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TMI Blog2016 (2) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... istrict Valuation Officer) for the purpose of computing capital gains - Held that:- As it could be seen that even the provisions of section 50C contemplates the adoption of fair market value for the purpose of valuation of the property. We hold that once the determination of fair market value is under consideration all the relevant factors i.e. land area available for construction should be taken into account irrespective of the actual land area conveyed. Accordingly, we are in agreement with the area of land as adopted by the ld.DVO . However, we find that as per the valuation of property is concerned, it is not correct on the part of ld.DVO to add towards 15% frontage on both sides of the road in order to arrive at the total rate at 990/- per sq.ft as ultimately the ld.DVO adopted the guideline value rate of Senniamman Koil Street at 861/- per sq.ft. In view of the above, we hold that the land should be valued by adopting the rate at 861/sq.ft for the area of 4,54,353 sq.ft. Accordingly, assessee gets a relief for the rate of 129/sq.ft. The Ld. AO is directed to rework the capital gains by adopting 861/- per sq.ft being the guideline value in the same manner in which the Ld DVO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x was not deducted at source [TDS] in terms of provisions of section 40(a(ia) of the Act for which show cause notice was issued to the assessee. In response to the show cause notice the assessee replied that this amount represents advances made for import of capital goods, which is outstanding as on 31-03-2007. Such advances were made towards purchase/import of capital goods on FOB basis at foreign sea ports, leading to the transfer of title to the goods outside India. Hence, there is no income being chargeable to income-tax in India. Accordingly, the provisions of section 195 of the Act are not attracted. It was also stated that such advances to suppliers have not been charged to the P & L account for the year under consideration as per the method of accounting followed by the assessee. In view of the aforesaid facts, it was argued that question of advances falling under the ambit of disallowance/addition u/s. 40(a)(ia) of the Act does not arise. Further, it was submitted that in connection with the transaction in India, the assessee stated that tax was duly deducted and deposited as applicable in accordance with the provisions under Chapter XVIIB of the Act. The ld. AO did not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute that the payment of the aforesaid amount has been made by the assessee company as advance to a non-resident company named as Linde AG, a resident of Germany. We hold that the provisions of section 40(a)(ia) of the Act are applicable only in the cases where any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services has been paid or payable to a resident. In the case of assessee company, the payments were made to a non resident German company, the fact which is undisputed on record. Hence, the provisions of section 40(a)(ia) cannot be invoked in this case. We find that if at all, the aforesaid amount of payment made to M/s. Linde AG is disallowable, the disallowance could be made only u/s. 40(a)(i) of the Act. We find that as per the provisions of section 40(a)(i) of the Act any interest, royalty, fees for technical services or other sum chargeable under this Act, which is payable outside India; or in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed and that of the revenue's appeal is dismissed. 9. The second issue to be decided in the appeal of the assessee is as to whether the ld. CIT(A) is correct in directing the ld.AO to adopt the valuation done by the DVO(District Valuation Officer) for the purpose of computing capital gains in the facts and circumstances of the case. 10. The brief facts of this issue are that the assessee sold measuring 13.90 acres of land structure thereon to M/s. Emmar MGF Land Pvt. Ltd on 21st June 2006 in respect of property situated at Old Door No.7A, New No.75, Vythianatha Mudali Street, Thondiarpet Village, Chennai for a sum of ₹ 25.05 crores and declared long term capital gains thereon. The ld.AO observed that the stamp duty valuation in respect of subject mentioned property was of ₹ 53.50 crores. The ld.AO issued a show cause notice to the assessee as to why the stamp duty valued ₹ 53.50 crores should not be substituted as sale consideration for the purpose of computing the capital gains. The ld.AO referred the valuation of the subject mentioned property in question to the DVO on 22-11-2010. Since time limit for completing the assessment expired on 30/12/2010 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiruvottriyur High Road (particular stretch) - ₹ 983/- per sq.ft Elaya Mudali Street - ₹ 537/- per sq.ft Senniamman Koil Street - ₹ 861/- per sq.ft We find that the Ld DVO observed that the subject mentioned property is nearer to Senniamman Koil Street. The ld.DVO adopted the guideline value rate of Senniamman Koil Street and added 15% for frontage on both side roads and arrived the rate per sq.ft as ₹ 990/- per sq.ft. We find that total land area conveyed in the registered sale deed was 6,05,804 sq.ft. The ld.DVO had adopted the net area available for sale of land at 4,54,353 sq.ft after deducting the area required for layout services and amenities @25% and then estimated the net area available for sale of land at ₹ 44,98,09,470/- [ 454353x ₹ 990 i.e. the rate of ₹ 861/sq.ft being guidelines value + ₹ 129/sq.ft 15% frontage on both sides]. Now, it is pertinent to reproduce the provisions section 50C of the Act at this juncture:- "Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. 11.1 From the above, it could be seen that even the provisions of section 50C contemplates the adoption of fair market value for the purpose of valuation of the property. We hold that once the determination of fair market value is under consideration all the relevant factors i.e. land area available for construction should be taken into account irrespective of the actual land area conveyed. Accordingly, we are in agreement with the area of land as adopted by the ld.DVO . However, we find that as per the valuation of property is concerned, it is not correct on the part of ld.DVO to add towards 15% frontage on both sides of the road in order to arrive at the total rate at ₹ 990/- per sq.ft as ultimately the ld.DVO adopted the guideline value rate of Senniamman Koil Street at ₹ 861/- per sq.ft. In view of the above, we hold that the land should be valued by adopting the rate at ₹ 861/sq.ft for the area of 4,54,353 sq.ft. Accordingly, assessee gets a relief for the rate of ₹ 129/sq.ft. The Ld. AO is directed to rework the capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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