2016 (9) TMI 1289 - AT - Income Tax

Computation of capital gain - fair market value taken as on 01.04.1981 - AO disallowed the claim of the assessee on the basis of guideline value of Sub-Registrar - Held that - Assessing Officer was expected to determine the fair market value as on 01.04.1981. Fair market value is nothing but a price that may be agreed between the willing purchaser and willing seller. Guideline value will not always reflect the market value. The guideline value is only to guide the Sub-Registrar to determine the market value for the purpose of collecting stamp duty. Therefore, this Tribunal is of the considered opinion that the guideline value of Sub-Registrar is one of the factors to be taken into consideration for the purpose of determining the fair market value as on 01.04.1981. Moreover, the location of the property, infrastructure facilities available around the property, public access to the property, distance between the bus stand, railway station, airport from the property, potential for future development, proximity to the schools, colleges and other public institutions, etc. are needed to be taken into consideration for the purpose of determining the fair market value. In the case before us, the property is admittedly located at Sarangapani Street, T. Nagar, which is one of the prime areas in the city of Chennai and there are several infrastructure facilities such as railway station, bus stand, market around the locality. There are schools, institutions and business establishments are available around the locality. While taking into consideration all the facilities available in the locality, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the fair market value estimated by the assessee as on 01.04.1981 is reasonable and acceptable one. Coming to the value of the building, if the property was demolished as on 01.04.1981, it would have fetched ₹ 15 lakhs in respect of debris and other material used in construction. The assessee has claimed only 46% of ₹ 15 lakhs estimated. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the claim of the assessee is reasonable. - Appeal of assessee allowed.

Summary

Issues:
Computation of capital gain based on fair market value as on 01.04.1981.

Analysis:
The appeal pertains to the computation of capital gain for the assessment year 2009-10, focusing on the determination of fair market value as on 01.04.1981. The Assessing Officer relied on the guideline value of &8377; 27,000 per ground, while the assessee computed the index cost of acquisition at &8377; 1,20,03,750 by adopting a fair market value of &8377; 20,62,500. The dispute centered around whether the guideline value accurately reflected the market value. The CIT(Appeals) considered factors such as the location of the property, infrastructure facilities, public access, and proximity to amenities in determining the fair market value. The property in question was situated in a prime area with various facilities nearby, leading the CIT(Appeals) to accept the assessee's valuation as reasonable and justifiable.

Regarding the building's value, the Assessing Officer noted its age and demolition in 1983, leading to a limited market value after depreciation. The assessee valued the building at &8377; 7,50,000 per ground, while the CIT(Appeals) found that the remains of the demolished building could have fetched &8377; 15 lakhs in 1982. The CIT(Appeals) deemed the assessee's valuation of 46% of &8377; 15 lakhs as reasonable, emphasizing the importance of determining the market value rather than book value. The Tribunal concurred with the CIT(Appeals) on both the fair market value and the building's valuation, dismissing the Revenue's appeal and confirming the lower authority's decision.

In conclusion, the Tribunal upheld the fair market value estimation and building valuation, emphasizing the importance of considering various factors beyond guideline values in determining property values. The decision highlighted the need to assess market value accurately based on location, amenities, and potential development prospects, rather than solely relying on guideline values for stamp duty purposes. The judgment reaffirmed the significance of thorough evaluation in capital gain computations to ensure fair and reasonable assessments.