2015 (6) TMI 253 - AT - Income Tax

Long term capital gain - selection of AY - when transfer of a property under the I T Act happens ? - Held that - In the instant case the conveyance deed was registered only on 29-5-2008, it can be safely concluded that the transfer of property for the purposes of capital gains took place on 29-5-2008 and the consequent conclusion that the gain or loss therefrom shall only be available for taxation in FY 2008-09 relevant to AY 2009-10. Thus the action of the AO in taxing the impugned capital gains of ₹ 2,490,78,280/- in AY 2009-10 was a legally correct decision which also finds strength from the decision of Hon ble Apex Court in the case of Suraj Lamps 2011 (10) TMI 8 - SUPREME COURT OF INDIA - Decided against assessee. Adoption of cost of acquisition of Shahwadi Property - whether the adoption of FMV by the registered valuer of the impugned property at ₹ 13,72,0007- is a correct value or not? - Held that - Facts on records, indicate that physical inspection of the property was done by the valuer on 26-9-2008 and the report was submitted by him on 29-9-2008 i.e. within a short period of three days. The valuation report further indicates that the comparable sale instances adopted by the valuer are in respect of properties which are not located in the immediate vicinity. Thus, the valuation report, prepared by the registered value M/s/ K C Engineers, cannot be accepted as a true and correct estimation of the FMV of the property as on 1-4-1981. The impugned property has not been disclosed in any wealth tax returns by the appellant which could have been helpful to estimate its FMV. Considering the peculiar aspect and the infirmities and deficiencies in the valuation of the registered valuer, it is considered reasonable, if the FMV of the property as on 1-4-1981 is restricted to ₹ 8,00,000/- as against ₹ 13,72,000/-. The A O is accordingly directed to recalculate LTCG taking the value of property as on 1-4-81 at ₹ 8,00,000/-. - Decided partly in favour of assessee. Part allowance of claimed deduction u/s. 54F - Held that - In the case in hand, the agreement to sell dated 31/03/2008 had already been acted upon the parties by delivery possession and registering sale-deed. Therefore, for this reason also, the judgement of the Hon ble Apex Court rendered in the case of Suraj Lamp and Industries Pvt.Ltd. vs. State of Haryana and Another (supra), would not help the Revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the long-term capital gain (LTCG) assessment year.
2. Fair market value (FMV) of the property as on 01/04/1981.
3. Partial allowance of exemption under Section 54F of the Income Tax Act.

Detailed Analysis:

1. Legitimacy of the Long-Term Capital Gain (LTCG) Assessment Year:
The primary issue revolves around whether the LTCG should be assessed in AY 2008-09 or AY 2009-10. The Assessee argued that the sale deed was executed, possession handed over, and the sale consideration received on 31/03/2008, thus the LTCG should be assessed in AY 2008-09. The AO and CIT(A) contended that since the conveyance deed was registered on 29/05/2008, the LTCG should be assessed in AY 2009-10.

The Tribunal referred to the Hon'ble Apex Court's judgment in Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana and Another, which emphasized that transfer of property under the Income Tax Act occurs only upon registration of the conveyance deed. However, the Tribunal noted that the judgment was not intended to apply retrospectively and should not affect transactions completed before the judgment date. The Tribunal also cited the Gujarat High Court's judgment in CIT vs. Hormasji Mancharji Vaid, which held that the transfer date is when the sale deed is executed, consideration paid, and possession handed over.

Consequently, the Tribunal concluded that the LTCG should be assessed in AY 2008-09, not AY 2009-10, as the sale deed was executed, and possession was handed over on 31/03/2008.

2. Fair Market Value (FMV) of the Property as on 01/04/1981:
The Assessee claimed the FMV of the property as on 01/04/1981 to be Rs. 13,72,000 based on a valuation report by a government-approved valuer. The AO adopted the value of Rs. 41,741 as per the gift deed, while the CIT(A) estimated the FMV at Rs. 8,00,000, considering the valuation report unreliable due to its hurried preparation and non-comparable sale instances.

The Tribunal upheld the CIT(A)'s decision, directing the AO to recalculate the LTCG taking the FMV of the property as on 01/04/1981 at Rs. 8,00,000, considering it reasonable given the circumstances.

3. Partial Allowance of Exemption under Section 54F:
The Assessee claimed an exemption under Section 54F amounting to Rs. 4,39,50,000, but the AO allowed only Rs. 1,12,40,000. The AO argued that the property transactions were structured to claim the exemption and that the property sold was a single composite property, not two distinct properties as claimed by the Assessee.

The Tribunal found the AO's arguments compelling, noting that the Assessee failed to provide evidence of the properties being distinct in municipal and other records. Thus, the Tribunal upheld the AO's decision to restrict the exemption claim to Rs. 1,12,40,000.

Conclusion:
- Assessee's Appeal (ITA No.1281/Ahd/2013): Partly allowed. The Tribunal held that the LTCG should be assessed in AY 2008-09, not AY 2009-10, and directed the AO to recalculate the LTCG with the FMV of Rs. 8,00,000 as on 01/04/1981. The partial allowance of exemption under Section 54F by the AO was upheld.
- Revenue's Appeal (ITA No.1283/Ahd/2013): Dismissed. The Tribunal found no merit in the Revenue's contention against the CIT(A)'s estimation of FMV and upheld the decision to assess the LTCG in AY 2008-09.