2019 (10) TMI 601 - AT - Income Tax

Capital gain computation - only grievance of AO is that that assessee should not have been granted the deduction of the valuation of the land as on 01/04/1981 at INR 9 102600/ wherein the valuer has taken the land at the rate of INR 130/ per square metre - AO has rejected the valuation report stating that it is without any basis - CIT-A has held that assessee has been given an option according to the provisions of section 55 (2) (b) of the income tax act to adopt the fair market value as on 1/4/1981 by submitting the valuation report from an approved valuer to substitute in option to the cost of acquisition of the asset - HELD THAT - AO has not put on record any evidence to show that the valuation report obtained by the assessee is devoid of any merit or the prevailing rate as on that date on 01/04/1981 of the similar property were less than INR 1 30/ per square meter. No such evidences have been shown to us or before the learned CIT A. In view of this, the rejection of the valuation report by the learned assessing officer cannot be accepted. Even otherwise in the grounds of appeal the learned AO has raised an issue that taking the valuation of land as per approved valuer s report means that the land purchased in 1993 has not been distinguished for the taxation purposes separately. However, no evidence has been produced before us that the impugned land sold by the assessee is acquired post 1 /4/1981. In view of this ground number 1 of the appeal is dismissed. Chargeable to tax as per the provisions of section 112 - HELD THAT - The above issue now is squarely covered by the decision of Dempo Co Ltd 2016 (10) TMI 62 - SUPREME COURT wherein it has been held that section 50 of the income tax act is a special provision for computing the capital gain in the case of depreciable asset is only restricted for the purpose of the provisions of section 48 of section 49 of the income tax act specifically. It has nothing to do with the exemption that is provided in totally different provisions. CIT- A while deciding the issue in para number 5.4.3 has relied upon the decision of the coordinate bench and granted relief to the assessee. - Decided against revenue.

Summary

Issues Involved:
1. Valuation of land as on 01.04.1981 for indexation purposes.
2. Treatment of short-term capital gain on depreciable assets.
3. Inclusion of stamp duty in the sale consideration.

Issue-wise Detailed Analysis:

1. Valuation of Land as on 01.04.1981 for Indexation Purposes:
The revenue contended that the CIT (A) erred in directing the AO to take the valuation of land as per the approved valuer's report because the assessee acquired some land after 01.04.1981. The AO rejected the valuer's report, citing an unusual appreciation in property value within 3 to 6 years, and calculated capital gain based on the cost price. The CIT (A) held that under section 55(2)(B), the assessee has the option to adopt the fair market value as on 01.04.1981 by submitting a valuation report from an approved valuer. The AO did not provide evidence to disprove the valuer's report. The Tribunal upheld the CIT (A)'s decision, dismissing the AO's rejection of the valuation report and affirming the assessee's right to use the fair market value as on 01.04.1981.

2. Treatment of Short-term Capital Gain on Depreciable Assets:
The revenue challenged the deletion of ?2,33,77,352/- as short-term capital gain on depreciable assets, arguing that the capital gain should be computed under section 50 and taxed as short-term capital gain. The CIT (A) upheld the short-term capital gain treatment but allowed it to be taxed at concessional rates applicable to long-term capital gains. The Tribunal referenced the Supreme Court's decision in CIT vs. V.S Dempo Co Ltd, which clarified that section 50 is limited to computing capital gains for depreciable assets and does not affect the concessional tax rates under section 112. The Tribunal dismissed the revenue's appeal on this ground.

3. Inclusion of Stamp Duty in the Sale Consideration:
The CIT (A) allowed the inclusion of stamp duty paid by the appellant as part of the sale consideration, deeming it an expenditure incurred wholly and exclusively in connection with the transfer of the capital asset under section 48. The revenue did not appeal this decision.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT (A)'s decisions on all contested issues. The valuation of land as on 01.04.1981 was accepted based on the approved valuer's report, the treatment of short-term capital gain on depreciable assets was aligned with the Supreme Court's interpretation, and the inclusion of stamp duty in the sale consideration was affirmed. The order was pronounced in the open court on 05/09/2019.