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2018 (8) TMI 1724 - AT - Income TaxComputation of capital gains adopting the fair market value (FMV) - value claimed by the assessee as on 01/04/1981 - Held that - CIT(A) found that the value of the property sold in S. No. 161/3 in 1986 was at 75 000/- per acre. Another evidence brought out by the Ld. CIT(A) was in the case of Tegala Murali PAN ACPPM7787G at 20 000/- per acre as on 01. 04. 1981 in respect of 5. 45 acres of land situated in Survey No. 26/1 in Vepagunta area. Considering all the evidences and information the Ld. CIT(A) determined the fair market value as on 01. 04. 1981 at 40 000/- per acre. During the appeal hearing the Ld. AR could not place any evidence to show that the FMV of the property sold by the assessee as on 01. 04. 1981 was more than 40 000/- per acre. Therefore we hold that the FMV determined by the Ld. CIT (A) is fair and reasonable therefore we do not find any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. The appeal of the assessee on this ground is dismissed. Deduction u/s 54F - Held that - The facts show that the property at 53&54 Priya Gardens Simhachalam was registered in the name of the assessee s wife and the property was enjoyed by the assessee s wife and the same is not disputed by the department. Once the property was registered in the name of the assessee s wife the same should not be considered in the hands of the assessee and reject the claim of the assessee for deduction u/s 54F of the Act. It is for the department to establish that the property No. 53 and 54 Priya Gardens is constructed from the sources of the assessee and it was the property of the HUF. The same exercise was not done by the AO. Therefore we are unable to accept the argument of the department to hold that the property was belonging to the assessee. Accordingly the said argument is untenable and rejected. The next issue is property at D. No. 9-33/1 Gopalapatnam Visakhapatnam as per the evidence available on record the second property at Gopalapatnam is commercial property but not a residential property - one property belonged to the assessee s wife and the second property was a commercial property and the assessee owns only one residential house. As per Section 54F for claiming the deduction u/s 54F the assessee should be either individual or HUF. The long term capital gains should result in transfer of capital asset not being a residential house. The assessee should acquire property within one year before or two years after the transfer of the property in case of purchase and three years after the date of transfer in case of construction. The assessee should not own more than one residential house other than the new asset. The word used in the section is the residential house but not the commercial property. The property at D. No. 9-33/1 Gopalapatnam is being used and assessed as commercial property the same cannot be treated as residential house. Similarly the property of the wife cannot be attached to the assessee for the purpose of disallowing the deduction u/s 54F. Therefore the assessee has satisfied all the conditions laid down in Section 54F hence we hold that the assessee is entitled for deduction u/s 54F - Decided partly in favour of assessee.
Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961. 2. Computation of capital gains by adopting the fair market value (FMV) of the property as on 01.04.1981. 3. Disallowance of exemption claimed under Section 54F of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Validity of the Notice Issued Under Section 148 The appellant contended that the notice issued under Section 148 was not in accordance with the law and should be quashed. However, this ground was not raised before the Commissioner of Income Tax (Appeals) [CIT(A)] and no petition was filed for admission of the additional ground. Consequently, the tribunal dismissed this ground as not maintainable. Issue 2: Computation of Capital Gains by Adopting FMV as on 01.04.1981 The appellant challenged the computation of capital gains, arguing that the fair market value (FMV) of the property as on 01.04.1981 should be ?1,00,000 per acre instead of ?40,000 per acre as determined by the CIT(A). During the assessment proceedings, the Assessing Officer (AO) found that the property in question was sold for ?3,46,00,000, with the appellant's share being ?1.73 crores. The appellant had adopted an FMV of ?1,00,000 per acre for calculating the indexed cost of acquisition. However, the AO, after conducting inquiries and obtaining information from the Sub Registrar Office (SRO), determined the FMV to be ?6,430 per acre as on 01.04.1981 based on the reverse calculation from the SRO value as on 01.04.1987. The CIT(A) admitted additional evidence from the appellant regarding the valuation by the Visakhapatnam Urban Development Authority (VUDA) in 1986 and considered various pieces of evidence, including property values in the vicinity. The CIT(A) ultimately estimated the FMV as on 01.04.1981 to be ?40,000 per acre. The tribunal upheld the CIT(A)'s determination, noting that the appellant failed to provide evidence supporting the claimed FMV of ?1,00,000 per acre. The tribunal found the FMV of ?40,000 per acre to be fair and reasonable, thus dismissing the appellant's claim on this ground. Issue 3: Disallowance of Exemption Claimed Under Section 54F The appellant claimed an exemption under Section 54F for ?21,67,658 for acquiring a new flat. The AO disallowed the exemption, stating that the appellant owned more than one residential house, which included properties at Flat No. 101, Jaya Enclave, Visakhapatnam, and another at 53 & 54 Priya Garden, Simhachalam, Visakhapatnam. The AO also considered a property at D. No. 9-33/1, Gopalapatnam, Visakhapatnam as a residential house, despite the appellant's claim that it was a commercial property. The CIT(A) upheld the AO's decision, presuming that the property in the name of the appellant's wife belonged to the Hindu Undivided Family (HUF) due to the lack of independent income sources for the wife. The tribunal, however, disagreed with the CIT(A) and AO. It held that the property registered in the name of the appellant's wife should not be considered as belonging to the appellant without concrete evidence proving it was funded by the HUF. It also accepted the appellant's argument that the property at Gopalapatnam was used for commercial purposes, supported by property tax receipts indicating its commercial use. The tribunal concluded that the appellant owned only one residential house and met the conditions laid down in Section 54F. Therefore, the tribunal allowed the exemption under Section 54F, setting aside the CIT(A)'s order on this issue. Conclusion: The tribunal's judgment partially allowed the appellant's appeal. The notice issued under Section 148 was dismissed as not maintainable. The computation of capital gains by adopting the FMV of ?40,000 per acre was upheld. However, the exemption under Section 54F was allowed, reversing the CIT(A)'s decision on this matter. The order was pronounced in the open court on 29th Aug, 2018.
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