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TMI Blog2007 (9) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... d of their shares at the rate of Rs. 1,83,250 per share to sell Natraj Cinema on 28-9-2000 to M/s. E-Citi Entertainment (I) (P.) Ltd., Mumbai. Long-terms capital gains, which arose on above sale of shares, was shown in the income-tax returns for assessment year 2001-02. There is no dispute on the sale consideration received. While computing capital gains, these shareholders had also claimed deduction on account of "cost of acquisition" of shares sold and as assets were held much before 1-4-1981, all the shareholders exercised option and sought deduction of indexed fair market value of shares as on 1-4-1981. In the assessment, the Assessing Officer got valuation of Cinema building through the Departmental Valuation Officer (DVO) and the said value was substituted in place of the value shown in the balance sheet. This way value of share worked out to Rs. 46,274 per share. The Assessing Officer did not take value as above but held that rule 1D of Wealth-tax Rules was applicable and face value of share was adopted. This way the value of share for deduction was worked out at the rate of Rs. 4,060 per share. Accordingly the deduction for cost of asset was allowed and long-term capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of above proposition, Shri Sapra relied upon the following decisions: 1.Jaswant Rai v. CWT [1977] 107 ITR 477 (Punj. & Har.). 2.CIT v. Smt. Chandrakala Lal [1978] 111 ITR 185 (Cal.) wherein as per the Head Note, the Court observed as under: "Held that the market value of the share cannot vary from person to person or from assessee to assessee." 3.Gulab Rai Hanuman Bux v. CWT [1992] 198 ITR 131 (Gauhati), wherein the Court observed as under: "If during the same assessment year the same quantity of wealth in the possession of one co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax and if such action on the part of the assessing authorities is sanctioned, it would militate against the principle of equality of law enshrined in article 14 of the Constitution." 4.CIT v. Kumararani Smt. Keenaksh Achi [2007] 292 ITR 624 (Mad.). At page 625, the Hon'ble High Court held as under: "Differential treatment cannot be meted out to another co-owner while making the assessment of the same property or while valuing the same property. The valuation made by the Tribunal was valid." 3.1 Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Appellate Tribunal in the case of Smt. Kaushaliya Rani Anand dated 11-8-2006. 5. We have given careful thought to the rival submissions of parties and examined facts and circumstances of the case. It is settled law that revenue authorities are required to have a consistent approach and cannot take different value of same share as on 1-4-1981. Therefore, on principle there was no justification for revenue authorities to take value of share of M/s. Tyagi Anand & Co. Pvt. Ltd. as on 1-4-1981 at the rate of Rs. 46,274 in the case of Shri H.R. Anand, Shri Pawan Anand, Shri Ramesh Anand and Smt. Neeru Anand and take some different value in other cases. The value taken in the case of Shri H.R. Anand and others should have been adopted in other cases and variation in value is not justified at all. It is true that in the case of Smt. Kaushalaya Rani Anand, the matter has been remanded by the Appellate Tribunal vide order dated 11-8-2006 but that case is clearly distinguishable. All the material facts and valuation taken in other cases were not brought to the notice of the Appellate Tribunal. This is specifically noted by the Tribunal in para 3.3 of the order (see page 134 of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. He rejected the argument that rule 1D had no application under the Income-tax Act, particularly for determining the fair market value of an asset like the one in hand. He refused to apply decision of Tribunal in the case of Smt. B. Subhadra (supra) and Smt. Vasavi Pratap Chand v. Dy. CIT [2004] 89 ITD 73 (Delhi). He held that above cases were distinguishable. He found and applied certain other cases of Tribunal and of High Court where application of provisions of rule 1D were justified. We find that apart from the cases relied upon by learned CIT (Appeals), there are two other cases where Benches have held that rule 1D of the Wealth-tax Rules can be applied for determining fair market value of shares sold while computing capital gain. One is decision of Bombay Bench of the Tribunal in the case of Dy. CIT v. Ayesha Ashok Soni [2006] 287 ITR (AT) 50 (Mum). The other is case of Dy. CIT v. Sirhind Steels Ltd. [2005] 97 ITD 12 (Ahd.). 7. After considering relevant statutory provisions, rules and facts and circumstances of the case, we are of view that decision of Bharat Hari Singhania (supra) or rule 1D of Wealth-tax Rules has no application in this case. The aforesaid decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Wealth-tax Act and vice versa. 7.2 The value determined under the Wealth-tax Rules does not represent the fair market value but the position under the Income-tax Act is quite different. Although the term "fair market value" is not defined, it has to be the market value of the property, which is fair and reasonable. It must appear to be as close to the market value as possible. It must be intrinsic value. As rightly observed in the case of Smt. B. Subhadra ( supra), in most of the cases value so arrived by applying Schedule III are totally different from the fair market value as understood under the Wealth-tax Act. This is apparent from reference to rules 8 and 20 of Schedule III to the Wealth-tax Act. Rule 8 excludes application of rule 3 in certain cases. Rule 20 is as under: "20. Valuation of assets in other cases. (1)The value of any asset, other than cash, being an asset which is not covered by rules 3 to 19, for the purposes of this Act, shall be estimated to be the price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date. (2)Notwithstanding anything contained in sub-rule (1), where the valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the cases decided by other Benches, it is not shown that the companies had similar assets in the balance sheets, which were required to be re-valued. (c)Under section 48 of the Income-tax Act for computing income chargeable under the head "Capital gain", from the full value of consideration received, the amount of cost of acquisition of the asset and cost of any improvement thereto is required to be deducted. Thereafter the indexed cost of acquisition is to be applied. There is no dispute that cost of acquisition of same asset is required to be deducted. It is not possible to take some different asset. In this case, shares have been sold at the rate of Rs. 1,83,250 per share. That value has been accepted but if value of the shares sold on the date of sale as on 28-9-2000 is taken under rule 1D, it is much less than the price received. Obviously the price charged has not been worked as per rule 1D. Therefore, it will not be legally fair or equitable to apply rule 1D for working out the cost of acquisition. One cannot have a different approach in fixing the price of same asset for a single purpose of computing capital gain. Further, written down value or value shown in the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember, 1989 have duly confirmed transfer of six shares in the name of Shri Shekhar Tyagi and Shri Sagar Tyagi. It is also not in dispute that original owner of shares late Shri Khajan Singh Tyagi and Smt. Phoolwati Tyagi held shares of company prior to 1-4-1981. Therefore, deduction towards cost of acquisition of shares sold by these persons was to be allowed by taking fair market value of shares as on 1-4-1981. We do not find any substance in the objection of the revenue. All the above-mentioned persons are entitled to deduction of value of shares as on 1-4-1981. We, order accordingly. The learned CIT (Appeals) on facts of the case was not justified in raising above objection when the same was not raised by the Assessing Officer. 11. Next issue raised in these appeals relates to deduction claimed under section 54F in cases of Smt. Madhu Tyagi and Shri Ramphal Tyagi. Shri Ramphal Tyagi had claimed that out of sale consideration of shares, he had invested Rs. 21,30,000 in the construction of a residential house. This amount was reflected in the balance sheet as on 31-3-2001. The assessee accordingly claimed deduction under section 54F. The revenue authorities disallowed this claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2(47)(vii ) clearly support that transaction would involve obtaining acquisition of share in a Co-operative Society. The learned counsel for the assessee also relied upon transfer deed between Shri Sagar Tyagi and Smt. Madhu Tyagi dated 12-3-2001, copy of which is available at pages 93-94 of the Supplementary paper book. It was accordingly contended that learned CIT (Appeals) erroneously denied claim of exemption to the assessee. 14. We have given careful thought to rival submissions of the parties. In our considered opinion, documentary evidence and relevant case law now placed before us was not considered by the lower authorities. Entire evidence was not made available to them. In other words claim of assessees under section 54F is required to be reconsidered objectively and in accordance with law. In the interest of justice, we set aside impugned orders of CIT (Appeals) in above two cases and restore this issue to the file of the Assessing Officer for re-determination of issue in accordance with law, after allowing reasonable opportunity of being heard to the assessees. Appeals on this issue, in the above two cases, are allowed for statistical purposes. 15. No other ground ..... 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