2018 (3) TMI 1602 - AT - Income Tax

Addition towards Long Term Capital Gain (LTCG)- indexation benefit - Held that - Grievance relating to the eligibility of indexation from 1981-82 is no more res integra. Since the property sold was first held by the father of the assessee and the assessee received the said property through bill on the death of his father, the indexation benefit would be available from A.Y. 1981-82. This issue is well settled in favour of the assessee and against the revenue by the decision in the case of Manjula J Shah 2011 (10) TMI 406 - BOMBAY HIGH COURT Adoption of FMV as on 01.04.1981 by discarding the valuation report of the DVO - Held that - The approved valuer himself as determined the range from ₹ 385.80 per sq. mtr. to 823.83 per sq. mtr. However, it can be seen that in spite of the range determined by him, he has adopted ₹ 1100 per sq.mtr. In doing so, the valuer has considered some extraneous consideration inasmuch as he has given much weigtage to the involvement of unaccounted money at the time of dealing and execution of the sale/transfer of the properties. Ld. counsel himself agreed that the observations of the approved valuer are unwarranted and uncalled for. The ld. counsel fairly conceded that the average of the range rates may be taken as the FMV as on 01.04.1981 which comes to around ₹ 605 per sq. mtr. - FMV of ₹ 1100 per sq. mtr. adopted by the approved valuer is not based upon sound principles, we direct the A.O. to re-compute the capital gains tax liability, if any, by adopting the FMV as on 01.04.1981 at ₹ 605 per sq. Mtr.

Summary

Issues:
- Validity of the order of the Ld. CIT(A)-6, Ahmedabad dated 14.07.2014 pertaining to A.Y. 2010-11.
- Deletion of Long Term Capital Gain (LTCG) of ?90,30,430.
- Eligibility of indexation from 1981-82.
- Adoption of Fair Market Value (FMV) as on 01.04.1981.
- Reference to Departmental Valuation Officer (DVO) for valuation.

Validity of CIT(A) Order:
The revenue challenged the validity of the order of the Ld. CIT(A)-6, Ahmedabad regarding A.Y. 2010-11. The revenue contended that the CIT(A) erred in deleting the addition of ?90,30,430 towards LTCG. The CIT(A) had ignored the fact that the property in question was first held by the assessee's father, making the assessee eligible for indexation from A.Y. 1981-82. The Tribunal upheld the CIT(A)'s decision, citing precedents from the Hon'ble High Courts of Bombay and Gujarat, which favored the assessee.

Eligibility of Indexation:
The issue of eligibility for indexation from 1981-82 was discussed, with the Tribunal ruling in favor of the assessee based on precedents. The property was first held by the assessee's father, allowing indexation benefits from A.Y. 1981-82. The Tribunal declined to interfere with the CIT(A)'s decision, which followed the High Court rulings.

Adoption of FMV as on 01.04.1981:
The Tribunal considered the adoption of FMV as on 01.04.1981, questioning the valuation report of the DVO. Citing a High Court decision, it deemed the reference to the DVO void ab initio, treating the DVO's report as non est. The Tribunal directed the AO to re-compute the capital gains tax liability by adopting the FMV as on 01.04.1981 at ?605 per sq. mtr, based on sound principles.

Reference to DVO for Valuation:
The Tribunal addressed the reference to the DVO for valuation, emphasizing that prior to the amendment of Section 55A, the AO lacked the power to refer the matter to the DVO for ascertaining FMV as on 01.04.1981. The Tribunal declared the reference to the DVO as void ab initio, directing the AO to re-compute the tax liability based on the approved valuer's FMV determination.

Conclusion:
The Tribunal partially allowed the revenue's appeal, directing the AO to re-compute the capital gains tax liability based on the FMV as on 01.04.1981 at ?605 per sq. mtr. The decision was based on the specific facts of the case and was not considered as a precedent for other cases. The order was pronounced in open court on 23-03-2018.