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TMI Blog2010 (9) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... r as on 1-4-1981 for the purpose of computation of capital gain. The assessee was asked to furnish necessary documentary evidences in support of the value of the property adopted as on 1-4- 1981 at ₹ 1230/- per sq.mt. In response to same, the assessee company filed a copy of valuation report dated 18-12-2003 which was prepared by a registered valuer Shri Y.S. Pathak wherein fair market value hereinafter called FMI as on 1-4-1981 was taken at ₹ 1230/- per sq. mtr. In order to verify the cost of acquisition of land adopted by the assessee at ₹ 1230/- per sq. mtr. as on 1-4-1981 the A.O obtained from the office of the concerned Joint Sub-Registrar certified copies of following sale instances at Dhanori registered in the year 1981. 1. Conveyance deed dated 1-2-1980 (registered in 1981) between Shri Arunak Piyush Oiwan (Vendor) and Shri Subedar Major Karam Singh, Shri Manjeet Singh (Vendees) with regards to land bearing Survey No. 33/1/3/1/2 Plot No. 15, Dhanori admeasuring 591.11 sq. mtrs consideration - ₹ 9000 at ₹ 15.23 per sq. mt. 2. Sale deed dated 20-8-1979 (Registered in 1981) between Madhavan Pillai (Constituted Attorney of Shri K.G.K. Nair Owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was enhanced at 15% to arrive at the market rate of ₹ 5558 per sq. mtrs. From this average rate, the value of cost of construction at a lump sum rate of ₹ 2500 per sq. mtr was reduced from the consolidated rate of land and building to arrive at the rate of land as on 1989 at ₹ 3058 per sq. mtrs This rate was reduced to 40% to arrive at the rate of land at ₹ 1230 per sq. mtr as on 1-4-1981. 7. The method of valuation adopted by the Regd. valuer was found by the A.O to be unrealistic and without any scientific basis for the reasons set out below. "(a) The valuer stated that the structure on the land was in a dilapidated condition but could not explain as to why the rate of building has been adopted at reckoner rates, which are applicable to new buildings and not to dilapidated building which was constructed in the year 1959-60 and which had hardly any value. (b) For the purpose of arriving at the rate of land and building as on 1989, the valuer had adopted the land and building rates for residential staff quarters and, factory shed whose area is only 6100.45 sq. mtrs. as mentioned in the order u/s 8(4) of Land Ceiling Act dated 26-3-2004 against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lightly higher than the rates of ready reckoner. For this also, there was no basis in the valuation report nor did the valuer refer to any comparable cases to arrive at such conclusion. According to the A.O, it was an arbitrary figure to notionally enhance the value of the property. (h) The valuer was also informed by the A.O about the sale instances collected by the department and was asked why he had not taken into consideration the sale instances of nearby land from office of sub-Registrar before, arriving at the land value at ₹ 1230/- per sq. mtrs as on 1-4-1981. It was admitted by the valuer than he did not refer to any actual sale instance either of 1981 or of 1989 to support the valuation of land done by him by land and building method applying reckoner rates. (i) The A.O was of the view that the land and constructed areas should have been valued separately. In his opinion, the better option to know the cost of construction of residential and factory buildings would have been to know the WDV of the building from the books of the assessee company and only the land should have been valued as per the Govt. rates or actual sale instances instead of adopting the land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reckoner valuation for 1989. The competent authority realized the difficulties to arrive at the fair market value of the properties as on 1-4-1981 for want of comparable instances. Hence to value the property relying on the incomparable instances is not correct. The instances quoted and referred by you are of no value and not at all comparable and hence cannot be relied to arrive at the fair market value of the land as on 1-4-1981. Valuation method The registered Government Valuer correctly valued the land as on 1-4-1981 by discounting at 60% the fair value of developed, sanctioned and cleared plot as per the Ready Reckoner of 1989. The competent authority were also of the opinion that the fair market value of the land were not uniformly available and there was total ambiguity and uncertainty to arrive at the fair market value as on 1- 4-1981 hence the competent authority came out with the circular to compute the fair market value as on 1- 4-1981 based on valuation with reference to ready reckoner for the year 1989. As per the ready reckoner chart 1989 the fair market value of the residential building was ₹ 3000/- per sq. mt and commercial premises ₹ 5,000/- and 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in the case of the subject land, the land is about 26 acres, fully developed and converted with all sanctioned and permissions and amenities and, therefore, the sale instances quoted by the department are not at all comparable to the land in question. The contention of he assessee that the sale instances are incomparable cannot be accepted because the sale instances referred to by the department also pertain to areas in and around residential, commercial and industrial zone of the area, where necessary permissions as required under various laws were obtained such as permission from the authorities of the Urban Land Ceiling Act etc. Further the plots are bound on all sides by other plots and roads implying proper zoning and plotting which clearly demonstrate that the sale instances which the department is relying are also located in well developed areas which are very well comparable to that of the assessee. Another contention of the assessee that the documents are executed without any specifications like plot location, plot identification number, length and width size, access road and lack of water drainage, electricity and other infrastructures facilities