2017 (4) TMI 1531 - AT - Income Tax

Capital gain computation - correctness of value of the plot under sale for the purpose of determination of Capital gain with reference to Section 50C - addition on the basis of the valuation report of the impugned Property issued by the learned DVO - HELD THAT - Having regard to the allowance of 30% claimed towards curtailment of land as referred to by CIT(A) in Para 3.2 of the CIT(A) order and also having regard to the comparable rates available at the time of sale coupled with other deficiencies such as lack of direct access to the Plot under sale and pancity of civic amenities etc. We deem it appropriate that the share of the assessee in the sale consideration be taken at ₹ 17,45,000/- instead of ₹ 34,90,000/- determined by the revenue. Accordingly, assessee gets relief to the extent of 50% in the deemed sale consideration. The AO is accordingly directed to re-compute the taxable capital gain in terms of the direction noted above. In the result, appeal of the assessee is partly allowed.

Summary

Issues involved:
1. Valuation of property for the purpose of determining capital gain under Section 50C of the IT Act.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax(Appeals)-II, Ahmedabad, for the Assessment Year 2007-08. The primary grounds of appeal included the dismissal of the appeal by the Commissioner based on the valuation report of the property issued by the Departmental Valuation Officer (DVO) and the addition of a specific amount under Section 50C of the Act. The Assessing Officer (AO) referred the property for valuation to the DVO as per the direction of the CIT(A) and made an addition based on the differential amount between the valuation by the DVO and the sale consideration shown by the appellant. The DVO valued the plot at a certain amount, and the AO adopted a fair market value based on this valuation report.

The appellant argued that the DVO did not provide an opportunity to submit objections regarding the valuation, and the area of the plot should have been considered differently. The appellant contended that only a portion of the plot would be usable due to compulsory acquisition, and the sale price was determined between the parties at a different amount. Additionally, the appellant raised concerns about the valuation date and the estimated sale rate used by the DVO. The appellant highlighted issues such as the development plan of the land and the lack of direct access to the plot and civic amenities.

After considering the submissions, the Tribunal found discrepancies in the valuation and directed the AO to re-compute the taxable capital gain based on a revised share of the appellant in the sale consideration. The Tribunal allowed the appeal partly, providing relief to the appellant by reducing the deemed sale consideration. The decision was based on factors such as the claimed curtailment of land, comparable rates at the time of sale, and deficiencies in the property. The appeal was partly allowed, resulting in a revised computation of taxable capital gain for the appellant.