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TMI Blog2017 (10) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... Out of the above an extent of 19,200 sq.ft. was purchased by the assessee's husband in the year 1958. The remaining land of 6,143 sq.ft. was purchased by assessee from BDA. There were disputes with regard to the property as the same was subject matter of acquisition by the BDA. Besides the above, the property was originally an industrial site on which the assessee's husband had constructed structures. The structures were let out to one Smt. Rudramma and her legal heirs. There were disputes with the tenant also. It is in this state of affairs that the property in question was sold by the Assessee after settling all the litigations. 4. The Assessee computed long term capital gain on sale of the property. The computation of capital gain as made and given by the Assessee and the computation of capital gains done by the AO was as follows. Particulars Particulars of calculation of Capital Gains by assessee Particulars of calculation of Capital Gains by the learned A.O. Additions / Disallowance made by A.O. Sale Consideration 6,15,00,000/- 6,15,00,000/- - Less: Cost of additional piece of land allotted by BDA 2,02,70,155/- 2,02,70,155/- - 4,12,29,845 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per sq.ft. In the appeal by the assessee the assessee has challenged the order of CIT(A) fixing the FMV as on 01.04.1981 at Rs. 50/sq.ft. and has claimed that the same should be fixed at Rs. 100/sq.ft. as claimed by the assessee. The revenue in its appeal has challenged the order of CIT(A) whereby CIT(A) fixed the FMV as on 01.04.1981 at Rs. 50/sq.ft. According to the revenue the FMV as on 01.04.1981 should have been fixed at Rs. 10/sq.ft. as done by the AO. 6. We have already seen that the assessee acquired the property by way of succession as legal heir of her husband. Under the second proviso to section 48 the assessee can claim indexed cost of acquisition as a deduction. The assessee claimed indexed cost from 01.04.1981. According to the AO indexed cost of acquisition can be allowed only from the year 1994 when the Assessee succeeded to the properties of her husband on intestate succession. According to the AO indexed cost of acquisition has to be computed for the period for which asset is held by the assessee. Since the assessee got the property by way of succession only in the year 1994, the AO gave indexed cost of acquisition from 1994. The CIT(A) held that the indexed cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been interpolated with cost inflation index issued by the Government and the minimum guidance value is worked out at Rs. 125/- per sq.ft. Further, the value has been arrived at after considering future usage and commercial potentiality where high rise structures can come up. I have relied upon 1985 circular because, there was no circular prior to this as per my knowledge. Q.5 I am showing you the statement government circular No.329/EST/79 dated 10/11/1982 and letter from Sub- Registrar, Koramangala dated 16/11/2009. Kindly go through the contents and explain what is there in it? Ans. In the circular the guidance value per square yard are there. The guidance values of four localities in the vicinity of Koramangala are as under: 1. Wilson Garden Rs. 272/- per square yard 2. UIsoor Rs. 272/- per square yard 3. Domlur Rs. 216/- per square yard 4. Viveknagar Rs. 216/- per square yard. In the letter of Sub-Registrar, Koramangala along with the annexures, the properties registered at Koramangala III Block are given and the rate per sq.ft. varies from Rs. 10/- to Rs. 22/- per sq.ft. Q.6 :Kindly explain, in view of the facts given above, explain your opinion abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there were not many transactions and guidance value in Koramangala is not given. I did not have possession of the documents like you have as per the letter dated 16/11/2009. Q.10 In this back ground ie., the sale transactions in Koramangala taking place at Rs. 10/-to Rs. 22/- and guidance value in neighbouring area varying from Rs. 24/- to Rs. 30/-, the property being acquired at as on 01/04/1981, the assessee not in possession of the property and prolonged litigation with respect to this property, do you have anything to say? Ans. In view of the sale transactions in Koramangala taking place at Rs. 10/- to Rs. 22/- and guidance value in neighboring area varying from Rs. 24/- to Rs. 30/-, the property being acquired at as on 01/04/1981, the assessee not in possession of the 'property and prolonged litigation with respect to this property I feel the property would not even have fetched Rs. 20/- per sq.ft.as it was not in possession of the assessee and it in the possession of BDA /CITB, I feel the FMV would be around the registration value at that time as the guidance values were not available for these properties. 11)Do you have anything else to say? Ans: This rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q ft. However, the AO adopted the same as on 1/4/1981 at Rs. 10 per sq ft. 3.13 The appellant narrated the various factors in the determination of FMV for the relevant period. As already discussed above, the valuation is necessarily an estimate as it would be impossible to find out properties identically situated with the property in question in all respects. Looking at the totality of the circumstances, in my considered opinion, taking the FMV as on 1/4/1981 at Rs. 50/- per sq ft would be appropriate, which would meet the ends of justice. The AO is, therefore, directed to recompute the long term capital gains by adopting FMV at Rs. 50/- per sq ft as on 1/4/1981." 9. Aggrieved by the aforesaid order of the CIT(A) both the assessee and the revenue are in appeal before the Tribunal. We have heard the rival submissions. The ld. DR has reiterated the stand of the AO as contained in the order of assessment. The ld. Counsel for the assessee reiterated the submissions as were made before the CIT(A). We have heard the rival submissions. In the matter of dispute with regard to the FMV as on 01.04.1981, the law provides for an option to the AO to seek the opinion on the question of valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of building as on 1.4.1981. Keeping these facts in mind and also taking note of the fact that the AO has not chosen to make a reference to the valuation officer u/s. 55A of the Act and also keeping in mind the fact that estimation of FMV as on 01.04.1981, in the absence of a good comparative sale instance, would be only an approximation, we deem it proper to conclude that the FMV as on 01.04.1981 should be fixed at Rs. 75/sq.ft. We hold and direct accordingly. The relevant grounds of appeal of the revenue are accordingly dismissed while that of the assessee is partly allowed. 10. As far as the question whether indexed cost of acquisition has to be computed by taking 1.4.1981 or the year 1994 when the Assessee succeeded to the property as legal heir of her deceased husband, the facts are that in the computation of capital gain the Assessee adopted the FMV of the property as on 1.4.1981 as the cost of acquisition of the property and on this claim there is no dispute by the revenue that the Assessees were entitled to claim so in view of the provision of Sec.49(1)(iii)(a) of the Act. The Assessees while computing it's cost of acquisition also claimed indexation on FMV as on 1.4.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place; (v) "Cost Inflation Index", in relation to a previous year, means such Index as the Central Government may, having regard to seventy-five per cent of average rise in the Consumer Price Index for urban non-manual employees for the immediately preceding previous year to such previous year, by notification in the Official Gazette, specify, in this behalf." 13. The controversy in the present case relates to interpretation of Explanation (iii) to Sec.48 of the Act, which defines the expression "Indexed Cost of Acquisition". We find that the issue of allowing indexation on identical facts had come for consideration before the Hon'ble Bombay High Court in the case of CIT Vs. Manjula J.Shah (2012) 204 TAXMAN 691 (Bombay). The question before the Hon'ble Bombay High Court was "While computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, whether the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset or the year in which the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmining the period for which an asset is held by an assessee under a gift, the period for which the said asset was held by the previous owner shall be included. As the previous owner held the capital asset from 29th Jan., 1993, as per Expln. 1(i)(b) to s. 2(42A), the assessee is deemed to have held the capital asset from 29th Jan., 1993. By reason of the deemed holding of the asset from 29th Jan., 1993, the assessee is deemed to have held the asset as a long-term capital asset. If the long-term capital gains liability has to be computed under s. 48 by treating that the assessee held the capital asset from 29th Jan., 1993, then, naturally in determining the indexed cost of acquisition under s. 48, the assessee must be treated to have held the asset from 29th Jan., 1993 and accordingly the cost inflation index for 1992-93 would be applicable in determining the indexed cost of acquisition. If the argument of the Revenue that the deeming fiction contained in Expln. 1(i)(b) to s. 2(42A) cannot be applied in computing the capital gains under s. 48 is accepted, then, the assessee would not be liable for long-term capital gains tax, because, it is only by applying the deemed fiction contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords used in s. 48, then the gains arising on transfer of a capital asset acquired under a gift or will will be outside the purview of the capital gains tax which is not intended by the legislature. Therefore, the argument of the Revenue which runs counter to the legislative intent cannot be accepted. 16. The Hon'ble Court further held that apart from the above, s. 55(1)(b)(2)(ii) provides that where the capital asset became the property of the assessee by any of the modes specified under s. 49(1), not only the cost of improvement incurred by the assessee but also the cost of improvement incurred by the previous owner shall be deducted from the total consideration received by the assessee while computing the capital gains under s. 48. The question of deducting the cost of improvement incurred by the previous owner in the case of an assessee covered under s. 49(1) would arise only if the period for which the asset was held by the previous owner is included in determining the period for which the asset was held by the assessee. Therefore, it is reasonable to hold that in the case of an assessee covered under s. 49(1), the capital gains liability has to be computed by considering tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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