The ITO, Ward-1(2), Guntur, Guntur V. Sri Padarti Venkata Rama Chandra Rao, Guntur

ITA 216/VIZ/2012

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9892 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M N MURTHY NAIKDR
• Keywords: Capital asset converted into stock in trade; Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 45(2); 50C; 142(1); 133(6); 54

Judgement Text

ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.216/VIZAG/2012 ( / ASSESSMENT YEAR: 2009-10) ITO, WARD - 1(2), GUNTUR VS. PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR [PAN: ADK PP6426G ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK,DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 29.07.2016 / DATE OF PRONOUNCEMENT : 16.09.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A), GUNTUR DATED 3.4.2010 AND IT PERTAINS TO THE ASSESSMENT YEAR 2009-10. ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY AND CAPITAL GAI NS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 17.7.2009 ADMITTING TOTAL INCOME OF ` 4,81,480/-. THE RETURN WAS PROCESSED U/S 143(1) O F THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') ON 1.12.2010. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTI NY UNDER CASS AND ACCORDINGLY, NOTICE U/S 142(1) OF THE ACT AND 143(2 ) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED R ELEVANT INFORMATION. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SOLD AN IMMOVABLE PRO PERTY AND COMPUTED LONG TERM CAPITAL GAIN. TO ASCERTAIN THE CORRECTNESS OF COMPUTATION OF LONG TERM CAPITAL GAIN, THE A.O. ISS UED A SHOW CAUSE NOTICE AND ASKED TO FURNISH DETAILS OF PROPERTIES A ND MODE OF COMPUTATION OF LONG TERM CAPITAL GAIN. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED LETTER AND SUBMITTED THAT HE HAD SOLD IMMOVABLE PROPERTY CONSISTING OF LAND ADMEASURING 4 89 SQ.YD. ALONG WITH BUILDING CONSISTING OF 4 FLOORS MEASURING 1262 0 SQ.FT. FOR A CONSIDERATION OF ` 1,50,00,000/-. THE ASSESSEE FURTHER SUBMITTED THA T HE HAD ACQUIRED THE PROPERTY BY WAY OF PARTITION DE ED DATED 28.5.2007 FROM HIS FATHER, IN TURN HIS FATHER HAS ACQUIRED TH E PROPERTY PRIOR TO ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 3 1.4.1981. SINCE, HE HAD ACQUIRED RIGHT OVER THE PR OPERTY BY WAY OF ONE OF THE MODE REFERRED TO IN SECTION 49(1) OF THE ACT , HE HAD ADOPTED FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.2001 AND COM PUTED COST OF ACQUISITION BY APPLYING INDEXATION FROM 1.4.1981 TO ASCERTAIN THE COST OF ACQUISITION OF PROPERTY. THE ASSESSEE FURTHER SUBMI TTED THAT HE HAS OBTAINED CERTIFICATE FROM THE REGISTERED VALUER, TO ASCERTAIN FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AND BASED ON S UCH CERTIFICATE ADOPTED THE VALUE AND COMPUTED LONG TERM CAPITAL GA IN BY APPLYING INDEXATION AS PER THE PROVISIONS OF SECTION 49(1) O F THE ACT AND COMPUTED LONG TERM CAPITAL GAIN OF ` 4,81,480/-. 3. THE A.O., DURING THE COURSE OF ASSESSMENT PROCEE DINGS, TO ASCERTAIN THE VALUE OF BOTH SITE AND CONSTRUCTION A S ON 1.4.1981, ADDRESSED LETTER TO THE SUB REGISTRAR, GUNTUR CALLI NG FOR INFORMATION U/S 133(6) OF THE ACT AND THE S.R.O. HAS FURNISHED FAIR MARKET VALUE OF BOTH LAND AND STRUCTURE AS ON 1.4.1981. THE A.O., ON PE RUSAL OF THE SALE DEED DATED 30.4.2008, NOTICED THAT THOUGH SALE CONS IDERATION RECEIVED AS A RESULT OF TRANSFER OF ` 1.5 CRORES, THE STAMP DUTY AUTHORITY HAVE FIXED FAIR MARKET VALUE OF THE PROPERTY AS ON THE D ATE OF TRANSFER AT ` 1,95,35,000/-, THEREFORE, ISSUED A SHOW CAUSE NOTIC E AND ASKED TO EXPLAIN WHY THE STAMP DUTY VALUE FIXED BY THE SUB R EGISTRAR FOR THE PURPOSE OF DETERMINATION OF STAMP DUTY SHALL NOT BE ADOPTED AS FULL ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 4 VALUE OF CONSIDERATION RECEIVED AS A RESULT OF TRAN SFER FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAINS. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED HIS LETTER DATED 15. 12.2011 AND STATED THAT HE HAD INVESTED PART OF SALE CONSIDERATION FOR PURC HASE OF PROPERTY AND CLAIMED EXEMPTION U/S 54 OF THE ACT, HOWEVER, FAILE D TO GIVE ANY EXPLANATION WITH REGARD TO APPLICATION OF DEEMED CO NSIDERATION UNDER THE PROVISIONS OF SECTION 50C OF ACT. 4. THE A.O. AFTER CONSIDERING THE EXPLANATION OF TH E ASSESSEE COMPUTED LONG TERM CAPITAL GAIN BY ADOPTING DEEMED CONSIDERATION OF ` 1,95,35,000/- FOR THE PURPOSE OF DETERMINATION OF C APITAL GAINS. WHILE DOING SO, THE A.O. OBSERVED THAT THE ASSESSEE HAS A CQUIRED RIGHT OVER THE PROPERTY BY WAY OF ONE OF THE MODE SPECIFIED U/ S 49(1) OF THE ACT, ACCORDINGLY THE BENEFIT OF INDEXATION SHALL BE ALLO WED FROM THE DATE THE ASSESSEE OWNED THE ASSET. IN THE PRESENT CASE ON H AND, THE ASSESSEE HAS GOT RIGHT OVER THE PROPERTY BY WAY OF PARTITION DEED DATED 28.5.2007 AND ACCORDINGLY BENEFIT OF INDEXATION IS AVAILABLE FROM THE ASSESSMENT YEAR 2008-09. AS REGARDS FAIR MARKET VALUE OF THE PROPERTY, THE A.O. OBSERVED THAT THOUGH ASSESSEE HAS OBTAINED A CERTIF ICATE FROM THE REGISTERED VALUER, VALUE ADOPTED BY THE ASSESSEE TO WARDS COST OF ACQUISITION OF THE PROPERTY AS ON 1.4.1981 IS WITHO UT ANY BASIS. THE A.O. FURTHER HELD THAT THE SRO HAS FURNISHED A CERT IFICATE, WHEREIN FAIR ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 5 MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 TOWARDS SITE IS FIXED AT ` 150 P.SQ.YD. AND TOWARDS STRUCTURE WITH RCC ROOF WA S FIXED AT ` 34.10 P.SQ.YD. SINCE THE VALUE ADOPTED BY THE ASSESSEE I S NOT SUPPORTED BY ANY VALID EVIDENCES, REJECTED COST OF ACQUISITION A DOPTED BY THE ASSESSEE AND ADOPTED SRO VALUE AND DETERMINED COST OF ACQUIS ITION BY APPLYING INDEXATION BENEFIT FROM THE ASSESSMENT YEAR 2008-09 AND RE-COMPUTED LONG TERM CAPITAL GAIN OF ` 1,89,42,855/-. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. WAS ERRED IN ADOPTING FAIR MARKET VAL UE OF THE PROPERTY BASED ON THE SRO CERTIFICATE WHICH IS A CIRCLE RATE FIXED FOR THE PURPOSE OF DETERMINING STAMP DUTY PAYABLE ON TRANSFER OF PR OPERTY. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFIC ER OUGHT TO HAVE ADOPTED FAIR MARKET VALUE GIVEN BY THE APPROVED VAL UER WHICH WAS DULY FILED DURING THE COURSE OF ASSESSMENT. IT IS ALSO FURTHER SUBMITTED THAT THE APPROVED VALUERS REPORT CONTAINS DETAILED ABST RACT OF CONSTRUCTION AFTER A THOROUGH INSPECTION OF THE SAID BUILDING/CO NSTRUCTION, THEREFORE, THERE IS NO REASON FOR THE A.O. TO DISBELIEVE THE C ERTIFICATE ISSUED BY THE REGISTERED VALUER TO ADOPT THE SRO VALUE. AS REGAR DS THE INDEXATION BENEFIT, THE ASSESSEE SUBMITTED THAT HE HAD ACQUIRE D RIGHT OVER THE ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 6 PROPERTY BY WAY OF ONE OF THE MODES SPECIFIED IN SE CTION 49(1) OF THE ACT AND ACCORDINGLY APPLIED INDEXATION BENEFIT FROM THE YEAR IN WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER. THE ASSE SSEE FURTHER SUBMITTED THAT HE HAD ACQUIRED PROPERTY BY WAY OF P ARTITION DEED ON 28.5.2007 AND THE SAID PROPERTY HAS BEEN ACQUIRED B Y HIS FATHER PRIOR TO 1.4.1981. AS PER THE PROVISIONS OF THE ACT, WHEN T HE ASSESSEE GOT RIGHT OVER THE PROPERTY BY WAY OF ANY MODE SPECIFIED U/S 49(1) OF THE ACT, WHEN THE ASSET WAS ACQUIRED BY THE ASSESSEE OR PREV IOUS OWNER BEFORE 1.4.1981, THEN THE ASSESSEE AT HIS OPTION CAN ADOPT COST TO THE PREVIOUS OWNER OR FAIR MARKET VALUE OF THE PROPERTY AS ON 1. 4.1981 WHICHEVER IS HIGHER. IN THE PRESENT CASE ON HAND, SINCE THE PRO PERTY WAS ACQUIRED BEFORE 1981, HE HAD ADOPTED FAIR MARKET VALUE OF TH E PROPERTY AS ON 1.4.1981, BASED ON THE VALUATION CERTIFICATE ISSUED BY THE REGISTERED VALUER. THEREFORE, THE A.O. WAS NOT CORRECT IN ADO PTING CIRCLE RATE FIXED BY THE STAMP DUTY AUTHORITIES FOR THE PURPOSE OF DE TERMINATION OF STAMP DUTY TO COMPUTE COST OF ACQUISITION OF THE PROPERTY . 6. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE HELD THAT THERE IS SOME FORCE IN THE CONTENTION OF THE A SSESSEE WITH REGARD TO THE INCORPORATION OF COST INFLATION INDEX WITH RESP ECT TO THE SAID PROPERTY AS ON 1.4.1981 AS BASE YEAR INSTEAD OF ADOPTING ASS ESSMENT YEAR 2008- 09 AS BASE YEAR ERRONEOUSLY BY THE A.O., SINCE THE EXPRESSION HELD BY ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 7 THE ASSESSEE IS NOT DEFINED U/S 48 OF THE ACT. THE EXPRESSION HAS TO BE CONSIDERED AS DEFINED UNDER EXPLANATION 1(I)(B) OF SECTION 2 OF THE ACT. THE OBJECT OF GIVING RELIEF TO AN ASSESSEE BY ALLOW ING INDEXATION IS WITH A VIEW TO OFFSET THE EFFECT OF INFLATION. THE CIT(A) FURTHER HELD THAT AS PER THE CIRCULAR NO.636 DATED 31.8.1992 ISSUED BY THE C BDT, THE FAIR METHOD OF ALLOWING RELIEF BY WAY OF INDEXATION IS TO LINK IT TO THE PERIOD OF HOLDING OF THE ASSET. THE SAID CIRCULAR FURTHER PR OVIDED THAT THE COST OF ACQUISITION AND THE COST OF IMPROVEMENT HAS TO BE I NFLATED TO ARRIVE AT THE INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT AND THEN DEDUCT THE SAME FROM THE SALE CONSIDERATION TO ARRIVE AT LONG TERM CAPITAL GAIN. IF INDEXATION IS LINKED TO THE PERIO D OF HOLDING ASSET AND IN THE CASE OF ASSESSEE COVERED U/S 49(1) OF THE ACT, THE PERIOD OF HOLDING OF THE ASSET HAS TO BE DETERMINED BY INCLUDING THE PERIOD FOR WHICH, THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER, THEN OBV IOUSLY IN ARRIVING AT THE INDEXATION, THE FIRST YEAR IN WHICH THE SAID AS SET WAS HELD BY THE PREVIOUS OWNER WOULD BE THE FIRST YEAR FOR WHICH SA ID ASSET WAS HELD BY THE ASSESSEE. WITH THESE OBSERVATIONS, DIRECTED THE A.O. TO ADOPT INDEXATION FROM THE YEAR IN WHICH THE ASSET WAS HEL D BY THE PREVIOUS OWNER OR FROM 1.4.1981, WHICHEVER IS BENEFICIAL TO THE ASSESSEE. AS REGARDS COST OF ACQUISITION OF THE PROPERTY, THE CI T(A) HELD THAT THE ASSESSEE HAS ADOPTED COST OF ACQUISITION OF THE PRO PERTY AS ON 1.4.1981, ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 8 BASED ON THE VALUATION REPORT ISSUED BY THE APPROVE D VALUER. THE ASSESSEE HAS SUBSTANTIATED FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 WITH VALUERS REPORT, WHEREAS THE A.O. HAS ADOPTED SRO VALUE FIXED BY THE STAMP DUTY AUTHORITIES FOR THE PURPOSE OF DETERMINATION OF STAMP DUTY WITHOUT ANY BASIS, WITH THESE OBSERVATIO NS, DIRECTED THE A.O. TO SUBSTITUTE THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981, AS PER THE APPROVED VALUERS REPORT AS AGAINST THE SRO VAL UE ADOPTED BY THE A.O. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ADOPT VALUE OF THE PROPERTY AS ON 1.4.1981 AS PER THE REPORT OF THE REGISTERED VALUER AS THE FAIR MARKET VALUE FOR DETERMINING COST OF ACQUISITION IN THE PLACE OF VALUE COMPUTED BY THE A .O. AS PER THE GUIDANCE VALUE RATES OBTAINED FROM THE SRO. THE LD . D.R. FURTHER SUBMITTED THAT THE CIT(A) ERRED IN PLACING RELIANCE ON THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF PRATAP M. INDULKAR IN I TA NO.1142/MUM/2010 WHICH DEALT WITH THE LEGALITY OF R EFERENCE TO VALUATION OFFICER U/S 55A OF THE ACT, WHICH IS NOT RELEVANT TO THE FACTS OF THE ASSESSEES CASE. THE D.R. FURTHER SUBMITTED THA T AS REGARDS THE INDEXED COST OF ACQUISITION, THE CIT(A) ERRED IN DI RECTING THE A.O. TO ADOPT INDEXATION BENEFIT FROM THE FIRST YEAR IN WHI CH THE ASSET WAS HELD BY THE PREVIOUS OWNER WHICH IS CONTRARY TO THE SPEC IFIC PROVISIONS OF ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 9 EXPLANATION (III) TO SECTION 48 OF THE ACT, WHERE I T HAS PROVIDED THAT THE INDEXATION SHOULD BE MADE FROM THE FIRST YEAR IN WH ICH THE ASSET WAS HELD BY THE ASSESSEE. THE D.R. FURTHER SUBMITTED T HAT THE CIT(A) OUGHT NOT TO HAVE RELIED ON THE EXPLANATION 1(I)(B) TO SE CTION 2(42A) FOR CONSTRUCTION OF THE EXPRESSION FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE, AS THE SAID EXPLANATION IS SOLELY MEA NT FOR RECKONING THE PERIOD FOR WHICH THE ASSET IS HELD BY THE ASSESSEE, FOR THE PURPOSE OF DETERMINING WHETHER THE ASSET IS SHORT TERM CAPITAL ASSET OR LONG TERM CAPITAL ASSET. 8. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE A.R. FURTHE R SUBMITTED THAT THE A.O. WAS ERRED IN ADOPTING MARKET VALUE OF THE PROP ERTY AS FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981, AS THE FAIR M ARKET VALUE OF THE PROPERTY IS MUCH MORE THAN THE SRO VALUE FIXED BY T HE STAMP DUTY AUTHORITY FOR THE PURPOSE OF DETERMINATION OF STAMP DUTY. THE A.R. FURTHER SUBMITTED THAT THE LEGISLATURE HAS EXPRESSL Y DRAWN A DISTINCTION BETWEEN TWO PHRASES FULL VALUE OF THE CONSIDERATIO N AND FAIR MARKET VALUE IN THE CONTEXT OF COMPUTATION OF COST OF ACQ UISITION OF THE PROPERTY AND DETERMINATION OF FULL VALUE OF CONSIDE RATION, AS A RESULT OF TRANSFER OF CAPITAL ASSET. THE A.O. WAS ERRED IN C ONSIDERING FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER TO SUBSTITUTE THE FAIR MARKET VALUE OF ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 10 THE PROPERTY FOR DETERMINING COST OF ACQUISITION OF THE PROPERTY. IN SUPPORT OF HIS ARGUMENT RELIED UPON THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN CASE OF N. GOVINDARAJU VS. ITO (201 5) 377 ITR 243. AS REGARDS THE INDEXED COST OF ACQUISITION, THE A.R. S UBMITTED THAT THE A.O. WAS ERRED IN APPLYING INDEXATION BENEFIT FROM THE D ATE IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. AS PER THE PROVISI ONS OF SECTION 49(1) OF THE ACT, WHEN THE ASSESSEE BECOMES THE OWNER OF THE PROPERTY BY WAY OF INHERITANCE OR SUCCESSION, THE ASSESSEE IS E LIGIBLE FOR INDEXATION BENEFIT FROM THE DATE WHEN ASSET WAS FIRST ACQUIRED BY THE PREVIOUS OWNER. IN THE PRESENT CASE, THE ASSESSEE GOT RIGHT OVER PROPERTY BY WAY OF PARTITION DEED IN THE YEAR 2007-08, WHICH WA S ACQUIRED BY HIS FATHER BEFORE 1.4.1981, THEREFORE, THE ASSESSEE HAS RIGHTLY COMPUTED INDEXATION BENEFIT FROM 1.4.1981. TO SUPPORT HIS A RGUMENT RELIED UPON THE DECISION OF HONBLE HIGH COURT OF MUMBAI IN THE CASE OF CIT VS. MAJULA J. SHAH (2013) 355 ITR 474. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS C OST OF ACQUISITION OF THE PROPERTY. THE ASSESSEE HAS ADOPTED COST OF ACQUISI TION OF THE PROPERTY AS ON 1.4.1981 BASED ON THE CERTIFICATE OF REGISTER ED VALUER. THE A.O. HAS DETERMINED COST OF ACQUISITION OF THE PROPERTY BASED ON THE SRO ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 11 VALUE OF THE PROPERTY FIXED BY THE STATE GOVERNMENT FOR THE PURPOSE OF DETERMINATION OF STAMP DUTY. THE A.O. WAS OF THE O PINION THAT COST OF ACQUISITION ADOPTED BY THE ASSESSEE BASED ON THE RE GISTERED VALUER CERTIFICATE IS NOT IN ACCORDANCE WITH THE PROVISION S OF SECTION 48 & 49 OF THE ACT. ACCORDING TO THE A.O., WHEN ASSET IS ACQUI RED BY THE ASSESSEE BY WAY OF ONE OF THE MODE SPECIFIED U/S 49(1) OF TH E ACT, THE ASSESSEE CAN EITHER ADOPT COST TO THE PREVIOUS OWNER OR FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981. ACCORDING TO THE A.O., TH E FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 IS AS PER THE SRO VALUE . 10. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HA S ADOPTED FAIR MARKET VALUE OF THE PROPERTY BASED ON THE CERTIFICA TE OF THE REGISTERED VALUER. THE ASSESSEE FURTHER CONTENDED THAT THE A. O. WAS NOT CORRECT IN APPLYING SRO VALUE AS FAIR MARKET VALUE OF THE PROP ERTY, AS THE SRO VALUE FIXED BY THE STATE GOVERNMENT IS NOT CORRECT MARKET VALUE OF THE PROPERTY. THE A.O. WAS ERRED IN EQUATING WITH FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER TO THE FAIR M ARKET VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTATION OF COST OF ACQUISITION. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASO N THAT THE A.O. WAS ERRED IN ADOPTING SRO VALUE TO SUBSTITUTE FAIR MARK ET VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTATION OF COST OF ACQUISITION OF THE PROPERTY. SECTION 48 OF THE ACT DEALS WITH THE MOD E OF COMPUTATION OF ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 12 INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS AN D IN THAT CONTEXT FULL VALUE OF CONSIDERATION WOULD MEAN THE CONSIDER ATION OR PRICE RECEIVED AS A RESULT OF THE TRANSFER OF A CAPITAL A SSET. IT IS DIFFERENT FROM FAIR MARKET VALUE OF THE PROPERTY, WHICH PHRASE IS USED IN SECTION 45(2) OF THE ACT RELATING TO CAPITAL GAINS AND SECTION 55 (3)(B) IN RELATION TO COST OF ACQUISITION. 11. THE LEGISLATURE HAS EXPRESSLY DRAWN A DISTINCTI ON BETWEEN THE TWO PHRASES FULL VALUE OF CONSIDERATION AND FAIR MAR KET VALUE. THE FORMER WOULD BE THE PRICE RECEIVED ON TRANSFER OF CAPITAL ASSET AND THE LATER WOULD BE THE PRICE OF A CAPITAL ASSET WOULD ORDINAR ILY PETCH ON SALE IN OPEN MARKET ON THE RELEVANT DATE. IN THE PRESENT C ASE ON HAND, THE ASSESSEE HAS ADOPTED FAIR MARKET VALUE OF THE PROPE RTY AS ON 1.4.1981 AS COST OF ACQUISITION WHICH IS BASED ON A CERTIFIC ATE ISSUED BY THE REGISTERED VALUER. THE A.O. WITHOUT ASSIGNING ANY REASONS DISBELIEVED REGISTERED VALUERS REPORT AND ADOPTED SRO VALUE OF THE PROPERTY FOR THE PURPOSE OF DETERMINATION OF COMPUTATION OF COST OF ACQUISITION, WHEN ACT SPECIFICALLY PROVIDES POWERS TO THE A.O. UNDER THE PROVISIONS OF SECTION 55(2) OF THE ACT, TO REFER THE VALUATION OF THE PRO PERTY TO THE VALUATION OFFICER, WHEN HE IS OF THE OPINION THAT THE FAIR MA RKET VALUE OF THE PROPERTY ADOPTED BY THE ASSESSEE IS HIGHER THAN THE FAIR MARKET VALUE OF THE PROPERTY. THE A.O., WITHOUT EXERCISING THE OPTI ON OF REFERRING THE ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 13 MATTER TO THE VALUATION OFFICER, SIMPLY ADOPTED SRO VALUE WHICH IS FIXED IN A DIFFERENT CONTEXT TO DETERMINE THE COST OF ACQ UISITION OF THE PROPERTY. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS ERRED IN ADOPTING SRO VALUE TO SUBSTITUTE THE FAIR MARKET VA LUE ADOPTED BY THE ASSESSEE, WHICH IS BASED ON A REGISTERED VALUER CER TIFICATE. 12. NOW IT IS PERTINENT TO DISCUSS HERE THE CASE LA W RELIED UPON BY THE ASSESSEE. THE ASSESSEE HAS RELIED UPON THE DECISIO N OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF N. GOVINDARAJU VS. ITO & ANR. 377 ITR 243, WHEREIN THE HONBLE HIGH COURT UNDER SIMILAR CIRCUMSTANCES HELD AS UNDER: SECTION 48 OF THE ACT DEALS WITH THE 'MODE OF COMP UTATION' OF INCOME CHARGEABLE UNDER 'CAPITAL GAINS' AND IN THAT CONTEXT 'FULL VAL UE OF THE CONSIDERATION' WOULD MEAN THE CONSIDERATION OR PRICE RECEIVED AS A RESULT OF THE TRANSFER OF A CAPITAL ASSET. IT IS DIFFERENT FROM 'FAIR MARKET VALUE' OF THE PROPERTY, WHICH PHRASE IS USED IN SECTION 45(2) [RELATING TO CAPITAL GAINS] AND SECTION 55(2) (B) [RELATING TO COST OF ACQUISITION]. (PARA 44) THE LEGISLATURE HAS EXPRESSLY DRAWN A DISTINCTION B ETWEEN THE TWO PHRASES: 'FULL VALUE OF THE CONSIDERATION' AND 'FAIR MARKET VALUE THE FORMER WOULD BE THE PRICE RECEIVED ON TRANSFER OF A CAPITAL ASSET AND THE LAT TER WOULD BE THE PRICE THAT A CAPITAL ASSET WOULD ORDINARILY FETCH ON SALE IN OPEN MARKET ON THE RELEVANT DATE. (PARA 47) ASSESSEE HAD PROVIDED THE REASONS FOR DETERMINING R S.225/- PER SQ. FT. AS THE FAIR MARKET VALUE OF THE PROPERTY BY PRODUCING THE RELEV ANT MATERIAL, INCLUDING VALUATION REPORT OF A REGISTERED VALUER, WHICH ALL HAVE BEEN IGNORED WHILE ARRIVING AT THE PRICE OF RS 84/- PER SQ. FT. THE ASSESSING OFFICER ASSESS ED THE VALUE OF THE PROPERTY AS ON 1.4.1981 ON THE BASIS OF SALE DEEDS OF SOME NEARBY PROPERTIES REGISTERED FOR SUCH PRICE IN THE YEAR 1981 AND THUS, ARRIVED AT THAT FI GURE. IN OUR OPINION, THE SAME CANNOT BE THE PROPER MODE OF ARRIVING AT THE 'FAIR MARKET VALUE' OF THE PROPERTY IN QUESTION AS ON 1.4.1981, FOR THE PURPOSE OF DETERMI NING 'CAPITAL GAINS' UNDER THE ACT. (PARA 48) ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 14 TRIBUNAL WAS NOT JUSTIFIED IN ARRIVING AT THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION AS ON 1.4.1981 WITHOUT TAKING INTO CONSIDE RATION THE MATERIAL ON RECORD, INCLUDING THE VALUATION REPORT FILED BY THE ASSESSE E. THE MATTER THUS REQUIRES TO BE REMANDED TO THE ASSESSING OFFICER FOR DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION IN ACCORDANCE WITH LAW AND IN THE LIGHT OF THE OBSERVATIONS MADE HEREINABOVE. (PARA 51) 13. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAI LS HAS RIGHTLY DIRECTED THE A.O. TO SUBSTITUTE VALUE ADOPTED BY TH E ASSESSEE AS FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 TO COMP UTE COST OF ACQUISITION. WE DO NOT FIND ANY REASONS TO INTERFER E WITH THE CIT(A) ORDER. HENCE, WE INCLINED TO UPHELD CIT(A) ORDER AN D REJECT GROUND RAISED BY THE REVENUE. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS BENEFIT OF INDEXATION. THE FACTS RELATING TO THE ISSUE ARE THA T THE ASSESSEE HAS SOLD A PROPERTY WHICH HE HAD ACQUIRED BY WAY OF PARTITIO N DEED IN THE YEAR 2007-08. THE ASSESSEE CLAIMS THAT HE GOT RIGHT OVE R THE PROPERTY BY WAY OF PARTITION DEED, WHICH WAS ACQUIRED BY HIS FA THER PRIOR TO 1.4.1981. THE ASSESSEE FURTHER SUBMITTED THAT AS P ER THE PROVISIONS OF SECTION 49(1) OF THE ACT, WHEN HE GOT RIGHT OVER TH E ASSET BY WAY OF ANY MODES SPECIFIED U/S 49(1) OF THE ACT, THE COST OF A CQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIO US OWNER OF THE PROPERTY ACQUIRED IT AS INCREASED BY THE COST OF AN Y IMPROVEMENT OF THE ASSET INCURRED OR BORN BY THE PREVIOUS OWNER OR THE ASSESSEE AS THE ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 15 CASE MAY BE. SINCE, HE GOT RIGHT OVER PROPERTY BY WAY OF INHERITANCE OR SUCCESSION, AS PER THE PROVISIONS OF THE ACT, HE HA S ADOPTED FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AND APPLIED IN DEXATION BENEFIT FROM THE DATE THE ASSET WAS FIRST HELD BY THE PREVIOUS O WNER AND COMPUTED LONG TERM CAPITAL GAIN. THE A.O. WAS OF THE OPINION THAT WHEN ASSESSEE IS OWNER OF THE PROPERTY BY WAY OF ANY ONE OF THE M ODE SPECIFIED U/S 49(1) OF THE ACT, THEN THE INDEXATION BENEFIT SHOUL D BE ALLOWED FROM THE DATE THE ASSET FIRST HELD BY THE ASSESSEE. THE A.O . FURTHER WAS OF THE OPINION THAT THE ASSESSEE HAS GOT RIGHT OVER PROPER TY BY WAY OF INHERITANCE/SUCCESSION THROUGH A PARTITION DEED DAT ED 28.5.2007 WHICH PERTAINS TO THE ASSESSMENT YEAR 2008-09 AND ACCORDI NGLY, THE ASSESSEE IS ELIGIBLE TO CLAIM BENEFIT OF INDEXATION FROM THE ASSESSMENT YEAR 2008- 09 ONWARDS. 15. WE DO NOT FIND ANY MERITS IN THE FINDINGS OF THE A.O., FOR THE REASON THAT WHEN THE ASSET WAS ACQUIRED UNDER ANY C IRCUMSTANCES GIVEN BY SECTION 49(1) OF THE ACT, FOR THE PURPOSE OF REC KONING THE PERIOD OF HOLDING, THE PERIOD OF HOLDING OF ASSET BY THE PREV IOUS OWNER IS CONSIDERED TO COMPUTE THE PERIOD OF HOLDING WHETHER IT IS LONG TERM OR SHORT TERM. IN A SIMILAR WAY, WHEN THE ASSESSEE GO T RIGHT OVER PROPERTY BY ANY OF THE MODES SPECIFIED U/S 49(1) OF THE ACT, OBVIOUSLY THE ASSESSEE IS ELIGIBLE FOR THE BENEFIT OF INDEXATION FROM THE PERIOD THE ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 16 ASSET WAS FIRST HELD BY THE PREVIOUS OWNER, BUT NOT THE PERIOD FROM WHICH THE ASSET WAS HELD BY THE ASSESSEE. THIS VIE W WAS UPHELD BY THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. M ANJULA J. SHAH (SUPRA), WHEREIN THE HONBLE HIGH COURT HELD THAT I NDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO YE AR IN WHICH PREVIOUS OWNER FIRST HELD ASSET AND NOT YEAR IN WHICH THE AS SESSEE BECAME OWNER OF ASSET. A SIMILAR VIEW IS GIVEN BY THE HONBLE H IGH COURT OF DELHI, IN THE CASE OF ARUN SANGLE TRUST VS. CIT (2012) 205 TAXMAN 456 AND ALSO THE HONBLE HIGH COURT OF GUJARAT, IN THE CASE OF CIT VS. GOWTAM MANUBHAI AMIN (2013) 218 TAXMAN 319. 16. IN THE PRESENT CASE ON HAND, THE ASSESSEE GOT R IGHT OVER PROPERTY BY WAY OF INHERITANCE THROUGH A PARTITION DEED WHIC H WAS ACQUIRED BY HIS FATHER PRIOR TO 1.4.1981. WHEN THE ASSESSEE GOT RIGHT OVER PROPERTY BY ANY OF THE MODE SPECIFIED U/S 49(1) OF THE ACT, THEN FOR THE PURPOSE OF COMPUTATION OF INDEXED COST OF ACQUISITION, THE PERIOD OF HOLDING OF PREVIOUS OWNER HAS TO BE CONSIDERED. THE CIT(A) AF TER CONSIDERING THE RELEVANT DETAILS RIGHTLY HELD THAT THE ASSESSEE IS ELIGIBLE FOR INDEXATION BENEFIT FROM THE PERIOD THE ASSET WAS FIRST HELD BY THE PREVIOUS OWNER OR 1.4.1981 WHICHEVER IS LATER AS PER THE PROVISIONS O F SECTION 49(1) OF THE ACT. WE DO NOT SEE ANY REASONS TO INTERFERE WITH TH E ORDER OF CIT(A). ITA NO.216/VIZAG/2012 PADARTI VENKATA RAMA CHANDRA RAO, GUNTUR 17 HENCE, WE INCLINED TO UPHOLD THE CIT(A) ORDER AND R EJECT GROUND RAISED BY THE REVENUE. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 16 TH SEPT16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 16.09.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1(2), GUNTUR 2. / THE RESPONDENT PADARTI VENKATA RAMA CHANDRA RA O, 21-11-31, GANTALAMMACHETTU STREET, CHOWTRA, GUNTUR 3. + / THE CIT, GUNTUR 4. + ( ) / THE CIT (A), GUNTUR 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM