2019 (3) TMI 1071 - HC - Income Tax

Capital gain computation - FMV determination as on 01.04.1981 - set-off of loss from shares against capital gain - as per Tribunal AO has to rework the capital gains by adopting the FMV for each cent of land as on 1.4.81 at ₹ 9,900 and if the capital gains as arrived at exceeds the amount of loss from purchase and sale of shares, the income from capital gains would become the main source of income and therefore, the loss from purchase and sale of shares would be allowed to be set off against such capital gains - HELD THAT - No substantial question of law arises in the present Appeal filed by the Revenue and we hold that the findings of fact arrived at by both the Appellate Authorities below are based on relevant and cogent materials before them. Since both the sale deeds of comparable cases were produced by the Assessee before the CIT (Appeals), who had opportunity to compare the location and area of land involved in the said comparable cases, the findings of fact arrived by him on that basis cannot be said to be perverse. It cannot also be said to be perverse merely because the survey numbers are not discussed in the orders passed by the Appellate Authorities. Since the two documents were on the record of the Appellate Authority, in our opinion the said authority rightly held that the value depends upon several factors like area of the property, location and proximity of the area, comparative factors like instances of sale, guideline value etc. Since all these relevant factors were taken into account by the Appellate Authorities below, we do not find any perversity in those orders and therefore, the same does not give rise to any substantial question of law requiring our further consideration under Section 260-A - Decided against revenue.

Summary

Issues:
1. Determination of fair market value for computation of capital gains.
2. Set off of loss against income from capital gains.

Analysis:

Issue 1: Determination of fair market value for computation of capital gains
The appellant claimed the fair market value (FMV) of lands acquired by the Income Tax Department at a significantly higher value compared to the Assessing Officer's determination. The Assessing Officer relied on guideline values from the District Registrar, which the appellant contested as not comparable to the property in question. The appellant provided evidence of sale instances to support their valuation, emphasizing the location and size of the property on the main road. The CIT (Appeals) considered the evidence presented and determined the FMV at a value higher than the Assessing Officer's but lower than the appellant's claim. The High Court upheld the CIT (Appeals) decision, considering factors such as property area, location, and comparable sale instances. The Court concluded that the findings were based on relevant and cogent materials, dismissing the Revenue's appeal.

Issue 2: Set off of loss against income from capital gains
The Tribunal affirmed the position that if a company's main income source is from capital gains, the exemption under the explanation to Section 73 applies, allowing set off of losses from other business activities against capital gains. In this case, the income from capital gains exceeded the loss from share transactions, making capital gains the primary income source. The Tribunal directed the Assessing Officer to rework the capital gains based on the revised FMV determination. The High Court found no substantial question of law in the Revenue's appeal, upholding the Tribunal's decision on the set off of losses against income from capital gains.

Overall, the High Court dismissed the Revenue's appeal, affirming the decisions of the lower authorities regarding the determination of fair market value and the set off of losses against income from capital gains.