Vittal Rao Natarajan Conjeevaran Rep by L/R, Smt.C.Mangamma , Ranga Reddy V. Income Tax Officer, Ward-10(5), Hyderabad

ITA 299/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8880 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 11-03-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVAS SRI SUNIL KUMAR
• Keywords: Capital asset; Cost of acquisition; Fair market value; Valuation report; Reason to believe; Set aside; Capital Gains
• Section: 45(2); 143(3); 205; 55A; 48; 22; 148; 54

Judgement Text

ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.299/HYD/2019 ASSESSMENT YEAR: 2013-14 SRI VITTAL RAO NATARAJAN CONJEEVARAN, REP. BY L/R SMT. C. MANGAMMA, RR DISTT. PAN:ADRPC3127G VS. INCOME TAX OFFICER WARD 10(5) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI V.SRINIVAS REVENUE BY : SRI SUNIL KUMAR PANDEY,DR DATE OF HEARING: 11/03/2021 DATE OF PRONOUNCEMENT: 22/03/2021 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE CIT (A)-6,HYDERABAD, DATED 23.10.2 018. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM HOUSE PROPERTY, CAPIT AL GAINS AND OTHER SOURCES. THE AO RECEIVED INFORMATION THAT THE ASSESSEE ALONG WITH HIS BROTHER HAD ENTERED INTO A DEVELOPME NT AGREEMENT CUM GPA VIDE DOCUMENT NO.1542/2012, DATED 30.07.201 2 ENTRUSTING THE PROPERTY BEARING NO.1-8-220 TO 229/9 /1, PLOT NO.6 FORMING PART OF OLD BUNGALOW NO.144, ADMEASURING 11 80 SQ.YARDS SITUATED AT NATARAJAN COLONY, SECUNDERABAD TO M/S L BS GANESH CONSTRUCTIONS, MARREDPALLY, SECUNDERABAD AFTER DISM ANTLING THE ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 2 OF 10 EXISTING BUILDING AT THE OWNERS COST FOR THE DEVEL OPMENT OF A RESIDENTIAL COMPLEX AND THAT THE ASSESSEE AND HIS B ROTHER WAS HAVING EQUAL SHARE IN THE PROPERTY. 3. THE AO OBSERVED THAT IN VIEW OF THE JUDGMENT OF THE HON'BLE HIGH COURT OF A.P IN THE CASE OF SRI POTLA NAGESWARA RAO VS. DCIT IN ITTA NO.245 OF 2014, THE CAPITAL GAIN ARISING OUT OF A DEVELOPMENT AGREEMENT IS TAXABLE IN THE YEAR OF ENT ERING INTO THE DEVELOPMENT AGREEMENT AND HANDING OVER OF POSSESSIO N. SINCE THE ASSESSEE DID NOT OFFER CAPITAL GAINS ARISING FR OM THE DEVELOPMENT AGREEMENT TO TAX, AO WAS OF THE OPINION THAT THERE IS A REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. ACCORDINGLY, THE ASSESSMENT WAS REOPENE D BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT ON 14.09.20 16. IN RESPONSE TO THE SAME, THE ASSESSEE FILED HIS REPLY ON 1.9.2016, THEREAFTER, THE ASSESSEE EXPIRED ON 2.1.2017 AND HI S DAUGHTER MS. MANGAMMA WAS BROUGHT ON RECORD AS HIS LEGAL HEI R. DURING THE ASSESSMENT PROCEEDINGS, THE LEGAL HEIR FILED A LETTER DATED 11.12.2017 STATING AS UNDER: 7.1 WITH REFERENCE TO THE SUBJECTED CITED ABOVE, I WOULD LIKE TO STATE THAT AS PER THE INFORMATION AVAILABLE WITH ME, MY FATHER LA TE SRI C.N. VITTAL RAO & HIS BROTHER SRI C.N. RAMESH, WERE THE JOINT OWNERS OF THE PROPERTY BEARING NO.6 (NEW MUNICIPAL NO.1-8-220 TO 229) AT NATARAJAN COLONY, P.G. SECUNDERABAD, WHICH WAS GIVEN ON DEVELOPMENT TO M/S . L.B.S GANESH CONSTRUCTIONS VIDE DEVELOPMENT