RAMCHAND VALAECHA, MUMBAI V. ITO 13(1)(4), MUMBAI

ITA 5674/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1916 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 16-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 09-09-2008
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value; Valuation report
• Section: 50C; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D BEFORE SHRI N.V. VASUDEVAN (JM) & B. RAMAKOTAIAH (A M) I.T.A.NO. 5674/MUM/2008 (ASSESSMENT YEAR : 2005-0 6) RAMACHAND VALECHA 15/1002 INDRA DARSHAN OSHIWARA ANDHERI WEST MUMBAI-400 053 VS. ITO 13(1)(4) MUMBAI. APPELLANT RESPONDENT PAN/GIR NO. : AADPV8783G ASSESSEE BY : SHRI AARTI VISSANJI DEPARTMENT BY : SHRI T.T. JACOB ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 1.7.2008 OF LEARNED CIT(A)-XIII, MUMBAI RELATING TO A.Y. 200 5-06. 2. GROUNDS OF APPEAL OF THE ASSESSEE READS AS FOLLO WS :- 1) LEARNED CIT(A) HAS GROSSLY ERRED IN ACCEPTING 70 1640/- VALUATION OF THE PROPERTY AS ON 1.4.1981 AT RS. 701 640/- AS PER VALUATION REPORT OF THE VALUATION OFFICER AND I N REJECTING THE VALUATION OF RS. 984,000/- AS PER VALUATION REP ORT OF VALUATION OFFICER. 2) LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE V ALUE OF THE PROPERTY AS PER THE STAMP DUTY OFFICE VALUE U/S . 50C AND IN REJECTING THE VALUATION REPORT OF THE VALUAT ION OFFICER OF THE ASSESSEE. 3) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT SINCE THE ASSESSEE OBJECTED THE ADOPTION OF STAMP DUTY VALUE U/S. 50C HE OUGHT TO HAVE REFERRED THE VALUATION TO THE VALUATION OFFICER RAMACHAND VALECHA 2 3. THE ASSESSEE IS AN INDIVIDUAL. DURING THE PREVIO US YEAR, HE SOLD A FLAT IN GANGA JAMUNA SOCIETY NAMELY FLAT NO. C-21. THE PROPERTY WAS SOLD FOR A SUM OF RS. 62,00,000/-. PROPERTY WAS ACQ UIRED IN THE YEAR 1977. THE ASSESSEE THEREFORE WAS ENTITLED TO ADOPT FAIR MARKET VALUE (FMV) OF THE PROPERTY AS ON 1.4.1981. THE ASSESSEE ADOPTED FMV AS ON 1.4.1981 AT RS. 8,00,000/- AND WORKED OUT INDEXED C OST OF ACQUISITION. THE ASSESSEE HAD PURCHASED ANOTHER FLAT IN INDRA DA RSHAN, SECTOR-II FOR A SUM OF RS. 21 LAKHS. THE ASSESSEE CLAIMED DEDUCTI ON U/S. 54 OF THE ACT. APART FROM COST OF RS. 21 LAKHS PAID FOR PURCH ASE OF A NEW FLAT AT INDRA DARSHAN, THE ASSESSEE ALSO INCURRED STAMP DUT Y AND REGISTRATION CHARGES AT RS. 1,11,400/- AND REGISTRATION CHARGES OF RS. 26,070/-. THUS, TOTAL REINVESTMENT MADE IN PURCHASE OF A NEW FLAT WAS RS. 22,37,470/-. COMPUTATION OF CAPITAL GAIN AS GIVEN B Y THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS AS FOLLOWS :- INCOME FROM CAPITAL GAIN RS. RS. SELLING PRICE OF GANGA JAMUNA FLAT 62,00,000 LESS : COST OF ACQUISITION 2,05,000 EST COST AS 1981 YEAR OF ACQUISITION (1977) 8,00,0 00 INDEXED COST 38,40,000 38,40,000 23,60,000 LESS : REINVESTMENT IN INDRA-DARSHAN, SECTOR II 21,00,000 2,60,000 LESS : STAMP DUTY 1,11,400 REGISTRATION 26,070 1,37,470 1,22,530 LESS : BROKERAGE 31,000 91,530 ASSESSING OFFICER NOTICED THAT THE STATE GOVERNMENT AUTHORITY HAD ADOPTED THE VALUE OF THE PROPERTY FOR THE PURPOSE O F STAMP DUTY AND ON REGISTRATION AT A SUM OF RS. 67,21,722/-. THE ASSES SING OFFICER ALSO REFERRED TO THE DVO, FMV OF THE PROPERTY AS ON 1.4. 