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2017 (9) TMI 847 - AT - Income TaxLong term capital gain addition - FMV enhancement - reducing cost of acquisition of the impugned capital asset sold as on 01.04.1981 from ₹ 25,78,300/- @ ₹ 700/- per sq.yd. to ₹ 7,35,750/- only @ ₹ 250/- per sq.yd - Held that - No reason or justification on assessee s part in seeking to enhance fair market value of his plots sold to ₹ 700/- despite the fact that the same location suffers from various depreciating factors as well as its distance from main road seeming to be at least between 500 to 1kmtr. These crucial facts make it clear that the assessee s plot did not enjoy much commercial value since sandwiched between Sabarmati river on the one hand and Ashram Road on the other. There is further no material that the said plot s value in anyway suffered because of Urban Land Ceiling Law or its effect thereupon. We therefore do not find any justification in travelling further to adopt valuation of Natraj or G. S. Shodhan situated at much far distance in a different locality & scheme than the above sample plot. The assessee s assertions in this regard based on coloured material and other documents are accordingly rejected. Whether both the lower authorities have correctly valued assessee s plot @Rs.250/- only than the above sample property sold on 01.10.1981 @Rs.484.10/- per sq.mtr.? - Held that - Although the assessee s valuation @Rs.700/- cannot be accepted in toto so are both the lower authorities findings drastically reducing the above valuation to ₹ 250/- only without any concrete evidence. All this makes us to observe that application of thumb rule in such a case would meet larger interest of justice. We therefore take average of sale price of ₹ 484.10/- per sq.mtr. and the price in question taken by the lower authorities @Rs.250/- ; coming to ₹ 367.05 per sq.mtr. as the appropriate fair market value of the assessee s property as on 01.04.1981. We make it clear that our instant adjudication is based on the above peculiar facts and circumstances shall not be treated as a precedent. The Assessing Officer shall accordingly finalize consequential computation. The assessee therefore partly succeeds on merits. The assessee s first plea is that the Assessing Officer could not have interfered in registered valuer s report u/s.55A(a) of the Act since the amendment in question authorizing him to proceed on such basis w.e.f. 01.07.2012 does not apply with retrospective effect. We however notice that clause(b) sufficiently answers assessee s former legal plea being inclusive in nature since having crucial expression in any other case . Same is the outcome of assessee s latter legal argument that it was mandatory for the Assessing Officer to make reference to the DVO in view of our sufficient discussion on merits supporting both the lower authorities action on merits since the above registered valuer s report did suffer from apparent irregularities. The assessee s two legal contentions are therefore rejected. Section 54EC deduction disallowance - Held that - Learned Departmental Representative strongly seeks to revive the impugned deduction disallowance on the ground that the assessee has invested his impugned capital gains in two sets of investments of ₹ 50lacs each in as many financial years; although within six months of the same arising from sale of the abovestated capital asset. We however notice that a co-ordinate bench in case of Jyotikaben Bhupendrbhai Shah (2014 (9) TMI 495 - ITAT AHMEDABAD ) has already decided the very issue in assessee s favour thereby accepting an identical claim of Section 54EC deduction. Learned Departmental Representative fails to indicate any distinction therein or any judicial precedent in hon ble jurisdictional high court or that of hon ble apex court. We therefore affirm the CIT(A) s findings under challenge - Decided against revenue
Issues Involved:
1. Long-term capital gains addition of ?65,50,266/-. 2. Section 54EC deduction disallowance of ?50 lacs. Issue-wise Detailed Analysis: 1. Long-term Capital Gains Addition of ?65,50,266/-: The assessee contested the addition of ?65,50,266/- to long-term capital gains, arguing that the fair market value (FMV) as of 01.04.1981 should be ?25,78,300/- as per the registered valuer's report, instead of the ?7,35,750/- determined by the Assessing Officer (AO). The AO had reduced the FMV to ?250/- per sq. yd. from ?700/- per sq. yd., leading to the contested addition. The assessee argued that: - The AO should have referred to the valuation officer under Section 55A of the Income Tax Act, 1961, rather than estimating the FMV himself. - The valuation by the AO was not justified as it did not consider the property's location and other relevant factors correctly. The CIT(A) upheld the AO's valuation, noting that: - The property in question was located 2 km inside the main Ashram Road, on a less wide road, which justified a lower valuation compared to the comparable property on the main Ashram Road. - The AO's estimation of ?250/- per sq. yd. was based on a thorough inquiry and comparison with a similar property. Upon appeal, the Tribunal observed: - Both the properties were part of the same town planning scheme but had different commercial potentials due to their locations. - The valuation of ?700/- per sq. yd. by the assessee's valuer was excessive, while the AO's valuation of ?250/- per sq. yd. was too low. - The Tribunal applied a thumb rule and determined an average FMV of ?367.05 per sq. yd. for the property as of 01.04.1981. The Tribunal partly allowed the assessee's appeal on merits, directing the AO to finalize the computation based on the revised FMV. 2. Section 54EC Deduction Disallowance of ?50 lacs: The Revenue contested the CIT(A)'s decision to allow the assessee's claim for a Section 54EC deduction of ?1 crore, made in two installments of ?50 lacs each in different financial years but within six months of the capital gain arising. The AO had restricted the deduction to ?50 lacs, citing the proviso to Section 54EC, which limits the investment to ?50 lacs in any financial year. The assessee argued that the investment limit applies per financial year, not per transaction, and cited various judicial precedents supporting this view. The CIT(A) allowed the deduction, referencing decisions from various ITAT benches, including the jurisdictional ITAT, which had consistently held that the limit of ?50 lacs applies per financial year, allowing for a total deduction of ?1 crore if the investments are made in two different financial years within six months of the transfer. The Tribunal upheld the CIT(A)'s decision, noting: - The consistent judicial interpretation that the investment limit of ?50 lacs applies per financial year. - The absence of any contrary judicial precedent from the jurisdictional High Court or the Supreme Court. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s findings. Conclusion: The Tribunal partly allowed the assessee's appeal regarding the long-term capital gains addition, directing a revised FMV of ?367.05 per sq. yd. The Revenue's appeal on the Section 54EC deduction was dismissed, upholding the assessee's claim of ?1 crore deduction in two financial years.
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