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TMI Blog2010 (7) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO is directed to allow the claim of the assessee in this regard. However, valuation expenses claimed by the assessee are only to support of its computation of capital gain for income-tax purpose. They cannot be said to be expenditure incurred wholly and exclusively in connection with sale of the capital asset. To the extent of disallowance of valuation expenses, order of learned CIT(A) is confirmed. Thus, ground No. 3 raised by the assessees is partly allowed. claim for exemption u/s 54EC - HELD THAT:- In the present case, the assessees transferred the capital asset on 25-10-2005 and therefore time for making investment has been extended up to 31-9-2006. The assessees have made the investment in long-term specified asset on 10-7-2006 within the extended time-limit laid down by the Circular referred. In view of the above, the assessees were entitled to claim deduction u/s 54EC. We direct the AO to allow claim of the assessees for exemption u/s 54EC. Thus, ground No. 4 is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... in Delstar Premises Co-operative Housing Society Ltd., 9-9A, Nyayamurthi S. Pathkar Marg, Hughes Road, Mumbai-36 (herein-after referred to 'property'). Smt. Sarla Sakraney & Smt. Maya Sakraney owned 1/4th share each over the property and Smt. Roop Sakraney owned ½ share of the property. The aforesaid property was sold by three co-owners on 24-10-2005 for a sale consideration of Rs. 4,05,00,000. Capital gain on such sale was computed by the three co-owners as follows :- Delstar Showroom Capital gains workings : Delstar In Rs. Sales consideration for the property 40,50,00,000 Less: expenses Dividing wall expenses & other expenses 1,50,000 Society transfer fees 25,000 Electricity and water meters transfer charges 94,000 Valuation report (current value) 15,000 Valuation report (1981) 31,400 Brokerage 4,05,000 7,20,400 Net consideration 3,97,79,600 1-4-1981 value as per valuation report (area 436@1,000) Indexed cost of acquisition 1,21,80,000 Long-term capital gains 2,75,99,600 Each share Roop Sakraney 2,00,00,000 50 per cent Invested in capital gain exemption account Sarla Sakraney 68,99,900 25 per cent Invested in REC Bonds Maya Sakraney 68,99,900 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.97) as per para 2 of the order 3,08,85,440 6. Aggrieved by the aforesaid addition made by the Assessing Officer, the assessees preferred the appeals before the Tribunal. 7. First and foremost objection of the assessees before learned CIT(A) was that reference to the DVO under section 55A was invalid. Under clause (a) of section 55A of the Act, the Assessing Officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee in accordance with the estimate made by the RV, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause (b) of section 55A of the Act, the Assessing Officer has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference. The assessee had claimed the valuation as on 1-4-1981 at a sum of Rs. 24,36,000 (which is Rs. 1,000 per sq.ft.) as aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the showroom. "(i)Dividing wall expenses:-In the year 1964, the showroom (more particularly demarcated as (D) in the plan furnished herewith) had been given on lease to Hindustan Machine Tools Ltd. (HMT). HMT had also taken on lease the adjoining property (more particularly demarcated as (C) in the plan furnished), which belong to one Mahtanis. Since, HMT was desirous of conducting its activities in one large showroom, for the sake of convenience, they broke the adjoining wall and conducted all its activities from Plot Nos. (C) & (D). HMT handed over back the possession of the said showroom. Several damages in the said showroom had to be repaired before the same could be made saleable. An amount of Rs. 1,50,000 is an expenses which is incurred during the year for the purpose of clearly demarcating the two adjacent shops which were bought separately but made as one of the tenants occupying the premises. The wall was built in order to restore the premises to its original condition and thereby should be added to the cost of acquisition as cost of improvement. This expenditure was made wholly and exclusively in connection with the transfer and should therefore be allowed under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence, the value as on 1-4-1981 adopted by the valuer at the rate of Rs. 1,100 for 2346 sq.ft. for the showroom and Rs. 50,000 for the car parking space appears to be not correct. I am therefore of the view that the correct value of the property referred to above as on 1-4-1981 is necessary in order to arrive at the correct FMV as on 1-4-1981 for the purpose of computation of long-term capital gain earned by the assessee for assessment year 2006-07. Thus, the argument that the reasons must be recorded by the Assessing Officer before making a reference is also met, since the Assessing Officer while making the reference has clearly done so, as evident from his letter of reference to the DVO. The contention that no reference can be made under section 55A(b)( ii) if a valuer's report is submitted by the assessee is fallacious. It cannot be the intention of the Legislature that where a valuer's report is filed, no reference to the DVO can be made at all. When the value claimed by the assessee is more than the FMV, even where the Assessing Officer is of the opinion that the value is overstated, section 55A(b)( ii) provides recourse to the Assessing Officer in such circumstances." 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of the fair market value of the property?" In para Nos. 4 & 5 of its Judgment of Hon'ble High Court held as follows :- "4.The Tribunal in its order dated 23rd July, 2004 has categorically observed thus :- "The first issue that arises for our consideration is whether the reference made by the Assessing Officer to the DVO under section 55A is bad in law under the facts and circumstances of the case. This issue, in our considered opinion is covered in favour of the assessee and against the revenue by the Judgment in the case of Rubab M. Kazerani reported in 91 ITD 429 (Mum.)(TM). Further the assessee also covered by the Third Member decision of the Pune Bench of the Tribunal, the case of the Krishnabai Tingre v. ITO reported in 101 ITD 317 (Pune)(TM) wherein it has been held that reference to DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value of land as on 1st April, 1981 shown by the assessee on the basis of approved valuer's report being more than its fair market value, reference under section 35A was not valid. Respectfully following the propositions laid down these two cases by the coordinate Benches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having recourse to sub-clause (ii) of clause (b) of section 55A of the Act." 14. In view of the aforesaid decisions, we are of the view that reference by the Assessing Officer to the DVO under section 55A for valuation of FMV of the property as on 1-4-1981 is not valid for the reasons that FMV declared by the assessee as per Government registered valuer's report was more than the FMV as estimated by the DVO. Since determination of the FMV as on 1-4-1981 was based on the report of the DVO, the same is held to be invalid. Consequently, estimation of the FMV of the property as on 1-4-1981 as made by the assessee is directed to be accepted. Ground No. 1 of the assessees is allowed. 15. In view of the decision in Ground No. 1, Ground No. 2 raised by the assessees in their appeals does not require any consideration. 16. As far as Ground No. 3 is concerned, we are of the view that as far as expenses on construction of dividing wall, electricity and water meter transfer charges are concerned, they are to be considered as expenditure incurred wholly and exclusively in connection with such transfer within the meaning of section 48(i) of the Act. These are expenses necessary for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otified by the Central Government in the Official Gazette for the purposes of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such bond) as it thinks fit." 19. As can be seen from the aforesaid provisions, investment in long-term specified asset has to be made by the assessee at any time within the period of six months after the date of transfer. The Long-term specified assets were bonds issued by National Highway Authority of India (NHAI) and Rural Electrification Corporation Ltd. (RECL). They were permitted to issue bonds to person who wanted to avail benefit under section 54EC of the Act; but a ceiling was fixed on the amount of bonds that could be issued by these two authorities viz., Rs. 1,500 crores for National Highway Authority of India and Rs. 4,500 crores for Rural Electrification Corporation Ltd. These issues were over-subscribed and the aforesaid two authorities stopped receiving applications for investment in these bonds. The assessees were ready to invest the funds within the period mentioned in section 54EC of the Act. In fact, assessees had made out a demand draft for making the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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