2016 (5) TMI 480 - AT - Income Tax

Determination of fair market value as on 1.4.1981 for the purpose of granting deduction while computing capital gains - indexation - reference to DVO - Held that - Property had been inherited by the assessee from grandmother who had acquired it before 1981. We hold that the indexation cost has to be given from the date from when the asset was held by the previous owner from whom it was inherited. We cannot brush aside the fact that the Learned AO had not referred the case to DVO for determination of fair market value as on 1.4.1981 on his own volition. Instead it was done based on the directions of this tribunal in the first round of appellate proceedings. In-fact, it is also seen that the assessee himself had raised this issue as an additional ground before this tribunal with a prayer to refer the case to DVO. While this is so, the assessee cannot have any grievance of the fact of Learned AO referring to DVO for determination of fair market value as on 1.4.1981. If the assessee has got any objections to the value determined by DVO, he is at liberty to file the same. But he chose not to file any objections for the same inspite of several opportunities provided to him by the Learned AO which is elaborated in the assessment order. Moreover, the assessee ought to have carried the matter further to the Hon ble Calcutta High Court against the order of this tribunal in the first round of appellate proceedings in case if he had any grievance. We find that the assessee was not able to produce any evidence in this regard before us. We find that the determination of fair market value as on the date of sale i/e 25.5.2004 by DVO after giving reduction of 15% towards various encumbrances attached to the property , cannot be faulted with. In these facts and circumstances, it is only just and proper to hold that the reference made by the Learned AO to DVO at the instance of the order of this tribunal cannot be faulted with. Interest u/s 234A and 234B - whether CIT(A) was wrong in not considering the fact that the AO has made provisional attachment u/s.281B of the I.T Act on 17.01.2009 whereas he has charged interest u/s. 234A & 234B upto the date of assessment order which is completely arbitrary, unjustified and illegal? - Held that - . We find lot of force in the arguments of the Learned AR on the aspect of adjustment of monies available in post office towards payment of taxes with corresponding impact on interest calculations. We hold that the monies lying in post office deposits which were the subject matter of attachment u/s 281B of the Act should be construed as taxes paid by the assessee and accordingly interest u/s 234A and 234 B of the Act has to be reworked accordingly.

Summary

Issues involved:
Determining fair market value as on 1.4.1981 for computing capital gains, indexation benefit for the cost of acquisition, levy of interest u/s 234 A and 234 B.

Analysis:

1. Determination of fair market value as on 1.4.1981:
The case involved an appeal regarding the fair market value of an immovable property for computing capital gains. The Appellate Tribunal noted that the property was inherited by the assessee and held that indexation cost should be given from the date the asset was held by the previous owner. Citing relevant judicial precedents, the Tribunal directed the Assessing Officer to recompute the capital gains by applying the cost inflation index of 100 per cent applicable for the financial year 1981-82. The Tribunal dismissed the revenue's appeal based on this analysis.

2. Indexation benefit for the cost of acquisition:
The Assessing Officer did not grant indexation benefit for the cost of acquisition, arguing that the property vested in the assessee only from 1999. However, the Co-ordinate Bench decision and judicial precedents supported indexation from the date the asset was first acquired by the previous owner. The Tribunal upheld the action of the Learned CIT(A) in granting relief to the assessee for indexation benefit from 1.4.1981. The grounds raised by the revenue were dismissed.

3. Levy of interest u/s 234 A and 234 B:
The assessee challenged the interest charged by the AO under sections 234 A and 234 B, arguing that provisional attachment u/s 281B of the Act was made on post office deposits. The Tribunal agreed with the assessee, holding that the attached monies in post office deposits should be considered as taxes paid by the assessee, impacting the interest calculations. As a result, the Tribunal allowed the ground raised by the assessee regarding the levy of interest.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal, emphasizing the determination of fair market value, indexation benefit, and the correct treatment of attached monies for interest calculations. The Order was pronounced on 13-4-2016.