The ACIT, Circle-4, Baroda V. Synbiotics Limited, Baroda

ITA 2602/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1892 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Question of law; Cost of acquisition; Fair market value; Valuation report
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPEAL(S) / BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 2624/AHD/2012 2008 - 09 M/S. SY N BIOTICS WADI WADI 390023 PAN:AACCS 9831Q THE ASST.CIT CIRCLE-4 BARODA 2. 2602/AHD/2012 2008 - 09 ASST.CIT COR-4, BARODA M/S.SYNBOTICS LTD. -DO- ADDRESS 3. 2786/AHD/2012 2008 - 09 AMBALAL S ARABHAI ENTERPRISES LTD. WADI WADI BARODA PAN: AABCA 6893K DY.CIT CIRCLE-1 BARODA 4. 35/AHD/2013 2008 - 09 THE DCIT, CIR-1(1) BARODA AMBALAL SARA B HAI ENTERPRISES LTD. WADI WADI,BARODA 5. 2694/AHD/201 2 2009 - 10 AMBALAL SARABHAI ENTERPRISES LTD. BARODA DY.CIT CIRCLE-1 BARODA 6. 36/AHD/2013 2009 - 10 DY.CIT CIRCLE-1, BARODA AMBALAL SARABHAI ENTERPRISES LTD. BARODA ASSESSEE(S) BY : SHRI S.N.SOPARKAR WITH SHRI M.K. PATEL REVENUE BY : SHRI KEYUR PATEL, SR.DR / DATE OF HEARING 05/04/2016 !' / DATE OF PRONOUNCEMENT 11/04/2016 ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 2 - / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS BUNCH OF SIX APPEALS OUT OF WHICH THREE BY T HE REVENUE AND OTHER THREE BY THE DIFFERENT TWO ASSESSEES ARE DIR ECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMMISSIONER OF INCOME TA X(APPEALS)-I/III, BARODA (CIT(A) IN SHORT) PERTAINING TO ASSESSMENT YEARS (AY) 2008- 09 (IN THE CASE OF SYNBIOTICS LTD.) AND AYS 2008-09 & 2009-10 (IN THE CASE OF AMBALAL SARABHAI ENTERPRISES LTD.). SINCE COMMON ISSUES AND FACTS ARE INVOLVED IN THESE APPEALS, THESE WERE HEA RD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE CROSS-APPEALS FOR AY 2008- 09 I.E. REVENUES APPEAL IN ITA NO.2602/AHD/2012 AND ASSESSEES APPEA L IN ITA NO.2624/AHD/2012. THE REVENUE AND THE ASSESSEE HA VE RAISED THE FOLLOWING GROUNDS OF APPEAL:- [A] REVENUES APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO ADO PT THE VALUE OF 550/- PER SQ.MRS AS FAIR MARKET VALUE AS ON 01.04.1 981 OF THE LAND SOLD BY THE ASSESSEE BY ADOPTING SALES INS TANCE OF M/S.ALEMBIC LTD. INSTEAD OF ADOPTING THE SALES INST ANCE OF ASSESSEES GROUP CONCERN NAMELY M/S.AMBALAL SARABHA I ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 3 - ENTERPRISE LTDF. WHEREIN THE FMV AS ON 01.04.1981 W AS ADOPTED AT 250 PER SQ.MTRS. AND WHICH WAS LOCATED IN THE SAME VICINITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTE R THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. [B] ASSESSEES APPEAL:- 1. FMV AS AT 1.4.1981, FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAINS ON TRANSFER OF FACTORY LAND, BE DIREC TED TO BE ADOPTED AS PER VALUATION REPORT OF GOVERNMENT APPROVED VALU ERS AT RS.1,940/- PER SQ.MTR. AS CLAIMED BY APPELLANTS AS AGAINST RS.550 PER SQ.MTR. AS ESTIMATED BY CIT(A) AND RS.250 PER S Q.MTR. AS ESTIMATED BY AO BY REJECTING VALUATION REPORT OF GO VERNMENT APPROVED VALUER AND BY REFERRING TO UNCOMPARABLE AN D INAPPLICABLE CASES. 2. ALTERNATIVELY , IN CASE FMV AS AT 1.4.1981 AS ESTIMATED BY GOVERNMENT APPROVED VALUER IS REJECTED, THEN, AVERA GE RATE OF RS.1,245 PER SQ.MTR., I.E. AVERAGE OF RATE OF RS.1, 940 PER SQ.MTR. ADOPTED BY APPELLANTS AND RATE OF RS.550 PER SQ.MT R. ESTIMATED BY CIT(A), BE DIRECTED TO BE ADOPTED AS FMV AS AT 1.4. 1981 FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAINS O N SALE OF FACTORY LAND. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/2010. WHILE FRAMING THE ASSESSMENT, TH E ASSESSING OFFICER (AO IN SHORT) RECOMPUTED THE CAPITAL GAIN ON TRANSF ER OF PORTION OF ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 4 - FACTORY LAND BY ADOPTING COST OF ACQUISITION OF RS. 250/- PER SQ.MTR AS ON 1.4.1981. HENCE, THE AO MADE ADDITION OF RS.11,74, 45,132/-, THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER, P REFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL. WHILE PARTLY ALLOWING THE APPEAL, THE LD.CIT(A) ADOPTED THE COST OF ACQUISITION A RS. 533/- PER SQ.MTR AND, ACCORDINGLY, RECOMPUTED THE CAPITAL GAIN. NOW THE REVENUE AND THE ASSESSEE ARE BOTH IN APPEALS BEFORE US TO CORRECTNE SS OF THE ORDER OF THE LD.CIT(A). 3. THE ONLY GROUND IN ASSESSEES APPEAL IS AGAINST ESTIMATION OF FAIR MARKET VALUE AS ON 1.4.1981. THE LD.SR.COUNSEL FOR THE ASSESSEE SHRI S.N.SOPARKAR VEHEMENTLY ARGUED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN RECOMPUTING THE CAPITAL GAIN AND NOT A CCEPTING THE COST OF ACQUISITION AS ADOPTED BY THE ASSESSEE. THE LD.C OUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE EVENT WHEN THE AO WAS NOT SAT ISFIED WITH THE VALUATION AS ADOPTED BY THE ASSESSEE. HE OUGHT T O HAVE CALLED FOR A DVOS REPORT. HE SUBMITTED THAT THE ASSESSEE HAS F URNISHED A REPORT OF THE VALUER AND HAD ESTIMATED THE FAIR MARKET VALUE AT RS.1940/- PER SQ.MTR. HE SUBMITTED THAT BOTH THE AUTHORITIES HAV E NOT CONSIDERED THE FACTS IN RIGHT PERSPECTIVE AND THE VALUATION WAS M ADE ON THE BASIS OF ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 5 - CONJECTURES AND SURMISES AND, THEREFORE, THE SAME C ANNOT BE CONFIRMED. HE SUBMITTED THAT BEFORE THE LD.CIT(A), IT WAS ARGU ED THAT IF THE VALUATION AS GIVEN BY THE ASSESSEE AND THE AO HAS G IVEN FINDING THAT THE SAME WAS NOT ACCEPTABLE AND NO OTHER BASIS WAS AVAI LABLE. THE LD.CIT(A) OUGHT TO HAVE ADOPTED THE USING THE REV ERSE INDEXATION. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SALE INSTANCES AS CONSIDERED BY THE AO ELIDE TO RESIDENTIAL PROPERTIES SITUATED AT 2-3 KMS AWAY FROM THE PROPERTY OF THE ASSESSEE THEREFORE, THE COMPAR ISON OF BOTH THE PROPERTIES WAS NOT JUSTIFIED. IN SUPPORT OF SUBMIS SIONS PLACED RELIANCE ON THE JUDGEMENT OF HONBLE HIGH COURT OF GUJARAT REND ERED IN THE CASE OF DECEAED SHANTADEVI GAEKWAD VS. DY.CIT REPORTED AT ( 2012) 22 TAXMAN.COM 30 (GUJ.). 3.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE AO AND HAS TAKEN THROUGH THE VALUATION REPORT AS FURNISHED BY THE ASSESSEE. HE SUBMITTED THAT THE VALUATION REPORT AS FURNISHED BY THE ASSESSEE DOES NOT INSPIRE CONFIDENCE AS VALUER HAS NOT GIVEN ANY SCIE NTIFIC BASIS AND HAS ESTIMATED PURELY ON THE BASIS OF CONJECTURES. HE F URTHER SUBMITTED THAT THE CASE-LAWS AS RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT AS THE AO HA S MADE ASSESSMENT ON THE BASIS OF SALE INSTANCES. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 6 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE REQUIRES FOR OUR ADJUDICATION IS WHA T SHOULD BE THE CORRECT VALUATION OF PROPERTY FOR THE PURPOSE OF COMPUTATIO N OF CAPITAL GAIN AS ON 01/04/1981. THE AO HAS ADOPTED THE VALUE OF RS.250 PER SQ.MTR ON THE BASIS OF THE SALE INSTANCES RELATED TO RESIDENTIAL AREAS SITUATED 2 TO 3 KMS AWAY FROM THE PROPERTY IN QUESTION. THERE IS NO DI SPUTE WITH REGARD TO THE FACT THAT PROPERTY IN QUESTION IS AN INDUSTRIAL LAND WHICH CANNOT BE COMPARED WITH THE RESIDENTIAL PROPERTIES HOWEVER , THE LD.CIT(A) DID NOT ACCEPT THE FAIR MARKET VALUE ADOPTED EITHER BY THE AO OR BY THE ASSESSEE AND PROCEEDED TO MAKE HIS OWN ESTIMATION. THE LD.CIT(A) HAS DECIDED THIS ISSUE IN PARAS-4 TO 4.3 BY OBSERVING A S UNDER:- 4.0 I HAVE CONSIDERED THE APPELLANT'S SUBMISSION S AND THE AO'S OBSERVATIONS. THE CONTENTIONS OF THE APPELLANT THAT THE FMV DETERMINED IN THE VALUATION REPORT SUBMITTED BY IT FOR THE PUR POSES OF DETERMINING FMV OF THE LAND AS ON 1.4.1981 IS CORRECT IS NOT AC CEPTABLE. THE AO HAS CLEARLY MENTIONED IN HIS ORDER THAT THE VALUATION R EPORT NOWHERE MENTIONS THAT THE NATURE OF LAND IS INDUSTRIAL. THE VALUATION HAS BEEN DONE PRESUMING THE LAND TO BE COMMERCIAL LAND DESPI TE THE FACT THAT AS ON 1.4.1981 IT WAS AN INDUSTRIAL LAND ON WHICH A FA CTORY WAS SITUATED. ALSO THE VALUER HAS NOT GIVEN ANY SALES INSTANCES R ELIED UPON TO ARRIVE AT THE VALUE OF THE LAND. THE DESCRIPTION OF SURROU NDING AREAS OF THE LAND IS ALSO THAT EXISTING AS ON THE DATE OF SALE A ND NOT AS ON 1.4.1981. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 7 - THE MARKET CONDITIONS AS ON 1.4.81 HAS NOT BEEN MEN TIONED ANYWHERE IN THE VALUATION REPORT. 4.1 THE APPELLANT IN ITS SUBMISSION IN THIS RE GARD HAVE ALSO ACCEPTED THAT THE APPROVED VALUER HAS ESTIMATED THE VALUE AS AT 1.4.1981 BASED ON LOCATION OF THE LAND IN POSH COMMERCIAL AREA AND NEAREST TO THE MAIN JUNCTION OF THE CROSS ROADS IN SUCH POSH AREA OF BA RODA CITY. THE APPELLANT HAS ALSO SUBMITTED THAT THE APPROVED VALU ER HAS CLEARLY INDICATED NATURE AND TYPE OF LAND ON PAGE 2 OF THE REPORT. BUT A PERUSAL OF PAGE 2 SHOWS THAT THE VALUER IS CONSIDERING THE PRESENT STATUS OF THE LOCALITY WHICH THE EVIDENT FROM THE FACT THAT HE HA S STATED THAT THE LAND IS OPEN PLOT OF NON-AGRICULTURAL LAND HAVING CONSID ERABLE FRONTAGE EXPOSER TOWARDS 132 FT; WIDE ROAD, WHICH IS FASTLY DEVELOPING AS BARODA CITY'S MALL AND HYPER MART HUB. THUS THE VALUER IS AGAIN TAKEN INTO ACCOUNT THE PRESENT CONDITION OF THE LOCALITY AROUN D THE LAND AND NOT THE SITUATION AS ON 1.4.1981. IT IS A KNOWN FACT THAT T HE MALL CULTURE STATED IN INDIA ONLY TOWARDS THE END OF 1990'S AND THE SIT UATION OF THE AREA IN WHICH THE LAND WAS SITUATED WAS ENTIRELY DIFFERENT AS ON 1.4.1981. THUS, THE VALUATION REPORT SUBMITTED BY THE APPELLANT CAN NOT BE RELIED UPON. 4.2. THE APPELLANT HAS ALSO RELIED UPON THE DECIS ION OF THIRD MEMBER IN CASE OF 3AHANGANJ COLD STORAGE V. ACIT REPORTED AT (1010) 133 TTJ (AGRA) TM 278 FOR ADOPTING REVERSE METHOD OF USING COST INFLATION INDEX. IN THIS DECISION THE BENCH HAS HELD THAT I N THE ABSENCE OF COMPARABLE INSTANCES, IF THE FMV ADOPTED AS ON 1.4. 1981 IS LOWER THAN THE VALUE DETERMINED BY USING REVERSE COST INFLATIO N INDEX, THEN THE VALUE ADOPTED IS ACCEPTABLE. BUT THIS IS NOT APPLIC ABLE IN THE PRESENT CASE, BECAUSE THE LAND IS LOCATED IN BARODA CITY AN D SEVERAL SALE INSTANCES OF SALE OF LAND AS ON 1.4.1981 ARE AVAILA BLE IN THE RESIDENTIAL AREAS OF THE CITY. THE AO'S OBSERVATION THAT TH E AREA OF SAYAJIGUNJ WAS THE MAIN POSH LOCALITY AS ON 1.4.1981 IS ALSO C ORRECT. HE HAS ALSO GIVEN SEVERAL SALE INSTANCES IN HIS ORDER. THE APP ELLANT WAS ALSO CONFRONTED WITH THE DOCUMENTARY EVIDENCES RELATED T O SUCH SALE INSTANCES DURING THE COURSE OF APPELLATE PROCEEDING S. THE APPELLANT HAD ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 8 - SUBMITTED ITS OBJECTIONS WHICH MAINLY CONSIST OF FA CT THAT THESE LANDS ARE SMALL IN AREA AND ARE LOCATED 2 TO 3 KM. AWAY FROM THE LAND OF THE APPELLANT. BUT STILL THE FACT REMAINS THAT AS ON 1. 