AGREEMENT CUM GPA DA TED 30.07.2012 BEARING DOC NO.1542/2012. HOWEVER, MY FATHER APPARE NTLY DID NOT ADMIT CAPITAL GAINS IN HIS INDIVIDUAL RETURN FOR THE A.Y 2013-14 SINCE THE PROPERTY BELONGS TO HIS HUF, AND FURTHER THE CONSTRUCTION PE RMISSION WAS NOT OBTAINED NOR THE FLATS WERE CONSTRUCTED AND ALLOTTE D BY THE DEVELOPER DURING THE YEAR. THE PERMISSION FOR CONSTRUCTION WAS OBTAI NED ONLY IN DEC 2013. HENCE, THE SAME IS NOT CHARGEABLE TO CAPITAL GAINS TAX IN HIS INDIVIDUAL STATUS FOR THE YEAR UNDER CONSIDERATION. ORIGINALLY, THE ABOVE PROPERTY WAS PART-OF THE JOIN T FAMILY PROPERTY COMPRISING OF MY GRANDFATHER LATE SRI C.P. NATARAJA N, GRANDMOTHER LATE SMT. C. BHAGVALAXMI, FATHER SRI C.V. VITTAL RAO, MY UNCLE SRI C.N. RAMESH AND TWO AUNTS AS ITS MEMBERS. THE JOINT FAMILY PROP ERTIES WERE PARTITIONED IN THE YEAR 1973-74 VIDE MEMORANDUM OF PAST PARTITI ON AND FAMILY ARRANGEMENT DT. 17-03-1974 WHICH HAS ALSO BEEN RECO GNIZED UNDER SECTION 171 OF THE I.T. ACT, 1961 VIDE ORDER DT.29-07-1975. I AM ENCLOSING HEREWITH COPY OF THE MEMORANDUM OF PAST PARTITION AND FAMILY ARRANGEMENT ALONG WITH ORDER U/S 171 OF THE IT ACT FOR YOUR READY REF ERENCE. IN THE SAID PARTITION, THE PROPERTY UNDER CONSIDERATION HAS BEE N ALLOTTED TO ALL THE THREE MALE MEMBERS OF THE JOINT FAMILY I.E., MY GRANDFATH ER, FATHER AND UNCLE IN 3 ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 3 OF 10 EQUAL SHARES, LATER, UP ON DEMISE OF MY GRANDFATHER SRI CP. NATARAJAN IN THE YEAR 1982, HIS 1/3RD SHARE DEVOLVED ON MY FATHE R AND UNCLE EQUALLY UNDER HINDU SUCCESSION ACT 1956. THUS MY FATHER BEC AME 50% SHAREHOLDER IN THE PROPERTY, PARTLY THROUGH PARTITION OF THE JO INT FAMILY AND PARTLY BY WAY OF SUCCESSION FROM MY GRANDFATHER. NOW, I HAVE BEEN LEGALLY ADVISED THAT THE PROPERTY UNDER CONSIDERATION IS ASSESSABLE PARTLY IN THE STATUS OF HUF AND PARTLY IN THE STATUS OF INDIVIDUAL AS UNDER ; . A) 1/3 RD SHARE - IN THE STATUS-OF HUF HAVING BEEN ALLOTTED TO HIM IN THE PARTITION IN HIS CAPACITY AS COPARCENER OF THE JT. FAMILY B) 1/6 TH SHARE IN HIS INDIVIDUAL STATUS AS LEGAL HEIR OF MY GRANDFATHER SRI C.P. NATARAJAN HOWEVER, AS EXPLAINED ABOVE, THE CAPITAL GAINS IS N OT CHARGEABLE TO TAX FOR THE YEAR UNDER CONSIDERATION SINCE NEITHER THE PERM ISSION FOR CONSTRUCTION WAS OBTAINED NOR. THE CONSTRUCTION WAS COMMENCED BY THE DEVELOPER DURING THE YEAR. FURTHER, WHILE COMPUTING THE CAPITAL GAIN S INDEXED COST OF LAND AND INDEXED COST OF OLD RESIDENTIAL BUILDING THAT WAS E XISTING AT THE TIME OF GIVING THE PROPERTY ON DEVELOPMENT IS ALLOWABLE. THE OLD R ESIDENTIAL COMPLEX COMPRISING OF GROUND PLUS 3 UPPER FLOORS WAS CONSTR UCTED IN THE YEAR 1982 AFTER OBTAINING PERMISSION FROM THE THEN MUNICIPAL CORPORATION OF HYDERABAD VIDE PERMIT NO. 128/41/E OF 1981-82. A CO PY OF THE OLD PERMISSION PLAN IS ENCLOSED HEREWITH FOR YOUR PERUS AL. THE SAID BUILDING WAS DISMANTLED AT THE TIME OF GIVING THE PROPERTY O N DEVELOPMENT. THEREFORE, THE INDEXED VALUE OF THE BUILDING IS ALLOWABLE AS D EDUCTION IN COMPUTATION OF CAPITAL GAINS. FURTHER, DEDUCTION U/S 54 OF IT ACT, 1961, IS ALLOWABLE IN RESPECT OF RESIDENTIAL FLATS BEING ALLOTTED BY THE DEVELOPER IN TERMS OF DEVELOPMENT AGREEMENT, IN EXCHANGE OF OLD RESIDENTI AL PROPERTY CONSEQUENT TO WHICH THERE WILL BE NO CAPITAL GAINS ON THIS COU NT ALSO. KINDLY COMPLETE THE ASSESSMENT AS PER THE RETURN FI LED ON 23-07-2013 BY TREATING THE SAME AS ONE FILED IN RESPONSE TO NOTIC E U/S 148 OF LT. ACT, 1961, SINCE NO PORTION OF CAPITAL GAINS IS ASSESSABLE TO INCOME TAX IN THE YEAR UNDER CONSIDERATION FOR THE REASONS STATED ABOVE. 4. THE AO HOWEVER, DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT THE PROPERTY IS BELONGING TO THE HUF AS HE NOTICED FROM THE ENCUMBRANCE CERTIFICATE THAT THE ASSESSEE S NAME IS NOT FIGURING IN HUF STATUS BUT WAS FIGURING IN INDIVIDU AL STATUS AND ALSO PAN CARD WAS IN INDIVIDUAL STATUS AND NOT IN H UF STATUS. THE ASSESSEE HAD ALSO CLAIMED THAT THE PERMISSION FOR CONSTRUCTION WAS GRANTED ONLY IN DECEMBER, 2013 AND THEREFORE, THE CAPITAL GAIN WAS NOT CHARGEABLE TO TAX IN A.Y 2 013-14. THE AO DID NOT ACCEPT THIS CONTENTION ALSO BY FOLLOWING TH E HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF S RI POTLA NAGESWARA RAO VS. DCIT (SUPRA). THEREAFTER, THE AO CONSIDERED THE VALUATION REPORT FURNISHED BY THE ASSESSEE IN S UPPORT OF THE COST OF THE LAND AND OLD BUILDING AND OBSERVED THAT THE RATES ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 4 OF 10 ADOPTED BY THE VALUER FOR LAND AND OLD BUILDING ARE VERY EXORBITANT. THE VALUER ADOPTED RATE FOR LAND AND B UILDING AT RS.120/- PER SQ. YD AND RS.147 PER SQ.FT RESPECTIVE LY FOR THE YEAR 1981-82 AS AGAINST THE RATE ADOPTED BY THE SRO, SEC UNDERABAD AT RS.40 PER SQ. YD AND RS.100 PER SQ. FT FOR THE Y EAR 1981-82 RESPECTIVELY. THEREFORE, HE COMPUTED THE ASSESSEE S SHARE OF CAPITAL GAIN AND THEREAFTER ALLOWED DEDUCTION U/S 5 4 AND ARRIVED AT TAXABLE INCOME OF RS.34,35,628/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRME D THE ORDER OF THE AO WITH REGARD TO THE COMPUTATION OF TAXABLE CA PITAL GAIN. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ORDER OF CIT(A) IS ERRONEOUS AND BAD IN LAW TO THE EXTENT IT IS PREJUDICIAL TO THE ASSESSEE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED C1T(A) ERRED IN ASSESSING THE CAPITAL GAINS IN RESPECT OF THE PROPERTY GIVEN ON DEVELOPMENT IN THE YEAR UN DER CONSIDERATION INSTEAD OF ASSESSING THE SAME IN THE YEAR OF CONSTRUCTION PERMISSION. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFIRMING THE VALUE OF LAN D AND BUILDING AT RS. 9,16,083/- AS ON 01-04-1981 AS AGAI NST RS. 13,41,000/- VALUED BY THE REGISTERED VALUER. 4) THE LEARNED ASSESSING OFFICER ERRED IN ADOPTING THE VALUE OF BUILTUP AREA ALLOTTED BY THE DEVELOPER AT RS. 63 0/- PER SQ. FT. INSTEAD OF VALUING THE SAME BASED ON COST TO TH E BUILDER. 5) ANY OTHER GROUNDS YOUR APPELLANT MAY URGE AT THE TIME OF HEARING. 1.7. THE GROUND NO.2 WITH RESPECT TO THE YEAR OF AS SESSABILITY AND GROUND 4 ARE NOT PRESSED. 5. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUNDS 1 & 5 ARE GENERAL N ATURE AND GROUND NO.2 WITH REGARD TO THE YEAR OF ASSESSABILIT Y AND GROUND NO.4 WITH REGARD TO THE VALUE OF BUILT UP AREA ALLO TTED BY THE BUILDER ARE NOT PRESSED BY THE ASSESSEE. THEREFORE, GROUND NO.2 & ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 5 OF 10 4 ARE REJECTED AS NOT PRESSED. THE ONLY GROUND TO B E CONSIDERED NOW IS GROUND NO.3. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW, WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AU THORITIES BELOW. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS SUBMITTED REGISTERED VALUERS REPORT, WHEREAS THE AO HAS ADOPTED THE SRO VALUE FOR ARRIVING AT THE VALUE OF LAND AND BUILDING AS ON 1. 4.1981. IT IS SETTLED LAW THAT WHERE AN ASSESSEE DISPUTES THE SRO VALUE, AND THE AO IS NOT SATISFIED WITH THE REPORT SUBMITTED B Y THE ASSESSEE, IN SUCH CIRCUMSTANCES, THE AO OUGHT TO HAVE REFERRE D THE MATTER TO THE VALUATION OFFICER U/S 55A OF THE I.T. ACT. T HE ASSESSEE HAD RELIED UPON VARIOUS CASE LAWS IN SUPPORT OF THIS CO NTENTION. IN THE CASE OF SHRI BARJINDER SINGH BHATTI VS. ITO IN ITA NO.1101/CHD/2014, THE COORDINATE BENCH AT CHANDIGAR H HELD AS UNDER: 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND DO NOT SUBSCRIBE TO THE VIEWS OF THE AUTHORITIES BELOW. THE ASSESSEE FI LED REPORT OF REGISTERED VALUER IN SUPPORT OF THE MARKET VALUE AS ON 01.04.1981. THE ASSESSING OFFICER WAS NOT HAVING AN Y EVIDENCE OR MATERIAL BEFORE HIM TO CONTRADICT THE REPORT OF THE REGISTERED VALUER. THE ASSESSING OFFICER, IF WAS NOT SATISFIED WITH THE REPORT OF THE REGISTERED VALUER, COULD HAVE MADE A REFEREN CE TO THE DEPARTMENTAL VALUATION OFFICER UNDER SECTION 55A OF THE ACT FOR THE PURPOSE OF COMPUTING INCOME FROM CAPITAL GAINS. THE ASSESSING OFFICER HAS THUS, NOT ACTED IN ACCORDANCE WITH LAW AND WITHOUT ANY BASIS OR EVIDENCE IN HIS POSSESSION, DI D NOT ACCEPT REPORT OF THE REGISTERED VALUER. IN THE ABSENCE OF ANY MATERIAL ON RECORD, ASSESSING OFFICER SHOULD NOT HAVE MADE HIS OWN CALCULATION FOR THE PURPOSE OF COMPUTING THE CAPITA L GAINS. THE ORDERS OF THE AUTHORITIES BELOW, THUS, CANNOT BE SU STAINED IN LAW. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIE S BELOW AND DIRECT ASSESSING OFFICER TO ACCEPT VALUATION REPORT ED BY THE ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 6 OF 10 ASSESSEE AS PER REPORT OF THE REGISTERED VALUER AS ON 01.04.1981 AND ACCEPT THE COMPUTATION FILED BY THE ASSESSEE. 8. IN THE CASE OF AJANTA TUBES LTD IN ITA NO.4432/DEL/2014, VIDE ORDER DATED 5.9.2019, THE CO ORDINATE BENCH AT NEW DELHI HAS HELD AS UNDER: 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT ION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. BRIEF FACTS OF THE CASE ARE THAT THE BUSINESS OF THE APPELLANT COMPANY WAS TO MANUFACTURE OF STEEL AND P.V.C. PIPES AT ITS WORKS AT GHAZIABAD (UP). THE APPELLANT COMPANY FILED ITS RET URN OF INCOME FOR THE ASSESSMENT YEAR 2008-2009 DECLARING THE TOTAL INCOME AT RS. 12,09,46,$10. THE APPELLANT COMPANY S OLD PART OF THE IMMOVABLE PROPERTY CONSISTING OF LAND AND BU ILDING ON 12TH