2023 (1) TMI 901 - AT - Income Tax

Capital gain computation - determination of the FMV as on 1.4.1981 - adoption of market value as on 01-04-1981 while computing capital gains on sale of a plot, in which both the assessees herein are co-owners - case of the assessees that they have adopted the value as determined by a registered valuer - HELD THAT - It may not be correct to adopt the average increase in the DLC value between 1983 and 1986 as the discounting factor, since it is in the common knowledge of every one that the increase in plot value is usually more on the occurrence of development activities. Hence, we are unable to accept the methodology adopted by the ld. CIT(A) on the basis of increase happening in the periods subsequent to 1983. We noticed that the approved valuer has arrived at the value of Rs.42/- per sq. Ft by adopting discounting factor as Rs.9/- per sq.ft, i.e., he has discounted the value at Rs.60/- per sq. ft determined by the Registrar for 1983 in order to arrive at the value as on 1.4.1982. Approach of the approved valuer is more acceptable in the facts and circumstances of the case. Accordingly, we are of the view that FMV as on 01- 04-1981 should be adopted at Rs.42 per sq. ft. Accordingly, we set aside the orders passed by the ld. CIT(A) in both the cases and direct the AO to recompute LTCG by adopting FMV as on 01-04-1981 at Rs.42 per sq. Ft. Deduction u/s 54 - assessee did not claim deduction u/s 54 of the Act in the return of income, but claimed the same for the first time before the ld. CIT(A) - HELD THAT - Since the assessee did not produce any documentary evidence with regard to the said claim, the ld. CIT(A) dismissed the same. In our view, the assessee may be given an opportunity to produce necessary documents in support of the claim of deduction u/s 54 of the Act. Accordingly, we set aside the order of the CIT(A) on this issue and restore the same to the file of the AO for examining the said claim. The assessee is also directed to furnish necessary evidences in support of his claim and the AO after examining them may take appropriate decision in accordance with law.

Summary

Issues:
1. Delay in filing appeals before the Tribunal.
2. Adoption of market value as on 01-04-1981 for computing capital gains on the sale of a plot.
3. Claim for deduction under section 54 of the Act.

Analysis:
1. Delay in Filing Appeals:
Both appeals were initially barred by a 93-day limitation, but the delay was condoned by the Tribunal upon the assessee's explanation citing personal inconveniences, leading to the admission of the appeals.

2. Adoption of Market Value for Capital Gains:
The key issue in both appeals revolved around the adoption of market value as on 01-04-1981 for computing capital gains on the sale of a residential plot co-owned by the assessees. The Assessing Officer (AO) determined the sale consideration based on the DLC value, leading to a dispute regarding the Fair Market Value (FMV) as on the specified date. The AO's estimation of FMV was contested by the assessees, who argued for a value determined by a registered valuer.

The Commissioner of Income Tax (Appeals) upheld the AO's decision, considering the increase in DLC rates from 1983 to 1987 to determine the FMV as on 01-04-1981. However, the Tribunal disagreed with this approach, stating that the increase in plot value is usually higher due to development activities, and preferred the discounting factor used by the registered valuer to arrive at the FMV. Consequently, the Tribunal directed the AO to recompute the Long Term Capital Gain (LTCG) by adopting the FMV as on 01-04-1981 at Rs.42 per sq. Ft, setting aside the CIT(A)'s orders.

3. Claim for Deduction under Section 54:
In the case of one of the assessees, a ground was raised regarding the claim for deduction under section 54 of the Act. The claim was not initially made in the return of income but was raised before the CIT(A) without supporting documentary evidence. The CIT(A) dismissed the claim due to lack of evidence. The Tribunal allowed the assessee an opportunity to produce necessary documents to support the claim, directing the AO to reexamine the claim based on the evidence provided.

In conclusion, the appeal of one assessee was allowed for statistical purposes, and the other assessee's appeal was allowed, with specific directions regarding the deduction claim under section 54 of the Act.