSESSEE FOR NIL VALUE . WE HAVE ALREADY HELD IN THE FOREGOING PARAS OF THIS ORDER THAT WHERE THE ASSESS EE HAS ACQUIRED SOME LAND FOR NIL VALUE PRIOR TO A YEAR STARTING FROM 1.4.1981, E VEN THEN THE PROVISION OF SECTION 48 SHALL BE APPLICABLE AND THE FAIR VALUE OF THE LA ND IN QUESTION AS ON 1.4.1981 ALONG WITH INDEXED COST OF ACQUISITION HAS TO BE DE TERMINED IN ORDER TO ARRIVE AT THE FIGURE OF 'LONG TERM CAPITAL GAIN' AND THE VALUE FO R WHICH THE ASSESSEE HAS ACQUIRED THE LAND IN QUESTION PRIOR TO 11,4.1981 IS NOT RELEVANT FOR DETERMINING THE 'FAIR MARKET VALUE' OF THE LAND AS ON 1.4.1981. HOW EVER, THE REVENUE HAS RELIED ON THE AMENDED PROVISION OF SECTION 55(2)(A)(II) AND H AVE SUBMITTED THAT IN ACCORDANCE WITH THIS AMENDED PROVISION OF LAW, IN S UCH A CASE AS THAT OF THE ASSESSEE, THE COST OF ACQUISITION SHALL BE TAKEN AT NIL. NONE OF THE PARTIES COULD CITE ANY DECISION OFHON'BLE COURT OR THE TRIBUNAL I N THEIR FAVOUR ON THIS ISSUE. THUS, IMPORTANT LAW POINT BEFORE US FOR ADJUDICATIO N IS THAT WHETHER IN VIEW OF AMENDED PROVISION OF SECTION 55(2) (A)(II) OF THE A CT, WHERE THE ASSESSEE HAS ACQUIRED A PIECE OF LAND AT NIL VALUE IN A YEAR PRI OR TO 1.4.81, THE 'FAIR MARKET VALUE' OF THE LAND IN QUESTION AS ON 11.4.81 FOR TH E PURPOSE OF DETERMINATION OF 'COST OF ACQUISITION' AS PER PROVISION OF SECTION 4 8 AND 49 OF THE ACT SHALL BE TAKEN AT NIL. FOR THE SAKE OF READY REFERENCE WE REPRODUC E THE PROVISION OF SECTION 55 (2) (A) OF THE ACT AS UNDER: FOR THE PURPOSES OF SECTIONS 48 AND49, 'COST OF ACQ UISITION', (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS, OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON A NY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, ITA NO.2111/AHD/2011 A.Y.2008-2009 11 (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASS ESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PR ICE ; AND (II) IN ANY OTHER CASE NOT BEING A CASE FALLING UNDER SU B- CLAUSES (I) TO (IV) OF SUB-SECTION OF SECTION 49, SHALL BE TAKEN TO BE NIL ; 7. A PLAIN READING OF THIS PROVISION OF LAW MAKES I T CLEAR THAT THE FOR THE PURPOSE OF SECTIONS 48 AND 49, THE COST OF ACQUISITION SHALL B E TAKEN AT 'NIL', IN THE CASE NOT FALLING UNDER THE PROVISION OF SECTION 55(2)(A)(I) OR ANY OTHER CASE NOT BEING CASE FALLING UNDER SUB-CLAUSE (I) TO (IV) OF SUBSECTION (!) OF SECTION 49, AND SHALL APPLY ONLY IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS, OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON A NY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS. THE CASE FALLING UN DER SUB-CLAUSE (I) TO (IV) OF SECTION 49(1) ARE WITH REGARD TO THE CASE WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE ON THE DISTRIBUTION OF ASS ETS ON PARTITION OF A HINDU UNDIVIDED FAMILY OR UNDER A GIFT OR WILL OR BY SUCC ESSION, INHERITANCE OR DEVOLUTION, OR ANY DISTRIBUTION OF ASSETS ON THE DISSOLUTION OF A FIRM, BODY OF INDIVIDUALS, OR OTHER ASSOCIATION OF PERSONS, WHERE SUCH DISSOLUTIO N HAD TAKEN PLACE AT ANY TIME BEFORE THE 1ST DAY OF APRIL, 1987, OR ON ANY DISTRI BUTION OF ASSETS ON THE LIQUIDATION OF A COMPANY, OR UNDER A TRANSFER TO