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2017 (11) TMI 114 - AT - Income TaxComputation of long term capital gain on sale of a flat - determination of Fair Market Value as on 1.4.1981 - Held that - As gone through the copy of valuation report furnished before the Tribunal. As notice that the registered valuer has adopted a rate of ₹ 360/- per sq.ft., and accordingly arrived at a value of ₹ 3,33,000/-. He has also qualified his report by stating in para 4 of his report that there are no comparable instances of sales in the area and accordingly determined the value on the basis of personal enquiries. However he has not described the details of enquiries, which renders the valuation report a bald one. Accordingly I am of the view that the valuation report furnished by the assessee may not come to its help for the reasons discussed above. CIT(A) has determined the value of ₹ 1,71,000/- on the basis of sale instance of a flat located in the same society that took place on 23.11.1983. In fact, the above said sale agreement was furnished by the assessee before the AO. Even though sale instance is subsequent to the valuation date of 1.4.1981, yet the Ld CIT(A) has adopted the same without discounting the same. Since the sale instance is a better evidence and in the absence of any other material, Ld CIT(A) was justified in adopting the fair market value as on 1.4.1981 at ₹ 1,71,000/-. Accordingly uphold his order passed on this issue. Deduction of professional fee paid to M/s B.R Dalal & Co for tax consultation and to Shri A.G. Pandit for drafting agreement for sale and transfer of shares of the flat - Held that - In respect of drafting sale agreement and transfer of shares, it is of the view that the same should be considered as expenses incurred in connection with the transfer, since the agreement is required for effecting transfer and the transfer cannot be considered as complete unless the shares were also transferred. Accordingly reverse the order of Ld CIT(A) on this issue and direct the AO to allow the deduction paid for drafting sale agreement and transfer of shares. Assessee has also claimed the loss of ₹ 2,98,000/- and interest loss of ₹ 4,49,971/- should be treated as cost of flat. First of all, the fair market value as on 1.4.1981 has been substituted as cost of flat and hence the same would subsume all the costs. Secondly, both the items cannot be related to the cost of purchase, as they are independent transactions. Accordingly confirm the orders of tax authorities on this issue. Deduction claimed u/s 54EC - Held that - The claim of the assessee is allowable as per the decision rendered by Hon ble Madras High Court in the case of CIT Vs. C. Jaichander & another 2014 (11) TMI 54 - MADRAS HIGH COURT
Issues:
1. Computation of long term capital gain on sale of a flat 2. Deduction claimed u/s 54EC of the Act Issue 1: Computation of Long Term Capital Gain on Sale of a Flat The assessee purchased a flat in 1970 and later took possession in 1974 due to recoverable losses from the chief promoter. The flat was sold in 2010, and investments were made in 2011 for deduction u/s 54EC of the Act. Discrepancies arose in the computation of capital gain, including the fair market value as on 1.4.1981, expenses deduction, and inclusion of losses in the cost of the flat. The AO and CIT(A) differed on the valuation methods and deductions allowed. The Tribunal analyzed the valuation reports and sale instances to determine the fair market value, concluding in favor of the CIT(A) on this issue. Issue 2: Deduction Claimed u/s 54EC of the Act The assessee claimed a deduction u/s 54EC of the Act, which was restricted by the AO and confirmed by the CIT(A). The Tribunal referred to a decision by the Hon'ble Madras High Court to allow the deduction of the claimed amount, overturning the CIT(A)'s order. The Tribunal partially allowed the appeal, directing the AO to permit the deduction u/s 54EC of the Act. The judgment was pronounced on 20.9.2017, resolving the issues raised by the assessee regarding the computation of capital gain and the deduction claimed under the relevant sections of the Income Tax Act.
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