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2012 (10) TMI 84 - AT - Income TaxAddition on account of long term capital gain on sale of house property - alleged underestimation of value of the sale consideration by adopting lower rate - reference to DVO for estimating the fmv on date of sale as on 14-07-2005 as well as 1- 4-81 - CIT(A) deleted the addition on ground of holding the actions of A.O. in substituting the admitted sale consideration by the FMV arrived at by the DVO and substituting the admitted FMV as on 01- 04-1981 by the FMV arrived at by the DVO to be not in confirmity with the provisions of the Act -Held that - In Section 48, the A.O. can compute the capital gain on the basis of full value of consideration received or accruing as result of the transfer of capital assets. as held by Apex Court, expression full value consideration cannot be construed to the market value of the assets transferred but only means the full value of the things received by the transferor. The A.O. referred the case u/s 55A for fair market value of the capital assets transfer and substituted the value of the DVO in computing the capital gain tax but the full value of consideration as discussed above cannot be construed to the fair market value. The A.O. has also taken the value as on 1.4.81 at Rs.94 lacs in place of Rs.1.03 crore value declared by the assessee on the basis of registered approved valuer report. As per Section 55A, the A.O. can made the reference if estimated value made by the registered valuer is less than fair market value. In this case, the value estimated by the registered valuer was Rs.1.03 crore whereas the DVO had given fair market value at Rs.94 lacs. Therefore, clause (a) of section 55A of the Act could not be made applicable. Clause (b) of section 55A can be invoked only in any other case when value of the asset claimed by the assessee was not supported by an estimate made by a registered valuer. Value estimated by the DVO is less than valued estimated by the Government approved valuer. Further, the difference between value estimated by the DVO and adopted on the basis of registered valuer s report, the difference is less than 15%. The A.O. has not brought on record any material to prove that the assessee had received much more whatever disclosed in the sale deed. Therefore, CIT(A) has rightly deleted the addition Decided against Revenue
Issues Involved:
1. Deletion of addition on account of long-term capital gain by the CIT(A) based on DVO valuation report. 2. Validity of the reference made to the DVO under Section 142A and Section 55A of the Income Tax Act. 3. Determination of fair market value (FMV) as on 1.4.1981 and the date of sale. 4. Applicability of Section 50C of the Income Tax Act. 5. Computation of capital gains under Section 48 of the Income Tax Act. Detailed Analysis: Issue 1: Deletion of Addition on Account of Long-Term Capital Gain The main ground of the Revenue was the deletion of the addition on account of long-term capital gain by the CIT(A) based on the DVO valuation report as on 1.4.1981 and on the date of sale, 14.07.2005. The assessees were co-owners of a property sold for Rs.8,51,00,000/- while the DVO determined the sale value at Rs.13,73,90,000/-. The CIT(A) deleted the addition made by the A.O. after detailed findings, holding that the reference to the DVO was not in accordance with the provisions of the Income Tax Act. Issue 2: Validity of the Reference to the DVO The CIT(A) held that a reference to the DVO under Section 142A is not for the purpose of computing capital gains and has no relevance to the issue under consideration. The reference made by the A.O. was under Section 142A, which is meant for estimating the value of investments under Sections 69 or 69B, not for capital gains. Therefore, the reference itself was not in accordance with the provisions of the Income Tax Act. Issue 3: Determination of FMV as on 1.4.1981 and the Date of Sale The CIT(A) noted that Section 55A empowers the A.O. to make a reference to the DVO to ascertain the FMV for the purpose of Chapter IV. However, this can only be done if the value claimed by the assessee is less than the FMV. In this case, the value adopted by the assessee was supported by a registered valuer's report, and the DVO's value was less than the value claimed by the assessee. Therefore, the A.O.'s action of adopting the DVO's value as on 01-04-1981 was not in accordance with the provisions of the Act. Issue 4: Applicability of Section 50C The CIT(A) held that Section 50C applies only when the sale consideration admitted by an assessee is less than the value assessed by the Stamp Valuation Authority. In this case, the sale consideration admitted by the appellant was higher than the value adopted by the Stamp Valuation Authority, making Section 50C inapplicable. The CIT(A) relied on decisions such as Jitendra Mohan Saxena v/s. ITO and Punjab Poly Jute Corporation v/s. ACIT, which supported this interpretation. Issue 5: Computation of Capital Gains under Section 48 The CIT(A) held that under Section 48, the capital gains should be computed based on the full value of consideration received or accruing as a result of the transfer of capital assets. The full value of consideration cannot be construed as the market value but only means the full value of the thing received by the transferor. The A.O. had wrongly substituted the FMV determined by the DVO for the actual sale consideration received by the assessee. Conclusion: The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeals and allowing the assessee's cross-objections. The Tribunal agreed that the A.O.'s actions were not in conformity with the provisions of the Income Tax Act and that the CIT(A) had rightly deleted the additions made to the capital gains returned by the assessee.
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