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2016 (6) TMI 451 - AT - Income TaxAdoption of FMV - claim of deduction U/s 50C - allowance of indexation - inheritance of property - AO taken value on the basis of DVO s valuation - Held that - It is undisputed fact that the assessee inherited the property from his mother in law and has 50% share in it, which has been sold during the year under consideration at ₹ 1.20 crores. The assessee s share was ₹ 60.00 lacs, which has been disclosed. The assessee had computed the capital gain by considering the FMV as on 01/4/1981 at ₹ 1,92,282/-. However, the ld. Assessing Officer had taken value at ₹ 1,28,700/- on the basis of DVO s valuation. It is settled law that the Assessing Officer cannot refer this issue U/s 55A to the DVO as the assessee has shown FMV as on 01/4/1981 at ₹ 1,92,282, which is more than FMV decided by the DVO at ₹ 1,28,700/-. Sub-section (a) of Section 55A of the Act had been amended by the Finance Act, 2012 w.e.f. 01/7/2012 and variance word inserted in this sub-section. Therefore, the ld Assessing Officer is directed to allow the indexation for the F.Y. 1981-82 on ₹ 1,92,282/-. Further the assessee had claimed improvement cost in F.Y. 2000-01 at ₹ 3.00 lacs and in F.Y. 2004-05 at ₹ 1,30,000/- in which indexation has been claimed by the assessee but the assessee had not produced any evidence before the lower authority to demonstrate that his mother in law had incurred any cost on improvement. Even registered valuer of the assessee and DVO of the department has not referred any improvement in the valuation report, therefore, we dismiss the assessee s appeal on indexation claimed in F.Y. 2000-01 and 2004-05. Deduction U/s 54F of the Act on two flats - Held that - This issue has been considered by the various courts and in number of cases that this deduction is allowable on even two flats, which can be a complete unit or even can be on different floors of the apartment. Accordingly we allow the deduction U/s 54F of the Act on two flats. Adoption of sale consideration - Held that - As for deduction U/s 54, the sale consideration is to be taken on the basis of actual sale consideration received by the assessee not determined by the stamp authority for the registration purposes or determined by the DVO referred U/s 50C of the Act.
Issues Involved:
1. Fair Market Value (FMV) of the asset as on 1/4/1981. 2. Cost of improvement incurred by the previous owner. 3. Deduction under Section 54 of the IT Act for investment in more than one residential flat. 4. Valuation of sale consideration under Section 50C(2) for claiming exemption under Section 54. Analysis: 1. Fair Market Value (FMV) of the asset as on 1/4/1981: The assessee contested the FMV of the asset as on 1/4/1981, claiming it to be ?1,99,282/-, while the Assessing Officer (AO) and the Departmental Valuation Officer (DVO) valued it at ?1,28,700/-. The Tribunal held that the AO cannot refer the matter to the DVO under Section 55A if the FMV declared by the assessee is higher than the DVO's valuation. The amendment to Section 55A by the Finance Act, 2012, effective from 01/07/2012, was noted, but it was not applicable to the assessment year in question. Therefore, the AO was directed to allow indexation based on the assessee's declared FMV of ?1,92,282/-. 2. Cost of improvement incurred by the previous owner: The assessee claimed an improvement cost of ?3,00,000/- in F.Y. 2000-01 and ?1,30,000/- in F.Y. 2004-05, which was incurred by the previous owner (mother-in-law). The AO disallowed these claims due to lack of evidence. The Tribunal upheld this decision, noting that neither the assessee's registered valuer nor the DVO mentioned any improvements in their reports. Thus, the claim for indexation on the improvement costs was dismissed. 3. Deduction under Section 54 of the IT Act for investment in more than one residential flat: The assessee sought deduction under Section 54 for two flats purchased in Chitrakoot Nagar, Jaipur. The AO restricted the deduction to one flat, but the Tribunal allowed the deduction for both flats. The Tribunal referenced various court decisions, including CIT Vs K.G. Rukminianna (2011) 331 ITR 211, which interpreted "a residential house" to include multiple units, allowing for deduction on more than one residential property. 4. Valuation of sale consideration under Section 50C(2) for claiming exemption under Section 54: The AO took the sale consideration as ?62,63,250/- based on the DVO's valuation under Section 50C, rather than the actual sale consideration of ?60,00,000/- declared by the assessee. The Tribunal ruled that for the purpose of deduction under Section 54, the actual sale consideration should be considered, not the value determined by the stamp authority or DVO. This decision was supported by the Jaipur Bench of ITAT in the case of Nand Lal Sharma Vs. ITO. Conclusion: The Tribunal partly allowed the appeal, directing the AO to: - Use the FMV declared by the assessee for indexation purposes. - Disallow the indexation on the claimed improvement costs due to lack of evidence. - Allow the deduction under Section 54 for both residential flats. - Consider the actual sale consideration for computing the exemption under Section 54. Order Pronounced: The appeal of the assessee was partly allowed, with the order pronounced in the open court on 30/05/2016.
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