DCIT 1(1), MUMBAI V. SHREE ADITYA FINWEALTH P.LTD, MUMBAI

ITA 5133/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3811 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C; 12

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5133 /MUM/2014 ( / ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX 1(1), ROOM NO. 579, AAYAKAR BHAWAN, MUMBAI 400 020. / V. M/S SHREE ADITYA FINWEALTH PVT. LTD., CTS- 832, NEAR SAFED POOL, KURLA ANDHERI ROAD, ANDHERI (E), MUMBAI 400 072. ./ PAN : AABCA2810N ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY SHRI A. RAMACHANDRAN , DR ASSESSEE BY : SHRI K. GOPAL / DATE OF HEARING : 24-2-2016 / DATE OF PRONOUNCEMENT :06-05-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 51 33/MUM/2014, IS DIRECTED AGAINST THE ORDER DATED 30.05.2014 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 1, MUMBAI (HEREINAFTER CAL LED THE CIT(A) ), FOR THE ASSESSMENT YEAR 2009-10, , THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) ARISI NG FROM THE ASSESSMENT ORDER DATED 30-12-2011 PASSED B Y THE LEARNED ASSESSING OFFICER(HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT). ITA 5133/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN I TA NO. 5133/MUM/2014 IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL ) READS AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N MADE BY THE A.O. BY SUBSTITUTING THE SALE CONSIDERATION DETERMINED BY S TAMP DUTY AUTHORITY FOR VALUE DETERMINED BY DVO WITHOUT APPRECI ATING THAT DVO HAS SUBMITTED ITS REPORT ON THE BASIS OF FACTUAL POSITION AND SALE INSTANCES AND A.O. IS RIGHT IN REPLACING IT FOR SALE C ONSIDERATION DETERMINED BY STAMP DUTY AUTHORITY?' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF TEXTILE MANUFACTURING. 4.DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR 2009-10 , THE ASSESSEE COMPANY SOLD A PROPERTY COMPRISING LAND AN D STRUCTURES. AN AGREEMENT FOR SALE WAS ENTERED INTO BETWEEN THE ASS ESSEE COMPANY AND M/S FUTURE COMMUNICATIONS LTD. ON 24.12.2008 FOR A TOTA L CONSIDERATION OF RS. 40 CRORES. THE ASSESSEE COMPANY WAS THE OWNER OF T HE LAND AND STRUCTURES AS ON THE DATE OF SALE AGREEMENT. THE PROPERTY WAS SITUATED AT MOHILI, VILLAGE MOHILI, SAFED POOL, KURLA ANDHERI ROAD, ANDHERTI (E AST), MUMBAI, TALUK SOUTH SALDETTE SUB DISTRICT OF BANDRA, DISTRICT BOM BAY SUBURBAN AND BEARING SURVEY NO. 50 AND 06 AND CST 832. THE SAID DOCUMENT/AGREEMENT WAS REGISTERED ON 24.12.2008 AND THE VALUE DECLARED AND DETERMINED BY THE STAMP DUTY AUTHORITIES ARE AS UNDER:- MARKET VALUE RS. 25,14,76,226/- AGREEMENT VALUE RS. 40,00,00,000/- WHILE COMPUTING THE CAPITAL GAIN, THE ASSESSEE COMP ANY HAS SHOWN THE VALUE OF THE LAND AND STRUCTURES AS UNDER:- ITA 5133/MUM/2014 3 VALUE OF LAND RS. 38 CRORES VALUE OF STRUCTURES RS. 2 CRORES THE ASSESSEE COMPANY HAS DECLARED LONG TERM CAPITAL GAIN ON THE LAND AND SHORT TERM CAPITAL GAIN ON THE STRUCTURES IN THE RE TURN OF INCOME FILED WITH THE REVENUE. THE A.O. MADE REFERENCE TO THE DVO FOR DETERMINATIO N OF THE FAIR MARKET VALUE OF THE AFORE-STATED PROPERTY ON THE DATE OF S ALE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 55A OF THE ACT. THE DVO SUBM ITTED ITS REPORT ASSESSING THE FAIR MARKET VALUE OF THE AFORE-STATED PROPERTY AT RS. 40,60,99,000/- FOR WHICH THE BREAK UP IS AS UNDER:- VALUE OF LAND RS. 38,08,30,000/- VALUE OF STRUCTURES RS. 2,52,69,000/- THE ASSESSEE COMPANY WAS SHOW CAUSED BY THE AO AS T O WHY ADVERSE INFERENCE REGARDING THE COMPUTATION OF CAPITAL GAIN S ON SALE OF THE AFORE- STATED PROPERTY MAY NOT BE DRAWN IN THE LIGHT OF TH E VALUATION REPORT OF THE DVO. THE ASSESSEE COMPANY SUBMITTED THAT THE VALUE DETER MINED BY THE VALUATION OFFICER U/S 55A OF THE ACT CANNOT BE SUBSTITUTED FO R FULL VALUE OF THE CONSIDERATION RECEIVED ON SALE OF THE AFORE-STATED PROPERTY AS THE SAME IS NOT APPLICABLE IN THE INSTANT CASE BECAUSE THE STAMP DU TY AUTHORITY HAD VALUED THE PROPERTY AT RS. 25,14,76,226 WHICH WAS MUCH LES SER THAN THE AGREEMENT VALUE OF RS. 40 CRORES. THE STAMP DUTY VALUE CAN BE SUBSTITUTED FOR AGREEMENT VALUE ONLY U/S 50C OF THE ACT WHICH IS NO T APPLICABLE IN THE INSTANT CASE AS THE COMPENSATION RECEIVED WAS MUCH MORE THAN THE STAMP ITA 5133/MUM/2014 4 DUTY VALUATION ADOPTED BY THE STATE AUTHORITIES. T HE ASSESSEE COMPANY PROTESTED AGAINST THE REFERENCE MADE TO THE DVO U/S . 55A OF THE ACT. THE ASSESSEE COMPANY RELIED UPON THE DECISION OF THE IT AT IN THE CASE OF ITO V. CHANDRAKANT R PATIL AND OTHERS (2011) 56 DTR (AHD) (TRIB) 449 AND JAYSHANKAR S. VAID V. DCIT (2010) 35 SOT 46 (AHD) A ND SUBMITTED THAT REFERENCE CAN BE MADE FOR VALUATION U/S 55A OF THE ACT TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY AND NOT THE FULL VAL UE OF THE CONSIDERATION RECEIVED. THE ASSESSEE COMPANY REQUESTED TO CONSID ER THE SALE AGREEMENT VALUE AS THE FULL VALUE OF THE CONSIDERATION FOR COMPLETION OF THE ASSESSMENT U/S. 143(3) READ WITH SECTION 143(2) OF THE ACT. THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSEE COMPANY. THE AO HELD THAT AS PER SECTION 55A (A) OF THE ACT, THE A.O. CAN REF ER THE VALUATION OF CAPITAL ASSET TO THE VALUATION OFFICER FOR DETERMINATION OF THE FAIR MARKET VALUE IN CASE THE VALUE OF ASSET CLAIMED BY THE TAX-PAYER IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER, IF THE A.O. IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALU E. THE AO OBSERVED THAT WHERE ANY REFERENCE IS MADE THEN THE PROVISIONS OF SECTION 16A(1) TO(6) OF THE WEALTH TAX ACT ,1957 APPLIES IN RELATION TO SUCH RE FERENCE . ON RECEIPT OF ORDERS U/S 16(3) OR 16(5) OF THE WEALTH TAX ACT,195 7 , AS PER SECTION 16(6) OF THE WEALTH TAX ACT,1957 THE A.O. SHALL COMPLETE TH E ASSESSMENT IN CONFORMITY WITH THE ESTIMATE OF THE VALUATION OFFIC ER. IN VIEW OF THE BINDING NATURE OF THIS SPECIFIC PROVISION, THE AO OBSERVED THAT HE IS BOUND BY LAW TO APPLY THE VALUATION SO MADE BY DVO WITH REFERENCE T O SECTION 55A OF THE ACT TO ALL THE COMPUTATIONAL PROVISIONS OF CHAPTER IV-E OF THE ACT. HENCE, IN VIEW OF THE ABOVE , THE ASSESSMENT WAS COMPLETED BY THE AO AFTER TAKING INTO CONSIDERATION THE FAIR MARKET VALUE AS DETERMINED BY THE DVO VIDE HIS VALUATION REPORT DATED 22.12.2011 AS FULL VALUE OF THE CONSIDERATION , VIDE ASSESSMENT ORDERS DATED 30.12.2011 PASSED U/S 143(3 ) OF THE ACT. ITA 5133/MUM/2014 5 5. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 30.12.2 011 PASSED BY THE AO U/S 143(3) OF THE ACT, THE ASSESSEE COMPANY FILED FIRST APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE COMPANY SUBMITTE D THAT THE ASSESSEE COMPANY HAS SOLD THE AFORE-STATED PROPERTY TO A DEV ELOPER WITH A CLEAR UNDERSTANDING THAT THE DEVELOPER WILL DEMOLISH THE STRUCTURE AND RE-DEVELOP THE SAME, WHICH IS CLEARLY STATED IN THE AGREEMENT. THE BUYER PURCHASED THE PROPERTY WITH DEVELOPMENT RIGHTS AND THE STRUCTURE WAS DEMOLISHED AFTER TAKING APPROVAL OF THE CONCERNED AUTHORITIES WHICH CLEARLY SHOWS THAT THE BUYER WAS NOT INTERESTED IN STRUCTURE. THE ASSESSE E COMPANY SUBMITTED THAT FOR DETERMINATION OF FAIR MARKET VALUE OF THE SCRAP OF THE STRUCTURE , A GOVERNMENT APPROVED VALUER WAS APPOINTED BY THE ASS ESSEE COMPANY WHO VALUED THE STRUCTURE ON SCRAP VALUE BASIS VIDE HIS VALUATION REPORT DATED 23.12.2008 FOR RS. 2,00,90,600/-. THE COPY OF THE VALUATION REPORT WAS SUBMITTED BEFORE THE AO AND THE VALUER IS DULY EMPA NELLED WITH INCOME TAX DEPARTMENT. THE ASSESSEE COMPANY SUBMITTED THAT THE FULL VALUE OF CONSIDERATION RECEIVED WAS RS. 40 CRORES AND WHEREB Y THE VALUE OF LAND WAS RS. 37,99,09,400 AND VALUE OF STRUCTURE WAS RS. 2,0 0,90,600/- AS PER THE GOVERNMENT APPROVED VALUER APPOINTED BY THE ASSESSE E COMPANY. THE STAMP DUTY AUTHORITIES HAVE VALUED THE PROPERTY CONSISTIN G OF LAND AND STRUCTURE AT RS. 25,14,76,226/- FOR STAMP DUTY VALUATION PURPOSE S. THUS , THE ASSESSEE COMPANY SUBMITTED THAT IT HAS CONSIDERED HIGHER VAL UE OF THE AGREEMENT VALUE AND STAMP DUTY VALUE , AND COMPUTED SHORT TER M CAPITAL GAINS AND LONG TERM CAPITAL GAINS ON SALE OF THE AFORE-STATED PROPERTY ACCORDINGLY. THE ASSESSEE COMPANY SUBMITTED THAT THE A.O. CAN MA KE REFERENCE TO THE VALUATION OFFICER IF THE CONDITION AS CONTAINED UND ER SECTION 50C(2) (A) OR (B) OF THE ACT ARE MET I.E. WHERE STAMP DUTY VALUE EXCEED FULL VALUE OF CONSIDERATION AND THE TAX-PAYER CLAIMS THAT THE VALUE AS ADOPTED BY THE STAMP DUTY ITA 5133/MUM/2014 6 AUTHORITIES EXCEED THE FAIR MARKET VALUE OF THE PRO PERTY CONSISTING OF LAND OR BUILDING OR BOTH, BUT IN THE INSTANT CASE FULL VAL UE OF CONSIDERATION OF RS. 40 CRORES IS MUCH HIGHER THAN THE VALUE RS. 25,14,76,2 26/- AS ADOPTED BY STAMP DUTY AUTHORITIES. THE ASSESSEE COMPANY FURTHER SUBMITTED THAT THE AO HAS REFERRED THE SAME TO THE VALUATION OFFICER DESPITE THE FULL VALUE OF CONSIDERATION IS TAKEN HIGHER OF STAMP DUTY VALUATION OR SALE AGREEMENT VALUE. TH E VALUE OF THE