2018 (10) TMI 1980 - AT - Income Tax

Computation of LTCG - invoking the provisions of the section 50C - DVO had made an addition on account of time gap, between 01.08.2007 to 31.05.2008, a increase in land rate on Rs. 5601/- Sq.ft. @ 11% per annum and consequently for 10 months increased the value by Rs. 514/- per Sq.ft. - HELD THAT - A perusal of provisions of the section 55A(b)(i) of the Act clearly shows that variation of 15% is permitted in respect of valuation as disclosed by the assessee and as valued by the DVO. Here, the difference between the sale consideration as disclosed by the assessee and as arrived at by the DVO is only Rs. 7,14,110/-, which is less than 10%, clearly no addition is liable to be made and the long term capital gains is to be computed by applying the value as disclosed by the assessee. Consequently, the addition as made by the ld. AO and confirmed by the Ld.CIT(A), stands deleted. We are not going into estimating the net value of land under the pretext of probable increase in land value on account of time gap between guideline value date and the transaction date as the addition made by the ld. Assessing Officer and sustained by the Ld.CIT(A), is being deleted on account of variation which is less than 10% in view of the provisions of the section 55A(b)(i) of the Act. Appeal of assessee allowed.

Summary

Issues:
1. Valuation dispute regarding the sale of an immovable property for computing long term capital gains.
2. Wealth Tax valuation dispute for a rented out property.

Valuation Dispute for Long Term Capital Gains:
In the case of ITA No.357/Chny/2018, the appellant, a HUF engaged in money lending, sold a property for Rs. 85 lakhs. The Assessing Officer valued the property at Rs. 1,28,78,625 under section 50C of the Act, leading to an appeal. The ITAT directed a valuation by the DVO, who valued it at Rs. 92,52,000, considering a time gap and land rate increase. The appellant declared the value at Rs. 85,51,828. The ITAT noted a permissible 15% variation under section 55A(b)(i), with a difference of Rs. 7,14,110 (less than 10%). Consequently, no addition was warranted, and the declared value was accepted for computing long term capital gains. The addition made by the Assessing Officer was deleted due to the permissible variation limit.

Wealth Tax Valuation for Rented Out Property:
Regarding WTA No.04/Chny/2018, the appellant appealed the Wealth Tax valuation of a rented out property. The ITAT observed that this was the only property owned by the appellant, and whether it was rented out had not been considered by the Assessing Officer. The issue was remanded to the Assessing Officer for re-evaluation after ensuring a fair opportunity for the appellant. If it is confirmed that the property was rented out during the relevant period, no Wealth Tax would be applicable. The issue was remanded for proper consideration as it was not addressed by the Assessing Officer or the CIT(A). The appeal was partly allowed for statistical purposes pending further verification by the Assessing Officer.

In conclusion, the appellant succeeded in ITA No.357/Chny/2018, and the appeal in WTA No.04/Chny/2018 was partly allowed for statistical purposes. The judgments were pronounced on 4th October 2018 in Chennai.