2015 (10) TMI 730 - AT - Income Tax

Computation of Capital gains - CIT(A) confirming the amount of the fair market value as on 1.4.1981 determined by the AO - assessee was allotted a piece of land measuring 0.50 acres in an Industrial Estate located in Chennai by Tamilnadu Small Industries Development Corporation Ltd in the year 1979 and during the year under consideration the assessee sold the above said industrial land - Held that - There is no dispute with regard to the fact that the assessee had purchased the impugned land prior to 1.4.1981 and hence it is entitled to adopt the fair market value as on 1.4.1981 (hereinafter FMV ) as its cost for the purpose of computing Capital Gains. In the original assessment proceedings the AO had adopted the FMV at Rs. 67, 500/-. However in the impugned set aside proceedings the AO adopted the rate of Rs. 44, 000/- determined by the DVO. However a perusal of the report given by the DVO would show that the said report is very much bald without giving any basis or authority. In this case the assessing officer has simply adopted the value determined by the DVO. We have already noticed that the report given by the DVO is liable to be rejected. On the contrary we have seen that the Guide line value as on 1.4.1981 fixed by the State Government for the impugned plot was Rs. 10, 89, 000/-. The other factors such as available infrastructure access to the infrastructure commercial importance etc. also need to be taken into consideration. The assessee has also claimed to have carried out certain improvements which will increase the commercial value of the land. Therefore this Tribunal is of the considered opinion that the fair market value fixed by the assessing officer at Rs. 44, 000 is very low. We notice that the Registered Valuer has determined almost the double the amount of Guide Line Value which also appears to be on the higher side. This Tribunal is of the considered opinion that after taking into consideration the commercial importance of the property and the infrastructures available the ends of justice would be met if the fair market value of the property as on 1.4.1981 is adopted by increasing the Guide Line value by 25% and the same work out to Rs. 13, 61, 250/- (Rs.10, 89, 000/- x 1.25). Accordingly the orders of the lower authorities are set aside and the assessing officer is directed to estimate the fair market value of the impugned property as on 01-04-1981 at Rs. 13, 61, 250/- and compute the capital gain accordingly. - Decided partly in favour of assessee.

Summary

Issues:
1. Determination of fair market value as on 1.4.1981 for computing Capital gains.

Analysis:

Issue 1: Determination of fair market value as on 1.4.1981 for computing Capital gains

The appellant contested the fair market value determined by the assessing officer and the DVO, arguing that the DVO did not consider all materials and submissions. The appellant had obtained a valuation certificate from a registered valuer, who assessed the fair market value at a higher amount. The appellant highlighted improvements made to the land, which were not considered by the DVO. The DVO defended their assessment, stating that necessary inspections and enquiries were conducted, and objections were considered. The Tribunal noted that the AO and DVO's values were significantly lower than the Guide Line Value set by the State Government and the registered valuer's assessment. The Tribunal emphasized that fair market value depends on various factors like location, infrastructure, and commercial importance, and should reflect a price agreed upon by willing parties. Considering these factors, the Tribunal set aside the lower authorities' orders and directed the assessing officer to estimate the fair market value at a higher amount, 25% more than the Guide Line Value, resulting in a revised value of &8377; 13,61,250. Consequently, the appeal was partly allowed, ruling in favor of the assessee.

This detailed analysis of the judgment showcases the dispute over the determination of fair market value for computing Capital gains, the arguments presented by both parties, the considerations made by the Tribunal, and the final decision reached in the appeal.