MARCH, 2Q08 FOR RS. 18,37,00,000 AND RS.9,09,4 5,000, RESPECTIVELY. THE APPELLANT IN ITS RETURN OF INCOME HAD SHOWN RS.11,77,91,426 AS LONG-TERM CAPITAL GAIN FROM SALE OF LAND AND 'NIL AS SHORT-TERM-CAPITAL GAIN FROM SALE OF BUILDING/SHED. THE NOTICE UNDER SECTION 148/143(3) OF THE INCOME TAX ACT, 1961 DATED 29TH DECEMBER, 2011 WAS SERVED UPON THE APPELLANT. THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX ON 30.Q3.2012 UNDER SECTION 143(3) OF THE ACT AT A TOTAL INCOME OF RS. 17,90,52,975 AFTER MAKING ADDITIONS ON ACCOUNT OF SHORT-TERM CAP ITAL GAINS OF RS.2,33, 77,352 AND RS.3,47,28,818 ON ACCOUNT OF LONG TERM CAPITAL GAINS. THE SALE DEEDS IN QUESTION WERE FOR COMPOSITE SALE OF LAND AND BUILDING (I.E., SALE DEED DID NOT MENTION THE BREAK-UP OF CONSIDERATION FOR LAND AND BUILDING SEP ARATELY) FOR RS. '18,31,00,000 AND RS.9,09,45,000. THE DISPUTE B ETWEEN THE APPELLANT COMPANY AND THE ASSESSING OFFICER IS THREE FOLDS; ONE RELATED TO THE APPORTIONMENT OF SALE PRI CE OF THE TWO SALE DEEDS BETWEEN LAND COMPONENT AND THE BUILDING AND SECOND RELATED TO NON-CONSIDERATION OF THE FAIR MAR KET VALUE (FMV) OF LAND AS ON 1-4-1981 AS PER THE APPROVED VA LUER'S REPORT AND LASTLY INCLUSION OF STAMP DUTY PAID BY T HE APPELLANT AS PART OF SALE CONSIDERATION. THE LEARNED CIT - A HAS DEALT WITH THE WHOLE ISSUE AS PER GROUND NUMBER 4 OF THE APPEAL AT PARA NUMBER 7 OF HIS ORDER. THE ONLY GRIEVANCE OF T HE LEARNED ASSESSING OFFICER IS THAT THAT ASSESSEE SHOULD NOT HAVE BEEN GRANTED THE DEDUCTION OF THE VALUATION OF THE LAND AS ON 01/04/1981 AT INR 9 102600/- WHEREIN THE VALUER HAS TAKEN THE LAND AT THE RATE OF INR 130/- PER SQUARE METRE. THE LEARNED ASSESSING OFFICER HAS REJECTED THE VALUATIO N REPORT STATING THAT IT IS WITHOUT ANY BASIS. THE LEARNED C IT - A HAS HELD THAT ASSESSEE HAS BEEN GIVEN AN OPTION ACCORDI NG TO THE PROVISIONS OF SECTION 55 (2) (B) OF THE INCOME TAX ACT TO ADOPT THE FAIR MARKET VALUE AS ON 1/4/1981 BY SUBMITTING THE VALUATION REPORT FROM AN APPROVED VALUER TO SUBSTIT UTE IN OPTION TO THE COST OF ACQUISITION OF THE ASSET. THE REFORE, THIS IS A BENEFICIAL PROVISION. THE LEARNED ASSESSING OFFICER HAS NOT PUT ON RECORD ANY EVIDENCE TO SHOW THAT THE VALUATION R EPORT OBTAINED BY THE ASSESSEE IS DEVOID OF ANY MERIT OR THE ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 7 OF 10 PREVAILING RATE AS ON THAT DATE ON 01/04/1981 OF TH E SIMILAR PROPERTY WERE LESS THAN INR 1 30/PER SQUARE METER. NO SUCH EVIDENCES HAVE BEEN SHOWN TO US OR BEFORE THE LEARN ED CIT - A. IN VIEW OF THIS, THE REJECTION OF THE VALUATION REP ORT BY THE LEARNED ASSESSING OFFICER CANNOT BE ACCEPTED. EVEN OTHERWISE IN THE GROUNDS OF APPEAL THE LEARNED ,AO HAS RAISED AN ISSUE THAT TAKING THE VALUATION OF LAND AS PER APPROVED V ALUER'S REPORT MEANS THAT THE LAND PURCHASED IN 1993 HAS NO T BEEN DISTINGUISHED FOR THE TAXATION PURPOSES SEPARATELY. HOWEVER, NO EVIDENCE HAS BEEN PRODUCED BEFORE US THAT THE IM PUGNED LAND SOLD BY THE ASSESSEE IS ACQUIRED POST 1/4/1981 . IN VIEW OF . THIS GROUND NUMBER 1 OF THE