2018 (7) TMI 1463 - AT - Income Tax

Computation of long term capital gains - assessee is a non-resident and resident of USA. Mr.B Chitti Babu is the representative assessee in this case - FMV determination - A.O. adopted the value of SRO as per section 50C(3) of IT act and computed the capital gains as the DVO has valued the property for more value than the value assessed by the SRO - Held that - DVO has valued the property after considering all the objections raised by the assessee before the DVO and the A.O. and valued the property at higher rate. Since the objections were considered by the technical expert and made the valuation of the property at higher rate no separate deduction is required to be allowed on account of the deficiencies canvassed by the Ld. A.R. Therefore, we hold that the A.O. has rightly adopted the value assessed by the SRO u/s 50C of the Act and accordingly, we uphold the order of the Ld.CIT(A) and dismiss the assessee s appeal on this ground. Revision of cost of land i.e. Fair Market Value(FMV) as on 01/04/1981 at ₹ 200/- per sq.yd. against FMV as on 1.4.1981 @ ₹ 100/- per sq.yd. as per the guideline value seeked by assessee - Held that - For arriving the FMV as on 1981 the correct method is guideline value, or the sale value of the lands in the area, or the authentic market information and the value declared by the assessee in her wealth tax return. The assessee has not furnished any information to substantiate that the guideline value was incorrect. The A.O. has adopted the SRO value in the case of the sale consideration as well as for cost of land (FMV) and the decision taken by the A.O. is consistent. In the absence of any evidence to establish that the land rate of the area was at ₹ 200/- as on 01/04/1981 and the market rate was more than ₹ 100/-, we hold that the FMV arrived by the AO is reasonable and do not find any reason to interfere with the order of the CIT(A) and the same is upheld. Computation of short term capital loss in respect of super structures - Held that - on going through the assessment order, the A.O. has adopted the value of sale consideration as adopted by the SRO. No other evidence produced by the assessee during the appeal hearing to controvert the finding given by the A.O., therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is dismissed. Charging of interest u/s 234B & C - assessee is non-resident and resident of US and sold the property to the resident - vendee required to deduct the tax at source as per section 195 - Held that - As relying on DIRECTOR OF INCOME TAX VERSUS M/S. JACABS CIVIL INCORPORATED / MITSUBISHI CORPORATION 2010 (8) TMI 37 - DELHI HIGH COURT assessee is not liable for interest u/s 234 of the Act to the extent of TDS to be made from the assessee. Accordingly, we direct the A.O. not to levy the interest u/s 234B of the Act to the extent of tax required to be deducted from the assessee by the purchaser. Accordingly, the appeal of the assessee on this ground is partly allowed.

Summary

Issues Involved:
1. Computation of Long Term Capital Gains.
2. Admission of Additional Grounds of Appeal.
3. Charging of Interest under Sections 234B and 234C of the Income Tax Act.

Detailed Analysis:

Computation of Long Term Capital Gains:
The primary issue in this case was the computation of long-term capital gains from the sale of immovable property by the assessee, a non-resident residing in the USA. The sale consideration declared by the assessee was ?15.00 lakhs, whereas the Sub-Registrar Office (SRO) assessed the market value at ?54,03,500/-. The Assessing Officer (A.O.) referred the matter to the Departmental Valuation Officer (DVO), who valued the property at ?89,03,000/-. The A.O. computed the capital gains based on the SRO value, as per Section 50C(3) of the Income Tax Act, which mandates that if the DVO's valuation exceeds the SRO's value, the latter should be adopted. The Tribunal upheld the A.O.'s decision, stating that the DVO had considered all objections raised by the assessee and no further deductions were warranted. The Tribunal found the A.O.'s valuation consistent and reasonable, dismissing the assessee's appeal on this ground.

Admission of Additional Grounds of Appeal:
The assessee argued that the Commissioner of Income Tax (Appeals) [CIT(A)] was unjustified in not entertaining fresh grounds of appeal, which were legal and could be raised at any time before the appellate authority. However, this issue was not specifically adjudicated by the Tribunal, as the focus remained on the computation of long-term capital gains and the applicability of interest under Sections 234B and 234C.

Charging of Interest under Sections 234B and 234C:
The assessee contended that as a non-resident, the purchaser was required to deduct tax at source under Section 195 of the Income Tax Act. Therefore, the assessee should not be liable for advance tax and consequential interest under Sections 234B and 234C. The Tribunal agreed with the assessee, citing the Delhi High Court's decision in Director of Income Tax Vs. Jacabs Civil Incorporated and Mitsubishi Corporation, which held that if the payer defaults in deducting tax at source, the non-resident is not liable for advance tax. The Tribunal also referenced similar judgments from other cases, including the Kolkata ITAT and the Uttarakhand High Court, reinforcing that the assessee should not be charged interest under Sections 234B and 234C to the extent of the tax that should have been deducted at source by the purchaser. Consequently, the Tribunal directed the A.O. not to levy interest under these sections, partially allowing the assessee's appeal on this ground.

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal upheld the A.O.'s computation of long-term capital gains based on the SRO's valuation but directed the A.O. to not levy interest under Sections 234B and 234C, aligning with the legal precedents regarding tax deduction at source for non-residents.