1981. DVO HAD ESTIMATED FMV OF THE PROPERTY AS ON 1.4.1981 AT RS. 7,01,640/-. THE ASSESSEE SUBMITTED REPORT OF A REGISTERED VALUER, W HO VALUED THE SAME RAMACHAND VALECHA 3 PROPERTY AT RS. 61,00,000/-. REGISTERED VALUER ALSO ESTIMATED FMV OF THE PROPERTY AS ON 1.4.1981 AT RS. 9,84,000/-. THE ASSE SSEE THEREFORE SUBMITTED THAT COMPUTATION OF CAPITAL GAIN AS MADE BY THE ASSESSEE SHOULD BE ACCEPTED. THE ASSESSING OFFICER, HOWEVER, WAS OF THE VIEW THAT THE FMV AS ON 1.4.1981 AS ADOPTED BY THE DVO CANNOT BE ACCEPTED BECAUSE THERE WAS NO CONCRETE EVIDENCE TO SUBSTANTI ATE THE SAME. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 50C OF THE ACT, VALUE ADOPTED FOR THE PURPO SE OF REGISTRATION AND STAMP DUTY HAS TO BE TAKEN AS THE SALE CONSIDERATIO N RECEIVED. THE ASSESSING OFFICER WORKED OUT THE CAPITAL GAIN AS FO LLOWS :- C-21 GANGA JAMUNA FLAT SALE PRICE ADOPTED U/S. 50C AS DISCUSSED ABOVE RS. 67,21,722 LESS VALUE ADOPTED AS ON 1.4.1981 AS PER VALUATION REPORT OF DVO RS. 7,01,640/- INFLATION INDES COST : 7,01,640 X 480 RS. 33,67,871 100 RS. 33,53,850 LESS : COST OF NEW FLAT (INDRA DARSHAN) CLAIMED U/S 54 COST AS PER AGREEMENT RS. 21,00,000 ADD : STAMP DUTY & REGISTRATION RS. 1,37,470 RS. 22,37,470 L.T.C.G. RS. 11,16,380 4. ON APPEAL BY THE ASSESSEE, LEARNED CIT(A) CONFIR MED THE ORDER OF THE ASSESSING OFFICER GIVING RISE TO THE PRESENT AP PEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. FIST, WE SH ALL DEAL WITH THE ISSUE WITH REGARD TO FMV AS ON 1.4.1981. THE ASSES SEE AT THE TIME OF FILING RETURN OF INCOME DID NOT HAVE ANY BASIS OF A RRIVING AT A SUM OF RS. 8 LAKHS AS FMV OF THE PROPERTY AS ON 1.4.1981. IT W AS PURELY ASSESSEES OWN ESTIMATE. REGISTERED VALUER WHOSE REPORT WAS FI LED BY THE ASSESSEE HAD ADOPTED VALUE OF RS. 9,84,000/-WHICH WORKS OUT TO RS. 500/-PER SQ.FT. ON THE OTHER HAND, THE DVO ESTIMATED THE FMV AS ON 1.4.1981 AT RAMACHAND VALECHA 4 RS. 8,00,000/- WHICH WORKS OUT TO RS. 355/- PER SQ. FT. IN ARRIVING AT THE VALUE OF RS. 500/-P.S.F., REGISTERED VALUER HAD TAK EN COMPARABLE SALE INSTANCES OF TWO FLATS BOTH LOCATED AT PUNJAB COOPE RATIVE HOUSING SOCIETY LTD., TAGORE ROAD, SANTACRUZE WEST, MUMBAI-400 054. ASSESSEES PROPERTY IS LOCATED AT 17 TH ROAD, SANTACRUZ WEST, MUMBAI-400 054. COMPARABLE SALE INSTANCES CONSIDERED BY THE REGISTE RED VALUER WERE OF SALES WHICH WERE MADE ON 21.7.1982 AND 6.9.1982. AV ERAGE RATE PER SQ. FT. IN RESPECT OF THE TWO COMPARABLE SALE INSTANCES WORKS OUT TO RS. 575/- PER SQ.FT. REGISTERED VALUER AFTER GIVING DISCOUNT OF 15% ARRIVED AT THE VALUE OF RS. 500/- P.S.FT. AS GIANT THE ABOVE, DVO HAD TAKEN SALE INSTANCES OF VERY SAME FLAT, WHICH HAS BEEN TAKEN B Y THE REGISTERED VALUER AND APART FROM THAT HE TOOK SALE INSTANCES O F TWO OTHER PROPERTIES LOCATED IN VILE PARLE. THESE SALE INSTANCES WERE DA TED 27.8.1980, IN WHICH THE RATE PER SQ. FT. RS. 278/- AND ANOTHER SA LE INSTANCES DATED 29.6.1982 IN WHICH RATE PER SQUARE FEET RS. 387/-. AFTER REFERRING TO THE ABOVE SALE INSTANCES, DVO HAS ARRIVED AT THE FIGURE OF RS. 355/- P.S.FT. FOR THE FOLLOWING REASONS :- FOR THE VALUATION, BUA RATE HAS BEEN DERIVED FROM COMPARABLE SALE INSTANCES AROUND THE PROPERTY IN NEARBY LOCALI TY AFTER TAKING INTO ACCOUNT ALL RELEVANT PROS AND CONS AND OTHER F ACTORS SUCH AS PHYSICAL, SOCIAL, ECONOMICAL, LEGAL, STATUS AND TIM E GAP ETC. AND RS. 355/- P.S.FT. AS ON 1.4.1981 IS CONSIDERED FAIR AND REASONABLE. 