APPEAL IS DISMISSE D. 9. IN THE CASE OF ITO VS. PADARTI VENKATA RAMA CHAN DRA RAO, REPORTED IN (2016) 74 TAXMANN.COM 195, VIDE IT S DECISION DATED 16.09.2016, THE COORDINATE BENCH AT VISAKPATN AM HAS HELD AS UNDER: 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS COST OF ACQUISITION OF THE PROPERT Y. THE ASSESSEE HAS ADOPTED COST OF ACQUISITION OF THE PRO PERTY AS ON 1.4.1981 BASED ON THE CERTIFICATE OF REGISTERED VAL UER. THE A.O. HAS DETERMINED COST OF ACQUISITION OF THE PROPERTY BASED ON THE SRO VALUE OF THE PROPERTY FIXED BY THE STATE GOVERN MENT FOR THE PURPOSE OF DETERMINATION OF STAMP DUTY. THE A.O . WAS OF THE OPINION THAT COST OF ACQUISITION ADOPTED BY THE ASSESSEE BASED ON THE REGISTERED VALUER CERTIFICATE IS NOT I N ACCORDANCE WITH THE PROVISIONS OF SECTION 48 & 49 OF THE ACT. ACCORDING TO THE A.O., WHEN ASSET IS ACQUIRED BY THE ASSESSEE BY WAY OF ONE OF THE MODE SPECIFIED ULS. 49(1) OF THE ACT, TH E 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., THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.198 1 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 CERT IFICATE OF THE REGISTERED VALUER. THE ASSESSEE FURTHER CONTENDED T HAT THE A.O. WAS NOT CORRECT IN APPLYING SRO VALUE AS FAIR MARKET VALUE OF THE PROPERTY, AS THE SRO VALUE FIXED BY TH E STATE GOVERNMENT IS NOT CORRECT MARKET VALUE OF THE PROPE RTY. THE A.O. WAS ERRED IN EQUATING WITH FULL VALUE OF CONSI DERATION AS A RESULT OF TRANSFER TO THE FAIR MARKET VALUE OF TH E PROPERTY FOR THE PURPOSE OF COMPUTATION OF COST OF ACQUISITION. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT THE A.O. WAS ERRED IN ADOPTING SRO VALUE TO SUBSTITUTE FAIR MARKET VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTATIO N OF COST OF ACQUISITION OF THE PROPERTY. SECTION 48 OF THE ACT DEALS WITH THE MODE OF COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' AND IN THAT CONTEXT FULL VALUE OF C ONSIDERATION ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 8 OF 10 WOULD MEAN THE CONSIDERATION OR PRICE RECEIVED AS A RESULT OF THE TRANSFER OF A CAPITAL ASSET. IT IS DIFFERENT FR OM FAIR MARKET VALUE OF THE PROPERTY, WHICH PHRASE IS USED IN SECT ION 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 MARKET VALUE'. THE FORMER WOULD BE THE PRICE RECEIVED ON T RANSFER OF CAPITAL ASSET AND THE LATER WOULD BE THE PRICE OF A CAPITAL ASSET WOULD ORDINARILY PETCH ON SALE IN OPEN MARKET ON TH E RELEVANT DATE. IN THE PRESENT CASE ON HAND, THE ASSESSEE HAS ADOPTED FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AS COST OF ACQUISITION WHICH IS BASED ORT A CERTIFICATE ISSUED BY THE REGISTERED VALUER. THE A.O. WITHOUT ASSIGNING ANY R EASONS DISBELIEVED REGISTERED VALUERS REPORT AND ADOPTED S RO VALUE OF THE PROPERTY FOR THE PURPOSE OF DETERMINATION OF COMPUTATION OF COST OF ACQUISITION, WHEN ACT SPECIFICALLY PROVI DES POWERS TO THE A.O. UNDER THE PROVISIONS OF SECTION 55(2) OF T HE ACT, TO REFER THE VALUATION OF THE PROPERTY TO THE VALUATIO N OFFICER, WHEN HE IS OF THE OPINION THAT THE FAIR MARKET VALU E OF THE PROPERTY ADOPTED BY THE ASSESSEE IS HIGHER THAN THE FAIR MARKET VALUE OF THE PROPERTY. THE A.O., WITHOUT EXE RCISING THE OPTION OF REFERRING THE MATTER TO THE VALUATION OFF ICER, SIMPLY ADOPTED SRO VALUE WHICH IS FIXED IN A DIFFERENT CON TEXT TO DETERMINE THE COST OF ACQUISITION OF THE PROPERTY. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS ERRED IN ADOPT ING SRO VALUE TO SUBSTITUTE THE FAIR MARKET VALUE ADOPTED B Y 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 D ECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF N. GOVI NDARAJU (SUPRA), WHEREIN THE HON'BLE HIGH COURT UNDER SIMIL AR CIRCUMSTANCES HELD AS UNDER: ' SECTION 48 OF THE ACT DEALS WITH THE 'MODE OF COMPU TATION' OF INCOME CHARGEABLE UNDER 'CAPITAL GAINS' AND IN THAT CONTEXT 'FULL VALUE OF THE CONSIDERATION' WOULD MEAN THE CO NSIDERATION OR PRICE RECEIVED AS A RESULT OF THE TRANSFER OF A CAPITAL ASSET. IT IS DIFFERENT FROM 'FAIR MARKET VALUE' OF THE PROPER TY, WHICH PHRASE IS USED IN SECTION 45(2) [RELATING TO CAPITA L 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 TR ANSFER OF A CAPITAL ASSET AND THE LATTER WOULD BE THE PRICE THA T 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 PROPERT Y BY PRODUCING THE RELEVANT MATERIAL, INCLUDING VALUATION REPORT O F 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 ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 9 OF 10 SOME NEARBY PROPERTIES REGISTERED FOR SUCH PRICE IN THE YEAR 1981 AND THUS, ARRIVED AT THAT FIGURE. IN OUR OPINI ON, THE SAME CANNOT BE THE PROPER MODE OF ARRIVING ~T THE 'FAIR MARKET VALUE' OF THE PROPERTY IN QUESTION AS ON 1.4.1981, FOR THE PURPOSE OF DETERMINING 'CAPITAL GAINS' UNDER THE ACT. (PARA 48 ) TRIBUNAL WAS NOT JUSTIFIED IN ARRIVING AT THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION AS ON 1.4.1981 WITHOUT TAK ING INTO CONSIDERATION THE MATERIAL ON RECORD, INCLUDING THE VALUATION REPORT FILED BY THE ASSESSEE. THE MATTER THUS REQUI RES TO BE REMANDED TO THE ASSESSING OFFICER FOR DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION IN ACCORDA NCE WITH LAW AND IN THE LIGHT OF THE OBSERVATIONS MADE HEREI NABOVE. (PARA 51)' 13. THE CIT (A) AFTER CONSIDERING THE RELEVANT DETA ILS HAS RIGHTLY DIRECTED THE A.O. TO SUBSTITUTE VALUE ADOPT ED BY THE ASSESSEE AS FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 TO COMPUTE COST OF ACQUISITION. WE DO NOT FIND ANY REASONS TO INTERFERE WITH THE CIT (A) ORDER. HENCE, WE INCLINE D TO UPHELD CIT (A) ORDER AND REJECT GROUND RAISED BY THE REVEN UE. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS BENEFIT OF INDEXATION. THE FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAS SOLD A PROPERTY WHICH HE HAD ACQUIRED BY WAY OF PARTITION DEED IN THE YEAR 2007-08. THE ASSESSEE CLAIMS THAT HE GOT RIGHT OVER THE PROPERTY BY WAY OF PARTI TION DEED, WHICH WAS ACQUIRED BY HIS FATHER PRIOR TO 1.4.1981. THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE PROVISIO NS OF SECTION 49(1) OF THE ACT, WHEN HE GOT RIGHT OVER TH E ASSET BY WAY OF ANY MODES SPECIFIED U/S. 