2014 (1) TMI 923 - AT - Income Tax

Adoption of full value of consideration u/s 50C of the Act Held that - The value determined by the valuation officer on reference made to him under section 50C(2) of the Act is binding on the AO - the provisions of section 50C and section 55A are on a different footing - the value given by the Valuation Officer is final and binding on the AO - In view of specific deeming provision of 50C, order of CIT(A) has to be upheld - As per the provisions of section 50C(ii) the valuation adopted by stamp value authorities has to be adopted - as assessee objected, the valuation was referred to DVO under the provision of Section 50C (2) and the DVO adopted a fair valuation which is correct and fair according to the provisions of law. Alteration in the cost of acquisition Held that - The order of CIT(A) upheld to the extent of differentiating the agreements for the purpose of arriving at the cost of acquisition CIT(A) analysed the agreements and determined the original cost at Rs.3 lakhs and confirmed the order - What the ld. CIT(A) missed was that the value of Rs.3 lakhs paid by assessee was cost as on 22.10.1979 - As per the provisions of the Act, the assessee is entitled for valuation as on 01.04.1981 - This aspect was not considered by the AO and CIT(A) - assessee valued property as on 01.04.1981 and claimed indexation - the cost of acquisition has to be adopted only as on 01.04.1986 - There is a registered valuation report according to which the value as on that date was at 33 lakhs and indexed cost at 480/140 was at Rs.1,13,14,285 - thus, the assessee is entitled to claim cost as on 01.04.1986 and indexed cost - Assessee is not entitled to add original cost or lease rights if any, as the property value was arrived as on 01.04.1986 on the basis of valuation report filed by assessee - The AO is directed to modify the computation and allow the benefit under section 54 as claimed Decided partly in favour of Assessee.

Summary

Issues Involved:
1. Adoption of full value of consideration invoking section 50C.
2. Altering the cost of acquisition.

Issue-wise Detailed Analysis:

1. Adoption of Full Value of Consideration Invoking Section 50C:

The assessee, a senior citizen, sold a property for Rs. 3.72 crores, which was valued for stamp duty purposes at Rs. 4,14,30,597. The Assessing Officer (AO) adopted the stamp duty value as the full consideration received, as per section 50C of the Income Tax Act. The assessee contested this, presenting a valuation report from an approved valuer estimating the property's value at Rs. 3,25,00,000 as of January 1, 2005. The AO referred the matter to the District Valuation Officer (DVO), who later valued the property at Rs. 3,87,60,443 as of March 31, 2005. The CIT(A) confirmed the DVO's valuation, stating that the value determined by the valuation officer under section 50C(2) is binding on the AO and that the provisions of section 50C and section 55A are on different footings. The Tribunal upheld CIT(A)'s decision, agreeing that the DVO's valuation was correct and fair according to the provisions of law. Thus, the AO was directed to adopt the DVO's valuation of Rs. 3,87,60,443 as the full consideration received.

2. Altering the Cost of Acquisition:

The assessee claimed the cost of acquisition of the property (flat No. 301) at Rs. 32,44,425, including the value of lease rights and an additional purchase consideration of Rs. 3 lakhs. The AO allowed cost indexation only on Rs. 3 lakhs, as the assessee failed to produce relevant agreements and evidence. The CIT(A) found that the agreements dated 22.09.1979 and 15.10.1979 were separate legal documents creating mutually exclusive rights. The consideration for creating lease rights was a monthly rent of Rs. 4000 for 98 years, and the consideration for purchasing the flat was Rs. 3 lakhs. Therefore, the assessee was entitled to claim the indexed cost of acquisition only on Rs. 3 lakhs. The Tribunal agreed with CIT(A)'s differentiation of the agreements but noted that the value of Rs. 3 lakhs paid by the assessee was the cost as on 22.10.1979. The Tribunal concluded that the cost of acquisition should be adopted as on 01.04.1986, based on a registered valuation report valuing the property at Rs. 33 lakhs. The indexed cost was calculated at Rs. 1,13,14,285. The AO was directed to modify the computation accordingly and allow the benefit under section 54 as claimed.

Conclusion:

The Tribunal upheld the DVO's valuation for the purpose of section 50C and directed the AO to adopt the value of Rs. 3,87,60,443 as the full consideration received. For the cost of acquisition, the Tribunal directed the AO to adopt the indexed cost based on the valuation as on 01.04.1986, amounting to Rs. 1,13,14,285, and to allow the benefit under section 54. The assessee's appeal was partly allowed.