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2011 (3) TMI 1673 - AT - Income TaxLong term capital gain Computation - Reference to DVO u/s 55A - Determination of FMV - assessee transferring property has adopted FMV of property as on 1/4/81 - whether reference made by the AO to the DVO under section 55A of the for determining the FMV as on 1/4/1981 was legally valid? - CIT(A) held such reference made to DVO is invalid - HELD THAT - Section 55A could be invoked only if the Ld. Assessing Officer is of the opinion that the value declared by the assessee is less than the fair market value of the asset. In the assessee s case the ld. AO has made this reference because he felt that the value of the property as on 1/4/1981 declared by the assessee is more than the fair market value. Thus the condition of clause (a) of section 55A is not satisfied. Respectfully following the decision of the Tribunal referred to above we uphold the order of the CIT(A) and dismiss the appeal by the revenue.
Issues:
1. Validity of reference made by Assessing Officer to DVO under section 55A for determining FMV as on 1/4/1981. 2. Adoption of Fair Market Value for computing long term capital gains. Issue 1: Validity of reference to DVO under section 55A: The appeal by the revenue concerned the validity of the reference made by the Assessing Officer to the DVO under section 55A for determining the Fair Market Value (FMV) of a property as on 1/4/1981. The revenue contended that the CIT(A) erred in directing the AO to adopt the market value provided by the appellant's registered valuer instead of the valuation given by the DVO. The CIT(A) analyzed the provisions of section 55A and concluded that the reference made under section 55A was invalid. The CIT(A) highlighted that the AO's reference to the DVO was not justified as the AO believed that the value declared by the appellant was higher than the fair market value, which did not meet the conditions of section 55A. The CIT(A) relied on various decisions and held that since the value claimed by the appellant was supported by a registered valuer's report, the reference under section 55A was not valid. Issue 2: Adoption of Fair Market Value for computing long term capital gains: The second issue involved the adoption of the Fair Market Value (FMV) for computing long term capital gains. The appellant, an individual, sold a plot of land and claimed the FMV of the property as on 1/4/1981 at a certain amount. The AO made a reference to the DVO under section 55A, who estimated the FMV at a lower value. The CIT(A) directed the AO to substitute the FMV as per the appellant's registered valuer's report for computing long term capital gains. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's reference to the DVO was invalid and that the appellant's claimed value, supported by a valuation report, should be accepted for determining the cost of acquisition. In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order to adopt the Fair Market Value as per the appellant's registered valuer's report for computing long term capital gains. The judgment highlighted the importance of valid references under section 55A and the significance of supporting valuations in determining property values for tax purposes.
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