2018 (8) TMI 1361 - AT - Income Tax

Computation of capital gains - value of house property u/s 50C - AO failed to consider the specific request of the assessee to refer the matter of valuation to the DVO - the assessee, at the outset, submitted that since the property is a leasehold property, therefore, the provisions of section 50C are not applicable. - Held that - a perusal of the assessment order and the order of the ld. CIT(A) nowhere mentions that it is a leasehold property since nothing is coming out from the record. It is also not coming out of record as to what has happened in the case of the co-owner. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh. While doing so, he has to give his opinion as to whether the property is a leasehold property or not and whether long term capital gain is chargeable on the leasehold property or not. Decided in favor of assessee for statistical purposes.

Summary

Issues:
1. Applicability of section 50C to a leasehold property.
2. Valuation of house property for capital gains calculation under section 50C.
3. Determination of long term capital gain on inherited property.

Issue 1: Applicability of section 50C to a leasehold property:
The appellant contended that since the property in question was a leasehold property, the provisions of section 50C were not applicable. The argument was supported by a decision of the Mumbai Tribunal. The Assessing Officer and the CIT(A) did not address this claim in their orders. The Tribunal directed the Assessing Officer to reevaluate whether the property was indeed a leasehold property and if the long term capital gain should be charged on a leasehold property, considering the decision of the Mumbai Tribunal.

Issue 2: Valuation of house property for capital gains calculation under section 50C:
The Assessing Officer determined the long term capital gain based on the prevailing circle rate in 1981-82, rejecting the assessee's claimed cost of acquisition and improvement without documentary evidence. The CIT(A) upheld this valuation based on the stamp duty valuation and the DVO's assessment, which was higher than the stamp duty value. The Tribunal did not address the valuation aspect in its decision.

Issue 3: Determination of long term capital gain on inherited property:
The appellant inherited the property and claimed deductions under section 54F. The Assessing Officer calculated the long term capital gain based on the sale deed value and rejected the cost of acquisition claimed by the assessee. The CIT(A) upheld the addition made by the Assessing Officer, considering the stamp duty value as the full value of consideration. The Tribunal did not delve into the calculation of long term capital gain but focused on the applicability of section 50C to the property.

In summary, the Tribunal's judgment primarily focused on the applicability of section 50C to a leasehold property, directing the Assessing Officer to reevaluate this aspect. The valuation of the property for capital gains calculation and the determination of long term capital gain on the inherited property were not extensively discussed in the judgment. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fresh assessment considering the leasehold nature of the property and relevant legal precedents.