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TMI Blog2014 (1) TMI 1909X X X X Extracts X X X X X X X X Extracts X X X X ..... ry year, but for a period of more than forty years, some method has to adopted and method adopted by him is one of the reasonable method. It is also a fact that after the winds economic liberalisation swept the country in year 1991 price of land in Mumbai appreciated considerably than the earlier period-especially when internal emergency was declared in the country i.e. 1975-77. We find that FAA has also used the reference books as one of the sources for arriving at the FMV. In our opinion method adopted by him is a better 'guesswork' than the guesswork done by the valuer. His estimation is also very near to the valuation made by the DVO. We have considered the case of S.Krishnan [ 1997 (4) TMI 22 - BOMBAY HIGH COURT ] cited by assessee. We find that decision delivered by the Hon'ble jurisdictional High Court dealt with acquisition of property. Therefore same is not of any help for deciding the issue before us especially in light of the principle mentioned at paragraph 4 of our order. Considering all we are of the opinion that FMV adopted by the FAA is a more reasonable and better proposition as compared to the FMV quoted by the valuer. Therefore, confirming his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surmises and purely personal opinion without any evidence for the basis of valuation adopted by him. Your appellants pray that the FMV determined by the CIT(A) be set aside and the AO be directed to compute capital gains on the basis of value determined by the registered valuer based on the evidences cited in the valuation report. 4. The CIT(A) erred in holding that the land appreciates in value at a uniform rate and that rate can be determined on the basis of sales price received by your appellants. Your appellants submit that the CIT(A) having observed that, rate of appreciation of any land situated in any part of the world may not appreciate uniformly and there may be ups and down in percentage of appreciation, still followed the very basis while determining the FMV in the impugned order. It is therefore submitted that the basis adopted by the CIT(A) is controverted by himself and therefore the basis is erroneous and, consequently, the valuation determined considering the basis has to be set aside. Your appellants pray that the AO be directed to compute capital gains on the basis of FMV of land as on 1st April, 1981 furnished to him. 5. The CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 48,70,00,000/- Less: Brokerage @ 1.5% 73,05,000/- Net consideration 47,96,95,000/- Less: Cost of acquisition : Land acquired in 1959 for ₹ 4,68,000/- Fair Market Value As on 1-4-81 as per valuation report 14,12,00,000/- Indexed cost of acquisition:- 14,12,00,000 406/100 57,32,72,000/- Loss on sale of land 9,35,77.000/- AO was of the opinion that since the value of the land as on 31-3-1993 was ₹ 26,700/- ,hence cost inflation indices as on 1-4-1981 and 31-3-1993 were to be taken at 100 and 244 respectively. He worked out the FMV of 28,737sq.fts. of land covered by ULCA at ₹ 10,943/- (26.700 x 100/ 244). He further noticed that as per the Indian Valuers Directory and Reference Book (IVDRB), the rate of undeveloped industrial land as on 01-04-1981 was ₹ 22/- per sq.fts.in And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was ₹ 56/- per sq.fts. and ₹ 22/- per sq.fts. for an undeveloped industrial land as on 1-4-1981. As a result, AO adopted the rate for undeveloped industrial land, as on 1-4-1981,as given in the IVDRB. 2. Assessee preferred an appeal before the First Appellate Authority(FAA) and filed paper book giving the details of the letters it had written to the AO and the letters received from the AO. Before him, it is argued that the FMV returned by the assessee was on the basis of the Regd. Valuers' certificate and therefore it was fair and reasonable, that the land should be treated as a developed industrial land and not as an undeveloped industrial land, that the plot of land fell in two different zones that the average of the rate for each zone should be adopted. After considering the assessment order and the submissions of the assessee FAA, held that neither the AO nor the assessee had made any serious effort to find out whether there was instance any sale around 1981 in the area in which the assessee's land was situated. Accordingly, he called for a Remand Report from the AO. He specifically directed the AO to find out either from the Office of the Sub-Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he different zones should be adopted. After considering the submissions of the assessee, FAA held that the valuation made by the Regd. Valuers was on the basis of some imaginary situations, that that the Valuation Reports submitted by the assessee were highly subjective and against the realities. Therefore, he rejected the Valuation Reports filed by the assessee. He further held that the assessee had purchased the property under appeal in 1959 for a sum of ₹ 4,68,000/- and had sold the same in 2000 for a sum of ₹ 48,70,00,000/-, that in a period of about 41 years a property worth ₹ 4,68, 000/- had appreciated to ₹ 48,70,00,000/-.Considering above facts, he worked out the compound annual rate of appreciation of the land. As per the FAA the compounded annual rate of appreciation of the land was 18.4656% per year, that land in question purchased for ₹ 4,68,000/- in 1959 would have appreciated to ₹ 1,94,65,959/- in 22 years, that though the rate of appreciation of any land situated in any part of the world could not appreciate uniformly and there could be ups and downs in the percentage of appreciation, that in a period of 22 years the average r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had been prepared after a great deal of research, that according to the reckoner the rate for the developed land in 1990 was ₹ 140/- per sq.fts., that the cost inflation index was 182 for 1990 and 100 as on l-4-1981,that the rate as on 1-4-1981 would be ₹ 76.92 per sq.fts. (140 x 100/ 182). After considering four different methods, he adopted a rate of ₹ 52.23/- for the area not covered under ULCA. Accordingly, he held that FMV of plot of land (5,32,596 sq.fts.) not covered under ULCA as on 1-4-1981 would be ₹ 2.78 Crores (5,32,596 52.23). As regards to the land of 28,737 sq.fts. covered under ULCA, he held that the assessee itself had returned the value in its W.T. Returns, that there was no reason why the same should not be adopted while valuing the assessee's land as on 1-4-1981, as, ULCA had come into effect in 1976 itself. He was of the opinion that the FMV of the land, covered by ULCA at Rs.l0,943/-, should be adopted as reasonable value. Finally he held that the FMV of the entire land as on 1-4-1981 would be ₹ 2,78,28,432/- (₹ 2,78,17,489 + ₹ 10,943). He directed the AO is directed to adopt figure of ₹ 2.78 Crores as aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in case they decide not to act upon that evidence, and adopt another valuation, that valuation must be on the basis of some material. (iv) In fixing or estimating the correct market value of an asset, though there are different methods and approaches, the problem being difficult and a choice as to which of the methods should be preferred, raises imponderable. It may be necessary to take even two or all those methods into account and determine the market value. It is clear that to insist on finding out the market value by applying only one particular method would not give the correct estimation of the fair market value of a property. (v) It is one of the settled principles of valuation that market value has to be ascertained by considering sales of similar properties in the same neighbourhood or similar environment. If there are no such instances of sales available then capitalisation of rent or making some sort of comparative evaluation of sales of other properties is an acceptable mode of valuation. A certain amount of guesswork would be there if no exactly similar instance of sale is available. In that case an estimate has to be made. (vi) Valuation of an asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to such restrictions as may be imposed as the conditions for exemption. In valuing such a property, one has to take into account the state of affairs as prevailing on the relevant valuation date. (xi) Not making available valuation report or the sale instances to the assessee, is a failure to comply with the principles of natural justice and fair play and on this ground alone the orders of the AOs can be set aside. Moreover while considering the fair market value, it was incumbent on the appropriate authority to have dealt with the objections raised by the assessees. (xii) It is for the, Appellate Tribunal as the final fact finding authority to determine on the facts of each case which is the method to be adopted to arrive at the proper market value . Therefore, unless a clear error of law is discernible in the finding reached by the Tribunal on the question of fair market value no interference can be made in an appeal. In other words the finding of the Tribunal would be binding on the High Court unless the Tribunal has arrived at the conclusion by taking wrong principles into consideration. 4.a. Undisputed facts of the case are that a plot of land purchased by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not held a reasonable and fair basis of valuation. Valuer has himself at the beginning of the part three of the valuation report has stated that the plot fell in Special Industrial Zone I-3,that in 1981 the D C Rules did not permit change of user from Industrial to Commercial or Residential or vice versa. If in 1981 commercial use was permissible then to value the plot on commercial basis cannot be endorsed. It should have been valued as Industrial plot. As per the Valuer he had conducted a search in the Registrar's office and he had not been able to locate any instance of sale of similar properties from 1979-83. Even if it is agreed that no instance of similar properties were available but some kind of instances which were near to similar properties could have been found. Even if the property was in industrial area instances of commercial or residential properties of that area or the nearby areas would have given some base. We know commercial or residential properties could not be compared with industrial plot but giving discount of certain factors which sets such properties from industrial properties a broad base can easily be arrived. We want to make it clear that it may no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds economic liberalisation swept the country in year 1991 price of land in Mumbai appreciated considerably than the earlier period-especially when internal emergency was declared in the country i.e. 1975-77.We find that FAA has also used the reference books as one of the sources for arriving at the FMV. In our opinion method adopted by him is a better 'guesswork' than the guesswork done by the valuer. His estimation is also very near to the valuation made by the DVO. We have considered the case of S.Krishnan (supra) cited by the AR of the assessee. We find that decision delivered by the Hon'ble jurisdictional High Court dealt with acquisition of property. Therefore same is not of any help for deciding the issue before us especially in light of the principle mentioned at paragraph 4 of our order. In these circumstances, considering the peculiar facts and circumstances of the case we are of the opinion that FMV adopted by the FAA is a more reasonable and better proposition as compared to the FMV quoted by the valuer. Therefore, confirming his order, we decide the effective ground of appeal against the assessee-company. As a result, appeal filed by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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