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2018 (10) TMI 278 - AT - Income TaxValuation of property u/s 50C - computation of capital gain - reference to DVO - land as situated in the interior area of Narayanapuram Varisai and there was no proper approach road, therefore, the Approved Valuer has rightly valued the property at ₹ 50,40,000/- - taking sale consideration of property - Held that - A perusal of the Departmental Valuation Officer s report shows that the method prescribed under the Wealth Tax Act was not followed. Moreover, the factors such as the location of property, availability of infrastructure facility around the area, potential development in the near future, accessibility to the infrastructure facility such as road, airport, educational institutions, etc. were not properly considered either by the Approved Valuer or by the Departmental Valuation Officer. In those circumstances, relying upon both the Valuer s report would not reflect the correct fair market value of the property. Therefore, when the assessee claims that what was received is only ₹ 50,00,000/-, the Approved / Registered Valuer estimated the property at ₹ 50,40,000/- and the Departmental Valuation Officer estimated at ₹ 81,68,304/-, this Tribunal is of the considered opinion that estimation of value of the property after considering the infrastructure facilities and other factors as referred above, at ₹ 69,00,000/- would meet the ends of justice. Accordingly, the orders of both the authorities below are modified and the Assessing Officer is directed to take the sale consideration of the property at ₹ 69,00,000/- and thereafter compute the capital gain. Coming to development charges the assessee has produced the receipt from Shri K. Manikandan for filling up the land to the extent of ₹ 3,10,000/-. This Tribunal is of the considered opinion that when the assessee has produced the receipt for filling the land, the Assessing Officer is not justified in disallowing the claim of the assessee. The cost of filling of land has to be allowed while computing the capital gain. The payment of brokerage was also disallowed by the Assessing Officer. It is a fact that in the real estate business, the assessee has to pay 2% to 3% of sale consideration as brokerage for negotiating the price of the property to the prospective purchasers. Therefore, this Tribunal is of the considered opinion that 2% of the total sale consideration has to be allowed as brokerage charges. Accordingly, the Assessing Officer is directed to allow 2% of ₹ 69,00,000/- as brokerage while computing the capital gain. Eligibility for exemption u/s 54 - Held that - In the eyes of common / Hindu law, husband and wife are considered to be one and same even though they are independent and distinct assessable entity under the Income-tax Act. In a joint family system, particularly, male dominated society, the investment would always be made in the name of eldest male member of the family. Since the property sold was admittedly belonging to the assessee, Tribunal is of the considered opinion that the investment made in the property belonged to the assessee s husband, has to be construed as investment made by the assessee. The additional construction, which was not disputed as not an independent residential unit, belonging to the assessee, therefore, the assessee is eligible for exemption under Section 54F in respect of the investment made. Accordingly, both the authorities below are not justified in disallowing the claim of the assessee. Hence, the orders of both the authorities below are set aside and the AO is directed to allow the claim of exemption under Section 54F. Now coming to development expenditure of ₹ 3,20,000/-, it is not in dispute that the property was sold on 22.01.2010. But, the quotation for so-called development was obtained from M/s Thirumalai Construction only on 20.03.2010. Therefore, after the sale of property, this Tribunal is of the considered opinion that the assessee would not have incurred the expenditure. Therefore, as rightly submitted by the D.R., the claim of ₹ 3,20,000/- is not justified. The disallowance of development expenditure of ₹ 3,20,000/- is confirmed. - Appeal of assessee partly allowed.
Issues Involved:
1. Valuation of property under Section 50C of the Income-tax Act, 1961. 2. Cost of levelling the land. 3. Brokerage expenses. 4. Exemption under Section 54F of the Income-tax Act, 1961. 5. Development charges. Issue-wise Detailed Analysis: 1. Valuation of Property under Section 50C of the Income-tax Act, 1961: The primary issue was the valuation of property sold by the assessee. The sale consideration as per the sale deed was ?50,00,000, but the Assessing Officer adopted ?90,20,000 based on the stamp duty authority's valuation. The assessee requested the Assessing Officer to refer the matter to the Departmental Valuation Officer (DVO), which was refused. The Tribunal noted that under Section 50C(2), the Assessing Officer "may" refer the valuation to the DVO if the assessee claims the stamp duty value exceeds the fair market value. The Tribunal opined that the term "may" does not give discretion to the Assessing Officer when the assessee requests a DVO reference. It ruled that the Assessing Officer should have referred the matter to the DVO. The Tribunal found the DVO's valuation (?81,68,304) and the Approved Valuer's valuation (?50,40,000) insufficiently detailed. The Tribunal estimated the value at ?69,00,000 and directed the Assessing Officer to compute the capital gain accordingly. 2. Cost of Levelling the Land: The assessee claimed ?3,10,000 for levelling the land, supported by a receipt from the contractor. The Assessing Officer disallowed this claim, considering it bogus. The Tribunal held that the receipt was sufficient proof and directed the Assessing Officer to allow the cost of levelling the land while computing the capital gain. 3. Brokerage Expenses: The assessee claimed ?3,00,000 as brokerage expenses, which the Assessing Officer disallowed due to lack of details. The Tribunal acknowledged that brokerage is typically 2-3% of the sale consideration in real estate transactions. It directed the Assessing Officer to allow 2% of ?69,00,000 as brokerage expenses while computing the capital gain. 4. Exemption under Section 54F of the Income-tax Act, 1961: The assessee sold another property and claimed exemption under Section 54F, stating the funds were used for additional construction on a property belonging to her husband. The Assessing Officer disallowed the exemption, arguing the investment was not in the assessee's name. The Tribunal noted that in Indian law, dual ownership is permissible, and investments in a spouse's property can be considered as the assessee’s investment. It ruled that the additional construction qualifies for exemption under Section 54F, setting aside the disallowance by the Assessing Officer. 5. Development Charges: The assessee claimed ?3,20,000 for development charges, supported by a quotation obtained after the sale of the property. The Assessing Officer disallowed the claim, doubting the expenditure occurred. The Tribunal upheld the disallowance, agreeing that the timing of the quotation suggested the expenditure was not incurred. Conclusion: The appeal for the assessment year 2011-12 was allowed, directing the Assessing Officer to adopt ?69,00,000 as the sale consideration and allow the levelling and brokerage expenses. The appeal for the assessment year 2010-11 was partly allowed, granting the Section 54F exemption but upholding the disallowance of development charges.
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