4.1981, THE LAND OF THE APPELLANT WAS BEING USED AS INDUSTRIAL LAND AND WAS LOCATED ON OUT SKIRTS OF THE BARODA CITY. HENCE THE VALUE OF T HE LAND SOLD BY THE APPELLANT CANNOT BE MUCH MORE DIFFERENT THAN THE SA LE RATES OF LAND IN SAYAJIGUNJ. 4.3. THE APPELLANT HAS ALSO STATED THAT THE AO'S C ONTENTIONS MAY BE GOOD WHERE LAND IS SOLD IS INDUSTRIAL LAND, USED AS INDUSTRIAL LAND AND IS SOLD FOR USE AS INDUSTRIAL LAND. HOWEVER IN THE G IVEN CASE THE LAND IN QUESTION IS LOCATED IN POSH COMMERCIAL AND RESIDENT IAL AREA OF BARODA IN WHICH SEVERAL COMMERCIAL PROJECTS ARE HAPPENING. THE PRICE REALIZED BY THE APPELLANT IS OF COMMERCIAL LAND. BUT AGAIN THIS ARGUMENT IS TRUE ONLY IN REGARD .TO THE PRICE REALIZED BY THE APPELL ANT ON SALE OF THE LAND. THESE FACTORS ARE NOT RELEVANT AT ALL FOR DETERMINI NG THE FMV AS ON 1.4.1981, BECAUSE AS ON THAT DAY THE LAND WAS INDUS TRIAL LAND AND WAS BEING USED FOR INDUSTRIAL PURPOSES AND THE COMMERCI AL DEVELOPMENT IN THAT AREA, AS TAKING PLACE ON THE DAY OF SALE, WAS NOT THERE. 4.1. DURING THE COURSE OF APPELLATE PROCEEDINGS, AN ALTERNATE PLEA WAS ALSO RAISED BY THE ASSESSEE THAT THE AVERAGE RATE O F RS.1,940/- PER SQ.MTR. MAY BE ADOPTED BEING THE AVERAGE OF TWO DIFFERENT R ATES ADOPTED BY THE ASSESSEE ON ONE HAND AND THE REVENUE ON THE OTHER H AND. ADMITTEDLY, IN THE PRESENT CASE, NEITHER THE AO NOR THE LD.CIT(A) CALLED FOR REPORT FROM DVO AND PROCEEDED TO MAKE THEIR OWN ESTIMATION. IN OUR CONSIDERED VIEW, IT IS INCUMBENT UPON THE ASSESSING AUTHORITY TO CALL FOR REPORT FROM DVO FOR ASCERTAINING THE FAIR MARKET VALUE OF THE A SSET, IN THE EVENT, IF HE IS NOT SATISFIED ABOUT THE CLAIM OF THE ASSESSEE . IN THE PRESENT CASE, WE ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 9 - FIND THAT WITHOUT CALLING FROM THE DVOS REPORT, TH E AO HAS ADOPTED A DIFFERENT RATE AND THE LD.CIT(A) HAS ADOPTED A DIFF ERENT RATE. THE BASIS FOR ADOPTING A DIFFERENT RATE BY THE LD.CIT(A) IS T HAT IN THE CASE OF 3 RD PARTY, THE DEPARTMENT HAS ADOPTED A RATE OF RS.533 PER SQ.MT. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT BOTH THE AUTHORITIE S BELOW ARE NOT JUSTIFIED IN ADOPTING THE RATE AS THE ASSESSEE HAD FURNISHED A REPORT FROM AN EXPERT, I.E. GOVERNMENT APPROVED VALUER. THE SALE INSTANCE S AS CONSIDERED BY THE AO ARE PERTAINING TO RESIDENTIAL PROPERTIES AND SUCH VALUATION CANNOT BE ADOPTED IN RESPECT OF THE INDUSTRIAL LAND. THE ESTIMATION OF FAIR MARKET VALUE DEPENDS ON VARIOUS FACTORS; NAMELY, LO CATION OF PROPERTY, NATURE OF PROPERTY, USAGE OF PROPERTY AND ALSO FUTU RE PROSPECTS OF SUCH PROPERTY. AS PER THE GOVERNMENT VALUER, THE PROPER TY HAS POTENTIAL OF APPRECIATION AND OF COMMERCIAL USAGES. THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD FOR REBUTTING THIS CONTENTION OF THE VALUATION. THEREFORE, AFTER CONSIDERING THE TOTALITY OF THE FA CTS AND MATERIAL AVAILABLE ON RECORD, IT WOULD BE PROPER THAT AN ESTIMATION OF FAIR MARKET VALUE AS ON 01/04/1981 IS TO BE MADE ON THE BASIS OF MATERIAL O N RECORD. THE VALUER IN EARLIER YEAR, HAD ADOPTED A HIGHER RATE OF FAIR MARKET VALUE AND IN THE SUBSEQUENT YEAR, HE ADOPTED A LOWER RATE. THEREFOR E, THE VALUATION ADOPTED BY THE GOVERNMENT APPROVED VALUER, CANNOT B E ADOPTED AS THE ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 10 - VALUATION IS MADE SOLELY ON THE BASIS OF POTENTIAL OF THE LAND BUT NOT ON THE BASIS OF THE ACTUAL PREVALENT RATE IN THE CLOSE VICINITY. THE REVENUE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD, DEMONST RATING THE PREVALENT MARKET RATE AS ON 01/04/1981 IN THE CLOSE VICINITY OF THE LAND IN QUESTION. THE AO HAS ADOPTED THE COST OF ACQUISITION AS ON 01 /04/1981 AT RS.250/- PER SQ.MTR. AND THE LD.CIT(A) ADOPTED THE COST OF A CQUISITION AS ON 01/04/1981 AT RS.551/- PER SQ.MTR., WHEREAS THE ASS ESSEE HAS CLAIMED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.1940/- P ER SQ.MTR. THEREFORE, IT CAN BE FAIRLY INFERRED THAT THE COST OF ACQUISIT ION WOULD BE AT RS.980/- PER SQ.MTR TO RS.1050/- PER SQ.MTR. TAKING THE AVER AGE. HENCE, WE DIRECT THE AO TO ADOPT A COST OF ACQUISITION AT RS.980/- P ER SQ.MTR. CALLING FOR REPORT FROM EXPERT AT HIS STAGE WOULD FURTHER DELAY THE DISPOSAL OF THE MATTER. THEREFORE, IN THE INTEREST OF JUSTICE AND CONSIDERING THE MATERIAL AVAILABLE ON RECORD, WE DIRECT THE AO TO TAKE THE C OST OF ACQUISITION AS ON 01/04/1981 AT RS.980/- PER SQ.MTR AND RECOMPUTE THE GAIN. THUS, THIS GROUND OF ASSESSEES APPEAL IS PARTY ALLOWED. 5. NOW, WE TAKE UP THE REVENUES APPEAL IN ITA NO.2 602/AHD/2012 FOR AY 2008-09, WHEREIN FOLLOWING GROUNDS HAS BEEN TAKEN BY THE REVENUE:- ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 11 - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO ADOPT T HE VALUE OF 550/- PER SQ.MRS AS FAIR MARKET VALUE AS ON 01.04.1 981 OF THE LAND SOLD BY THE ASSESSEE BY ADOPTING SALES INSTANC E OF M/S.ALEMBIC LTD. INSTEAD OF ADOPTING THE SALES INST ANCE OF ASSESSEES GROUP CONCERN NAMELY M/S.AMBALAL SARABHA I ENTERPRISE LTDF. WHEREIN THE FMV AS ON 01.04.1981 W AS ADOPTED AT 250 PER SQ.MTRS. AND WHICH WAS LOCATED IN THE SAME VICINITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTE R THE ABOVE ROUNDS AS MAY BE DEEMED NECESSARY. 5.1. IN THIS APPEAL, ONLY ONE EFFECTIVE ISSUE, I.E. GROUND NO.1(SUPRA). THE LD. RESPECTIVE REPRESENTATIVES OF THE PARTIES HAVE ADVANCED THEIR ARGUMENTS AS WERE MADE IN ITA NO.2624/AHD/2012 FOR AY 2008-09 (ASSESSEES APPEAL-SUPRA). WE HAVE DECIDED THE ISS UE OF FAR MARKET VALUE OF COST OF ACQUISITION OF PROPERTY @ RS.980/- PER S Q.METER AS ON 1.4.1981 IN ITA NO.2624/AHD/2012. SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THEREFORE TAKING A CONSISTENT VIEW, WE DISMISS THE GROUND OF REVENUES APPEAL FOR THIS YEA R. AS A RESULT, REVENUES APPEAL IN ITA NO.2602/AHD/2012 FOR 2008-0 9 IS DISMISSED. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 12 - 6. NOW, WE TAKE UP THE REVENUES APPEAL IN ITA NO.3 5/AHD/2013 AND ASSESSEES APPEAL IN ITA 2786/AHD/2012 FOR AY 2 008-09. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE RESPECTIV E PARTIES:- [A] ASSESSEES APPEAL:- 1. CONFIRMING DISALLOWANCE OF RS.1,31,940/- BEING INTEREST ON BONDS ISSUED TO SHAREHOLDERS OF STANDARD PHARMACEUT ICALS LTD. ON AMALGAMATION. 2. ERRED IN CONFIRMING ADHOC DISALLOWANCE OF RS.2,7 4,391/- BEING 5% OF OTHER EXP. AND DIRECTORS TELEPHONE & VEHICLE EXP. OF RS.6,65,001/-. 3. ERRED IN ESTIMATING FMV AS AT 01.041981 @ RS.5 50/- PER SQ.MTR FOR COMPUTING LTCG ON SALE OF FACTORY LAND, HENCE REJECTING VALUE ADOPTED AS PER VALUATION REPORT @ R S.2050/SQ MTR. ALTERNATIVELY, LD.CIT(A) OUGHT TO HAVE ESTIMATED FM V @ RS.1300/ SQ MTR BEING AN AVERAGE OF VALUE ADOPTED AS PER VAL UATION REPORT AND THAT ESTIMATED BY LD.CIT(A). 4. CONFIRMING DISALLOWANCE OF SALARY AND WAGES OF R S.26,07,170/- AND WAGES OF RS.26,97,170/- AND OTHER EXPENSES OF R S.7,21,334/- PERTAINING TO PACKART PRESS UNIT. [B] REVENUES APPEAL:- ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 13 - 1. ERRED IN DIRECTING AO TO ADOPT RS.550/SQ MTR AS FMV ON 01.04.198, WHILE COMPUTING LTCG ON SALE OF LAND, BY ADOPTING SALE INSTANCES OF ALEMBIC LTD.; IGNORING FMV OF RS2 5/SQ MTR ESTIMATED BY AO. 6.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 31/12/2010. WHILE FRAMING THE ASSESSMENT, TH E ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE OF RS.1,31,940/- O N ACCOUNT OF INTEREST ON BONDS, MISCELLANEOUS EXPENSES OF RS.10,24,557/- RECOMPUTATION OF CAPITAL GAIN OF RS.28,19,74,492/- AND ALSO MADE DIS ALLOWANCE OF SALARY AND WAGES OF RS.26,97,170/-. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS PAR TLY CONFIRMED THE DISALLOWANCE OF RS.1,31,940/-, MISCELLANEOUS EXPENS E TO THE EXTENT OF RS.2,74,391/- AND OTHER EXPENDITURE TO THE EXTENT O F RS.7,65,001/-. IN RESPECT OF COMPUTING LTCG ON SALE OF FACTORY LAND, HENCE REJECTING VALUE ADOPTED VALUE ADOPTED AS PER VALUATION REPORT @ RS .2050/ SQ MTR. FURTHER THE LD.CIT(A) CONFIRMED DISALLOWANCE OF SAL ARY AND WAGES OF RS.26,97,170/- AND OTHER EXPENSES OF RS.7,21,334/- PERTAINING TO PACKART PRESS UNIT. AGGRIEVED BY THE ORDER OF THE LD.CIT( A), NOW THE REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 14 - 7. WITH REGARD TO GROUND NOS.1 & 2, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH ARE NOT PRESSED ON ACCOUNT OF S MALLNESS OF THE AMOUNT. HOWEVER, THE LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE ASSESSEE RESERVES HIS RIGHT TO CONTEST THE ADDITION ON THESE DISALLOWANCES IN ANY OTHER ASSESSMENT YEAR. 7.1. THE LD.SR.DR HAS NO OBJECTION FOR THE SUBMISSI ON OF THE LD.COUNSEL FOR THE ASSESSEE. THEREFORE, GROUND NOS.1 & 2 ARE DISMISSED AS NOT PRESSED. 8. WITH REGARD TO GROUND NO.3, THE LD.COUNSEL FOR T HE ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE WAS RAISED IN IT A NO.2624/AHD/2012 FOR AY 2008-09. THE LD.COUNSEL FOR THE ASSESSEE AD OPTED THE SAME ARGUMENTS A WERE MADE IN ITA NO.2624/AHD/2012. THE LD.SR HAS ALSO ADVANCED THE SAME ARGUMENTS AS WERE RAISED IN ITA N O.2624/AHD/2012. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AN IDENTICAL HAS BEEN DECIDED BY US IN ASSESSEES A PPEAL (SYNBIOTICS LTD._IN ITA NO.2624/AHD/2012 BY OBSERVING AS UNDER: - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ONLY ISSUE REQUIRES FOR OUR ADJUDICATION IS WHAT SHOULD BE THE CORRECT VALUATION OF PROPERTY FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN AS ON 01/04/1981. THE AO HAS ADOPTED THE VALUE OF 250 SQ.PER MTR ON THE B ASIS OF THE SALE INSTANCES ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 15 - RELATED TO RESIDENTIAL AREAS SITUATED 2 TO 3 KMS AW AY FROM THE PROPERTY IN QUESTION. THERE IS NO DISPUTE WITH REGARD TO THE F ACT THAT PROPERTY IN QUESTION. INDUSTRIAL LAND WHICH CANNOT BE COMPARED WITH THE R ESIDENTIAL PROPERTIES HOWEVER, THE LD.CIT(A) DID NOT ACCEPT THE FAIR MARK ET VALUE ADOPTED EITHER BY THE AO OR BY THE ASSESSEE AND PROCEEDED TO MAKE HIS OWN ESTIMATION. THE LD.CIT(A) HAS DECIDED THIS ISSUE IN PARAS-4 TO 4.3 BY OBSERVING AS UNDER:- 4.0 I HAVE CONSIDERED THE APPELLANT'S SUBMISSION S AND THE AO'S OBSERVATIONS. THE CONTENTIONS OF THE APPELLANT THAT THE FMV DETERMINED IN THE VALUATION REPORT SUBMITTED BY IT FOR THE PURPOSES O F DETERMINING FMV OF THE LAND AS ON 1.4.1981 IS CORRECT IS NOT ACCEPTABLE. T HE AO HAS CLEARLY MENTIONED IN HIS ORDER THAT THE VALUATION REPORT NO WHERE MENTIONS THAT THE NATURE OF LAND IS INDUSTRIAL. THE VALUATION HAS BEE N DONE PRESUMING THE LAND TO BE COMMERCIAL LAND DESPITE THE FACT THAT AS ON 1 .4.1981 IT WAS AN INDUSTRIAL LAND ON WHICH A FACTORY WAS SITUATED. ALSO THE VALU ER HAS NOT GIVEN ANY SALES INSTANCES RELIED UPON TO ARRIVE AT THE VALUE OF THE LAND. THE DESCRIPTION OF SURROUNDING AREAS OF THE LAND IS ALSO THAT EXISTING AS ON THE DATE OF SALE AND NOT AS ON 1.4.1981. THE MARKET CONDITIONS AS ON 1.4 .81 HAS NOT BEEN MENTIONED ANYWHERE IN THE VALUATION REPORT. 4.1. DURING THE COURSE OF APPELLATE PROCEEDINGS, AN ALTERNATE PLEA WAS ALSO RAISED BY THE ASSESSEE THAT THE AVERAGE RATE O F RS.1,940/- PER SQ.MTR. MAY BE ADOPTED BEING THE AVERAGE OF TWO DIFFERENT R ATES ADOPTED BY THE ASSESSEE ON ONE HAND AND THE REVENUE ON THE OTHER H AND. ADMITTEDLY, IN THE PRESENT CASE, NEITHER THE AO NOR THE LD.CIT(A) CALL ED FOR REPORT FROM DVO AND PROCEEDED TO MAKE THEIR OWN ESTIMATION. IN OUR CONSIDERED VIEW, IT IS INCUMBENT UPON THE ASSESSING AUTHORITY TO CALL FOR REPORT FROM DVO FOR ASCERTAINING THE FAIR MARKET VALUE OF THE ASSET, I N THE EVENT, IF HE IS NOT SATISFIED ABOUT THE CLAIM OF THE ASSESSEE. IN THE PRESENT CASE, WE FIND THAT WITHOUT CALLING FROM THE DVOS REPORT, THE AO HAS A DOPTED A DIFFERENT RATE AND THE LD.CIT(A) HAS ADOPTED A DIFFERENT RATE. TH E BASIS FOR ADOPTING A DIFFERENT RATE BY THE LD.CIT(A) IS THAT IN THE CASE OF 3 RD PARTY, THE DEPARTMENT HAS ADOPTED A RATE OF RS.533 PER SQ.MT. AFTER CONS IDERING THE TOTALITY OF THE FACTS OF THE CASE AND MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ADO PTING THE RATE AS THE ASSESSEE HAD FURNISHED A REPORT FROM AN EXPERT, I.E . GOVERNMENT APPROVED VALUER. THE SALE INSTANCES AS CONSIDERED BY THE AO ARE PERTAINING TO ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 16 - RESIDENTIAL PROPERTIES AND SUCH VALUATION CANNOT BE ADOPTED IN RESPECT OF THE INDUSTRIAL LAND. THE ESTIMATION OF FAIR MARKET VAL UE DEPENDS ON VARIOUS FACTORS; NAMELY, LOCATION OF PROPERTY, NATURE OF PR OPERTY, USAGE OF PROPERTY AND ALSO FUTURE PROSPECTS OF SUCH PROPERTY. AS PER THE GOVERNMENT VALUER, THE PROPERTY HAS POTENTIAL OF APPRECIATION AND OF C OMMERCIAL USAGES. THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD FOR R EBUTTING THIS CONTENTION OF THE VALUATION. THEREFORE, AFTER CONSIDERING THE TOTALITY OF THE FACTS AND MATERIAL AVAILABLE ON RECORD, IT WOULD BE PROPER TH AT AN ESTIMATION OF FAIR MARKET VALUE AS ON 01/04/1981 IS TO BE MADE ON THE BASIS OF MATERIAL ON RECORD. THE VALUER IN EARLIER YEAR, HAD ADOPTED A HIGHER RATE OF FAIR MARKET VALUE AND IN THE SUBSEQUENT YEAR, HE ADOPTED A LOWE R RATE. THEREFORE, THE VALUATION ADOPTED BY THE GOVERNMENT APPROVED VALUER , CANNOT BE ADOPTED AS THE VALUATION IS MADE SOLELY ON THE BASIS OF POTENT IAL OF THE LAND BUT NOT ON THE BASIS OF THE ACTUAL PREVALENT RATE IN THE CLOSE VIC INITY. THE REVENUE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD, DEMONSTRATING TH E PREVALENT MARKET RATE AS ON 01/04/1981 IN THE CLOSE VICINITY OF THE LAND IN QUESTION. THE AO HAS ADOPTED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.250/- PER SQ.MTR. AND THE LD.CIT(A) ADOPTED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.551/- PER SQ.MTR., WHEREAS THE ASSESSEE HAS CLAIMED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.1940/- PER SQ.MTR. THEREFORE, IT CAN BE FAIRLY INFERRED THAT THE COST OF ACQUISITION WOULD BE AT RS.980/- PER SQ .MTR TO RS.1050/- PER SQ.MTR. TAKING THE AVERAGE. HENCE, WE DIRECT THE AO TO ADO PT A COST OF ACQUISITION AT RS.980/- PER SQ.MTR. CALLING FOR REPORT FROM EXPERT AT HIS STAGE WOULD FURTHER DELAY THE DISPOSAL OF THE MATTER. THEREFORE, IN THE INTEREST OF JUSTICE AND CONSIDERING THE MATERIAL AVAILABLE ON RECORD, WE DI RECT THE AO TO TAKE THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.980/- PE R SQ.MTR AND RECOMPUTE THE GAIN. THUS, THIS GROUND OF ASSESSEES APPEAL IS PA RTY ALLOWED. 4.2. THE APPELLANT HAS ALSO RELIED UPON THE DECIS ION OF THIRD MEMBER IN CASE OF 3AHANGANJ COLD STORAGE V. ACIT REPORTED AT (1010 ) 133 TTJ (AGRA) TM 278 FOR ADOPTING REVERSE METHOD OF USING COST INFLA TION INDEX. IN THIS DECISION THE BENCH HAS HELD THAT IN THE ABSENCE OF COMPARABLE INSTANCES, IF THE FMV ADOPTED AS ON 1.4.1981 IS LOWER THAN THE VA LUE DETERMINED BY USING REVERSE COST INFLATION INDEX, THEN THE VALUE ADOPTE D IS ACCEPTABLE. BUT THIS IS NOT APPLICABLE IN THE PRESENT CASE, BECAUSE THE LAN D IS LOCATED IN BARODA CITY AND SEVERAL SALE INSTANCES OF SALE OF LAND AS ON 1. 4.1981 ARE AVAILABLE IN THE RESIDENTIAL AREAS OF THE CITY. THE AO'S OBSERV ATION THAT THE AREA OF ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 17 - SAYAJIGUNJ WAS THE MAIN POSH LOCALITY AS ON 1.4.198 1 IS ALSO CORRECT. HE HAS ALSO GIVEN SEVERAL SALE INSTANCES IN HIS ORDER. TH E APPELLANT WAS ALSO CONFRONTED WITH THE DOCUMENTARY EVIDENCES RELATED T O SUCH SALE INSTANCES DURING THE COURSE OF APPELLATE PROCEEDINGS. THE APP ELLANT HAD SUBMITTED ITS OBJECTIONS WHICH MAINLY CONSIST OF FACT THAT THESE LANDS ARE SMALL IN AREA AND ARE LOCATED 2 TO 3 KM. AWAY FROM THE LAND OF THE AP PELLANT. BUT STILL THE FACT REMAINS THAT AS ON 1.4.1981, THE LAND OF THE APPELL ANT WAS BEING USED AS INDUSTRIAL LAND AND WAS LOCATED ON OUT SKIRTS OF TH E BARODA CITY. HENCE THE VALUE OF THE LAND SOLD BY THE APPELLANT CANNOT BE M UCH MORE DIFFERENT THAN THE SALE RATES OF LAND IN SAYAJIGUNJ. 