49( I) OF E ACT, TH E COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED I T AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASS ET INCURRED OR BORN BY THE PREVIOUS OWNER OR THE ASSESSEE AS TH E CASE MAY BE. SINCE, HE GOT RIGHT OVER PROPERTY BY WAY OF INHERITANCE OR SUCCESSION, AS PER THE PROVISIONS OF THE ACT, HE HAS ADOPTED FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AN D APPLIED INDEXATION BENEFIT FROM THE DATE THE ASSET WAS FIRS T HELD BY THE PREVIOUS OWNER AND COMPUTED LONG TERM CAPITAL GAIN. THE A.C. WAS OF THE OPINION THAT WHEN ASSESSEE IS OWNER OF T HE PROPERTY BY WAY OF ANYONE OF THE MODE SPECIFIED U/S . 49(1) OF THE ACT, THEN THE INDEXATION BENEFIT SHOULD BE ALLO WED 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 PROPERTY BY WAY OF INHERITANCE/SUCCESSION THROUGH 'A PARTITION DEED DATED 28.5.2007 WHICH PERTAINS TO THE ASSESSMENT YEAR 200 8-09 AND ACCORDINGLY, 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 TH E A.O. FOR THE REASON THAT WHEN THE ASSET WAS ACQUIRED UNDER ANY CIRCUMSTANCES GIVEN BY SECTION 49( 1) OF THE ACT, F OR THE PURPOSE OF RECKONING THE PERIOD OF HOLDING, THE PER IOD OF HOLDING OF ASSET BY THE PREVIOUS OWNER IS CONSIDERE D TO COMPUTE THE PERIOD OF HOLDING WHETHER IT IS LONG TE RM OR SHORT ITA NO 299 OF 2019 VITTAL RAO NATARAJAN CONJEEVAR AN PAGE 10 OF 10 TERM. IN A SIMILAR WAY, WHEN THE ASSESSEE GOT RIGHT OVER PROPERTY BY ANY OF THE MODES SPECIFIED U/S. 49(1) O F THE ACT, OBVIOUSLY THE ASSESSEE IS ELIGIBLE FOR THE BENEFIT OF INDEXATION FROM THE PERIOD THE ASSET WAS FIRST HELD BY THE PRE VIOUS OWNER, BUT NOT THE PERIOD FROM WHICH THE ASSET WAS HELD BY THE ASSESSEE. THIS VIEW WAS UPHELD BY THE HON'BLE BOMBA Y HIGH COURT, IN THE CASE OF MANJULA J SHAH (SUPRA), WHERE IN THE HON'BLE HIGH COURT HELD THAT INDEXED COST OF ACQUIS ITION HAS TO BE COMPUTED WITH REFERENCE TO YEAR IN WHICH PREVIOU S OWNER FIRST HELD ASSET AND NOT YEAR IN WHICH THE ASSESSEE BECAME OWNER OF ASSET. A SIMILAR VIEW IS GIVEN BY THE HON' BLE HIGH COURT OF DELHI, IN THE CASE OF ARUN SHUNGLOO TRUST V. CIT [2012] 205 TAXMAN 456/18 TAXMANN.COM 261 AND ALSO THE HON' BLE HIGH COURT OF GUJARAT, IN THE CASE OF CIT V. GAUTAM MANUBHAI AMIN [2013] 218 TAXMAN 319/38 TAXMANN.COM 42. 10. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE REMAND THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO REFER THE VALUATION OF THE PROPERTY TO THE VALUATION OFFICER AND AFTER OBTAINING HIS REPORT, THE AO SHALL RECOMPUTE THE TA XABLE CAPITAL GAIN. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL B E GIVEN A FAIR OPPORTUNITY OF HEARING. 11. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2021. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 22 ND MARCH, 2021. VINODAN/SPS COPY TO: 1 SRI V. SRINIVAS, FCA, C/O H.NO.10-2-195, 2 ND FLOOR, VAG GANESH COMPLEX, EAST MARRAEDPALLY, SECUNDERABAD 500026 2 ITO WARD 10(5) 5 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD 500004 3 CIT (A)-6 HYDERABAD 4 PR. CIT 6 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER