1995 (9) TMI 97 - AT - Income Tax

Summary

Issues:
1. Computation of capital gains based on the fair market value of a property.
2. Claiming deduction under section 53 for a residential property.
3. Valuation of perquisites related to rent-free accommodation provided by the employer.

Analysis:

1. The appeal was filed against the CIT's order under section 263 regarding the computation of capital gains from the sale of a property. The CIT directed the ITO to determine the fair market value of the property as on 1-1-1964 considering the cost of construction and market value declared in the WT assessments. The CIT rejected the argument that the WT valuation did not reflect the actual property value. The ITAT agreed with the CIT, stating that even if the WT valuation was correct, it would contradict the property's value in 1964. The ITAT upheld the CIT's direction to reassess the property value for capital gains calculation.

2. The assessee claimed a deduction under section 53 for a property, asserting it was a residential house. The CIT found discrepancies in the usage of the property, with the assessee changing statements about its occupation. The ITAT noted that the assessee failed to provide evidence supporting the property's residential use. The ITAT agreed with the CIT's decision to disallow the deduction under section 53, stating that the property did not qualify as a residential house based on the facts presented.

3. The issue of valuing perquisites related to rent-free accommodation provided by the employer was also raised. The CIT directed the ITO to evaluate the perquisites as per Rule 3 of the IT Rules. The ITAT supported the CIT's decision, emphasizing that the rule accounted for situations where the fair rental value was lower than the prescribed percentage. The ITAT upheld the CIT's order, dismissing the appeal and affirming the revision under section 263.

In conclusion, the ITAT upheld the CIT's directions on all issues, emphasizing the need for accurate valuation and compliance with relevant tax provisions in determining capital gains, claiming deductions, and assessing perquisites related to accommodation provided by the employer.