4.3. THE APPELLANT HAS ALSO STATED THAT THE AO'S C ONTENTIONS MAY BE GOOD WHERE LAND IS SOLD IS INDUSTRIAL LAND, USED AS INDU STRIAL LAND AND IS SOLD FOR USE AS INDUSTRIAL LAND. HOWEVER IN THE GIVEN CASE THE LAND IN QUESTION IS LOCATED IN POSH COMMERCIAL AND RESIDENTIAL AREA OF BARODA IN WHICH SEVERAL COMMERCIAL PROJECTS ARE HAPPENING. THE PRICE REALIZ ED BY THE APPELLANT IS OF COMMERCIAL LAND. BUT AGAIN THIS ARGUMENT IS TRUE O NLY IN REGARD .TO THE PRICE REALIZED BY THE APPELLANT ON SALE OF THE LAND. THES E FACTORS ARE NOT RELEVANT AT ALL FOR DETERMINING THE FMV AS ON 1.4.1981, BECAUSE AS ON THAT DAY THE LAND WAS INDUSTRIAL LAND AND WAS BEING USED FOR INDUSTRI AL PURPOSES AND THE COMMERCIAL DEVELOPMENT IN THAT AREA, AS TAKING PLAC E ON THE DAY OF SALE, WAS NOT THERE. 4.4. DURING THE COURSE OF APPELLATE PROCEEDINGS, AN ALTERNATE PLEA WAS ALSO RAISED BY THE ASSESSEE THAT THE AVERAGE RATE O F RS.1,940/- PER SQ.MTR. MAY BE ADOPTED BEING THE AVERAGE OF TWO DIFFERENT R ATES ADOPTED BY THE ASSESSEE ON ONE HAND AND THE REVENUE ON THE OTHER H AND. ADMITTEDLY, IN THE PRESENT CASE, NEITHER THE AO NOR THE LD.CIT(A) CALL ED FOR REPORT FROM DVO AND PROCEEDED TO MAKE THEIR OWN ESTIMATION. IN OUR CONSIDERED VIEW, IT IS INCUMBENT UPON THE ASSESSING AUTHORITY TO CALL FOR REPORT FROM DVO FOR ASCERTAINING THE FAIR MARKET VALUE OF THE ASSET. I N THE EVENT, THE AO IS NOT SATISFIED ABOUT THE CLAIM OF THE ASSESSEE. IN THE PRESENT CASE, WE FIND THAT WITHOUT CALLING FROM THE DVOS REPORT, THE AO HAS A DOPTED A DIFFERENT RATE AND THE LD.CIT(A) HAS ADOPTED A DIFFERENT RATE. TH E BASIS FOR ADOPTING A DIFFERENT RATE BY THE LD.CIT(A) IS THAT IN THE CASE OF 3 RD PARTY, THE DEPARTMENT HAS ADOPTED A RATE OF RS.533 PER SQ.MT. AFTER CONS IDERING THE TOTALITY OF THE FACTS OF THE CASE AND MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 18 - BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ADO PTING THE RATE AS THE ASSESSEE HAD FURNISHED A REPORT FROM AN EXPERT, I.E . GOVERNMENT APPROVED VALUER. THE SALE INSTANCES HAS CONSIDERED BY THE A O PERTAINING TO RESIDENTIAL PROPERTIES AND SUCH VALUATION CANNOT BE ADOPTED UND ER THE INDUSTRIAL LAND. ESTIMATION OF FAIR MARKET VALUE WHICH DEMONSTRATES ON VARIOUS FACTORS; NAMELY, LOCATION OF PROPERTY, NATURE OF PROPERTY, U SAGE OF PROPERTY AND ALSO FUTURE PROSPECTS OF SUCH PROPERTY. AS PER THE GOVE RNMENT VALUER, PROPERTY HAS POTENTIAL OF APPRECIATION AND OF COMMERCIAL USA GES. THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD FOR REBUTTING THIS CO NTENTION OF THE VALUATION. THEREFORE, AFTER CONSIDERING THE TOTALITY OF THE FA CTS AND MATERIAL AVAILABLE ON RECORD, IT WOULD BE PROPER THAT AN ESTIMATION OF FA IR MARKET VALUE AS ON 01/04/1981 IS TO BE MADE ON THE BASIS OF MATERIAL O N RECORD. THE VALUATION IN EARLIER YEAR, HAD ADOPTED A HIGHER RATE OF FAIR MARKET VALUE AND THE SUBSEQUENT YEAR, HE HAS ADOPTED A LOWER RATE. THER EFORE, THE VALUATION ADOPTED BY THE GOVERNMENT APPROVED VALUER, CANNOT B E ADOPTED AS THE VALUATION HAS MADE SOLELY ON THE BASIS OF POTENTIAL OF THE LAND BUT NOT ON THE BASIS OF THE ACTUAL PREVALENT RATE IN THE CLOSE VIC INITY. THE REVENUE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD, DEMONSTRATING TH E PREVALENT MARKET RATE AS ON 01/04/1981 IN THE CLOSE VICINITY OF THE LAND IN QUESTION. THE AO HAS ADOPTED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.250/- PER SQ.MTR. AND THE LD.CIT(A) ADOPTED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.551/- PER SQ.MTR., WHEREAS THE ASSESSEE HAS CLAIMED THE COST OF ACQUISITION AS ON 01/04/1981 AT RS.1940/- PER SQ.MTR. THEREFORE, IT CAN BE FAIRLY INFERRED THAT THE COST OF ACQUISITION WOULD BE AT RS.980/- PER SQ .MTR TO RS.1050/- PER SQ.MTR. TAKING THE AVERAGE. HENCE, WE DIRECT THE AO TO ADO PT A COST OF ACQUISITION AT RS.980/- PER SQ.MTR. CALLING FOR REPORT AT HIS STAG E FURTHER DELAYING THE MATTER. THEREFORE, IN THE INTEREST OF JUSTICE AND CONSIDERI NG THE MATERIAL AVAILABLE ON RECORD, WE DIRECT THE AO TO TAKE THE COST OF ACQUIS ITION AS ON 01/04/1981 AT RS.980/- PER SQ.MTR. THUS, THIS GROUND OF ASSESSE ES APPEAL IS PARTY ALLOWED. 9.1. THEREFORE, TAKING A CONSISTENT VIEW, WE HEREBY DIRECT THE AO TO RECOMPUTED THE CAPITAL GAIN BY ADOPTING THE COST OF ACQUISITION AT RS.980/- PER SQ.METER. THUS, GROUND OF APPEAL IS P ARTLY ALLOWED. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 19 - 10. WITH REGARD TO GROUND NO.4, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT UNDER THE IDENTICAL FACTS, THE TRIBU NAL WAS PLEASED TO REMIT THE ISSUE BACK TO THE FILE OF AO FOR DECIDING THE S AME. THEREFORE, IN THIS YEAR ALSO, THIS ISSUE MAY ALSO BE SENT BACK TO THE FILE OF AO FOR DECIDING THE SAME. THE LD.SR.DR HAS NO OBJECTION. THUS, TH IS GROUND IS SENT BACK TO THE FILE OF AO AND, ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 11. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO.35/A HD/2013 FOR AY 2008-09. GROUNDS READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFI CER TO ADOPT VALUE OF 550/- PER SQ.MTR. AS FAIR MARKET VALUE AS ON 01.04. 1981 OF THE LAND SOLD BY THE ASSESSEE BY ADOPTING SALES INSTANCES OF M/S.ALEMBIC LTD AND IGNORING SALES INSTANCES ELIDE UPON BY THE ASSESSING OFFICER, WHEREIN THE FAIR MARKET VALUE AS ON 01.04.1981 WAS ADOPTED AT 250 PER SQ.MTRS. WHICH ARE MORE APPROPRIATE ON THE FACTS AND CIRCUMSTANCES OF THE C ASE. 2. THE APPELLANT CRAVES LEAVE TO AD TO, AMEND OR AL TER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY 11.1.THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED IN ITA NO.2624/AHD/2012 FOR AY 2008-09 AND THE ISSUE IS TO BE ADJUDICATED WITH REGARD TO T HE FAIR MARKET VALUE ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 20 - (FMV) AS ON 01/04/1981. THE RESPECTIVE REPRESENTAT IVES OF THE PARTIES ADVANCED THEIR ARGUMENTS AS WERE MADE IN ITA NO.262 4/AHD/2012 (IN THE CASE OF SYNBIOTICS LTD.). 11.2 ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ADVANCED HIS ARGUMENTS AS WERE MADE IN IT A NO.2624/AHD/2012(SUPRA). 11.3. SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED BY US IN ITA NO.2624/AHD/2012-SUPRA, TAKING A CONSISTENT VIEW, T HIS ISSUE IS ALSO DECIDED ACCORDINGLY. THUS, GROUND OF REVEUES APPE AL IS DISMISSED. 12. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA N O.2694/AHD/2012 AND REVENUES APPEAL NO.36/AHD/2013 FOR AY 2009-10. [A] ASSESSEES APPEAL: 1. ERRED IN CONFIRMING ADHOC DISALLOWANCE OF RS.1, 47,328/- BEING 5% OF OTHER EXP AND DIRECTORS TELEPHONE & VEHICLE EXP. OF RS.7,65,001/- 2.ERRED IN ESTIMATING FMV AS AT 0.04.981 @ RS.550/ SQ MTR AND RS.437/SQ MTR FOR COMPUTING LTCG ON SALE OF FACTORY AND TO NEPTUNE GROUP & DHARIWAL GROUP RESPECTIVELY, HENCE REJECTING VALUE ADOPTED AS PER VALUATION REPORT @ RS.950/ SQ MTR & RS.1550/SQ MTR. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 21 - ALTERNATIVELY, LD.CIT(A) OUGHT TO HAVE ESTIMATED FM V @ RS.1250/SQ MTR AND RS993.50/SQ MTR FOR SALE OF LAND TO NEPTUNE GROUP & DHARIWAL GROUP I.E. AN AVERAGE OF VALUE ADO PTED AS PER VALUATION REPORT AND THAT ESTIMATED BY CIT(A). 3. CONFIRMING DISALLOWANCE OF RS1,89,11,310/- U/S. 14A OF THE ACT. 4.CONFIRMING DISALLOWANCE OF SALARY AND WAGES OF RS .26,97,170/- PERTAINING TO PACKART PRESS UNIT [B] REVENUES APPEAL: 1. ERRED IN DIRECTING AO TO ADOPT RS550/SQ MTR AS FMV ON 01.04.1981, WHILE COMPUTING LTCG ON SALE OF LAND, BY ADOPTING SALE INSTANCES OF ALEMBIC LTD.; IGNORING F MV OF RS.25/SQ MTR ESTIMATED BY AO 2. GENERAL. 12.1. GROUND NO.1 IS NOT PRESSED BY THE LD.COUNSEL FOR THE ASSESSEE DUE TO SMALLNESS OF THE AMOUNT AND, THEREFORE, THE SAME IS DISMISSED AS SUCH. 13. WITH REGARD TO GROUND NO.2, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT A SIMILAR GROUND HAS BEEN RAISED IN ITA NO.2624/AHD/2012 FOR AY 2007-08 (IN THE CASE OF SYN BIOTICS LTD.- SUPRA). RESPECTIVE REPRESENTATIVE OF THE PARTIES A DVANCED THEIR ARGUMENTS ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 22 - AS WERE MADE IN THE CASE OF SYNBIOTICS LTD.(SUPRA) . THEREFORE, CONSISTENT VIEW, THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 14. WITH REGARD TO GROUND NO.3 OF THE APPEAL, THE L D.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT EARNED ANY INCOME WHICH IS NOT TAXABLE. THEREFORE, DISALLOWANCE MADE U/S.14A IS NOT CALLED FOR. THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGE MENT OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. CORRTECH EE RGY LTD. REPORTED AT (2015) 372 ITR 97. 14.1. THE LD.SR.DR SUPPORTED THE ORDERS OF THE AUTH ORITIES BELOW. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW AS WELL AS THE JUDGEMENT RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE. THE REVENUE HAS NOT REBUTTED THE CONTENTION THAT THERE IS NO EXEMPT INCOME. THE HONBLE JURISDICTIONAL HIGH COURT IN THE SAID C ASE HELD AS UNDER:- '13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE LD. CIT(A) HAS DECIDED THIS ISSUE AS UNDER : 3.2 AS REGARDS INTEREST, APPELLANT HAD BORROW ED FUNDS ON WHICH INTEREST WAS PAID. WHILE MAKING INVESTMENTS, BOTH ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 23 - BORROWED FUNDS AS WELL AS OWN FUNDS WERE USED HENCE ONE CANNOT SAY THAT BORROWED FUNDS WERE USED ONLY FOR B USINESS PURPOSE AND OWNED CAPITAL WAS ONLY USED FOR INVESTM ENT. ADMITTEDLY NO SEPARATE ACCOUNTS ARE MAINTAINED FOR BUSINESS AND INVESTMENT ACTIVITIES THEREFORE APPELLANT'S CLA IM IS NOT JUSTIFIED THAT BORROWED FUNDS WERE NOT USED IN MAKI NG INVESTMENT. IN VIEW OF THIS, I DO NOT AGREE WITH MY PREDECESSOR THAT SINCE APPELLANT HAD SUFFICIENT INT EREST FREE FUNDS, NO PART OF BORROWED FUNDS CAN BE ATTRIBUTED TO INVESTMENTS. FURTHER, APPELLANT'S ARGUMENT THAT IT DID NOT EARN ANY EXEMPT INCOME DURING THE YEAR AND THEREFOR E NO DISALLOWANCE OF SECTION 14A CAN BE MADE IS WITHOUT ANY BASIS. SINCE APPELLANT MADE INVESTMENT IN SHARES WHICH WIL L RESULT ONLY IN DIVIDENDS WHICH ARE EXEMPT FROM TAX, NOT RE CEIVING ANY EXEMPT INCOME DURING THE YEAR WILL NOT ENTITLE APPELLANT TO CLAIM EXPENSES RELATING TO INVESTMENTS WHICH WIL L RESULT ONLY IN EXEMPT INCOME. THEREFORE IN THE ABSENCE OF CLEAR CUT DETAILS OF UTILISATION OF FUNDS, THE FORMULA GIVEN IN RULE 8D WHICH IS MANDATORY THIS YEAR IS TO BE APPLIED. SINC E ASSESSING OFFICER WORKED OUT INTEREST DISALLOWANCE AS PER RUL E 8D, THE INTEREST DISALLOWANCE IS CONFIRMED. THE LD AR SUBMITTED THAT THIS FINDING OF LD. CIT(A) IS CONTAINING TO THE LAW SETTLED BY VARIOUS JUDICIAL PRONOUNCEMENTS. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE FACTS AND THE DECISION RELIED UPON BY THE LD AR. THE HON'BLE PUNJAB & HARY ANA HIGH COURT IN THE CASE OF CIT VS. WINSOME TEXTILE INDUST RIES LTD. REPORTED AT (2009) 319 ITR 204(P&H) HAS HELD THAT I N THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE DID NOT MAKE ANY CLA IM FOR EXEMPTION. IN SUCH A SITUATION, SECTION 14A COULD H AVE NO APPLICATION. IN THIS CASE ALSO, THE ASSESSEE HAS NO T CLAIMED ANY EXEMPT INCOME IN THIS YEAR. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGEMENT OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. WINSOME TEXTILE INDUSTRIES LTD. (SUPRA), WE HEREBY ALLOW THIS GROUND AND DIRECT THE AO TO DELETE THE A DDITION. THEREFORE, GROUND NOS 1 TO 1.2 RAISED BY THE ASSESS EE IN ITS CROSS-OBJECTION ARE ALLOWED.' ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 24 - 4. COUNSEL FOR THE REVENUE SUBMITTED THAT THE ASSES SING OFFICER AS WELL AS CIT(APPEALS) HAD APPLIED FORMULA OF RULE 8D OF T HE INCOME TAX RULES, SINCE THIS CASE AROSE AFTER THE ASSESSMENT YEAR 200 9-2010. SINCE IN THE PRESENT CASE, WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2009-2010, SUCH FORMULA WAS CORRECTLY APPLIED BY THE REVENUE. WE HOWEVER, NOTICE THAT SUB-SECTION(1) OF SECTION 14A PROVIDES THAT FO R THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV OF THE ACT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE A SSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF AN Y INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT THE TRIBU NAL HELD THAT DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF COMMISSIONER OF INCOM E TAX V WINSOME TEXTILE INDUSTRIES LTD REPORTED IN (2009) 319 ITR 2 04 (PUNJ & HAR) IN WHICH ALSO THE COURT HAD OBSERVED AS UNDER : '7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSI ON. THE JUDGEMENT OF THIS COURT IN ABHISHEK INDUSTRIES LTD (2006) 286 IT R 1 WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIV EN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THAT DEDUCT ION FOR INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FOR BUSINESS PU RPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WITHOU T HAVING NEXUS WITH THE BUSINESS. THE OBSERVATIONS MADE THEREIN HA VE TO BE READ IN THAT CONTEXT. IN THE PRESENT CASE, ADMITTEDLY TH E ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATI ON SECTION 14A COULD HAVE NO APPLICATION.' 5. WE DO NOT FIND ANY QUESTION OF LAW ARISING, TAX APPEAL IS THEREFORE DISMISSED. 15.1. RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMEN T OF THE HONBLE JURISDICTIONAL HIGH COURT, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 25 - 16. GROUND NO.4 IS AGAINST CONFIRMING THE DISALLOWA NCE OF SALARY AND WAGES OF RS.26,97,170/- AND OTHER EXPENSES OF RS.7, 21,334/- PERTAINING TO PACKART PRESS UNIT. 16.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE IDENTICAL ISSUE HAS BEEN BEFORE THE TRIBUNAL AND THE ISSUE HAS BEEN SENT TO THE AO FOR DECISION AFRESH. THEREFORE, THIS ISSUE MAY ALSO BE SENT BACK TO THE FILE OF AO FOR DECISION AFRESH. THE LD.SR.DR HAS NO OBJECT ION. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CONSIDERING THE SUBMISSIONS, WE HEREBY RESTOR E THE ISSUE BACK TO THE FILE OF AO FOR DECISION AFRESH. THUS, THIS GRO UND IS ALLOWED FOR STATISTICAL PURPOSES. 18. LASTLY, WE TAKE UP THE REVENUES APPEAL IN ITA NO.36/AHD/2013. THE ONLY ISSUE IN THIS REVENUES APPEAL IS DIRECTIN G THE AO TO ADOPT RS.550/- PER SQ METER AS FMV ON 0/04/1981. SIMIL AR ISSUE HAS BEEN DECIDED BY US IN ITA NO.2624/AHD/2012 (IN THE CASE OF SYNBIOTICS LTD.). THEREFORE, TAKING A CONSISTENT VIEW, THIS GROUND OF REVENUES APPEAL IS DISMISSED. ITA NOS.2624 & 2602/AHD/2012 (CROSS-APPEALS) FOR AY 2008-09 AND 4 OTHERS - 26 - 19. WE SUMMARIZE THE RESULT AS UNDER:- 1. ASSESSEES APPEAL IN ITA NO.2624/AHD/2012 FOR AY 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 2. REVEUES APPEAL IN ITA NO.2602/AHD/2012 FOR AY 2 008-09 IS DISMISSED. 3. ASSESSEES APPEAL IN ITA NO.2786/AHD/2012 FOR AY 2008- 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4. REVENUES APPEAL IN ITA NO.35/AHD/2013 FOR AY 20 08-09 IS DISMISSED. 5. ASSESSEES APPEAL IN ITA NO.2694/AHD/2012 FOR AY 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. REVENUES APPEAL IN ITA NO.36/AHD/2013 FOR AY 20 09-10 IS DISMISSED. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/ 04 /2016 (.., .../ T.C. NAIR, SR. PS !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. /0/12 3 / CONCERNED CIT 4. 3 ( * ) / THE CIT(A)-1/III, BARODA 5. 4 5 -12 , * 12' , 0 / DR, ITAT, AHMEDABAD 6. 578 9 / GUARD FILE. / BY ORDER, .4* - //TRUE COPY// S / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD