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2013 (4) TMI 829 - AT - Income TaxComputation of LTCG - Adoption of correct FMV - deduction claimed against Capital Gains - Held that - Assessee has declared the FMV on the basis of the report of the Registered Valuer - The report of the RV is supported by the backward indexation computed on the basis of cost inflation index CBDT s circular No. 636 dated 31.08.1992 - decided in favor of assessee Deduction for cost addition by way of payment made to Bank for protecting right in the property - Held that - This amount cannot be said, by any stretch of imagination, to be a part of cost of acquisition as the assessee had already acquired this property free from any sort of encumbrances - It cannot be treated as cost of improvement as it was not incurred towards improvement - Decided against assessee
Issues Involved:
1. Sustaining the order passed under section 143(3). 2. Computation of Long Term Capital Gains (LTCG) and related deductions. 3. Fair Market Value (FMV) determination as on 01/04/1981. 4. Deduction for payment made towards bank guarantee. 5. Charging of interest under sections 234A, 234B, and 234C. Issue-wise Detailed Analysis: 1. Sustaining the Order Passed Under Section 143(3): The assessee did not press Ground No. 1, and therefore, it was dismissed as not pressed. 2. Computation of Long Term Capital Gains (LTCG) and Related Deductions: The assessee declared a loss of Rs. 1,07,35,966/- in LTCG, claiming deductions under section 54 of Rs. 92,12,470/-. The AO computed the LTCG at Rs. 1,84,24,645/-, rejecting the assessee's claim. The AO's computation was based on a FMV of Rs. 21,24,207/- as on 01/04/1981, against the assessee's claim of Rs. 64,29,807/-. The AO also refused to consider Rs. 1,34,14,519/- towards the cost of the asset. The Tribunal found the AO's computation incorrect and sided with the assessee's valuation, noting that the AO's partial acceptance of the Registered Valuer's report was not justified. 3. Fair Market Value (FMV) Determination as on 01/04/1981: The Tribunal held that the FMV as on 01/04/1981, declared by the assessee based on the Registered Valuer's report, should be accepted. The AO's acceptance of the building's value but rejection of the land's value was found illogical. The Tribunal emphasized the consistency required in accepting valuation reports and supported the assessee's valuation using the cost inflation index method, which aligned with the CBDT's guidelines. 4. Deduction for Payment Made Towards Bank Guarantee: The assessee claimed a deduction of Rs. 1,27,00,000/- paid to Union Bank of India to release the property title deed. The Tribunal agreed that this amount could be allowed as a deduction, as it was necessary to clear the encumbrance to transfer the property. This payment was inextricably linked to the transfer of the asset and thus deductible. The Tribunal cited various judicial precedents supporting this view. 5. Charging of Interest Under Sections 234A, 234B, and 234C: The Tribunal noted that charging interest under section 234B is mandatory but allowed for consequential relief based on the final computation of tax liability. Conclusion: The appeal was partly allowed, with the Tribunal favoring the assessee on the computation of LTCG and the deduction for the bank payment, while sustaining the mandatory interest charges under section 234B. The stay application was dismissed as infructuous. The order was pronounced in the open court on 4th April 2013.
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