2016 (11) TMI 955 - AT - Income Tax

Computation of capital gain - Adoption of value - Held that - In the instant case, the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10 per cent. Therefore, we hereby direct the Assessing Officer to adopt the value as declared by the assessee. This ground of the assessee is allowed. Disallowance of indexation on the amount paid for acquiring possession of strip of land for computing the long-term capital gain - Held that - The assessee is claiming to be the owner of the land even prior to the allotment made by the concerned authority, thus the assessee is claiming indexation since April 1, 1981. On a pointed query, the assessee could not produce any material suggesting that the ownership of the land in question was transferred to the assessee prior to the date when the land was allotted to the assessee. Even in respect of the Theory of Adverse Possession, the assessee has not placed any material on record that the assessee was declared owner by virtue of theory of adverse possession. In our considered view, for claiming to be the owner of the land, the assessee was required to produce necessary evidences. In the absence of evidence, when contrary evidences are on record, we do not see any reason to interfere with the orders of the authorities below - Decided against assessee Not taking the fair market value of the asset as on April 1, 1981 as cost of acquisition under section 55(2) - Held that - The Assessing Officer has adopted the value at indexed cost of acquisition as on April 1, 1981 at ₹ 4,31,940 and in respect of the strip of land, adopted the indexation cost of acquisition at ₹ 13,97,120. So far as the indexed cost of acquisition with regard to the strip of land is concerned, in ground No. 3, we have already decided the matter against the assessee. Therefore, we are not inclined to interfere with the finding of the learned Commissioner of Income-tax (Appeals) on this issue. The submission of the assessee is rejected. Fair market value ought to have adopted at ₹ 110 per sq. yard for other portions of land - Held that - We find force in the contention of the learned counsel for the assessee that fair market value of the property is to be adopted on the basis of comparable sale instances. Therefore, we hereby direct the Assessing Officer to re-compute the cost of acquisition on the basis after ascertaining the fair market value of the property with reference to April 1, 1981 excluding the strip of land which was purchased in the year 2008. This ground of the appeal of the assessee is allowed for statistical purposes.

Issues Involved:
1. Computation of long-term capital gain.
2. Adoption of sale consideration under section 50C of the Income-tax Act, 1961.
3. Indexation on the amount paid for acquiring possession of a strip of land.
4. Fair market value of the asset as on April 1, 1981, as cost of acquisition under section 55(2) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Computation of Long-Term Capital Gain
The assessee contested the computation of long-term capital gain by the Assessing Officer (AO), which was confirmed by the Commissioner of Income-tax (Appeals) (CIT(A)). The AO computed the long-term capital gain at ?2,43,18,412 against the declared gain of ?1,53,56,462. The assessee argued that the CIT(A)'s action was illegal, unjustified, arbitrary, and against the facts of the case. However, the tribunal did not provide a distinct judgment on this specific issue, implying that the primary focus was on the other grounds of appeal.

Issue 2: Adoption of Sale Consideration under Section 50C
The assessee challenged the AO's adoption of the sale consideration at ?6,12,70,120 against the actual sale consideration of ?6,00,00,000. The assessee argued that the difference of ?12,70,120 (2.11%) was within the tolerable limits of 15% variation recognized by the Supreme Court in C.B. Gautam v. Union of India. The tribunal found merit in this argument, referencing the Pune Bench's decision in Rahul Constructions v. Deputy CIT, where a difference of less than 10% was deemed ignorable. Consequently, the tribunal directed the AO to adopt the sale consideration as declared by the assessee. This ground of the assessee was allowed.

Issue 3: Indexation on Amount Paid for Acquiring Possession of Strip of Land
The assessee claimed indexation on ?13,97,120 paid for acquiring possession of a strip of land, arguing ownership since the purchase of the original plot and citing the Theory of Adverse Possession. The CIT(A) and the AO did not allow this indexation. The tribunal upheld the lower authorities' decision, noting the absence of evidence proving ownership before the land's regularization in 2008. The tribunal dismissed this ground of the assessee's appeal.

Issue 4: Fair Market Value as on April 1, 1981, under Section 55(2)
The assessee contended that the fair market value as on April 1, 1981, should be considered for computing long-term capital gains, submitting a value of ?110 per sq. yard supported by a registered sale deed of a nearby area. The CIT(A) dismissed this claim, stating the assessee could not establish the value as on April 1, 1981. The tribunal found force in the assessee's argument that fair market value should be based on comparable sale instances and directed the AO to re-compute the cost of acquisition after ascertaining the fair market value as on April 1, 1981, excluding the strip of land purchased in 2008. This ground was allowed for statistical purposes.

Conclusion:
The appeal of the assessee was partly allowed, with the tribunal providing specific directions on the adoption of sale consideration and re-computation of the cost of acquisition while dismissing the claim for indexation on the strip of land. The tribunal's order was pronounced in the open court on July 27, 2016.

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