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TMI Blog2012 (10) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... of FMV of the property as on 01-04-1981 at Rs.5,000/- per cent for the first and second property. In relation to Property sold on 10-07-1981 - There is evidence available that the value of the land was adopted as on 10-07-1981 at Rs.14,000/- per cent. The assessee has also adopted the same value while computing the capital gains. The reasons assigned by the AO for rejecting the comparable sale instances are not justified. The valuation as declared by the assessee for this property is directed to be accepted. Thus, the appeals are partly allowed. - ITA Nos.198 & 199(B)/2011 - - - Dated:- 31-8-2012 - N Barathvaja Sankar And N V Vasudevan, JJ. Appellant Rep by: S Venkatesan, CA Respondent Rep by: Smt Susan Thomas Jose, JCIT(DR) ORDER Per: N V Vasudevan, JM: These are appeals by the two assessee s namely Smt. Mizar Anitha Pai Smt Mizar Ashalatha Pai, against two orders both dated 29-11-2010 of CIT(A)-IV, Bangalore, relating to assessment years: 2007-08. 2. The facts and circumstances under which both these appeals have been filed and the issue involved in both the appeals are identical. Therefore, we deem it convenient to pass a common order. 3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 750 1/4th share of the assessee Rs. 8,88,187 The dispute in these two appeals is with regard to the adoption of fair market value of the three properties as on 01-04-1991 (sic). As far as the first property is concerned, the FMV as on 1.4.1991 (sic) was adopted by the Assessee at Rs.11,000/- per cent by the assessee in her computation of capital gains. 5. Under the provisions of sec.55(2)(b)(i) of the IT Act, where the capital asset became the property of the assessee before 01-04-1981. The assessee has an option to adopt the FMV of the capital asset as on 01-04-1981 as cost of acquisition of the capital asset. Similar dispute exists in the case of other co-owners also and also in the case of Smt. Mizar Ashalatha Pai. According to the AO, the value of the land as on 01-04-19881 adopted at Rs.11,000/- per cent by the registered valuer was not done on the basis of comparable sale instances and had been done only on the basis of local enquiries. According to the AO, the better way of determining the FMV of the property as on 01-04-1981 was to refer to comparable sale instances in the same area. The AO accordingly, procured comparable sale instances from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted before the AO that the Mangalore Urban Development Authority (MUDA) had given a letter to the assessee in the year 1987 in which they have charged Rs.10,000/- per cent in Kankanady Village, in a place named Nethravathi Nagar. The AO on perusal of the documents was of the view that the sale in question was in the year 1987 six years from 01-04-1981. Apart from this, the AO was also of the view that the MUDA property were closer to the city and was a planned layout development with facilities like roads, drainage, electricity, play area etc. He was also of the view that the cost in question also includes development cost and therefore, the land cost would at best can be only 60% and therefore, he was of the view that Rs.6,000/- as land cost in 1987 could be appropriate. The AO thereafter made the following observations; a) The valuation report submitted by the assessee cannot be relied upon in view of the deficiencies pointed out in earlier part of this order. b) The sale instances procured from the Sub-registrar s office show that the maximum price for a land in that area is around at Rs.2,000/- per cent. No other comparable sale instances have been produced by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing as on 01- 04-1981 is adopted at Rs.20/- per sq.ft. In view of the above capital gains on this transaction is reworked out as under; Date of transfer: 20th Oct.2006 Sale consideration (1,71,12,500/4) Rs.42,78,122 Less: Indexed cost of FMV as on 01-04-1981 Land cost (Rs.3,500 x 290 cent x 519/100)+4 Rs.13,16,962 Bldg.cost (Rs.20x11,925 Sq.ftx519/100)+4 Rs. 3,09,454 Well cost: (Rs.5000x519/100)+4 Rs. 6,487 Rs.16,32,903 Long term capital gains Rs.26,45,219 9. As far as the second property is concerned, the assessee had sold it for a consideration of Rs.29,87,500/- and computed her share of LTCG as follows: Date of Transfer: 20th Oct.2006 Sale consideration (29,87,500/4) Rs.7,46,875 Less: acquisition details: indexed cost of fair marketvalue as on01-04-1981: 1,15,000x519/100 Rs.5,96,850 Long term capital gains Rs.1,50,025 The AO did not accept the FMV of the land at Rs.10,000/- as on 01- 04-1981 for almost identical reasons discussed while dealing with the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the fair market value to be adopted as on 01-04-1981 in respect of the assessee s property measuring 3.85 cents. In view of the above, the capital gains on this particular transaction is worked out as under; Date of transfer: 14th Feb.2007 Sale consideration (33,65,750/4) Rs.91,438 Less: acquisition details; indexed cost of fair market value as on 01-04-1981 (Rs.7,000 x 3.85 cents x 519/100) +4 Rs.34,968 Long term capital gains Rs.56,470 13. Aggrieved by the action of the AO in computing the capital gains in the manner as aforesaid the assessee preferred the appeal before the CIT(A). The CIT(A) after considering the AO s order was of the view that the AO was magnanimous to adopt to Rs.3500/- per cent for the first property whereas in the documentary evidence suggested that the FMV as on 01-04-1981 was even lesser. The CIT(A) however, confirmed the findings of the AO in this regard. As far as the second property is concerned, the CIT(A) upheld the order of the AO. As far as the third property is concerned, the CIT(A) upheld the order of the AO. 14. Aggrieved by the order of the CIT(A), the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said valuation for the purpose of WT Act is precluded from disputing the correctness thereof for the purpose of assessment of capital gains as the factor of fair market value is decisive for the purpose of both WT Act as well as for ascertaining the cost of acquisition under the IT Act- date 31st March, 1989 being nearer to 1st April, 1974, than December, 1991, there was no jurisdiction for applying reverse indexation from a farther date- Moreover, the full value of consideration received on transfer of jewellery belonging to a royal family as in this case is generally higher than the market value- Thus, it would be unsafe to apply the process of reverse indexation on the basis of actual sale price in December, 1991 for the purpose of ascertaining the market value of said items as on 1st April, 1974 . Reliance was also placed on the decision of the Third Member Bench, Agra ITAT in the case of Jahanganj Cold Storage Vs ACIT (2010) 133 TTJ 278 wherein it was held as follows; Capital gains Cost of acquisition fair market value as on 1st April, 1981assessee sold its factory which was set up during 1968-69 For computing the capital gains, it estimated the fair mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the proposition that FMV as on 01-04-1981 can be determined by admitting the sale consideration received on transfer and applying the cost index and working backwards and arriving at the value. As far as the decision of the Hon ble Gujarat High Court in the case of Shantadevi Gaekwad Vs DCIT (supra) is concerned, the process of reverse indexation was accepted by the Hon ble Gujarat High Court in the matter of valuation of jewellery where the valuation of the very same jewellery was available in the wealth tax assessment as on 31-03-1989. The Hon ble Court held that the revenue had accepted the value of jewellery given by the assessee for wealth tax purposes as on 31-03- 1989. The aforesaid decision in our view, therefore, cannot be taken as laying down any general purpose as canvassed by the learned counsel for the assessee. The decision in the case of Jahanganj Cold Storage, supra was a case where the assessee admitted the FMV as on 01-04-1981 by applying the cost inflation index to the sale value of land for a stamp duty purpose in the reverse order. The AO further estimated the FMV on the basis of value of agricultural land whereas the property that was sold was a commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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