STRUCTURE WAS VALUED BY THE GOVERNMENT VALUER WHO IS AN INCOM E TAX APPROVED VALUER. THE AGREEMENT CLEARLY PROVIDED THAT THE STRUCTURE W ILL BE DEMOLISHED. THE VALUATION OF THE STRUCTURE BY DVO IS VALUED AFTER I TS DEMOLITION BASED UPON THE FUTURE VALUE OF THE STRUCTURE WHEREAS THE STRUC TURE WAS ALREADY DEMOLISHED AT THE TIME WHEN DVO VALUED THE STRUCTUR E. THUS , THE ASSESSEE COMPANY SUBMITTED THAT REFERENCE TO SECTION 55A OF THE ACT TO THE DVO WAS ILLEGAL AND BAD IN LAW FOR ASCERTAINING THE FAIR M ARKET VALUE OF A CAPITAL ASSET AND NOT FOR ASCERTAINING FULL VALUE OF THE CONSIDE RATION. THE SALE CONSIDERATION WAS HIGHER THAN THE VALUE DETERMINED BY THE STAMP DUTY AUTHORITY. THE VALUATION OF THE LAND AS PER THE DV O IS NOT HIGHER BY EVEN 1% OR EVEN 0.5%. THE ASSESSEE COMPANY RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SMT. NILOFER I SINGH, (2009)309 ITR 233 (DEL. HC) AND THE DECISION(S) OF ITAT , AHMEDABAD B ENCHES IN THE CASE OF ITO V. CHANDRAKANT P. PATEL & OTHERS,(2011) 56 DTR(AHD) (TRIB) 449 AND IN THE CASE OF JAYSHANKAR S. VAID V. DCIT,(2010) 355 SOT 4 6 (AHD) . THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE COMPANY NOTED THAT THE ASSESSEE COMPANY HAS DECLARED LONG TERM CA PITAL GAINS ON SALE OF LAND BY TAKING VALUE OF LAND AT RS. 38 CRORES AND SHORT TERM CAPITAL GAINS ON STRUCTURES BY TAKING THE VALUE OF STRUCTURE AT R S. 2 CRORES RESPECTIVELY AS PER THE ASSESSMENT ORDER PAGE 2. THE A.O. HAS REFE RRED THE MATTER FOR DETERMINATION OF FAIR MARKET VALUE OF THE PROPERTY U/S. 55A OF THE ACT. THE ITA 5133/MUM/2014 7 DVO HAS DETERMINED THE VALUE OF LAND AT RS. 38,08,3 0,000/- AND VALUE OF STRUCTURE AT RS. 2,52,69,000/- AS SALE CONSIDERATIO N ALTHOUGH THE ASSESSEE COMPANY OBJECTED THAT THE SUBSTITUTION OF SALE CONS IDERATION FOR COMPUTATION OF CAPITAL GAINS IS APPLICABLE ONLY IN TERMS OF SEC TION 50C OF THE ACT WHEREAS THE SAME IS NOT APPLICABLE IN THE CASE OF THE ASSES SEE COMPANY BECAUSE THE ASSESSEE COMPANY HAS TAKEN THE HIGHER VALUE OF SALE CONSIDERATION AT RS.40 CRORES WHICH IS MUCH MORE THAN THE VALUE ADOPTED BY STAMP DUTY AUTHORITIES AT RS. 25,14,76,226/-. THE AO HAS REFERRED TO SECT ION 55A OF THE ACT AND HELD THAT THE AO IS BOUND BY THE REPORT OF THE VALU ATION OFFICER IN RESPECT OF FAIR MARKET VALUE OF THE PROPERTY. THE AO HAS ALSO NOTED THAT WHERE ANY SUCH REFERENCE IS MADE , THE PROVISIONS OF SECTION 16A(1 ) TO (6) OF WEALTH TAX ACT,1957 APPLIES AND HELD THAT THE AO IS BOUND TO A PPLY THE VALUE AS DETERMINED BY THE DVO FOR COMPUTING CAPITAL GAINS. THE CIT(A) RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V.. SMT NILOFER I SINGH (SUPRA). THE CIT(A) OBSERVED THAT THE DIFFER ENCE BETWEEN DVO REPORT AND ASSESSEE COMPANYS VALUATION IS OF 1.01%. THE DVO HAS VALUED THE FAIR MARKET VALUE OF THE STRUCTURE AFTER ITS DEMOLITION AS SUBMITTED BY THE ASSESSEE COMPANY AND SUPPORTED BY THE ASSESSEE COMP ANY WITH EVIDENCE AND HENCE THE APPEAL OF THE ASSESSEE COMPANY WAS ALLOWE D BY THE CIT(A) VIDE ORDERS DATED 30-05-2014. 7. AGGRIEVED BY THE ORDERS DATED 30-05-2014 OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. D.R. SUBMITTED THAT THE ASSESSEE COMPANY HAS SOLD THE PROPERTY WHICH COMPRISES LAND AND STRUCTURE THEREON VIDE AGREEMENT DATED 24.12.2008 FOR A TOTAL CONSIDERATION OF RS. 40 CROR ES , WHILE THE VALUATION AS PER STAMP DUTY AUTHORITIES IS RS. 25,14,76,226/-. THE INCOME EARNED FROM THE SALE OF LAND HAS BEEN OFFERED TO TAX AS LONG TE RM CAPITAL GAINS WHILE THE INCOME FROM SALE OF BUILDING HAS BEEN OFFERED TO TA X AS SHORT TERM CAPITAL ITA 5133/MUM/2014 8 GAINS. THE BREAK UP OF THE FULL VALUE OF THE CONSI DERATION OFFERED BY THE ASSESSEE COMPANY IS RS. 38 CRORES FOR THE LAND AND RS. 2 CRORES FOR THE BUILDING. THE A.O. HAS REFERRED THE MATTER TO DVO WHEREBY THE VALUE OF THE LAND IS DETERMINED AT RS. 38,08,30,000/- AND VALUE OF THE STRUCTURE IS DETERMINED AT RS. 2,52,69,000/- BY THE DVO. THE A. O. HAS BROUGHT TO TAX THE GAINS ACCORDINGLY ON BOTH SALE OF LAND AND STRU CTURE AS LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS RESPECTIVELY BY ADOPTING VALUES AS DETERMINED BY THE DVO AS FULL VALUE OF CONSIDERATIO N UNDER CHAPTER IV-E OF THE ACT. THE CIT(A) HAS WRONGLY DELETED THE ADDITI ONS MADE BY THE AO. THUS, THE LD. D.R. SUPPORTED THE ADDITION MADE BY THE A.O . BY RELYING ON THE ASSESSMENT ORDER OF THE A.O. . 9. THE LD. COUNSEL FOR THE ASSESSEE COMPANY SUBMITT ED THAT THE STAMP DUTY VALUATION IS RS. 25,14,76,226/- , WHILE THE AG REEMENT VALUE IS RS. 40 CRORES WHICH IS MUCH MORE THAN STAMP DUTY VALUE. TH E A.O. CANNOT LEGALLY REFER THE MATTER TO THE DVO IN ACCORDANCE WITH THE PROVISIONS OF THE ACT . THE AO CAN ONLY REFER TO DVO FOR VALUATION U/S 50C(2) O F THE ACT WHERE THE VALUATION ADOPTED BY THE STAMP DUTY AUTHORITIES IS HIGHER THAN THE AGREEMENT VALUE AND THE TAX-PAYER CLAIMS THAT THE STAMP DUTY VALUE ADOPTED BY STAMP DUTY AUTHORITIES EXCEED THE FAIR MARKET VALUE OF TH E CAPITAL ASSET . THE LD. COUNSEL SUBMITTED THAT THE DVO VALUED THE STRUCTURE AT RS. 2,52,69,000/- AFTER THE DEMOLITION OF THE BUILDING BASED UPON THE FUTURE VALUE OF THE STRUCTURE WHEREAS THE STRUCTURE WAS ALREADY DEMOLIS HED AT THE TIME OF VALUATION BY THE DVO. THUS THE REFERENCE TO DVO WA S ILLEGAL AS STAMP DUTY VALUATION IS MUCH LOWER THAN THE ACTUAL CONSIDERATI ON RECEIVED BY THE ASSESSEE COMPANY. THE LD. COUNSEL FURTHER RELIED U PON THE ORDERS OF THE CIT(A) AND REITERATED THE SUBMISSIONS AS MADE BEFOR E THE AUTHORITIES BELOW WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. ITA 5133/MUM/2014 9 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING CASE LAWS. WE HAVE OB SERVED THAT THE ASSESSEE COMPANY HAS DECLARED LONG TERM CAPITAL GAINS ON SAL E OF LAND BY TAKING VALUE OF LAND AT RS. 38 CRORES AND SHORT TERM CAPI TAL GAINS ON STRUCTURES BY TAKING THE VALUE OF STRUCTURE AT RS. 2 CRORES RESPE CTIVELY AS PER THE ASSESSMENT ORDER PAGE 2. THE ASSESSEE COMPANY GOT T HE VALUE OF THE STRUCTURE VALUED BY THE GOVERNMENT VALUER WHO WAS A LSO INCOME TAX APPROVED VALUER. THE ABOVE-SAID INCOME TAX APPROVE D VALUER APPOINTED BY THE ASSESSEE COMPANY HAD VALUED THE STRUCTURE AT RS .2,00,90,600/- AND THE LAND WAS VALUED AT RS.37,99,09,400/- . THE ASSESSSE E COMPANY HAS STATED THAT THE STRUCTURE WAS TO BE DEMOLISHED BY THE BUYE R AS PER THE TERMS OF AGREEMENT AND THE BUILDING IS TO BE RE-DEVELOPED BY THE BUYER WHICH IS NOT CONTROVERTED BY THE REVENUE. THUS, THE VALUATION OF THE STRUCTURE BY THE APPROVED VALUER APPOINTED BY THE ASSESSEE COMPANY H AS BEEN DONE ON SCRAP VALUE BASIS AS THE STRUCTURE WAS TO BE DEMOLISHED A FTER PURCHASE BY THE BUYER AS PER TERMS OF AGREEMENT. THE A.O. HAS REFER RED THE MATTER TO DVO FOR DETERMINATION OF FAIR MARKET VALUE OF THE PROPERTY U/S. 55A OF THE ACT. THE DVO HAS DETERMINED THE VALUE OF LAND AT RS. 38,08,3 0,000/- AND VALUE OF STRUCTURE AT RS. 2,52,69,000/-, ALTHOUGH THE ASSESS EE COMPANY OBJECTED THAT THE SUBSTITUTION OF ACTUAL SALE CONSIDERATION FOR C OMPUTATION OF CAPITAL GAINS WITH THE VALUE AS DETERMINED BY DVO IS APPLICABLE ONLY IN TERMS OF SECTION 50C OF THE ACT WITH RESPECT TO TRANSFER OF LAND OR BUILDING OR BOTH , WHEREAS THE SAME IS NOT APPLICABLE IN THE CASE OF THE ASSES SEE COMPANY BECAUSE THE ASSESSEE COMPANY HAS TAKEN THE HIGHER VALUE OF SALE CONSIDERATION AT RS.40 CRORES OF THE PROPERTY CONSISTING OF LAND AND STRUC TURE WHICH IS MUCH MORE THAN THE VALUE ADOPTED BY STAMP DUTY AUTHORITIES AT RS. 25,14,76,226/-. IT IS STATED BY THE ASSESSEE COMPANY THAT THE DVO VALUED THE STRUCTURE AFTER ITS DEMOLITION BY THE BUYER BASED UPON THE FUTURE VALUE OF THE STRUCTURE WHEREAS THE STRUCTURE WAS ALREADY DEMOLISHED WHICH IS AGAIN NOT CONTROVERTED BY THE REVENUE. THE AO HAS REFERRED TO SECTION 55A OF THE ACT AND HELD THAT THE AO ITA 5133/MUM/2014 10 IS BOUND BY THE REPORT OF THE DEPARTMENTAL VALUATIO N OFFICER IN RESPECT OF FAIR MARKET VALUE OF THE PROPERTY DETERMINED BY THE DVO. THE AO HAS ALSO NOTED THAT WHERE ANY SUCH REFERENCE IS MADE , THE PROVISI ONS OF SECTION 16A(1) TO (6) OF WEALTH TAX ACT,1957 APPLIES AND THE AO HELD THAT HE IS BOUND BY LAW TO APPLY THE VALUE AS DETERMINED BY THE DVO FOR COMPUT ING THE CAPITAL GAINS. THE CIT(A) RELIED UPON THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF CIT V.. SMT NILOFER I SINGH (SUPRA) AND ALSO NOTED THAT THE DIFFERENCE BETWEEN DVO REPORT AND ASSESSEE COMPANYS VALUATION IS ONLY OF 1.01% AND GAVE THE RELIEF TO THE ASSESSEE COMPANY. CAPITAL GAINS ARE CHARGEABLE TO TAX UNDER THE ACT U NDER CHAPTER IV-E OF THE ACT AS PER PROVISIONS OF SECTION 45 TO 55A OF THE A CT. SECTION 45 OF THE ACT STIPULATES THAT PROFITS OR GAINS ARISING FROM THE T RANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE T O INCOME-TAX UNDER THE HEAD CAPITAL GAINS FOR THE ASSESSMENT YEAR. SECTI ON 45(1) READ WITH SECTION 48 OF THE ACT STIPULATES THAT THE CAPITAL GAINS SHA LL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET , THE AMOUNT OF EXPEN DITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE SUCH TRANSFER AS ALSO COST OF ACQUISITION OF THE ASSET AND COST OF ANY IMPROVEMENT THERETO. THE CONJOINT READING OF SECTION 45(1) AND 48 OF THE ACT WILL CLEARLY REVEAL THAT IN CASE OF TRANSFER BY WAY OF SALE OF PROPERTY , THE CAPITAL GAIN ARISING THERE-FROM HAS TO BE COMPUTED BY TAKING THE FULL VALUE OF THE CONSIDERA TION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER OF THE PROPERTY AND TH ERE-FROM COST OF ACQUISITION , COST OF IMPROVEMENT AND EXPENSES INCURRED WHOLLY AN D EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE PROPERTY IS TO BE DEDUCTED. THE ASSESSEE COMPANY IN THE INSTANT CASE HAS SOLD THE PROPERTY C ONSISTING OF LAND AND STRUCTURE THEREON FOR AN AGGREGATE VALUE OF RS.40 C RORES , WHILE THE VALUE AS COMPUTED BY STAMP DUTY AUTHORITIES OF THE AFORE-STA TED PROPERTY WAS MUCH LOWER AT 25,14,76,226/-. THE AO HAS NOT RECORDED AN Y SATISFACTION ITA 5133/MUM/2014 11 WHATSOEVER AS IS EVIDENCED FROM THE ORDERS OF THE A UTHORITIES BELOW BEFORE REFERRING THE MATTER TO DVO THAT THE FAIR MARKET VA LUE OF THE PROPERTY IS HIGHER THAN THE AGREEMENT VALUE OF RS. 40 CRORES AT WHICH THE PROPERTY WAS SOLD BY THE ASSESSEE COMPANY ALBEIT THE VALUE ADOPT ED BY THE STAMP DUTY AUTHORITIES WAS MUCH LESSER AT RS. 25,14,76,226/-. NO ADVERSE INCRIMINATING MATERIAL WAS BROUGHT ON RECORD BY THE AO BEFORE MAK ING REFERENCE TO DVO THAT THERE IS ANY ATTEMPT BY THE ASSESSEE COMPANY T O SUPPRESS OR CONCEALS THE VALUE OF SALE CONSIDERATION OF THE PROPERTY. TH E DVO HAS VALUED THE STRUCTURE AT RS. 2,52,69,000/- AFTER DEMOLITION OF THE STRUCTURE BASED UPON THE FUTURE VALUE OF THE STRUCTURE WHEREAS THE STRUC TURE WAS ALREADY DEMOLISHED AT THE TIME OF ITS VALUATION BY DVO , AS THE STRUCTURE WAS ITSELF MEANT TO BE DEMOLISHED BY THE BUYER AS THE BUYER BO UGHT THE PROPERTY FOR RE- DEVELOPMENT PURPOSES AS PER TERMS OF THE AGREEMENT WITH THE BUYER. THE ASSESSEE COMPANYS APPOINTED VALUER DETERMINED TH E VALUE OF THE STRUCTURE AT RS.2,00,90,600/- ON SCRAP VALUE BASIS WHICH WAS BASED ON THE LEGITIMATE PREMISE THAT THE SAME WAS MEANT TO BE DEMOLISHED BY THE BUYER FOR RE- DEVELOPMENT PURPOSES AS PER THE AGREEMENT WITH THE BUYER AND THE SAME WAS CONSIDERED AS FULL VALUE OF THE CONSIDERATION FOR THE PURPOSES OF COMPUTING CAPITAL GAINS UNDER CHAPTER IV-E OF THE ACT. THE FU LL VALUE OF CONSIDERATION IN THE CASE OF SALE AS STIPULATED IN SECTION 48 OF THE ACT MEANS FULL SALE PRICE ACTUALLY PAID. THE LAWMAKERS HAVE NOT USED THE WORD S FAIR MARKET VALUE U/S 45(1) READ WITH SECTION 48 OF THE ACT FOR BRINGING TO TAX THE CAPITAL GAINS EARNED IN THE CONTEXT OF THE SALE OF THE PROPERTY W HILE THE WORDS USED ARE FULL VALUE OF THE CONSIDERATION. THE WORDS FULL VALUE OF CONSIDERATION USED IN SECTION 48 OF THE ACT IN THE CONTEXT OF SALE OF