2019 (7) TMI 1442 - HC - Income Tax

LTCG - fair market value as on 1.4.1981 - valuation of the property as sold by the assessee for the purpose of computation of capital gain - Tribunal held that the assessee for the purpose of valuation under the Wealth Tax Act has adopted a value and there is no going back on the said valuation - HELD THAT - Attempt of the assessee before the CIT(A) was to take advantage of the notification issued by Government of Puducherry, much after the relevant date, which is 01.04.1981. Therefore, any subsequent notification issued by the Government of Puducherry could have been taken advantage by the assessee that too before the CIT(A) for the first time. Assessee himself has accepted before the Assessing Officer that the valuation of the property, as adopted by him, in the Wealth Tax Assessment may be taken into consideration. However, to the said extent the Assessing Officer did not grant relief. We find the reasons assigned by the Tribunal are perfectly legal and valid considering the factual position. However, valuation adopted by the assessee in the Wealth Tax Assessment was not adopted by the Assessing Officer and there has been a deduction even in that valuation. The reasonable approach would have been to adopt the valuation in the Wealth Tax Assessment, since the Tribunal holds that the assessee could not have been taken two different values i.e., one valuation is under the Wealth Tax Assessment and another is under Income Tax Act. Therefore to that extent, we are of the view that the assessee is entitled to relief. Appeal is partly allowed and the matter is remanded to the AO to compute the capital gain by taking the value of the land at ₹ 1,65,600/- and the value of the building at ₹ 80,000/- and the Assessing officer is directed to redo the assessment to the extent indicated. Consequently, substantial questions of law is left open.

Summary

Issues: Valuation of property for computation of capital gain

Issue 1: Valuation Method for Long Term Capital Gains
The primary issue in this case involves the correct method for valuing a property for the computation of Long Term Capital Gains. The appellant contested the method used by the Assessing Officer, arguing that the valuation should be based on the fair market value as of 1.4.1981, rather than the value adopted for wealth tax purposes. The Tribunal upheld the initial valuation, emphasizing that the value chosen under the Wealth Tax Act should stand. The appellant further argued that a subsequent notification designating the property as a heritage site should impact the valuation. However, the High Court determined that the appellant could not benefit from a post-valuation notification and that the original valuation should be accepted.

Issue 2: Adoption of Valuation in Wealth Tax Assessment
The appellant also raised concerns regarding the valuation adopted in the Wealth Tax Assessment, suggesting that it should be considered for determining capital gains. The High Court acknowledged the discrepancy between the valuations under the Wealth Tax Assessment and the Income Tax Act. Despite the appellant's plea to adopt the Wealth Tax Assessment valuation, the Assessing Officer did not provide relief. The Court concluded that a reasonable approach would be to consider the valuation from the Wealth Tax Assessment, as the appellant should not be subject to differing valuations. Consequently, the Court partially allowed the appeal, remanding the matter to the Assessing Officer for recomputing the capital gain based on the values specified.

In summary, the High Court addressed the issues of property valuation for capital gain computation, emphasizing the importance of consistency in valuation methods and rejecting the appellant's attempt to benefit from a post-valuation notification. The Court directed the reassessment based on the values from the Wealth Tax Assessment, underscoring the need for uniformity in valuation practices under different tax laws.