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TMI Blog2016 (3) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... view, we confirm the order of the learned CIT (Appeals) to the extent of number of trees to be 99 as against 142 claimed by the assessee. - Decided against assessee Computation of cost of acquisition and improvement to be taken for computing capital gain - Held that:- The cost of improvement, in case of a tree can only be those expenses which are incurred either to enhance the life span of the trees or to enhance the fruit bearing capacity of such trees. These further expenses are not of such nature and are incurred only for the upkeep of the orchard or for the maintenance of the trees only. Therefore, we uphold the action of the Assessing Officer in not treating these expenses as part of cost of acquisition or cost of improvement. We further uphold the action of the Assessing Officer in not allowing the Net Present Value as computed by the assessee for the loss of likely earning. As we have earlier mentioned that this approach may be appropriate for estimating the amount of compensation, but for the purpose of computing the capital gains, this is not the right approach. In view of the above, we uphold the order of the Assessing Officer. - Decided against assessee - ITA No.947 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessed as capital gains. Besides, that a computation was provided to the Assessing Officer and it was contended that an amount of ₹ 85,600/- per tree be treated as Fair Market Value as on 1.4.1981 as the assessee was having full grown orchards on his ancestral land at that time and further it was pleaded that the assessee was having 142 number of trees on his land. In this view, prayer was made to compute the cost of acquisition/improvement in this manner. Rejecting the contention of the assessee the Assessing Officer considered the number of trees in his land to be 99, on the basis of compensation of land described in Jamabandi filed by the assessee. Further, the assessee considered the cost of acquisition to be ₹ 2500/- per tree, being the basic value of tree and expenses incurred to bring the tree to the fruit bearing stage. In this manner, the Long Term Capital Gain was computed at ₹ 54,62,604/-. 4. Aggrieved by this, the assessee went in appeal before the learned CIT (Appeals) and reiterated the contention raised before the Assessing Officer. The learned CIT (Appeals) dismissed the appeal of the assessee holding that the method of NPV(Net Present Value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been generous enough to give the benefit to the assessee in term of cost of acquisition/improvement being the cost of tree till the age it becomes fruit bearing. In this way, it was prayed to confirm the order of the learned CIT (Appeals). 8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The assessee has challenged the action of the Assessing Officer in treating the said receipt as 'capital gain'. We cannot adjudicate this issue as the same was decided by the I.T.A.T. in the first round. The directions given to the Assessing Officer, while setting aside the case was to compute the income under the head 'capital gain'. 9. While computing capital gains under the said circumstances, two disputes, have arisen. First is with regard to number of trees. In the present case, the claim of the assessee is that there were 142 trees, while the Assessing Officer has considered there being only 99 trees. The second dispute is with regard to cost of acquisition and cost of improvement per tree to be taken for computing the income under the head 'capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op, is of no help to the assessee as even if some crops were being cultivated in the said land, the same cannot be classified as apple trees and no cost of acquisition can be attributed to the same. After considering the Jamabandi, the Assessing Officer come to a conclusion that the land containing bagichas were 0-63-98 hectares, on conversion which comes to 8.7 bighas and the assessee's 1/3rd share at 2.9 bighas. As per agreement made by the assessee and his 2 brothers with M/s Jaypee Karchamm Hydro Corporation Ltd. (JKHCL) New Shimla, the khasra Nos.494, 496, 499, 500 573/1 were taken on rent by the second party. On going through copies of jamabandi the Assessing Officer has noticed that khasra No.494 khasra No.573/1 measuring 0-10-98 0- 53-00 are reflected as bagicha i.e. apple orchard and remaining khasra Nos.496, 499 500 are either banjar kadim or under agriculture crops. We are in agreement with this finding of the Assessing Officer, which he has arrived after a totally scientific method applied on the basis of revenue records. As regards number of apple trees to be grown per bighas, the Assessing Officer has applied 25 number of apple trees per bigha on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment for improvement, etc. This amount of ₹ 300/- is said to be incurred per tree per annum and is in the nature of recurring expenditure. Further, the assessee has assumed average life of a tree to be 45 years and further assuming that the trees were 15 years of age at the time of leasing the land, the value of trees at the time of evaluation is arrived at ₹ 4600/- per tree. Once arriving at this cost per tree, the assessee deducted the net present value or likely earning for remaining bearing life of trees, i.e. 30 years and adding the basic value of tree to this figure, an amount of ₹ 85,600/- per tree is arrived at. 13. After going through the method adopted by the assessee at arriving at the cost of acquisition and the cost of improvement, we do not find ourselves in agreement with the same. What the assessee has done is to arrive at the Net Preseent Value of likely earning for the remaining life of trees. This method may be in consonance with arriving at an amount to be estimated for getting compensation for loss of revenue earning apparatus of a person. But this is not a right approach to estimate the cost of acquisition and improvement for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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