6. IT IS SEEN FROM THE REGISTERED VALUERS REPORT, HE HAS MENTIONED THAT COMPARABLE SALE INSTANCES CONSIDERED BY HIM WE RE OF FLATS IN HIGHLY MIDDLE CLASS LOCALITY LOCATED HALF WAY BETWEEN S.V. ROAD AND LINKING ROAD, NORTH OF JUHU ROAD. DVO ON THE OTHER HAND, HA S MENTIONED THAT HE WAS USING PHYSICAL METHOD OF VALUATION USING APP ROPRIATE SALE INSTANCES. WE FIND THAT BOTH THE VALUATION ARE EST IMATES AND CANNOT BE SAID TO BE ACCURATE. LEARNED COUNSEL FOR THE ASSESS EE HAS FILED BEFORE US A DECISION OF THE ITAT MUMBAI G BENCH IN THE CASE OF LATE SHRI T.R.SRINIVASAN VS. ADCIT, IN ITA NO. 4110/MUM/2002 IN A.Y. 1998-99. IN THAT APPEAL, THE DISPUTE WAS WITH REGARD TO FMV AS ON 1.4.1981 OF A PROPERTY INDRAJIT COOPERATIVE HOUSING SOCIETY LTD., SANTACRUZ WEST, RAMACHAND VALECHA 5 MUMBAI IN THE VERY SAME AREA, WHERE THE ASSESSEES PROPERTY IS LOCATED. THE TRIBUNAL IN THE AFORESAID DECISION HAD ADOPTED FMV AS ON 1.4.1981 OF RS. 720/- PER SQUARE FEET. BESIDES THE ABOVE, TH E ASSESSEE HAS ALSO FILED BEFORE US EVIDENCE INDIAN VALUERS DIRECTORY A ND REFERENCE BOOK GIVING MARKET VALUE OF THE PROPERTY IN MUMBAI AS ON 1.4.1981. IN THE SAID DIRECTORY RESIDENTIAL UNIT WITHOUT LIFT IN SAN TACRUZ WEST HAS BEEN STATED TO BE AT RS. 720/- PER SQUARE FEET. CONSIDER ING ALL THE ABOVE FACTORS, WE ARE OF THE VIEW THAT IT WOULD BE JUST A ND APPROPRIATE TO ADOPT FMV OF THE PROPERTY OF THE ASSESSEE AS ON 1.4.1981 AT RS. 9,15,000/-. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO AD OPT FMV OF THE PROPERTY AT RS. 9,15,000/-. 7. NEXT ISSUE IS AS TO WHETHER THE FULL VALUE CONSI DERATION RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF CAPI TAL GAIN HAS TO BE ADOPTED AT RS. 67,21,722/- AS PER THE VALUATION FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION OR AT RS. 62,00,000/- WHICH I S THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE. IN OUR VIEW THI S ISSUE WILL BECOME ACADEMIC IF THE FMV OF THE PROPERTY AS ON 1.4.1981 IS ADOPTED AT RS. 9,15,000/-. EVEN IF, VALUE FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION IS ACCEPTED AS THE FULL VALUE OF CONSIDERATION RECE IVED ON TRANSFER, CAPITAL GAIN WILL BE COMPUTED AS FOLLOWS :- LONG TERM CAPITAL GAIN ON SALE OF FLAT AT GANGA JAM UNA CHS LTD. VALUE AS PER STAMP VALUATION AUTHORITIES 6721722 ESTIMATED COST AS ON 1.4.1981 915000 INDEXED COST : 915000X480/100 4392000 2329722 LESS : REINVESTMENT IN FLAT AT INDRA DARSHAN 22374 70 LONG TERM CAPITAL GAIN AFTER REINVESTMENT 92252 THE ASSESSEE HAS ALREADY GIVEN COMPUTATION OF CAPIT AL GAIN OF RS. 91,530/-. DIFFERENCE BEING VERY NOMINAL, WE ARE OF THE VIEW THAT THIS ISSUE DOES NOT NEED ANY ADJUDICATION. FULL VALUE ON CONSIDERATION AS RAMACHAND VALECHA 6 ADOPTED BY THE REVENUE AUTHORITIES FOR THE PURPOSE OF COMPUTING CAPITAL GAIN IS THEREFORE CONFIRMED. 8. IN THE RESULT, APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BEEN PRONOUNCED ON 30TH DAY OF APRIL, 2 010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 30 TH APRIL, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS