2019 (5) TMI 412 - AT - Income Tax

Taxable gift - assessment u/s 15(2) of the Gift Tax Act - Valuation to determine the ownership of the property - Owner of the gifted property - actual value of the property - Valuation by DVO - assessee, late Smt.Fathima Rahim executed a deed settling 94 cents of land along with building in which Fathima College of Pharmacy is housed in favour of her son, who is the legal heir of the assessee - HELD THAT - Land and building at Survey No.3308/1 3 of Kilikolloor village, Kollam in which the Malik Dinar Trust running the Fathima College of Pharmacy was actually owned by the assessee Mrs.Fathima Rahim and not by the Malik Dinar Trust. This apart, in ground number 2(5) of the appeal, the assessee has also agreed to the fact that the land and building therein are her own and not of the said Trust. As the ownership is proved now, transfer of this captioned property through a deed of partition without executing a valid gift deed entered into on 20.04.1995, to Mr.Azad Rahim, the assessee's son and legal heir shall necessarily be considered for taxation under the Gift Tax Act as deemed gift by virtue of the provisions of section 4(1)(c) of the Gift Tax Act. By virtue of the said section, where there is a release, discharge, surrender, forfeiture etc in property by a person, the value of such release, discharge, surrender, forfeiture etc to the extent to which it has not been found to the satisfaction of the Assessing Officer to have been bonafide, shall be deemed to a gift made by the person responsible for release, discharge, surrender, forfeiture etc. Considering all the above, no infirmity in the decision of the Assessing Officer has taken to bring to tax the value of the land and building amounting to ₹ 37,04,000/- which in turn been gifted to the assessee s son / legal heir, as determined by the Valuation Officer of the Department and accordingly, the same is confirmed. Decided against assessee.

Summary

Issues Involved:
1. Ownership of the building gifted.
2. Correct valuation of the land gifted.

Detailed Analysis:

Ownership of the Building Gifted:
The primary issue in this appeal was to determine whether the building gifted was owned by Smt. Fathima Rahim or the Malik Dinar Educational Trust. The Supreme Court had granted the assessee permission to question the ownership of the building, which led to a series of legal proceedings.

The Commissioner of Income-tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) had previously confirmed that the building belonged to the assessee. The Hon’ble High Court also upheld this decision but allowed the assessee to file objections before the Departmental Valuation Officer (DVO). The DVO, after considering the objections, concluded that the building was indeed owned by the assessee. The CIT(A) supported this conclusion, stating that the Malik Dinar Trust did not have sufficient income to construct the building, as evidenced by their financial statements.

The ITAT reiterated that the Hon’ble Supreme Court had only permitted the assessee to question the ownership of the building. The CIT(A)’s findings were based on the Deed of Partition, which clearly stated that Smt. Fathima Rahim had full ownership of the land and building, and they were transferred to her son/legal heir, Mr. Azad Rahim. The CIT(A) emphasized that no documents were produced to prove that the Malik Dinar Trust owned the building.

The ITAT concluded that the arguments of the assessee were devoid of merit and dismissed the appeal, confirming that the building was owned by Smt. Fathima Rahim.

Correct Valuation of the Land Gifted:
The second issue was regarding the valuation of the land gifted. The initial valuation by the DVO was ?58,66,000, which was later reduced to ?37,04,000 after considering the objections. The CIT(A) and the ITAT confirmed this revised valuation.

The Hon’ble Supreme Court had not granted permission to question the valuation but only the ownership. The DVO's report, which valued the property at ?37,04,000, was adopted by the Gift Tax Officer and confirmed by the CIT(A). The ITAT found no infirmity in this valuation and upheld the CIT(A)’s decision.

Conclusion:
The ITAT dismissed the appeal filed by the assessee, confirming that the building was owned by Smt. Fathima Rahim and that the valuation of the gifted property at ?37,04,000 was correct. The appeal was dismissed, and the order pronounced on April 30, 2019.