M/s. Joy Exhibitors, JODHPUR V. ITO, BHILWARA

ITA 454/JODH/2009

• Counselvise Citation: 45423314 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-11-2011
• Assessment Year: 1990-1991
• Appeal Filed On: 27-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: U C JAIN
• Keywords: Capital asset; Fair market value; Valuation report
• Section: 142(1); 148; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NOS.454/JU/2009 ASSESSMENT YEAR : 1990-91 PAN: AAGFJ 6767 P M/S. JOY EXHIBITORS VS. THE ITO NAGORI GARDEN WARD- 2 BHILWARA BHILWARA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN DEPARTMENT BY: SHRI G.R. KOKANI DATE OF HEARING: 28-11-2011 DATE OF PRONOUNCEMENT: 16-12-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A), AJMER DATED 29-06-2009 FOR THE ASSESSMENT YEAR 1990-91. 2.0 THE ASSESSEE HAS RAISED 12 GROUNDS OF APPEAL IN ITS APPEAL. DURING THE COURSE OF PROCEEDINGS BEFORE US THE LD. AR SUBMITTED THAT THE ONLY ISSUE RAISED IN ALL THE GROUNDS OF APPEAL EXCEPT IN GROUND OF APPEAL NO. 12 ARE RESPE CT OF VALUATION OF LAND AS ON DEC. 1981 ON ACCOUNT OF DISSOLUTION OF THE FIRM. 2.1 THE 12 TH GROUND OF APPEAL IS AGAINST CHARGING OF INTEREST U /S 234A AND 234B. THE CHARGING OF INTEREST IS MANDATORY AND CONSEQUENTIAL IN NATURE. 2.2 IN THIS CASE, THE ASSESSMENT WAS COMPLETED ON 2 8-03-2002 VIDE WHICH INCOME WAS ASSESSED AT RS. 49,49,500/-. AT THE TIME OF ORIGINA L ASSESSMENT MADE ON 28-03-02, THE AO HELD THAT THE LAND HAS BEEN TRANSFERRED TO THE PAR TNERS ON THE DISSOLUTION OF THE FIRM AND 2 THEREFORE, THE FIRM WAS TO BE CHARGED ON THE CAPITA L GAIN ARISING FROM THE TRANSFER OF THE LAND BY THE FIRM TO THE PARTNER. THE VALUATION OF T HE LAND WAS DETERMINED BY DVO AT RS. 49,95,500/-. THE COST OF THE LAND WAS TAKEN AT RS. 49,500/- AND HENCE THE ADDITION WAS MADE TO THE EXTENT OF RS. 49,49,500/-. 2.4 AGAINST THE ORDER OF THE AO, THE ASSESSEE FILED THE APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION. THE MATTER CAME UP BEFORE THE TRIBUNAL AND THE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 45(4) HAVE RIGHTLY BEEN APPLIED. IT WAS FURTHER HELD THAT CORRECT YEAR FOR THE CHARGE OF CA PITAL GAINS IS ASSESSMENT YEAR 1990-91. THE LAND WAS HELD AS NOT AGRICULTURAL LAND. IT WAS FURTHER HELD BY THE TRIBUNAL THAT THE DVO HAD ERRED IN MAKING VALUATION BY TREATING IT A S A FREE HOLD LAND WHEREAS IT IS NOT EXACTLY SO. THE ASSESSMENT ORDER WAS SET ASIDE AND THE MATTER WAS RESTORED TO THE FILE OF THE AO FOR DETERMINATION OF PROPER FAIR MARKET VALU E OF THE ASSESSEES INTEREST IN THE LAND. THE AO REFERRED THE MATTER TO THE DVO TO ASCERTAIN THE FAIR MARKET VALUE IN VIEW OF THE OBSERVATION OF THE ITAT . 2.5 THE DVO SUBMITTED HIS VALUATION REPORT VIDE LET TER DATED 29 TH DEC 2008 AND AS PER THIS REPORT, THE VALUATION WAS DETERMINED AT R S. 45,08,000/-. THE ONLY DIFFERENCE BETWEEN THE ORIGINAL VALUATION AND THE PRESENT VALU ATION IS DEDUCTION ON ACCOUNT OF 5% DUE TO LEASE TENURE I.E. FREE HOLD TO LEASE HOLD. A NOTHER REBATE WAS GIVEN TO THE EXTENT OF 5% DUE TO DISPUTE IN LAND. THE AO ON THE BASIS OF T HE REPORT OF THE DVO REQUIRED THE ASSESSEE TO FURNISH ITS OBJECTIONS. THE ASSESSEE S UBMITTED THE OBJECTIONS AND THESE HAVE BEEN MENTIONED BY THE AO IN THE ASSESSMENT ORDER. F OR READY REFERENCE, WE REPRODUCE THE SUBMISSIONS OF THE LD. AR AS UNDER:- 3 IN THE ABOVE CONTEXT WE SUBMIT THE OBSERVATION OF ITAT WHICH WAS TO BE CONSIDERED BY THE DVO BEFORE GIVING THE FRESH VALUE . I) HE HAS GONE BY THE SALE INSTANCES. NO CONSIDERATION HAS BEEN GIVEN TO THE FACT THAT THE DISPUTE WAS GOING ON ONE HAND WITH THE TENANT AND ON THE OTHER HAND WITH THE STATE GOVERNMENT. A LAND WITH SUCH DISPUTES CANT BE EQUATED WITH A DISPUTELESS LAND F OR THE PURPOSE OF ITS VALUATION. II) WHILE VALUING THE ASSETS CONSIDERATION HAS TO BE GI VEN TO THE HAZARDS WHICH ARE PREVALENT IN THIS CASE AND REFERR ED 146 ITR 228 (SC) 102 ITR 735. THAT THE ABOVE ACTORS HAS NOT BEEN CONSIDERED, THUS THE VALUATION HAS NOT BEEN PROPERLY DONE AS PER OBSERVATION POINTED OUT B Y THE ITAT, HENCE DESERVE TO BE RECALCULATED ACCORDINGLY. SUBJECT TO ABOVE THOUGH THE TIME FOR SUBMISSION OF OBJECTION WAS GIVEN VERY LESS AND THAT TOO AT THE TIME OF DEATH IN VERY NEAR RELATVE EVEN AT SIGHT WE SUBMIT AS UNDER: I) THE DVO HAS TAKEN RATE OF MARKET RATE OF SHOP SITUA TED IN NAGORI GARDEN AS COMMERCIAL LAND WHEREAS OUR LAND IS VACAN T LAND AND IS NOT COMMERCIAL LAND. IN CONVERSION IN COMMERCIAL LA ND A SUM OF RS. 2,54,869/- WERE DEPOSITED WITH THE GOVERNMENT T HE DETAIL ALREADY SUBMITTED. HENCE THE SAME BE CONSIDERED WHI LE CALCULATION OF MARKET RATE. THE DETAIL IS AGAIN ENCLOSED. II) THE DVO HAS CONSIDERED TOTAL 29911 SQ. FT. LAND WHE REAS AS PER MAP APPROVED BY THE REVENUE COLLECTOR (COPY ENCLOSE D), THE LAND IS ONLY 27033.75 SQ. FT. 4 III) THE LAND IS NOT SITUATED IN NAGORI GARDEN THOUGH KN OWN AS NAGORI GARDEN BUT IS SITUATED WITHIN THE AREA OF BERWA MOH ALLA IN BETWEEN PASHU CHIKITSALAYA AND GOVT. PRIMARY SCHOOL . THE CERTIFICATE FROM MUNICIPAL COUNCIL ALREADY SUBMITTE D TO DVO, THE COPY OF THE SAME ENCLOSED FOR YOUR READY REFERENCE PLEASE. IV) THAT A SUM OF RS. 7,488/- WAS DEPOSITED EVERY YEAR FROM 1982 AS LEASE RENT WHICH IS ALSO NOT CONSIDERED IN COST. V) THAT IN 1990-91 THERE WAS NO DLC RATE, HENCE THE VA LUE AS ASCERTAINED BY UIT/ MUNICIPAL COUNCIL IS THE BEST G UIDE. ACCORDINGLY TO THE MUNICIPAL COUNCIL THE PRICE OF L AND WAS ONLY 300/- SQ. YARD. THE COPY OF ALLOTMENT LETTER OF LAN D SITUATED NEAR TO OUR LAND IS ENCLOSED FOR YOUR READY REFERENCE PLEAS E. VI) EVEN IN NAGORI GARDEN UIT ALLOTTED LAND @ 360/- PER SQ. YARD. THE COPY OF THE ALLOTMENT LETTER IS ENCLOSED FOR YOUR R EADY REFERENCE PLEASE. VII) THAT DISPUTE WITH THE STATE GOVERNMENT REMAINED UP TO 1993 AND WITH THE TENANT FROM 1980 TO 1996. THE COPIES OF RE SPECTIVE ORDERS / DOCUMENTS ARE ENCLOSED HEREWITH. VIII) THAT THE MARKETABLE LAND AS PER APPROVED MAP BY THE COLLECTOR, BHILWARA WAS ONLY ABOUT 9000 SQ. FT. THE REMAINING WAS NOT SALEABLE. THE SAME IS VERIFIABLE FROM THE APPROVED MAP AS SUBMITTED ABOVE. IX) THAT THE LAND WAS PURCHASED IN 1980, THEREFORE PLEA SE LET US KNOW THE MARKET RATE OF 1981 FOR CALCULATING LONG TERM CAPITAL GAIN. THE OTHER PAYMENT YEAR-WISE MAY ALSO BE CONSIDERED FOR ARRIVING GAIN. IN OUR OPINION AS PER THE BASIS OF VALUATION OF COM MERCIAL SHOP CONSIDERED BY THE DVO RS. 80/- TO 90/- PER SQ. FT. +/- 10% SQ. FT. IS THE FAIR MARKET RATE AS ON 01/04/1981 AND LIKEWISE AS PER MU NICIPAL COUNCIL RATE AS REFERRED FOR THE LOCATION THE RATE AS ON 01/04/1 981 COMES APPROXIMATELY 5 RS. 25/- TO 30/- +/- 10% PER SQ. FT. AND AS PER UIT ALLOTMENT AS REFERRED ABOVE IN THE NAGORI GARDEN THE RATE MAY BE RS. 40/- TO 50/- +/- 10% AS ON 01/04/1981. IN VIEW OF ABOVE ALL PLEASE DETERMINE THE PROPER FA IR MARKET VALUE AFTER PROVIDING PROPER AND REASONABLE OPPORTUNITY T O US AND AFTER CONSIDERING ENTIRELY OF CIRCUMSTANCES AS DIRECTED B Y THE ITAT AND AS REFERRED ABOVE. THE PROPER AND FAIR MARKET VALUE SHOULD BE BASED ON SUCH MATERIAL, WHICH IS DEFINITE, PRECISE, BASED ON SOLID FACTUAL FOUNDATION AND NOT MERELY IN HURRY, SURMISE AND CONJECTURE. 2.6 THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE MADE THE FOLLOWING OBSERVATIONS. (I) AS REGARDS THE CLAIM OF AR VIDE PARA (I) REGARD ING TAKING OF MARKET RATE OF SHOP AS COMMERCIAL LAND WHEREAS T HE LAND OF THE ASSESSEE WAS NOT COMMERCIAL LAND. THIS OBJECTION IS NOT ACCE PTABLE AS THE LAND WAS SITUATED IN COMMERCIAL AREA. HENCE THE DVO HAS VALU ED THE PROPERTY AT CORRECT RATE. (II) AS REGARDS OBJECTION FOR AREA OF LAND THE D VO HAS CORRECTLY TAKEN THE MEASUREMENT AND THERE IS NO DIFFERENCE. T HIS OBJECTION IS NOT ACCEPTABLE AS THE SAME WAS PHYSICALLY INSPECTED BY THE DVO. (III) AS REGARDS THE CLAIM OF THE AR THE LAND IS SITUATED NEAR NAGORI GARDEN IS NOT ACCEPTABLE AS THE CORRECT VALU E HAS BEEN ADOPTED BY THE DVO. (IV) AS REGARDS THE PAYMENT OF LEASE FOR VALUATI ON OF COST IS ALSO NOT ACCEPTABLE AS LEASE MONEY IS A TAX AND NOT THE VALUE FOR THE VALUATION OF LAND. 6 (V) AS REGARDS NON AVAILABILITY OF DLC RATE FOR ASCERTAINING VALUE IT HAS BEEN CLAIMED THAT THE MUNICIPAL COUNCI L HAS ALLOTTED LAND AT THE RATE OF 300/- PER SQ. MTR. AND ASSESSEE HAS SUB MITTED THE COPY OF ALLOTMENT LETTER, IS ALSO NOT ACCEPTABLE AS THE LAN D ALLOTTED AS PER THIS ALLOTMENT LETTER WAS TO JEENGAR SAMAJ SAMITI WHICH IS A RELIGIOUS SOCIETY FOR A PARTICULAR CASTE AND THE MUNICIPALITY ALLOTS LAND TO ANY SOCIETY OR SAMAJ ON CONCESSIONAL RATE BEING FOR RELIGIOUS PURP OSES. (VI) AS REGARDS THE CLAIM OF THE ASSESSEE THAT T HE UIT BHILWARA ALLOTTED LAND AT THE RATE OF 360/- PER SQ. YARD IS ALSO NOT ACCEPTABLE AS THE LAND WAS ALLOTTED AS PER ALLOTMENT LETTER TO BHILWA RA URBAN COOPERATIVE BANK, WHICH IS A PUBLIC COOPERATIVE SOCIETY AND LAN D TO ANY SOCIETY IS ALLOTTED ON NOMINAL PRICE LESS THAN THE RESERVE PRI CE FOR GENERAL PUBLIC PURPOSES. (VII) THE CLAIM OF THE AR THAT THE MARKETABLE LA ND AS PER APPROVED MAP BY THE COLLECTOR, BHILWARA WAS ONLY 90 00 SQ. FT. AND REMAINING WAS NOT SALEABLE IS ALSO NOT ACCEPTED AS THE ASSESSEE HAS SOLD WHOLE AREA OF LAND AND NOT ONLY THE SALABLE LAND AS CLAIMED BY IT. IN VIEW OF THE ABOVE DISCUSSION IT IS HELD THAT THE ALL OBJECTIONS RAISED IN THE REPLY DATED 31/12/2008 IS NOT ACCEPTE D AS DISCUSSED ABOVE. HOWEVER, THE ASSESSEE HAS ALSO CLAIMED THAT FOR CAL CULATING LONG TERM CAPITAL GAIN THE MARKET RATE OF 1981 IS TO BE ASCER TAINED IS PARTLY ACCEPTED AND THE MARKET VALUE FOR 1981 IS TAKEN AS PER FOLLO WING PARA. 2.7 THE AO NOTICED THAT THE ASSESSEE HAS PURCHASED THE LAND IN 1980 AT RS. 49,500/-. THE VALUE FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN IS TO BE TAKEN AT 01-04-1981. THE AO NOTICED THAT THE COST INDEX FOR THE FINANCIAL YE AR 1982-83 WAS 109% AS AGAINST 100% IN FINANCIAL YEAR 1981-82 AND ACCORDINGLY THE VALUE AS ON 01-04-1981 WAS DETERMINED AT 109% OF THE COST OF THE LAND PURCHASED IN 1980. THE REFORE, THE AO DETERMINED THE CAPITAL GAIN AT RS. 44,15,200/- 7 2.8 BEFORE, THE LD.CIT(A), THE ASSESSEE MADE THE SU BMISSIONS AND THESE ARE SUMMARIZED AS UNDER:- 1. THE AO HAS NOT CONSIDERED THE FINDINGS OF THE TR IBUNAL WHILE MAKING SET ASIDE ASSESSMENT. THE DVO HAS GONE BY SALE INSTANCES WHICH ARE OF SOME NEARBY SHOPS AND TREATED THE LAND AS FREE HOLD LAND. THE LAND WAS UNDER DISPUTE NOT ONLY WITH THE TENANT BUT ALSO WITH THE STATE GOVT. AND THE LAND SHOULD HAVE BEEN CONSIDERED AS D ISPUTE LAND FOR THE PURPOSE OF VALUATION 2. THE ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY BE CAUSE THE VALUATION REPORT WAS RECD ON 29-12-08 WHILE THE ASS ESSMENT WAS GOING TO BE BARRED BY LIMITATION ON 31-12-08. IT WAS STATED THAT ON THIS GROUND, THE ORDER DESERVES TO BE ANNULLED. 3. THE HAZARD, CLOG OR JEOPARDY IS A VITAL FACTOR W HICH DETRACTS THE VALUE OF THE ASSETS. REFERENCE HAS BEEN MADE TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CWT BIHAR VS MAHA RAJA KUMAR KAMAL SINGH 146 ITR 202. IN THE INSTANT CASE, THE LAND AS PER ORDER OF THE COLLECTOR, BHILWARA BECAME VESTED IN THE STATE. THE DISPUTE WITH THE STATE GOVT. REMAINED UPTO 1993 AND WITH THE TENANT FROM T HE DATE OF PURCHASE OF LAND TILL 1996 AND NO PERMISSION WAS GRANTED FOR CO NSTRUCTION BY THE MUNICIPAL COUNCIL, BHILWARA. THE MAKETABLE LAND WAS ONLY 9,000 SQ. FT. AND REMAINING WAS NOT SALEABLE 4. THE DVO AND THE AO TOOK THE VALUE OF THE CONSTRU CD SHOPS FOR THE PURPOSE OF VALUATION OF LAND WHEREAS THE LA ND WAS VACANT LAND AND AT THAT TIME, IT WAS NOT COMMERCIAL LAND 5. THE DVO TOOK THE DLC RATE AS STATED IN THE VALUA TION REPORT. TILL 1993, THERE WAS NO DLC RATE AND THIS F ACT HAS BEEN STATED BY SUB-REGISTRAR, BHILWARA IN WRING TO INCOME-TAX OFFI CER AND HENCE THE VALUATION TAKEN BY THE DVO IS NOT CORRECT.. 8 6. THE MARKET PRICE SHOULD BE TAKEN ON WHICH SUB-RE GISTRAR REGISTERED THE DOCUMENTS OF SALE/PURCHASE OF LAND E ITHER AT NAGORI GARDEN OR SURROUNDING TO IT 7. A SUM OF RS. 7,488/- PER YEAR FROM 1982 TO 1990 WAS PAID ON THIS VACANT LAND AS LEASE AMOUNT. THIS AMOUNT W ITH INDEXING COST HAS NOT BEEN CONSIDERED BY THE AO IN ARRIVING AT THE AC TUAL COST OF THE LAND. 8. THE AO HAS NOT CONSIDRED A SUM OF RS. 2,54,869/- PAID FOR CONVERSION OF LAND FROM AGRICULTURAL TO COMMERCIAL LAND WHEN THE AO HAS TAKEN THE FAIR MARKET VALUE OF THE COMMERCIAL LAND. 9. THE AO HAS ONLY ALLOWED 5% REBATE IN RESPECT OF THE LEASE HOLD LAND. THERE IS WIDE DIFFERENCE BETWEEN THE LEA SE HOLD AND FREE HOLD LAND AND THE AO SHOULD HAVE GIVEN REBATE AT LEAST O F 15%. 10. THE AO FOR ESTIMATING THE FAIR MARKET VALUE AS ON 1-4-1981 HAS TAKEN THE HELP OF COST INDEX FOR THE FINANCIAL YEAR 1981-82 AND 1982- 83 BUT WHILE VALUING THE FAIR MARKET VALUE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AO HAS NOT TAKEN NOTE OF COST IN DEX AND HAS NOT DETERMINED FAIR MARKET VALUE ON THE BASIS OF COST I NDEX IN THE FINANCIAL YEAR 1989-90 AND AS COMPARED TO FINANCIAL YEAR 1981 -82. 2.9 BEFORE THE LD.CIT(A), THE ASSESSEE GAVE THE FOL LOWING DETAILS FOR DETERMINING THE FAIR MARKET VALUE AS ON 1-4-1981 AND AS ON THE DATE OF DISSOLUTION OF THE FIRM. THESE DETAILS ARE REPRODUCED AS UNDER:- (A) VALUE AS ON 01/04/1981 CONSIDERING AS COMMERC IAL VACANT LAND: I) FOR TOTAL AREA OF 29911 SQ. FT. @ 19/- PER SQ. FT. 5,68,309/- II) FOR SALEABLE AREA ONLY 9000 SQ. FT. @ 19/- PER SQ. FT. 1,71,000/- III) FOR APPROVED LAND ONLY 27033 SQ. FT. @ 19/- P ER SQ. FT. 5,13,627/- INDEX COST: I) RS. 5,68,309/- X 172 / 100 = I) RS. 9,77,490/- + 90,450/- LEASE COST 10,67,940/- II) RS. 1,71,000/- X 172 / 100 = II) RS. 2,94,120/ - + 90,450/- LEASE COST 3,84,570/- III) RS. 5,13,627/- X 172 / 100 = III) RS. 8,83,44 0/- + 90,450/- LEASE COST 9,73,980/- 9 NOTE: A SUM OF RS. 2,54,869/- PAID FOR CONVERSION O F LAND NOT SEPARATELY ADDED AS ABOVE RATE HAS BEEN TAKEN FOR COMMERCIAL LAND. B) FAIR MARKET VALUE FOR ASSTT. YEAR 1990-91 I) FAIR TOTAL AREA 29911 SQ. FT. LESS : 35% FOR DISPUTED LAND AS PER 2(IV) OF OUR LETTER @RS. 53/- PER SQ. FT.= 5,54,850/- 15,85,280/- 15% FOR LEASE HOLD LAND 2,37,790 /- 7,92,640/- 7,92,640/- II) FOR SALEABLE AREA : 9000 SQ. FT. @ 53/- PER SQ . FT. = LESS: 35% FOR DISPUTED LAND 1,66,950/- 15% FOR LEASE HOLD 71,550/- 2,38,500/- 2,38,500/- III) FOR APPROVED AREA 27033 SQ. FT. @ 53/- PER SQ . FT. = 14,32,750/- LESS : 35% FOR DISPUTED LAND 5,01,460/- 15% FOR LEASE HOLD 2,14,910/- 7,16,370/- 7,16,370/- AFTER CONSIDERING ALL, YOUR HONOUR WILL APPRECIATE THAT THE POSITION OF CAPITAL GAIN FOR THE ASSESSMENT YEAR 1990-91 COMES AS UNDER: - PARTICULARS FAIR MARKET VALUE FOR ASSTT. YEAR 1990-91 COST AS ON 01/04/81 WITH INDEXING FOR 1990-91 GAIN / LOSS OF CAPITAL I) FOR TOTAL AREA 7,92,640/- 10,67,940/- (-) 2,75,300/- II) FOR SALEABLE AREA 2,38,500/- 3,84,570/- (-) 1,46,070/- III) FOR APPROVED AREA 7,16,370/- 9,73,890/- (-) 2,57,520/- THUS IN NO CASE THERE IS ANY INCOME FROM LONG TERM CAPITAL GAIN. HENCE REQUEST YOU TO KINDLY CONSIDER ANY OF THE ABOVE LOSS UNDER THE HEAD OF CAPITAL GAIN OR PASS THE APPROPRIATE ORDER IN THE LIGHT THAT NO PROPER OPPORTUNITY WAS PROVIDED, THE ITAT ORDER HAS NOT BEEN PROPERLY CONSIDER IN TH E CORRECT PERSPECTIVE AND THE OBJECTION RAISED WERE NOT PROPERLY TAKEN, AND RATE BASED ON THE EVIDENCE COLLECTED FROM THE SUB-REGISTRAR OFFICE FOR VACANT LAND NOT P ROPERLY CONSIDERED WHILE CALCULATING THE FAIR MARKET VALUE BY THE AO. 10 2.10 THE SUBMISSIONS GIVEN BY THE ASSESSEE WERE CON FRONTED TO THE AO AND THE AO SUBMITTED THE REMAND REPORT VIDE LETTER NO. 57 DATE D 9-6-2009. THE AO SUBMITTED THAT THE DVO HAS MADE COMPLIANCE OF THE ORDER OF THE ITAT A ND CONSIDERED ALL THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE HIM. THE AO THEREFORE , SUBMITTED THAT THE VALUATION MADE BY THE DVO IS CORRECT AND CAPITAL GAIN HAS RIGHTLY BEEN ADOPTED BY THE AO IN THE ASSESSMENT ORDER. 2.11 THE ASSESSEE SUBMITTED BEFORE THE LD.CIT(A) TH AT AO HAS MADE NO COMMENTS ON THE SUBMISSIONS GIVEN BY THE ASSESSEE AND HAS ONLY REFERRED TO THE FINDINGS GIVEN BY THE AO IN THE ASSESSMENT ORDER. THE LD.CIT(A) UPHELD TH E FINDINGS OF THE AO AFTER OBSERVING AS UNDER:- 5.6 FACTS OF THE CASE AND ARGUMENT OF THE APPE LLANT HAVE BEEN CAREFULLY CONSIDERED. FROM THE PERUSAL OF THE RECORDS IT IS F OUND THAT IN VIEW OF DIRECTIONS OF HONBLE ITAT THE MATTER REGARDING VALUATION OF LAND WAS AGAIN REFERRED TO THE DVO BY THE AO. THE APPELLANT ALSO FILED VARIOUS OBJ ECTIONS REGARDING VALUATION TO THE DVO. DETAILS REGARDING ALLOTMENT OF LAND TO BHILWARA URBAN CO- OP BANK BY THE UIT AND JINGAR SAMAJ SAMITI WERE PROVIDED BY TH E APPELLANT TO THE DVO. THEREAFTER DVO SUBMITTED HIS REPORT ON 29-12-2008 I N WHICH THE VALUE OF LAND WAS DETERMINED AT RS. 45,08,000/- AS AGAINST RS. 49 ,95,000/- IN THE ORIGINAL REPORT. THE FACTS REGARDING THE LAND BEING LEASE HO LD AS AGAINST FREE HOLD AND DISPUTE IN LAND WERE ALSO CONSIDERED BY THE DVO. IN SUCH A SITUATION IT CAN BE REASONABLY CONCLUDED THAT DVO HAS DETERMINED THE VA LUE OF LAND AFTER CONSIDERING ALL THE OBJECTIONS OF THE APPELLANT. NO NEW FACTS HAVE BEEN BROUGHT ON RECORD EITHER BEFORE THE AO OR THE UNDERSIGNED. IN SUCH A SITUATION, THERE IS NO REASON TO INTERFERE WITH VALUE OF LAND AS DETERMINE D BY THE DVO AT RS. 45,08,000/-. 11 5.7 FROM THE ASSESSMENT ORDER, IT IS FURTHER FOUND THAT THE AO DETERMINED THE INDEXED COST OF LAND AT RS. 92,802/- AS MENTIONED BELOW ON PAGE 5 OF THE ASSESSMENT ORDER: - THE ASSESSEE HAS PURCHASED LAND IN 1980 AND THE CO ST PRICE FOR THE PURCHASE WAS AT RS. 49,500/-. THE COS T INDEX BASE FOR THE PURPOSE OF CAPITAL GAIN INDEXING HAS BEEN ARRIV ED IN FINANCIAL YEAR 1981-82 WHEN THE INDEX WAS 100% AND IT RAISED AT 109 UB F.Y. 1982-83. THE 100% INDEX IS JUST ONE YEAR AFTER THE PURCHASE OF THE LAND AS SUCH I ALSO ESTIMATE INCREASE OF 9% AS IN SUBSEQUENT YEAR AND ADOPT THE FAIR MARKET VALUE AS ON 01.04.19 81 AT RS. 53,955/-. LAND PURCHASE PRICE IN 1980 49,500/- ADD: INDEXED FOR 1980-81 @ 9% 4,455/- FAIR MARKET VALUE AS ON 01.04.81 DURING F.Y. 1981 -82 53,955/- ADD: COST INDEXED @ 72% 38,847/- TOTAL COST AFTER INDEXATION 92,802/- THE ASSESSEE ALSO CLAIMED THAT THE LEASE MONEY PAID ON THE ABOVE LAND BE ALSO INCLUDED IN THE VALUE OF COST OF LAND IS NOT ACCEPTABLE AS THE LEASE MONEY IS A TAX PAYABLE TO M UNICIPALITY OR UIT FOR WHICH NECESSARY REBATE IS ALLOWABLE U/S 24 OF THE IT ACT, 1961 UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE THE CLAIM OF THE ASSESSEE FOR INCREASING THE VALUE OF LAND AS COST ON ACCOUNT OF LEASE PAYMENT IS NOT ACCEPTED AN D THE VALUE OF LAND IS ADOPTED AT RS. 92,802/- FOR THE PURPOSE OF CHARGE OF CAPITAL GAIN U/S 45(4) OF THE IT ACT, 1961 AS DISCUSSED ABO VE. 5.8 IN VIEW OF ABOVE MENTIONED FACTS AND CIRCUMSTAN CES, I HOLD THAT THE COMPUTATION OF LONG TERM CAPITAL GAIN AT R S. 44,15,198/- HAS BEEN 12 RIGHTLY MADE BY THE AO. THE ACTION OF AO IS CONFIRM ED. GROUND NO. 1 TO 4 OF THE APPEAL ARE THUS DISMISSED. 2.12 BEFORE US THE LD. AR HAS FILED THE WRITTEN SUB MISSIONS WHICH ALSO CONTAINS THE FACTS IN CHRONOLOGICAL ORDER. THESE ARE REPRODUCED AS UNDER:- S. NO. DATE EVENTS P. BOOK PAGE NO. 01 20-12-79 TWO PERSONS NAMELY SHRI MADANLAL AGARWA L AND SHRI BADRILAL SHARMA ENTERED INTO PARTNERSHIP TO ST ART BUSINESS OF EXHIBITION OF FILMS UNDER THE NAME & STYLE OF M/S JOY EXHIBITORS AT BHILWARA 128 - 132 02 31-7-80 SHRI BADRILAL AND SHRI MADANLAL PURCHASE D 1 BIGHA AND 2 BISWA AGRICULTURAL LAND FROM SHRI SOBHA LAL FOR A SUM OF RS. 49500/- IN THE NAME OF INDIVIDUAL PARTNERS WITH THE NAME OF THE FIRM. AT THE TIME OF PURCHASE THE ENTIRE AGRICULTURAL LAND WAS IN POSSESSION OF TENANT M/S MAHALAXMI SAW MILLS THROUGH SHRI SATYAPAL S/O MULAK RAJ SOMTI RESIDENT OF BHILWARA TO WHOM IT WAS LET OUT AT THE RATE OF R S. 225/- PER MONTH AS IS EVIDENT FROM THE RECITAL MAD E IN THE SALE DEED DATED 31-07-1980 [P.B. PAGE 95]. 93 - 97 03 2-1-81 THAT PRIOR TO 2-1-81 THE ASSESSEE SURREND ERED THE LAND TO THE GOVT. OF RAJASTHAN UNDER RULE 9(2) OF RAJASTHAN LAND REVENUE CONVERSION & REGULATION OF AGRICULTURAL LAND FOR ALLOTMENT OF THE SAME LAND ON LEASE FOR CONSTRUCTION OF CINEMA BUILDING 109 - 112 04 22-01-82 THE COLLECTOR BHILWARA BY ORDER DATED 2 2-1-82 ALLOTTED THE LAND ON LEASE TO THE FIRM FOR A PERIOD OF 20 YEARS FOR CONSTRUCTION OF CINEMA BUILDING. 109 - 112 05 2-3-82 A LEASE DEED WAS EXECUTED BETWEEN GOVT. O F RAJASTHAN & THE FIRM M/S JOY EXHIBITORS, BHILWARA FOR ALLOTMENT OF LAND TO THE FIRM FOR A PERIOD OF 2 0 YEARS FOR THE CONSTRUCTION OF CINEMA BUILDING 109 - 112 06 28-9-88 THE COLLECTOR BHILWARA ISSUED A SHOW CAU SE NOTICE TO THE FIRM INVITING REASONS FOR NOT CANCELING OF LEASE GRANTED ON 22-1-82 AS THE FIRM FAILED TO CONSTRUCT A CINEMA BUILDING WITHIN TIME ALLOWED 153 13 [COULD NOT CONSTRUCTED CINEMA BUILDING AS THE TENANT WAS IN POSSESSION OF THE ENTIRE LAND] 07 26-12-89 A DEED OF DISSOLUTION OF PARTNERSHIP FI RM WAS EXECUTED AND ACCORDING TO WHICH THE FIRM WAS DISSOLVED ON 1-9-89. THE CLAUSE NO. 3 TO 6 OF DISSOLUTION DEEDS READS AS UNDER: [3] ;G FD TEHU TKS FD 49,500/ - #0 ESA [KJHNH FKH ML LE; NKSUKSA HKKXHNKJKSA US VK/KK VK/KK #I;K ;KUS 24,750/-, 24,750/- YXK, FKSA JH CNZHYKY BU #I;KSA DKS VHKH UGHA YS JGS GSA [4] ;G FD VXJ ENUYKY VXZOKY BL HKKXHNKJH DS UKE LS JKT; LJDKJ LS OKIL TEHU YSUK PKGS RKS JH CNZHYKY DK S BLESA DKSBZ VKIFRR UGHA GKSXH VKSJ JKT; LJDKJ ESA VIUK UK E HKH PYUS NSXK FDURQ ML TEHU IJ [VXJ JKT; LJDKJ IQU% TEHU NSR H GS RKS] JH CNZHYKY DK FDLH HKH RJG DK GD ;K VF/KDKJ UG HA JGSXKA [5] ;G FD JH CNZHYKY TC TC HKH JH ENUYKY VXZOKY PKGSXSA OGAK OGAK MIFLFKR GKSAXS ,OA FTU FTU NLRKOSTKSA VKF N IJ GLRK{KJ PKGSAXS ;K VU; ENN PKGSAXS RKS JH CNZHIZLKN LC DK;Z DJSAXSA [6] ;G FD BL LHKH DKEKSA DS FY, PKGS JH ENUYKY VXZOKY DKS JKT; LJDKJ OKIL TEHU PKGS FLUSEK DS FY, ;K VU; FDLH DK;Z DS FY, TKS FD TKAP ,XTHFOVLZ DS UKE DH GKSXH I QU% VKOAFVR DJS ;K U DJSA] JH ENUYKY JH CNZHYKY DKS #I; S NL YK[K 31/12/92 RD NS NSAXSA ;FN ;G JDE JH ENUYKY VXZOKY US 31/12/92 RD UGHA FN;S RKS JH ENUYKY VXZOKY 01/01/1993 