2015 (11) TMI 1782 - AT - Income Tax

Long-term capital gain - deemed sale of consideration of the property on the basis of DVO's report - determining the fair market value of the assessee's property - action of the AO in adopting the higher sale consideration as per the market value determined for stamp duty purpose for invoking the provision of section 50C - HELD THAT - Respectfully follow the ratio of the decision of the Hon'ble jurisdictional High Court in the case of Asha Devi Agarwal 1987 (6) TMI 18 - CALCUTTA HIGH COURT and direct the AO/DVO to compute the fair market value of the let out portion of the assessee's property by taking into consideration the rent actually receivable by the assessee from the tenants. The assessee has also contended that if the valuation of the let out portion of the assessee's property is done by taking into consideration, the actual rent receivable by the assessee from the tenants, the total fair market value of the property of the assessee as per such revised estimation would be less than the sale consideration of ₹ 1,30,00,000/- shown by the assessee and there would be no case of making addition on account of capital gain. We direct the Assessing Officer to verify this contention of the assessee and if it is found after recomputation of the valuation of the assessee's property that the fair market value is less than the sale consideration shown by the assessee, no addition shall be required to be made on this issue. - Appeal of the assessee is treated as allowed.

Summary

Issues:
- Addition to total income under "long-term capital gain" based on deemed sale consideration.

Analysis:
1. The appeal was against the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) to the total income of the assessee under "long-term capital gain" due to the deemed sale consideration of the property at Rs. 2,46,63,105/- based on the DVO's report.

2. The Assessing Officer invoked section 50C to compute the capital gain by adopting the stamp duty value of Rs. 3,17,90,300/- as the sale consideration, higher than the Rs. 1,30,00,000/- shown by the assessee. The assessee's explanations regarding the property being fully tenanted and the objection to the valuation by the Registrar of Assurance were not accepted.

3. The ld. CIT(Appeals) upheld the Assessing Officer's action, leading to an appeal before the Tribunal. The Tribunal remitted the matter back for a reasonable opportunity of being heard, leading to the DVO determining the fair market value at Rs. 2,46,63,105/-. The ld. CIT(Appeals) upheld the section 50C invocation based on the DVO's report, directing the Assessing Officer to use the revised fair market value.

4. During the hearing, the assessee contended that the fair market value should consider the actual rent received from tenants, not the fair market rent. Citing a High Court decision, the assessee argued against the method used by the authorities in determining the value of the tenanted property.

5. The Departmental Representative supported the ld. CIT(Appeals)'s order, stating that all objections were duly considered by the DVO.

6. The Tribunal agreed with the assessee, following the High Court's decision that the value of a tenanted property should be based on the actual rent received. They directed the Assessing Officer to compute the fair market value considering the rent actually receivable. If the revised valuation is lower than the sale consideration, no addition on capital gain should be made.

7. Consequently, the appeal of the assessee was allowed with the direction to compute the fair market value based on the actual rent received from tenants, potentially resulting in no addition on capital gain.