2013 (2) TMI 604 - AT - Income Tax

Fair market value for the purpose of computation of capital gain - assessee took it as at Rs. 5,588 per cent as on 01-04-1981 where as AO on the basis of the letter received from Sub Registrar has fixed at Rs.466 per cent - Held that - For the purpose of estimating the fair market value as on 01-04-1981 consideration of the locality in which the land is situated, the accessability to infrastructure facilities, comparative sale instances in the locality, potentiality for future development, distance between the land and the bus stand, railways station, airport, etc has to be made. The guideline value fixed by the Sub Registrar is only a guideline value to ascertain the market value and may be one of the factors to be taken into consideration for estimating the fair market value, however, it cannot be the sole basis for fixing the fair market value as on 01-04-1981. As the taxpayers now claim that in the case of the neighbour the fair market value as on 01-04-1981 was fixed at Rs.2,300. Unfortunately, all these facts were not considered by the assessing authority therefore the assessing officer has to reconsider the issue in the light of all factors mentioned above and thereafter take a decision - in favour of assessee for statistical purposes. Exemption u/s 54, 54F and 54EC denied - as per AO the taxpayers have deposited the amount in the fixed deposit in State Bank of Travancore, Pettah Branch, Trivandrum - Held that - Unable to accept the claim of the taxpayers as legislature has framed the scheme for the purpose of giving exemption from the capital gain tax by asking the taxpayer to deposit the amount in the capital gain bond scheme. Therefore, if the taxpayer wants to take benefit of the scheme the money has to be deposited in the capital gain bond. Deposit of money in the fixed deposit cannot be construed as deposit in the capital gain bond, therefore the taxpayers are not eligible for exemption at all - against assessee. Indexed cost of improvement declined - Held that - As on the inspection of the land, the revenue authorities found that no improvement was undertaken by the taxpayers. No material is available on record to suggest that the taxpayer has undertaken any improvement in the land therefore no infirmity in the orders of the lower authority - against assessee.

Summary

Issues:
1. Fair market value as on 01-04-1981 for computation of capital gain.
2. Exemption under sections 54, 54F, and 54EC.
3. Indexed cost of improvement.

Analysis:

Issue 1: Fair Market Value
The dispute revolved around determining the fair market value as on 01-04-1981 for computing capital gain. The taxpayers claimed a higher value compared to the one fixed by the assessing officer based on a letter from the Sub Registrar. The taxpayers argued that a neighboring property had a significantly higher value, indicating an undervaluation. The Tribunal emphasized that fair market value is the price agreed upon by a willing buyer and seller, influenced by various factors like location, potential for development, and accessibility to facilities. The Tribunal criticized the assessing officer for solely relying on the Sub Registrar's guideline value, emphasizing the need to consider all relevant factors. Consequently, the Tribunal set aside the lower authorities' orders and remitted the issue back to the assessing officer for a fresh decision considering all relevant factors.

Issue 2: Exemption under Sections 54, 54F, and 54EC
The taxpayers claimed exemption under these sections for depositing the amount in a fixed deposit instead of a capital gain bond. The Tribunal held that to avail of the exemption, depositing the amount in the capital gain bond scheme is mandatory as per legislative requirements. Despite the taxpayers' claim that the bank mistakenly deposited the amount in a fixed deposit, the Tribunal maintained that negligence, if any, by the bank does not alter the statutory requirement. Consequently, the Tribunal confirmed the lower authorities' decision to deny the exemption.

Issue 3: Indexed Cost of Improvement
The taxpayers' claim for indexed cost of improvement was rejected as there was no evidence of any actual improvement on the land. The Tribunal emphasized the importance of material evidence over oral statements, concluding that without proof of improvement, the claim could not be allowed. Therefore, the Tribunal upheld the lower authorities' decision on this issue.

In conclusion, the Tribunal partly allowed the taxpayer's appeal for statistical purposes, remitting the fair market value issue back to the assessing officer for reconsideration while confirming the denial of exemptions under sections 54, 54F, and 54EC, as well as the rejection of the indexed cost of improvement claim.