2015 (3) TMI 529 - AT - Income Tax

Computation of capital gain - Determination of fair market value as on 01-04-1981 - Held that - In view of the order of the Tribunal in the case of Shri Kurian Joseph 2015 (3) TMI 484 - ITAT COCHIN the assessing officer has no other way except to accept the value as on 01-04-1981 by taking 10% of the sale consideration. Therefore, it would remain only as an academic issue and would not serve any purpose to both the parties. By taking into consideration of the interest of the parties, this Tribunal is of the considered opinion that since the assessee has claimed only ₹ 1 lakh per cent which is far below 10% of the sale price, the same needs to be accepted. Accordingly, the orders of the lower authorities are set aside and the assessing officer is directed to accept the market price as on 01- 04-1981 at ₹ 1 lakh per cent. - Decided in favour of assessee. Disallowance of commission paid to brokers for selling the land - Held that - There is a practice of payment of commission for sale of land. The commission is ranging from 1% to 3% depending upon the area, terms agreed upon between the vendor and the broker. This Tribunal is of the considered opinion that by taking into consideration of the practice of payment of commission ranging from 1% to 3% on the sale price and the details furnished by the assessee with names and addresses before the assessing officer, copy of which is available at page 24, the assessing officer is not justified in restricting the claim at 2% without making any further enquiry.The very fact that the payment was made to six brokers shows that their whereabouts also could not be traced out in the efflux of time. By taking into consideration all the circumstances, this Tribunal is of the considered opinion that disallowance of ₹ 2,16,250 may not have justified. Accordingly, the orders of the lower authorities are set aside and the disallowance of ₹ 2,16,250 is deleted. - Decided in favour of assessee. Claim of the assessee u/s 54F in respect of investment made - capital gain arose on sale of land was used for construction of residential house as submitted by assessee - CIT(A) allowed the entire claim of ₹ 1,27,50,000 - Held that - In this case, the assessee claims that a sum of ₹ 50 lakhs was spent before the due date for filing of the return of income and what was spent after filing the return of income is only ₹ 60 lakhs. This fact was not considered by both the authorities below. The assessee has also expressed difficulty for depositing the amount in the capital gain account when the construction was going on. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered in the light of the decision of this Tribunal in Smt. Rosamma Korah (2014 (3) TMI 765 - ITAT COCHIN) and the judgment of the Kerala High Court in Dr Xavier J Pulikkal (2014 (4) TMI 211 - KERALA HIGH COURT). Accordingly, the orders of the lower authorities are set aside on this issue and the issue of claim of the assessee u/s 54F is remitted back to the file of the assessing officer. It is open to the assessee to place all the material facts which are relevant before the assessing officer. - Decided in favour of revenue for statistical purpose.

Summary

Issues Involved:
1. Determination of fair market value as on 01-04-1981 for computation of capital gain.
2. Disallowance of commission paid to brokers for selling the land.
3. Claim of the assessee under Section 54F of the Income Tax Act for investment made in new residential premises.

Issue-wise Detailed Analysis:

1. Determination of Fair Market Value as on 01-04-1981 for Computation of Capital Gain:
The primary issue in the assessee's appeal was the determination of the fair market value of the land as on 01-04-1981 for the purpose of computing capital gains. The assessee sold 14.365 cents of land and claimed the fair market value as Rs. 1 lakh per cent, supported by a valuation report from a registered valuer. However, the assessing officer fixed the fair market value at Rs. 36,000 per cent based on information from the Sub-Registrar's office. The Tribunal noted that the assessing officer relied on a sale deed of one cent of land, which was not comparable due to differences in location and area. The Tribunal found that the information from the Sub-Registrar did not disclose a uniform value and lacked reliability. Referring to its earlier decision in the case of Kurian Joseph, the Tribunal held that taking 10% of the sale price as the market value as on 01-04-1981 was an approved method. Since the assessee claimed only Rs. 1 lakh per cent, which was below 10% of the sale price, the Tribunal directed the assessing officer to accept the assessee's valuation.

2. Disallowance of Commission Paid to Brokers for Selling the Land:
The assessee claimed Rs. 6,48,750 towards commission paid to brokers, which was 3% of the total sale consideration. The assessing officer allowed only 2%, disallowing Rs. 2,16,250. The Tribunal observed that the prevailing rate of commission in Kerala ranged from 1% to 3% and that the assessee had provided details of the brokers. The Tribunal found that the assessing officer did not justify the reduction to 2% and did not make further inquiries. Considering the practice of paying commission and the details provided, the Tribunal held that the disallowance was not justified and deleted the disallowance of Rs. 2,16,250.

3. Claim of the Assessee Under Section 54F of the Income Tax Act for Investment Made in New Residential Premises:
The revenue's appeal concerned the assessee's claim under Section 54F for investment in a new residential house. The CIT(A) allowed the claim based on the assumption that the entire money was spent on construction. The assessing officer argued that not all the money was spent before the due date for filing the return and that the balance was not deposited in the capital gain account as required under Section 54F(4). The Tribunal noted that the assessee had spent Rs. 50 lakhs before the due date and Rs. 120 lakhs after. It referred to the decisions in Smt. Rosamma Korah and Dr. Xavier J Pulikkal, which emphasized the need to deposit unutilized funds in the capital gain account. The Tribunal remitted the issue back to the assessing officer for reconsideration in light of these decisions and directed the assessee to provide relevant material.

Conclusion:
The Tribunal allowed the assessee's appeal regarding the fair market value and commission paid to brokers. It remanded the issue of the Section 54F claim back to the assessing officer for further examination. The revenue's appeal was allowed for statistical purposes.