LS 18 IZFRKR DH NJ LS JH CNZHYKY DKS C;KT HKH VNK DJSAXSA YSFDU GJ DHER IJ ;G JDE 31/12/92 RD VO; VNK DJ NH TK,XHA 104 - 105 08 29-12-88 THE COLLECTOR BHILWARA BY HIS ORDER DAT ED 29-12-88 CANCELLED THE LEASE DEED IN RESPECT OF 1 BIGHA 2 BISWA GRANTED ON 22-1-82 AND DIRECTED THE TEHSILDAR BHILWARA TO TAKE ACTION AS PER PROVISIONS OF RULE 9(2) OF RAJASTHAN LAND REVENUE CONVERSION & REGULATION OF AGRICULTURE LAND FOR TAKING POSSESSION OF LAND 113 - 114 09 4-5-91 THE HONBLE REVENUE MINISTER, GOVT. OF RA JASTHAN BY ORDER DATED 4-5- 91 VACATED THE ORDER OF COLLECTOR BHILWARA DATED 29-12-88 AS THE HONBLE REVENUE MINISTER FOUND THAT THE ASSESSEE COULD NOT CONSTRUC T THE CINEMA BUILDING WITHIN TIME ALLOWED DUE TO THE FACT THAT LAND WAS IN POSSESSION OF TENANT AND THE ISSUE OF EJECTMENT OF TENANT IS PENDING IN THE COUR T. 134 - 136 14 THE HONBLE MINISTER FURTHER FOUND THAT DUE TO OPENING OF EDUCATIONAL INSTITUTION IN THE AREA IT I S NOT POSSIBLE TO CONSTRUCT THE CINEMA BUILDING ON SUCH LAND AS SUCH THE LAND WAS ORDERED FOR CONVERSION FOR BUSINESS PURPOSES 10 27-2-93 A FRESH LEASE DEED WAS EXECUTED BETWEEN THE GOVT. OF RAJASTHAN AND M/S JOY EXHIBITORS ALLOTTING LAND FOR BUSINESS PURPOSES. [CONSTRUCTION OF CINEMA BUILDING WAS NOT ALLOWED] THIS SHOWS THAT ON 26- 12-89 THERE WAS INCHOATE RIGHT IN THE REM AS RIGHT WAS ACQUIRED ON 27-02-93. THUS ON 26-12-89 THERE WAS NO ABSOLUTE RIGHT WITH THE ASSESSEE ABOUT THE OWNERSHIP OF THE AGRICULTURAL LAND. 38 - 45 11 5-5-97 THE LD. ASSESSING OFFICER PASSED AN ORDER ON 5-5-97 FOR ASSTT. YEAR 1993-94 U/S 148 AND DETERMINED CAPITAL GAINS U/S 45(4) AT RS. 21,34,010/- IN THE HANDS OF FIRM 12 12 30-7-99 THE MUNICIPAL BOARD BHILWARA GRANTED PER MISSION TO CONSTRUCT COMMERCIAL COMPLEX ONLY ON 13024 SQ. FT. AND THE BALANCE OF LAND WAS REQUIRED TO BE LEFT OPEN FOR ROADS, PARKING ETC AS PER PLAN ATTACHED TO THE LEASE DEED. [P.B. 45] 137 13 23-11-00 THE CIT(A) AJMER ANNULLED THE ASSESSMEN T ORDER PASSED BY AO FOR THE ASSTT. YEAR 1993-94 14 21-03-01 THE AO ISSUED A FRESH NOTICE U/S 148 ON 21-03-2001 FOR THE ASSESSMENT YEAR 1990-91 AND VALUED THE AGRICULTURAL LAND UNDER REFERENCE AT RS. 4995000/- FOR THE PURPOSE OF SEC 45(4) ON THE BASIS OF D.V.O. REPORT WHICH WAS BASED ON THE SALE INSTANCES OF SMALL, COMMERCIAL SHOPS DULLY CONSTRUCTED WITH ALL THE AMENITIES (P.B. 91-92) AND WITH OUT DUE REGARD TO SALEABLE AREA AVAILABLE OR PERMISSIBLE FOR SALE / CONSTRUCTION AND THE FACT THAT THE LAND WAS UNDER T HE POSSESSION OF TENANT ON THE MONTHLY RENT OF RS. 225 /- WHICH WAS CONTINUED TILL THE DATE OF INSPECTION OF PROPERTY BY THE DVO ON 18-03-2002 [P.B. 4 PARA 6.6] AND ON 16-12-2008 (P.B. 77 PARA 3.4 & P.B. 79 PARA 6.7). 1 9 15 17-4-01 A RETURN WAS FILED UNDER PROTEST SHOWING NIL INCOME. 16 21-3-02 VALUATION OF LAND WAS DETERMINED BY DVO AS ON DECEMBER 1989 AT RS. 49,95,000/- ON THE BASIS OF INSPECTION OF PROPERTY ON 18-3-2002 BY TREATING THE 1 - 10 15 ENTIRE LAND AS COMMERCIAL LAND AND SALEABLE AS SUCH . 17 18-10-02 THE LD CIT (A) HELD THAT VALUE OF LAND CANNOT BE TAKEN MORE THAN RS. 20 LACS AND FURTHER HELD THAT LAND WAS PURCHASED BY TWO PARTNERS INDIVIDUALLY AND AS SUCH NO CAPITAL GAIN ARISES IN THE HANDS OF FIRM AS IN THE BOOKS OF FIRM NO INVESTMENT WAS SHOWN WITH REGARD TO PURCHASE OF AGRICULTURAL LAND AND THE INVESTMENT WAS MADE BY THE PARTNERS INDIVIDUALLY IN THEIR INDIVIDUAL CAPACITY. 18 14-09-07 THE HONBLE TRIBUNAL SET ASIDE THE ISSU E RELATING TO VALUATION OF LAND IN QUESTION AND REMANDED THE MATTER TO THE AO WITH THE FOLLOWING DIRECTION [P.B. 29] : - AT THE SAME TIME, THE FACTORS WHICH ARE AGAINST THE ASSESSEE CANNOT BE LOST SIGHT OF IN DETERMINING THE FAIR MARKET VALUE AS HAS BEEN DONE BY THE DVO IN THE PRESENT CASE. THE HONBLE SUPREME COURT IN THE CASE OF CWT VS. RAGHUBAR NARAIN SINGH [1984] 146 ITR 228 [SC] HAS HELD THAT WHILE VALUING THE ASSETS, CONSIDERATION HAS TO BE GIVEN TO THE HAZARD S WHICH ARE PREVALENT IN THE CASE. SIMILARLY, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CWT VS. SMT. SHIRINBANOO [ 1976] 102 ITR 735 [GUJ] CONSIDERED A CASE IN WHICH THERE WAS A MORTGAGE DEBT ON THE PROPERTY WHOSE VALUATION WAS DISPUTED. IT WAS HELD THAT SUCH MORTGAGE DEBT WAS TO BE DEDUCTED FOR VALUING THE PROPERTY FOR LEVY OF ADDITIONAL WEALTH TAX. FROM THE ABOVE DECISIONS, IT BECOMES OBVIOUS THAT THE FACTORS WHICH WEIGH AGAINST THE ASSESSEE ARE REQUIRED TO BE PROPERLY REFLECTED IT THE PROCESS OF DETERMINATION OF THE FA IR MARKET VALUE. AS THESE FACTORS HAVE NOT BEEN TAKEN INTO CONSIDERATION WHILE VALUING THE INTEREST OF TH E ASSESSEE IN THE LAND BY THE DVO AND FURTHER NO REGISTERED VALUERS REPORT HAS BEEN MADE AVAILABLE ON BEHALF OF THE ASSESSEE, IN OUR CONSIDERED OPINIO N, THE QUESTION OF VALUATION CANNOT BE DECIDED AT OUR END. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AN D RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR DETERMINATION OF PROPER FAIR MARKET VALUE OF TH E ASSESSEES INTEREST IN THE LAND IN ACCORDANCE WITH OUR ABOVE REFERRED OBSERVATIONS. IT IS ON THE BASIS OF SUCH FRESH VALUE DETERMINED BY THE DVO AND AFTER 11 - 31 16 CONSIDERING THE ASSESSEES OBJECTION, THE AMOUNT OF CAPITAL GAIN IN TERMS OF SEC. 45(4) WOULD BE CALCULATED IN THE PRESENT YEAR. 19 31-10-08 THOUGH THE HONBLE TRIBUNAL SET ASIDE T HE ISSUE OF VALUATION AND RESTORED THE MATTER TO THE FILE OF TH E AO ON 14-09-2007 BUT THE AO FOR THE FIRST TIME ISSUED NOTICE U/S 143(2) ON 31-10-2008 FIXING THE CASE FOR 03-11-2008 WHEN THE ASSESSMENT WAS GETTING BARRED BY LIMITATION ON 31-12-2008. 32 33 34 20 03-11-08 THAT IN RESPONSE TO NOTICE THE AR OF TH E ASSESSEE APPEARED BEFORE AO AND ON THIS DATE THE AO WROTE A LETTER TO THE DVO FOR DETERMINATION OF VALUE OF THE LAND IN QUESTION. NO PROCEEDING TOOK PLACE FROM 03- 11-2008 TO 29-12-2008. 33 21 29-12-08 THE VO PREPARED THE VALUATION REPORT AN D SENT THE SAME TO THE AO FROM AJMER TO BHILWARA BY FAX. [phone] AFTER RECEIPT OF VALUATION REPORT ON FA X THE AO ISSUED A NOTICE U/S 143(2) & 142(1) FIXING THE CASE FOR HEARING ON 30-12-08. 33 23 30-12-08 ON 30-12-08 THE AR OF THE ASSESSEE APPE ARED. THE CASE WAS ADJOURNED FOR 31-12-2008. 33 24 31-12-08 THE AR OF THE ASSESSEE ATTENDED AND FIL ED DETAILED OBJECTION AGAINST THE VALUE DETERMINED BY THE DVO. 86 - 88 25 31-12-08 THE AO PASSED THE ORDER IN THE MANNER P ROVIDED U/S 144 ON THE BASIS OF DVOS REPORT WITHOUT CONSIDERING THE ASSESSEES OBJECTION ON THE VALUATI ON MADE BY THE DVO AND THE DIRECTION ISSUED BY THE HONBLE TRIBUNAL. AO PAGE 5 6 26 29-06-09 THE LD CIT (A) DISMISSED THE ASSESSEES APPEAL BY ADOPTING THE SAME VALUATION AS MADE BY DVO IN UTTER DISREGARD TO THE DIRECTION OF THE HONBLE TRIBUNAL. CIT (A) PARA 5.6 PAGE 7-8 HAVING DISSATISFIED WITH THE ORDER OF THE LD CIT (A ) THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE HONBLE TRIBUNAL A GAINST THE DETERMINATION OF VALUATION OF AGRICULTURAL LAND AS ON DEC. 1989 A T RS. 45,08,400/- BY GROUND OF APPEAL NO. 1 TO 11. SUBMISSION IN RESPECT OF GROUNDS OF APPEAL 17 1] THAT FROM THE COPY OF THE VALUATION REPORT PREPARED BY THE DVO, ASSESSMENT ORDER PASSED BY AO AND THE ORDER PASSED BY LD CIT (A) IT IS CLEAR THAT NONE OF THE AUTHORITIES CARED TO COMPLY WITH THE DIRECTION ISSUED BY THE HONBLE TRIBUNAL WHILE ADOPTING TO THE VALUA TION OF LAND IN CORRECT PERCEPTIVE. THE PERUSAL OF ORDER SHEET SHOWS THAT NO ATTEMPT WAS MADE BY THE ASSESSING OFFICER AT ANY POINT OF TIME TO PASS A ASSESSMENT ORDER AFTER CONSIDERING THE DIRECTION ISSUED BY THE HONBLE TRI BUNAL. 2] THAT THE DIRECTION OF THE HONBLE TRIBUNAL WAS TO C ONSIDER HAZARDS WHICH WERE PREVALENT AND ATTACHED TO THE LAND WHILE DETER MINATION OF ITS VALUE . THE RECORD SHOWS THAT FOLLOWING HAZARDS WERE ATTACH ED TO THE LAND AS ON 26-12-89 WHICH ADVERSELY AFFECTED THE VALUE OF THE LAND: - A] THE LAND ON THE DATE OF VALUATION WAS AGRICULTURAL LAND AND AS SUCH CANNOT BE VALUED ON THE BASIS OF SALES INSTANCES OF DULLY CONSTRUCTED COMMERCIAL SHOPS OF SMALL SIZE. THE AUTHORITIES FAI LED TO CONSIDER THAT AN AGRICULTURAL LAND EVEN WITHIN THE MUNICIPAL LIMI T CANNOT IPSO FACTO BECOMES COMMERCIAL LAND UNLESS THE LAND USED IS CHA NGED BY THE STATE GOVERNMENT AFTER RECOVERING DUE AMOUNT FOR THE SAME . THIS VITAL FACT WAS NOT CONSIDERED WHILE ADOPTING THE VALUATION OF THE LAND IN QUESTION. B] THE LAND WAS IN POSSESSION OF THE TENANT ON THE MON THLY RENT OF RS. 225/-. THIS FACT WAS ALSO NOTED BY THE DVO IN THE P ERFORMA OF THE VALUATION WHEN THEY INSPECTED THE SITE. THIS VITAL FACT THAT LAND IN QUESTION WAS UNDER THE POSSESSION AND CONTROL OF TH E TENANT AND THE LITIGATION WAS GOING ON WITH THE TENANT HAD ADVERSE LY AFFECTED THE MARKET PRICE OF THE LAND. THIS VITAL HAZARDS WAS NO T CONSIDERED BY THE AUTHORITIES BELOW. 18 C] THAT THE LAND WAS STOOD SURRENDERED TO THE STATE GO VERNMENT UNDER RULE 9 (2) OF RAJASTHAN LAND REVENUE AND CONVERSION AND REGULATION OF AGRICULTURAL LAND PRIOR TO 02-01-1981 AND THE LEASE DEED GRANTED FOR THE CONSTRUCTION OF CINEMA BUILDING WAS CANCELLED ON 29 -12-1988 FOR WHICH A SHOW CAUSE NOTICE WAS ALREADY ISSUED ON 28- 09-88. THE COLLECTOR, BHILWARA ALSO DIRECTED THE TEHSILDAR, BH ILWARA TO TAKE THE POSSESSION OF THE LAND. 3] THE VALUATION REPORT PREPARED BY DVO DO NOT THROUGH ANY LIGHT AS TO THE CONSIDERATION OF THESE VITAL HAZARDS ATTACHED TO TH E LAND WHICH ADVERSELY AFFECTED THE VALUE OF THE LAND WHILE ESTIMATING THE VALUE AS ON DEC. 1989 AND AS SUCH THE VALUATION REPORT OBTAINED BY THE AO FROM THE DVO WHICH IS THE SOLE BASIS FOR MAKING THE ADDITION REQUIRES TO BE REJECTED AND THE LAND IS REQUIRED TO BE VALUED EITHER AS PER RENT CAPITAL IZATION METHOD OR BY BELTING SYSTEM CONSIDERING THE FOLLOWING FACTORS: - A] AREA OF LAND AVAILABLE FOR COMMERCIAL PURPOSE AS TH E ENTIRE LAND CANNOT BE SOLD IN SMALL PLOTS WITHOUT PROVIDING ROADS AND SET BACK. AS PER THE SUBSEQUENT LEASE DEED GRANTED ON 27-02-1993 THE PER MISSIBLE AREA FOR THE USE OF THE LAND FOR COMMERCIAL PURPOSE WAS ONLY 13024 SQ. FT. AND THE BALANCE OF AREA WAS DIRECTED TO BE LEFT OPEN FO R SET BACK, PARKING AND THE ROADS AND AS SUCH THE RATE IS TO BE APPLIED ON THE LAND AREA OF 13024 SQ. FT. AND NOT ON 29911 SQ. FT. AS APPLIED BY DVO. B] THE AMOUNT REQUIRED TO BE DEPOSITED WITH THE STATE GOVERNMENT FOR THE CONVERSION AND DEVELOPMENT OF THE LAND IS REQUIRED TO BE REDUCED FROM THE VALUE WORKED OUT ON 13024 SQ. FT. WHICH IS ONLY SALEABLE AREA AVAILABLE TO THE ASSESSEE. C] THE RATE IS TO BE APPLIED AS APPLICABLE TO THE OPEN LAND AND NOT THE RATES ON WHICH DULLY CONSTRUCTED SHOPS WERE SOLD. 19 4] THAT IN SPITE OF SUCH VITAL HAZARDS ATTACHED TO THE LAND AS ON 26-12-89 THE LD DVO CONVENIENTLY HELD THAT FROM THE LAND RATE ADOPTED IN THE ORIGINAL REPORT AT THE RATE OF RS. 167/- SQ. FEET A REBATE O F 5% IS SUFFICIENT AS DIFFERENCE BETWEEN THE LEASE HOLD LAND AND FREE HOL D LAND AND A FURTHER REDUCTION OF 5% IS TO BE MADE FOR THE DISPUTED LAND . THE APPROACH ADOPTED BY THE LD DVO WHICH FOLLOWED BY THE LD AO AND THE L D CIT IS TOTALLY ERRONEOUS AND CONTRARY TO THE DIRECTION OF THE HON BLE TRIBUNAL. 5] THAT WHILE ARRIVING THE LAND RATE AT THE RATE OF RS . 167/- PER SQ. FT. THE LD DVO IN THE ORIGINAL REPORT AS WELL AS IN THE SUBSEQ UENT REPORT THE DVO CONSIDERED THE SALE INSTANCES WHICH WERE IN RESPECT OF DULY CONSTRUCTED SHOPS SOLD BY THE MUNICIPAL BOARD IN THE AUCTION AND THE RATES SO ARRIVED WAS NOT IN RESPECT OF THE VACANT PLOT OF LARGE AREA WHICH TO WAS IN FORM OF AGRICULTURAL LAND, IN POSSESSION OF TENANT AND FOR WHICH THERE WAS ONLY INCHOATE RIGHT WITH THE ASSESSEE AS THE FRESH LEASE DEED WAS GRANTED AFTER EXPIRY OF A PERIOD OF MORE THAN THIRTY SEVEN MONTHS . 6] THAT DURING THE ASSESSMENT PROCEEDINGS THE DVO OBTA INED A CERTIFICATE DATED 23-12-2008 WITH REGARD TO DLC RATE FROM THE D EPUTY REGISTRAR REGISTRATION AND STAMP AND IT WAS INFORMED BY THE S UB REGISTRAR THAT NO DLC RATE WAS FIXED IN THE YEAR 1989 & 1990 AND AS S UCH THE DVO RELIED ON THE SALE INSTANCES OF FULLY CONSTRUCTED SMALL SHOPS AND OVER LOOKED THE RATES OF VACANT COMMERCIAL PLOT SOLD AVAILABLE IN THE SAM E DETAILS IN WHICH THE RATE OF CONSTRUCTED COMMERCIAL SHOPS WAS GIVEN AT R S. 167/- PER SQ. FT. 7] THAT DURING THE APPELLATE PROCEEDINGS THE ASSESSEE ALSO FILED A CERTIFICATE BEFORE THE LD CIT (A) WHICH WAS ISSUED BY THE DEPUT Y REGISTRAR REGISTRATION AND STAMP ADDRESSED TO THE COLLECTOR, NAGAR PARISHAD, BHILWARA THAT IN THE YEAR 1990-91 THE RATE OF DULLY CONSTRUCTED COMMERCIAL SHOPS WAS RS. 167/- PER SQ. FT. AND THE MAXIMUM RAT E IN THE BHILWARA FOR 20 OPEN COMMERCIAL LAND WAS RS. 54/- PER SQ. FT.. THE WRITTEN SUBMISSION AND THE PAPER BOOK WAS FORWARDED BY THE LD CIT (A) TO T HE ASSESSING OFFICER BUT THE LD CIT FAILED TO CONSIDER THE VITAL EVIDENC E PRODUCED BEFORE HIM. 8] THAT EVEN FROM THE SALE INSTANCES RELIED BY THE DVO WHICH WERE OBTAINED FROM THE DEPUTY REGISTRAR REGISTRATION AND STAMP AN D ON THE BASIS OF WHICH THE VALUATION OF THE LAND IN QUESTION WAS DET ERMINED AT RS. 167/- SQ. FT. SHOWS THAT THE RATE OF RS. 167/- SQ. FT. WAS IN RESPECT OF DULLY CONSTRUCTED SMALL COMMERCIAL SHOPS SITUATED IN FULL Y DEVELOPED AREA WITH ALL THE AMENITIES AND WERE SOLD BY MUNCIPAL CORPORA TION, BHILWARA. HOW THE DVO COULD APPLY THE RATE OF FULLY CONSTRUCTED S HOPS OF SMALL SIZES IN RESPECT OF OPEN LAND AND THAT TO WAS UNDEVELOPED, N ON CONVERTED INTO COMMERCIAL AND COULD NOT HAVE SOLD IN ITS ENTIRETY WITHOUT LEAVING SUFFICIENT SPACE FOR PUBLIC AMENITIES AND WHICH TO WAS IN THE POSSESSION OF THE TENANT AND HAVING NO LEGAL RIGHT TO SALE THE SA ME DUE TO CANCELLATION OF LEASE DEED ON 29-12-1988. 9] THAT FROM THE RATES PROVIDED BY THE SUB REGISTRAR R EGISTRATION [P.B. 91-92] ON THE BASIS OF WHICH THE AO ADOPTED THE LAND RATE OF RS. 167/- PER SQ. FT. SHOWS THE RATE OF COMMERCIAL LAND OF SMALL SIZE AS UNDER: - DATE AREA IN SQ. FT. AMOUNT RATE PER SQ. FT. P.B.PAGE 12-01-90 187 10700/- 57.22 92 31-05-90 450 23000/- 51.11 92 31-12-90 450 15000/- 33.00 92 90-91 54.00 90 (AS PER CERTIFICATE OF DEPUTY REGISTRAR REGISTRATION & STAMP) 21 THE LD. AR HAS RELIED ON THE FOLLOWING DECISIONS. A] APPROPRIATE AUTHORITY AND ANOTHER V/S R.C. CHAWALA & OTHERS, 249 ITR 450 (SC) B] CWT V/S RAJ KUMARI BHUVANESHWARI, 215 ITR 198 C] CWT V/S KAMALA GANAPATHY SUBRAMANIAM, 220 ITR 170 ( MAD). THE LD. AR HAS RAISED THE ALTERNATIVE SUBMISSIONS A S UNDER: (A) THAT THE VALUATION OF LAND ON THE BASIS OF RENT CAPITALIZATION METHOD COMES TO RS. 54000/- AS DETAIL BELOW: - MONTHLY RENT RS. 225/- RENT OF THE YEAR 225X12= RS. 2700/- CAPITALIZATION AT THE RATE OF 20 TIMES. VALUATION COMES TO RS. 54000/-. (B) THAT EVEN ON THE BASIS OF MAXIMUM RATE AVAILABLE FO R OPEN COMMERCIAL LAND WHICH COMES TO RS. 54/- PER SQ. FT. THE VALUATION OF THE PROPERTY IN RESPECT OF SALEABLE PORTION WORK S OUT AS UNDER:- SALEABLE AREA AVAILABLE OUT OF TOTAL AREA 29911 SQ. FT. 13024 SQ. FT. RATE PER SQ. FT. 54/- TOTAL VALUE 13024 X 54/- = 7,03,296/- LESS AMOUNT REQUIRED TO BE PAID FOR CONVERSION AND DEVELOPMENT (P.B. 106 TO 108) 2,54,869/- MARKET VALUE 4,48,427/- IN LIGHT OF ABOVE THE WORKING OF THE CAPITAL GAIN S HALL BE AS UNDER: - 22 DATE OF PURCHASE OF LAND 31-07-1980 (P.B. PAGE 93-9 7) 49,500/- ADD REGISTRATION EXPENSES 3,000/- 52,500/- INDEXATION COST AS ON 31-12-1989 (172%) 90300/- PROFIT ASSESSABLE U/S 45(4) SALEABLE VALUE AVERAGE OF VALUE OF LAND AS PER LAND 251214/- CAPITALIZATION METHOD AND AS PER AREA AVAILABLE FOR SALE ON THE RELEVANT DATE (54000/- + 448427/- / 2 ) TAXABLE LONG TERM CAPITAL GAIN U/S 45(4) 160914/- IN LIGHT OF ABOVE THE MAXIMUM VALUE OF THE LAND AS ON THE DATE OF DISSOLUTION OF THE FIRM CANNOT BE ESTIMATED MORE THAN THE AVERAGE OF VALUE DETERMINED BY THE RENT CAPITALIZAT ION METHOD AT RS. 54000/- AND THE VALUE WORKED OUT ON THE BASIS OF SA LE INSTANCES AT RS. 448427/- AND THE TAXABLE CAPITAL GAIN COMES TO RS. 1,60,914/-. 2.13 ON THE OTHER HAND, THE LD. DR SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED THAT THE LAND WAS VALUABLE LAND AND THE DVO IS EXPERT IN VALUING THE LAND AS ASCERTAINED BY THE FAIR MARKET VALUE OF THE LAND. THE VALUATION SO MADE BY THE DVO IS FAIR AND REASONABLE AND THE SAME SHOULD BE ADOPTED FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. 2.14 WE HAVE HEARD BOTH THE PARTIES. SECTION 45(4) REFERS TO PROFIT AND GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF THE FIRM. FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN, IT HAS 23 BEEN MENTIONED IN SECTION 45(4) THAT FAIR MARKET VA LUE OF THE ASSETS ON THE DATE OF SUCH TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THE FAIR MAR KET VALUE HAS BEEN DEFINED IN SECTION 2 (22)(B) OF THE ACT. THE FAIR MARKET VALUE IS THE PRICE THAT THE CAPITAL ASSETS WOULD ORDINARILY FETCH ON SALE IN THE OPEN M ARKET ON THE RELEVANT DATE. THUS THE FAIR MARKET VALUE IS TO BE ASCERTAINED ON THE D ATE OF DISSOLUTION. THE ENCUMBRANCES, IF ANY, ARE TO BE CONSIDERED FOR ASCE RTAINING THE FAIR MARKET VALUE ON THE DATE OF THE DISSOLUTION OF THE FIRM. IF THE PROPERTY IS IN THE POSSESSION OF THE TENANTS AND THE TENANTS CANNOT BE EVICTED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF RENT CONTROL ACT THEN THE FAIR MARKET VALUE OF T HE PROPERTY IS TO BE ASCERTAINED BY CAPITALIZING THE NET RENTAL INCOME. THUS THE FA IR MARKET VALUE OF PROPERTY OCCUPIED BY TENANTS WILL BE DIFFERENT FROM THE FAI R MARKET VALUE OF THE SAME PROPERTY WHICH IS IN THE POSSESSION OF THE OWNER. T HE HON'BLE ANDDRA PRADESH HIGH COURT IN THE CASE OF ADDL. CIT VS SMT. INDIRA BAI, 151 ITR 692 HAS HELD THAT PROPERTY OCCUPIED BY THE TENANT IS TO BE VALUED ON RENTAL METHOD TO ASCERTAIN THE FAIR MARKET VALUE. THE FAIR MARKET VALUE IS THE BES T PRICE WHICH A VENDOR CAN BE REASONABLY RECEIVED IN THE CIRCUMSTANCES OF A PAR TICULAR CASE . IN ASCERTAINING SUCH PRICE, ONE WILL HAVE TO CONSIDER A WILLING, RE ASONABLE AND PRUDENT PURCHASER MAY PAY FOR THE PROPERTY. IN ASCERTAINING SUCH VALU E, ALL FACTORS HAVING ANY DEPRESSING OR APPRECIATING EFFECT ON THE VALUE OF T HE PROPERTY HAVE TO BE TAKEN INTO ACCOUNT. IF SUCH CONSIDERATIONS ARE NOT TAKEN INTO ACCOUNT THEN THE FINDING IN RESPECT OF DETERMINATION OF FAIR MARKET VALUE IS A GAINST VIOLATION IN LAW. REFERENCE 24 IS MADE TO THE DECISION OF HON'BLE PATNA HIGH COURT IN THE CASE OF LALITA TODI & OTHERS VS CIT, 123 ITR 40. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SMT. SHIRINBANOO 102 ITR 735 HELD THAT ONLY METH OD OF EVALUATING AN ENCUMBERED ASSET IS TO CONSIDER THE VALUATION OF TH E ASSETS LESS THE VALUATION OF ENCUMBRANCE THEREON. IT IS ONLY AFTER EXCLUDING THE AMOUNT OF MORTGAGED DEBIT WHICH IS THE VALUATION OF THE ENCUMBRANCE THAT ONE GETS THE VALUE OF AN ENCUMBERED ASSETS. CONSIDERING THE ABOVE FACTS, ONE WILL HAVE TO ASCERTAIN THE FAIR MARKET VALUE ON THE DATE OF VALUATION AND ONE WILL HAVE TO CONSIDER THE FACTUAL SITUATION RELEVANT ON THE DATE OF DISSOLUTION, THE DATE ON WHICH THE FAIR MARKET VALUE IS TO BE ASCERTAINED. 2.15 IN THE INSTANT CASE, THE COLLECTOR, BHILWADA I SSUED A SHOW CAUSE NOTICE WITH INTENTION TO CANCEL LEASE GRANTED FOR CONSTRUCTION OF THE CINEMA. AFTER ISSUING SHOW CAUSE NOTICE, THE COLLECTOR, BHILWARA PASSED A N ORDER VIDE WHICH THE LAND WAS TO BE REVERTED BACK TO THE STATE. HENCE, ON THE DATE OF DISSOLUTION, THE ORDER OF THE COLLECTOR WAS IN EXISTENCE AND A PRUDENT PURCHA SER WILL DEFINITELY TAKE INTO ACCOUNT SUCH ORDER WHILE OFFERING PRICE FOR PURCHAS E. THE LAND UNDER CONSIDERATION HAS BEEN ORDERED TO BE REVERTED BACK TO THE STATE. IT IS TRUE THAT THE ASSESSEE FILED THE REVISION PETITION BEFORE THE STATE GOVT. IN THE REVISION PETITION, IT WAS SUBMITTED THAT ASSESSEE OBTAINED PERMISSION TO CONS TRUCT A CINEMA AFTER GETTING THE ASSURANCE FROM ARA MACHINE OWNER THAT HE WILL VACAT E THE LAND AND WILL SHIFT HIS BUSINESS. THE ARA MACHINE OWNER WAS HAVING UNAUTHOR IZED POSSESSION AND THE ASSESSEE FILED THE PETITION IN THE CIVIL COURT TO GET THE ARA MACHINE EVICTED. THE 25 DISPUTE IS STILL PENDING IN THE CIVIL COURT. THE AS SESSEE WAS ALLOWED TO CONSTRUCT THE CINEMA WITHIN 06 YEARS AND THE SAME COULD NOT B E DONE BECAUSE THE LAND WAS IN ADVERSE POSSESSION AND THE MATTER WAS PENDING IN THE CIVIL COURT. SUCH ENCUMBRANCES AS ON THE DATE OF DISSOLUTION ARE DEFI NITELY TO BE CONSIDERED FOR ASCERTAINING THE FAIR MARKET VALUE. THE DVO HAS GI VEN REBATE OF ONLY 5% IN RESPECT OF THE DISPUTE. HE HAS NOT APPRECIATED THE FACT THAT ASSESSEE WAS NOT ABLE TO GET THE LAND VACATED FROM THE POSSESSION OF THE TENANT DURING 06 YEARS. THE ASSESSEE WAS HAVING LICENCE WHICH WAS A VALUABLE RI GHT AND NO PRUDENT PERSON WILL MAKE THE STONE UNTURNED TO GET THE BENEFIT. MOREOV ER, THE COLLECTOR, BHILWARA ALREADY PASSED AN ORDER VIDE WHICH THE LAND STOOD R EVERTED BACK TO THE STATE AS CINEMA WAS NOT CONSTRUCTED. THE OWNER HAS TO TRANSF ER THE LAND IN FAVOUR OF THE STATE GOVT. AND THEN THE STATE GOVT. CAN GIVE THE S AME ON LEASE FOR CONSTRUCTION OF CINEMA. 2.16 THE LD. AR OF THE ASSESSEE DURING THE COURSE O F PROCEEDING BEFORE US HAS SUBMITTED THAT FAIR MARKET VALUE OF LAND SHOULD BE ADOPTED AS AN AVERAGE OF VALUE DETERMINED BY RENT CAPITALIZATION METHOD AND THE S ALE VALUE AS PER THE COMPARABLE RATES AFTER GIVING DISCOUNT. THE VALUE SUGGESTED BY THE ASSESSEE IN ITS SUBMISSION IS AVERAGE OF TWO METHODS AND THE SAME HAS BEEN STA TED AT RS. 2,51,214/-. LOOKING TO THE FACT THAT PERMISSION WAS ALSO OBTAINED FOR C ONSTRUCTING CINEMA AND THE ASSESSEE HAS FILED APPEAL, WE FEEL THAT IT WILL BE FAIR AND REASONABLE TO ADOPT THE VALUE AT RS. 3.50 LACS. THE COST OF CONSTRUCTION AS ON 01-04-1981 IS TO BE TAKEN AT RS. 52,500/-. THE AO WILL RECOMPUTE THE CAPITAL GAI N AS PER FINDINGS GIVEN ABOVE. 26 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16- 12-2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 16/12/2011 MISHRA COPY TO: 1. M/S. JOY EXHIBITORS, BHILWARA 2. THE ITO, WARD- 2, BHILWARA 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO. 454/JU/09) A.R.. ITAT: JAIPUR 27 28