is not correct. As c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce between the stated consideration in the documents and the market value as per ready reckoner which highlights the absurdity in the values as mentioned in the ready reckoner. Even if the assessee's contention were to be accepted, the difference between the consideration shown in the documents and the guideline rates is at best twice the value of the rates shown in the ready reckoner. But whereas in the valuer's report, he value taken by the valuer is ₹ 1230/- per sq. mt which is about 80 times the consideration shown in the three comparable sale instances obtained by the department from the SRO. As could be seen from the sale deeds, the land in question was sold at ₹ 3767/- per sq. mt and at ₹ 5861/-er sq. mt in April 2004 and March 2005. The valuer in his report adopted the rate at ₹ 1230/- per sq. mt as on 1-4-1981 and if one goes by this rate, the value of the land is appreciated only three times and five times respectively in 13 and 14 years which is absurd considering the appreciation in the land rates in Pune city particularly in up coming areas in and around Dhanori. It is also interesting to note that the first sale was made in April 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's claim regarding FMV at ₹ 1230/- per sq. mt as on 1-4-1981 and adopting FMV @ 15.23 per sq. mt by making a detailed submissions which are reproduced in para 3.9 of CIT(A)'s order. Having considering the submissions made on behalf of the assessee, the CIT(A) agreed with the finding of the A.O that the valuation has been done by the assessee's valuer without proper basis and by methods which do not yield realistic valuation. Therefore, he held that the value of the land as on 1-4-1981 so determined on behalf of assessee, was gross overstated. Same has been opposed before us. Detailed arguments were raised in this regard. On the other hand, the learned DR supported the orders of the authorities below. 12. Having considered the rival submissions and material on record, we find that the main issue involved in this appeal is with regards to computation of FMV as on 1-4-1981 of the land in question falling in Survey No. 44 at Danori, Pune. The assessee has sold the land at Dhanori partly in A.Y. 2005-06 and partly in 2008-2009. The A.O has taxed the capital gain in A.Y. 2005-06 and has held that the capital gain in respect of the balance portion of the land is taxable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1230/- per sq. mt. as on 1-4-1981. 16. In the course of hearing, the assessee had referred to valuation report as stated above which is placed at pages 1 to 6 of the paper book. the stand of the assessee was that the land owned by the assessee was within the limits of Pune Municipal Corporation (referred to as PMC for short). Secondly, it was submitted that the said land was a non-agricultural land and could be used for commercial or residential purposes as same was permitted to be used earlier. This fact has not been disputed by the revenue. The valuer considered the rate of residential units, commercial units on the ground floor and upper floor arrived at an average rate of ₹ 5575/- per sq. mtr. From the said amount, the valuer reduced the cost of construction of ₹ 2500/- per sq. mt. and arrived at an average land rate of ₹ 3075/- per sq. mt. These were the rates of 1989. In view of the circular issued by the concerned Town Planning Valuation Department the said rate was reduced to 40% in order to arrive at the rate of ₹ 1230/- per sq. mt. 17. As per the said circular issued by Town Planning Department numbered as A-5 Mulyankan /PK.257/6516. 6616 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was that considering the open land only, the minimum land rate was ₹ 1,000/ - per sq. mtr. in 1989 and discounting the same considering the above said circular issued by the Town Planning Department, the minimum rate of the said land as on 1981 was 400/- per sq. mtr. 19. We find it undisputed that the assessee's land was a non-agriculture land within the PMC limits and could be utilized for construction of residential, commercial/industrial units as per master plan and building bye laws thereunder applicable in the said area at relevant point of time. We find that the assessee has referred to sale of conveyance deed executed by assessee part of same at page 307 of the paper book backside, reads as under: "AND WHEREAS the VENDOR wanted to give for determent the property mentioned in Schedule A hereunder written to the interested party and having come to learn about the said intentions of the VENDOR, herein about the same, the DEVELOPER herein, who was then on look out suitable land for avocation of development of properties, approached the VENDOR and requested the VENDOR herein to grant to the DEVELOPER herein the contract of construction of the proposed res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there was no question of determining the FMV on the basis of those lands. The assessee has raised various contentions to bring out distinction between the three instances and the assessee's case in its reply placed at pages 146 to 150 as discussed above which was not duly considered by the A.O. The A.O has not disputed the fact that the comparable cases relied upon by the A.O were outside the PMC limit. Unequal should not be treated equally. The value of land situated in PMC limit is certainly higher than one outside municipal limits in Dhanori area. The land in municipal limit has benefit of infrastructure such as severage, water, electricity road security etc. so its value has to be higher. A.O has discussed the sale instances of ₹ 247/- but ignored the same while reached to conclusion whereby value of land @ 15.23 per sq. mtr as on 1=-4- 1981. This reflects the approach of A.O as well as CIT(A). 22. We also find that the said compared plots were small in size and undeveloped, zoning was not available and were around 3 to 4 kms away from the assessee's land. The said plots were in interior part of dhanori village and not having benefit of development in terms of water, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of property is not justified and contrary to the facts on record. 24. Without prejudice to the above, we find that there was not much of a development outside the Pune Corporation limits and the basic facilities infrastructure like roads, drainage, drinking water supply, etc. were absent outside PMC limit though falling in same revenue estate i.e. Dhanori. So same could not be compared with the assessee's land for the purpose of adopting fair market value as on 1-4- 1981 so as to compute capital gain with regards to property in question. We also find that on page 17 of the assessment vide para 8.2 the A.O observed as under: "Further; in view of the claim of the assessee that the land in question is 26 acres fully developed and sanctioned etc. this office has made an attempt to obtain sale instances of bigger properties from the SRO of the area concerned. The department could lay hand on a copy of agreement of sale dated 2010- 1990, which was subsequently registered on 19-3-1999. This instance was obtained as it was developed by a society on bigger land. This agreement is executed on 20-10-1990 between Shri Rajkumar Jitram Agarwal (purchaser through partner of M/s. Shree Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, the FMV of the assessee's land could be about at least 15 times of ₹ 247/-. In view of the above, the rate adopted by the A. O. cannot be accepted because it is devoid of concept of equally which is basis f principles of natural justice. Principle of natural justice is strength of progressive society. Without prejudice to above, even the fourth sale instance of ₹ 247/ - per sq. mtr. was for land outside PMC limit in 1981 in Dhanori village and it cannot be considered to be comparable with the assessee's land. At the same time we find that the estimate of FMV as made by the registered valuer on behalf of assessee at ₹ 1230/- per sq. mtr. is also on higher side. 25. Regarding built up structure, we find it undisputed that land in question had old built up area as well. We find that in case of G.R. Radhakrishnan Vs. Appropriate Authority (249 ITR 690 (Mad), the Hon'ble Madras High Court has held as under. "Held, that when two things are sought to be compared, it is necessary that the things are in fact comparable. When plots with buildings thereon are compared, the buildings cannot be treated as scrap, irrespective of their age, the amount invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in PMC limit although in revenue estate of Dhonori village had to be considered as much better located land than the other lands in Dhanori village which are outside PMC limit as they were away from the main road i.e. Pune Alandi Road. Accordingly, if the stamp duty authorities had fixed ₹ 400/- per sq. mtr. As minimum FMV in 1981 for land in general in revenue estate of Dhanori village, the assessee's land had to be valued at much higher a price. This view is supported by the fact that in 2004-05 when the assessee sold its pieces of land, the market value was almost double the stamp duty valuation at the relevant time which is evident from fact that the CIT(A) on page 12 of his order noted that the assessee received ₹ 7.28 crores as against ₹ 3.09 crore stamp valuation in sale deed dated 1- 4-2004 and ₹ 16 crores as against ₹ 9.82 crores stamp valuation as per sale deed dated 28-3-2005 This shows that the minimum FMV of ₹ 400/- per sq.mtr. as on 1-4-1981 as per stamp duty valuation could be increased in same proportion for arriving reasonable FMV of assessee's land at relevant point of time. Taking of all facts and circumstances FMV of land in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since for A.Y. 2005-06 there was no time limit on carry forward of depreciation, the claim of the assessee was justified. In this background, it was submitted that the claim of unabsorbed depreciation be allowed. On the other hand, the learned DR supported the orders of the authorities below. 27.1 After going through the orders of the authorities and hearing the submissions of both the parties, we find that lower authorities have not appreciated the fact as low as discussed above, perhaps, because they were not having benefit of the same at relevant point of time. In any case, assessee can raise legal contention at any stage. So interest of justice, this issue is restored to A.O with direction to decide the same as per fact and law after providing opportunity of hearing to the assessee. 28. The assessee claimed business loss of current year of ₹ 7,90,67,790/- which included excise duty, interest on bank loans, sales tax dues, labour dues, etc. It was observed by the lower authorities that the return of income was filed upto A.Y. 1999-00 only. Even in the year under consideration the return was filed so as to verify genuineness of the expenditure. It was observed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. This reasoned finding is supported by the ratio of jurisdictional High Court in the case of Chaturbhuj Dwarkadas Kapadia Vs. CIT (2003) 260 ITR 491 (Bom) wherein the Hon'ble High Court observed that once under some clause of the agreement a limited power of attorney is intended to be given to the developer to deal with the property, then the date of agreement would be the relevant date to decide the date of transfer u/s 2(47_(v) of the Act. Under the facts and circumstances, the lower authorities were justified in holding that the capital gain on sale of land is chargeable to tax for A.Y. 2007=-08 because the agreement coupled with posession took place on 19-3-2007. Same needs no interference from our side. We uphold the same. 30. The next is with regards to adoption of fair market value as on 1-4-1981 of the land in question for computation of capital gains. This issue has been discussed and decided in ground no. 1 in ITA No. 1568/PN/2008 for A.Y. 2005-06 in preceding paragraphs of this year. Following the same reasoning, this issue is decided accordingly. 31. In the result, both the appeals are partly allowed as indicated above. Order is pronounced in the open court on 6-9- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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