A REVOCABLE OR AN IRREVOCABLE TRUST, OR UNDER ANY SUCH TRANSFER AS IS REFERRED TO IN CERTAIN CLAU SES OF SECTION 47 OR IN THE CASE OFHUF BY THE MODE REFERRED TO IN SUB-SECTION (2) OF SECTION 64 AT ANY TIME AFTER THE 31ST DAY OF DECEMBER, 1969, AND IN THIS TYPE OF CAS ES, THE COST OF ACQUISITION OF THE ASSET SHALL BE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT AS INCREASED BY THE COST IN IMPROVEMENT OF THE ASSETS ETC. WE FIND THAT THE PROVISION OF SECTION 55(2)(A) SHALL APPLY IN RELATION TO THE CAP ITAL ASSETS MENTIONED IN SECTION 55(2)(A) OF THE ACT ONLY. THE CAPITAL ASSETS AS MEN TIONED IN SECTION 55(2)(A) ARE EXHAUSTIVE AND ALL INCLUSIVE OF CAPITAL ASSETS, SUC H AS GOODWILL, TRADE MARK BRAND NAME, RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIA GE PERMITS OR LOOM HOURS, AND BEING AN EXHAUSTIVE LIST OF CAPITAL ASSETS, ANY OTH ER CAPITAL ASSET SUCH AS LAND ETC. COULD NOT BE INCLUDED FOR THE PURPOSE OF VALUATION OF 'COST OF ACQUISITION' FOR SECTIONS 48 AND 49 OF THE ACT. IT IS WELL SETTLED T HAT WHEN CERTAIN PROVISION OF LAW HAS CLEAR LANGUAGE AND LEAVES NO ROOM FOR AMBIGUITY , THERE SHOULD BE NO VIOLENCE TO THE PROVISION AS ENACTED BY THE LEGISLATURE AND NO WORDS SHOULD BE ADDED OR OMITTED WHILE READING A SPECIFIC PROVISION OF LAW. WE FIND THAT THE LEGISLATURE HAS INTENTIONALLY NOT ADDED WORD 'LAND' IN THE PROVISIO N OF SECTION 55(2(A) OF THE ACT, AND THEREFORE, THE PROVISION OF SECTION 55(2)(A)(II ) OF THE ACT WOULD NOT BE APPLICABLE WHILE VALUING THE 'COST OF ACQUISITION' OF THE LAND FOR THE PURPOSE OF COMPUTATION OF 'LONG TERM CAPITAL GAIN' OF THE ASSE SSEE. ACCORDINGLY, WE HOLD THAT THE VALUE OF THE LEASE-HOLD RIGHTS IN THE LAND IN Q UESTION OF THE ASSESSEE. HAS TO BE DETERMINED IN ACCORDANCE WITH THE PROVISION OF SECT ION 48 OF THE ACT BY VALUING 'FAR MARKET VALUE' OF THE LAND AS ON 1.4.1981 AND T HE INDEX COST OF ACQUISITION HAS TO BE DETERMINED IN ORDER TO ASSESS LONG TERM CAPIT AL GAINS IN THE HANDS OF THE ASSESSEE. IN THE LIGHT OF THE OBSERVATION MADE BY US HEREINAB OVE AND IN VIEW OF THE RATIO LAID DOWN BY THE JUDGMENT AS CITED ABOVE WE D O NOT FIND ANY REASON FOR NOT ITA NO.2111/AHD/2011 A.Y.2008-2009 12 ALLOWING THE INDEXED COST CLAIMED ON THE BASIS OF T HE VALUATION REPORT AS MADE BY THE AUTHORITIES BELOW. THE VALUATION MADE BY THE V ALUER IN TERMS OF SE. 48 OF THE ACT TAKING INTO CONSIDERATION THE MARKET VALUE OF T HE PROPERTY AS ON 01.04.1981 AND THE COMPUTED LOSS OF LONG TERM CAPITAL GAIN ON THAT BASIS CANNOT BE NEGATED ULTIMATELY THE RESULTANT COMPUTATION OF CAPITAL GAI N ON THE BASIS OF SUCH VALUATION REPORT AS WORKED OUT BY THE ASSESSEE DEMANDS POSITI VE CONSIDERATION BY THE REVENUE. 12. IN THAT VIEW OF THE MATTER WE DO NOT FIND ANY M ERIT IN MAKING ADDITION BY THE AUTHORITIES BELOW. THUS, THE ADDITION IS HEREBY DE LETED. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25/02/2019 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) VICE PRESIDENT (MADHUMITA ROY) JUDICIAL MEMBER AHMEDABAD; DATED 25/02/2019 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. !' / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD