2016 (9) TMI 1074 - AT - Income Tax

Addition debiting the cost of appreciation as on 1.4.1981 - capital gain computation - Held that - From the details of the sale instance of plots in the same area during the same period i.e. March, 1978 to 20.04.1981, it is noticed that the Market Value has varied between ₹ 371 per sq. yard to ₹ 1811 per sq.yard. Wide difference can be attributed to a number of factors such as location, extent of land and the taste of bidders. The area of plots considered for comparison is very less compared to the area of the plot contributed as capital by the assessee. As rightly pointed out by the learned counsel for the assessee the area is almost four times and therefore, the data relied upon by the AO cannot be relied upon in toto, more particularly, since the sale instances at Sl. No.1 to 6 are of the financial year 1978-79, the average of which is less than ₹ 1000/- per sq. yard while the average of the sale instances in 1981 is around ₹ 1780 per sq. yard. Since, the FMV of the land as on 1.4.1981 is to be adopted and the value adopted by the assessee @ ₹ 1000 per sq. yard is much less than this average, as convinced that the value adopted by the assessee is fair, reasonable and based on the relevant data. In view of the same, thus direct the AO to adopt the same for arriving at the cost of acquisition necessary for arriving at the capital gain. In view of the same, the assessment order is set aside. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of cost of appreciation in A.Y 2002-03.

Analysis:
The assessee, a firm engaged in film exhibition, filed its return for A.Y 2002-03 declaring total income of ?5,95,690. The AO observed the assessee declared income under "capital gains." The assessee had acquired land in 1967 and contributed part of it to a partnership in 1981. The AO adopted ?525 per sq. yard as the cost of acquisition, while the assessee valued it at ?1000 per sq. yard. The CIT (A) confirmed the AO's decision, leading to the appeal before the ITAT.

The assessee argued that the fair market value in 1981 was ?1755/sq. yard based on four sale instances. The Revenue supported the AO's decision based on the Sub Registrar's valuation of ?550/sq. yard. The ITAT considered the sale instances in the same area during 1981, noting values ranging from ?371 to ?1811 per sq. yard. The ITAT found the assessee's valuation of ?1000 per sq. yard reasonable compared to the average value of ?1780 per sq. yard in 1981. Hence, the ITAT directed the AO to adopt the assessee's valuation for calculating capital gains, setting aside the assessment order.

The ITAT's decision was based on the fair market value of the property as on 1.4.1981, considering the sale instances and the significant difference in values observed in the same area during the relevant period. The ITAT found the assessee's valuation reasonable and fair, leading to the allowance of the appeal against the addition of cost of appreciation for A.Y 2002-03.