THE PROPERTY HAS TO BE GIVEN PLAIN AND NATURAL MEANING WHICH MEANS THE FULL SALE PRICE ACTUALLY PAID. IT DOES NOT HAVE ANY REFERENCE TO THE MARKET VALUE OF THE PROPERTY BUT IS REFERRED TO THE CONSIDERATION VALUE REFERRED TO IN THE SALE DEEDS AS THE SALE PRICE OF THE CAPITAL ASSETS WHICH HAVE BEEN TRANSFERRED. ITA 5133/MUM/2014 12 SECTION 55A OF THE ACT CONCERNS WITH REFERENCE TO V ALUATION OFFICER AND STARTS WITH THE EXPRESSION WITH A VIEW TO ASCERTAINING TH E FAIR MARKET VALUE OF A CAPITAL ASSET FOR THE PURPOSES OF THIS CHAPTER . T HUS, IS EVIDENT FROM THE WORDS USED IN THE STATUTE, THE REFERENCE CAN BE MAD E TO DVO U/S 55A OF THE ACT IS FOR THE PURPOSES OF ASCERTAINING THE FAIR MA RKET VALUE OF THE CAPITAL ASSET. THUS, WHEN THE AO HAS TO ASCERTAIN THE FAIR MARKET VALUE OF THE CAPITAL ASSET SO TRANSFERRED, RESORT CAN BE HAD TO THE DVO FOR ASCERTAINING THE FAIR MARKET VALUE OF THE ASSET BY INVOKING SECTION 55A O F THE ACT . THERE ARE VARIOUS SITUATIONS CONTEMPLATED UNDER CHAPTER IV-E OF THE ACT WHEREBY FAIR MARKET VALUE OF THE ASSET IS REQUIRED TO BE COMPUTE D FOR BRINGING THE SAME TO TAX AS PER MANDATE OF THE ACT. REFERENCE FOR SUCH I NSTANCES ARE CONTEMPLATED UNDER CHAPTER IV-E OF THE ACT SUCH AS U/S 45(1A), 4 5(2), 45(4) OF THE ACT. SECTION 50C OF THE ACT CONTEMPLATE REFERENCE TO THE DVO WHEN THE VALUE ADOPTED BY STAMP DUTY AUTHORITIES IS HIGHER THAN TH E AGREED CONSIDERATION FOR TRANSFER OF CAPITAL ASSET BEING LAND OR BUILDING OR BOTH , AND THE TAX-PAYER CLAIMS THAT THE VALUE ADOPTED BY THE STAMP DUTY AUT HORITIES EXCEEDS THE FAIR MARKET VALUE OF THE CAPITAL ASSET BEING LAND OR BUI LDING OR BOTH, THEN THE REFERENCE MAY BE MADE TO THE DVO FOR VALUATION BY T HE AO . THUS, THE SPECIAL CASES AS LAID DOWN UNDER CHAPTER IV-E OF THE ACT RE QUIRING REFERENCE TO THE DVO FOR VALUATION OF PROPERTIES DOES NOT COVER THE CASES OF SALE OF PROPERTY WHERE THE SALE CONSIDERATION IS ABOVE THE VALUE ADO PTED BY STAMP DUTY AUTHORITIES, AS IN THE INSTANT CASE UNDER APPEAL WH ERE THE FULL VALUE OF CONSIDERATION OF THE PROPERTY IS RS. 40 CRORES WHIL E VALUE ADOPTED BY STAMP DUTY AUTHORITIES IS MUCH LESSER VALUE AT RS. 25,14, 76,226/. IN OUR CONSIDERED VIEW, THE A.O. ERRED IN REFERRING THE MATTER TO THE DVO U/S 55A OF THE ACT IN THE INSTANT CASE KEEPING IN VIEW FACTUAL MATRIX OF THE CASE AS PER OUR DETAILED DISCUSSIONS AND REASONING AS SET O UT ABOVE. WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED ORDER OF THE CIT (A) WHICH WE UPHOLD AND ITA 5133/MUM/2014 13 CONFIRM. IN OUR CONSIDERED VIEW, THE ADDITION MADE BY THE A.O. CANNOT BE SUSTAINED AND IS HEREBY ORDERED TO BE DELETED. WE O RDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA N0. 5133/MUM/2014 FOR THE ASSESSMENT YEAR 2009-10 IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY , 2016. # $% &' 06-05-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 06-05-2015 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI