9911796707
TMI Blog2022 (4) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... er at 250/- per sq. yard was neither less nor more and it was reasonable considering the location and other factors like proximity distance from Airport, Railway line etc. In this regard, he also derived support from the valuation report of another approved valuer submitted by the assessee wherein the rates of 350/- per sq. yard, 400/- per sq. yard and 210/- per sq. yard were quoted as comparable instances. In our opinion, the similar issue thus has already been decided on merit by the learned PCIT in the case of Shri Yogeshbhai Laxmanbhai Makwana, one of the co-owners of the property in question, after taking into consideration all the relevant aspects and we do not find any justifiable reason to take a different view in the matter. We accordingly direct the Assessing Officer to adopt the rate of 250/- per sq. yard as the cost of acquisition as on 01.04.1981 being the fair market value of the property in question while computing the Long Term Capital Gain and allow Ground No.2 of the assessee s appeal. Area of land to be taken into consideration for determining cost of acquisition to be deducted while computing Long Term Capital Gain - HELD THAT:- We are of the view that what is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri Sakar Sharma, AR For the Revenue : Shri S.S. Shukla, Sr. DR ORDER PER P.M. JAGTAP, VICE-PRESIDENT : These two appeals filed by two assessees against two separate orders passed by learned Commissioner of Income-Tax (Appeals)-7, Ahmedabad dated 28.09.2016 and by Commissioner of Income-Tax (Appeals)-10, Ahmedabad dated 10.02.2017 for Assessment Year 2012-13 involve some common issues relating to the computation of Long Term Capital Gain arising from the sale of capital asset being immovable property jointly owned by two assessees and the same, therefore, have been heard together and are being disposed of by a single consolidated order for the sake of convenience. 2. First we shall take up the appeal filed by Shri Rajendra Laxmanbhai Makwana being ITA No. 3270/Ahd/2016 which is directed against the order of learned Commissioner of Income-Tax (Appeals)-7, Ahmedabad dated 28.09.2016. 3. The relevant facts of the case giving rise to this appeal are that the assessee, who is an individual, filed his return of income for the year under consideration on 21.07.2012 declaring total income of ₹ 3,74,560/-. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by taking into consideration area of land of 8470 sq. yards @ ₹ 250/- per sq. yard and the cost of construction separately at ₹ 24,92,400/- on the basis of valuation report of the Registered Valuer. As noted by the Assessing Officer, the fair market value of the land taken by the Registered Valuer in his report at ₹ 250/- per Sq. Yard was based on two sale instances of the immovable property in the same locality. On verification of the relevant documents in respect of the said two sale instances, the Assessing Officer found that there were certain mistakes in the valuation report made by the Registered Valuer and the actual rate of the said sale instances was ₹ 80/- per sq. yard. Keeping in view these glaring mistakes in the computation of Long Term Capital Gain made by the Assessing Officer, a letter was issued by him on 13.03.2015 requiring the assessee to show-cause as to why the transaction should not be treated as transfer of land only and deduction on account of cost of acquisition being fair market value of the land sold should not be restricted to ₹ 80/- per sq. yard rejecting the index cost of construction claimed by the assessee. The conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the buyer. Thus from the condition mentioned it is clear that you have not handed over your residential premises and Krishna Pottery premises to the buyer but only the road side constructions have been handed over to the buyer. This was also evidenced from the property details (Parishist in Gujarati) specified in the sale deed dated 09/09/2011. This shows that the residential building and Krishna Pottery work premises were disposed by you by your own way and the same were not transferred to the buyer. In this connection, you file evidence in support of your claim that you have sold residential building and Krishna Pottery Premises to the buyer. In the absence of the such evidence, it will be treated the capital asset as open land as stated in the Registered sale Deed executed by you in respect of the said property by you with 3 other for consideration of ₹ 5,04,43,000/- vide document No.9822 dated 09/09/2011 and capital Gain exemption claimed will be treated U/s 54F and the calculation will be made accordingly. As the capital gain exemption U/s 54 will be available only if there is transfer of long term capital asset being building or land appurtenant thereto and being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the considerations have been received for construction as claimed by you. You are also required to submit the evidence for transferring the construction value stated by you to the buyer and consideration received for the same. In the absence of the such evidence, it will be treated as open land as stated in the Registered sale Deed executed by you in respect of the said property by you with 3 other for consideration of ₹ 5,04,43,000/- vide document No.9322 doted 09/09/2011. 4. The valuation of land of the said property your valuer, Shri Kanu P Gajjar has considered ₹ 250/- per square yard. The valuer has reported at page 7 of the report that sales instances from the registered office for the year 1980-81 in respect of R. Survey No.977, Moje Saijpur Bogha were considered and the tabulation of the same is produced as under. "Sale Instances from register office for year 1980/81.(R. Sur. No:- 977, Moja; Saijpur Bogha) SR.NO 1 2 AMOUNT ₹ 20000 ₹ 90000 LOCATION F.P. NO. /SUR. NO. SP.NO:-21/P.R.SUR. NO:- 16. S.P.NO.--35/1, R. SUR. NO:- 16. AREA SQ. Ml. /SQ.YDS 100.00 SQ.YDS. 412.00 SQ. YDS NAME OF SELLER - - NAME OF PURCHASER - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction, site and plot, with ownership rights of constructions site and plot, with rights of passage and easement and with all other rights existing expressly and impliedly for ₹ 90,000/-". On the basis of this rate, the valuation of construction property alongwith land comes to ₹ 218.45/- Per Sq. yard. Thus, the above sale instances put forth by the valuer is in respect of building construction with land as such the same is not applicable to the open land as worked out by the valuer for the land under consideration. In view of the same you are required to show cause as to why the valuation of land should not be taken as ₹ 80/- sq. yard as per the sale instances of document No.8792 dated 15/07/1981 in place of ₹ 250/- claimed by you as per the valuation Report. 6. From the above it is clear, the valuation Report done and prepared by Shri Kanu P Gajjar of Amee Engineer is made based on incorrect facts, which can be evidenced from the details of safe instances quoted and interpreted by the valuer for determining the valuation of the land and construction. 7. In view of the above, you are required to furnish evidence details as called for above to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Buyer agreed to buy the 627 Sq. Yard land and construction with the liability to pay any amount as demanded by the tenants to get possession of land with construction on it. The Buyer made settlements with the tenants to get the possession of land with the construction on it but still as on date there is one tenant who holds the possession of land with construction on it and has refused the settlement offer of the Buyer, same can be physically verified by the Department. The possession of rest of 5327 Sq. Yard land with construction (both Commercial & Residential land with the construction) was with us and hence sold at the rate of 9,000.00/Sq. Yard (Rupees Nine Thousand per Sq. Yard). 2. Page No 5 of "Banakhat" confirms that there was a construction of Krishna Colony along with other construction which was used for our commercial & residential purpose. The land along with construction to be called as "Majkur Jamin". 3. Para 6 at Page No. 8 of "Banakhat" confirms that there was a construction of Krishna Colony, construction of shops, construction of Krishna Pottery Works which was used for commercial purpose and the construction of Bungalow w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jointly continued the commercial activities as "Partnership Firm". The "Partnership" was dissolved in 1975 and my father became sole "Proprietor" of said business. He died in 1986 and we as legal hairs entered into the business as "Partners" and continued the business under the name "Krishna Pottery Works". The business was stopped in 1994 and the licenses to run the business were surrendered to the concerned authority (copy of cancellation of License attached). Sir, as per my knowledge and information the "Books of Records" has to be preserved for the period of 10 Years and as it was very difficult to preserve the "Books' of Records" for such a long period of more than 10 years for a "Partnership Firm" same has been periodically destroyed. 9. Sir, in regards to the valuation of any land, the sale value of other property for the same period are taken as a indicative value and then final market value of land is determined considering many other factors affecting the cost. The indicative value can never be considered as FMV in any case without considering the additional factors affecting the cost. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of Public Transport Service as the Bus Slop was adjutant to the wall of subject land under the name "Navi Chawl Bus Stop ". vi. Full facility of Street Light on the Main Road to which subject land was located. vii. Our land was suitable for any type of construction related to Factory, Commercial Building, Mall, Multiplex, Residential Constructions. (Bungalows, Tenements. Raw Houses, Flats & Apartments, etc). Multistory Buildings, etc. viii. Main Drainage Line is passing right in the front of the Main Gate of subject Land. ix. Power Sub-Station is located at the distance of about 500 Meters away from the Main Gate of Subject Land. x. Approximately 2/3 area of Saijpur Bogha is facing the problem of Rain Water Deposition during the rainy season but as our land was located at the height more than that of Main Road, we never faced the problem of Rain Water Deposition till the date nor we have suffered any loss due to the same. 12. Sir, Kindly find attached copy of Original Lease Deed executed between Kuberdas Hargovendas Modi and Samuben on 03/05/1947 (copy of Original Lease Deed attached herewith). As per the Original Lease Deed Samuben purchased Lease Rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot. Also, the rate of a big commercial cum residential plot is always much higher compared to a small residential plot and the therefore the value of our commercial cum residential plot as per Valuation Report is a justified value in all terms & means. 14. Sir, Kindly refer to the "Sales Deed" registered at Sr. No. 8792/1981 on 15/07/1981. As mentioned in the Sales Deed it was a very small residential plot owned by a "Rabari" Okhabhai Jorabhai Rabari in Rabari Vas, with a narrow entrance to the said plot compared to the above described plot mentioned at Sr. No. 12. The plot was located in a slum area without any facility as described above. As per Sales Deed 250 Sq. Yard residential plot of "Rabari Vas" in a slum area was sold at ₹ 20,000.00 (@ 80.00 per Sq. Yard). If a very small residential plot with a very narrow entrance and without any facility in the slum area of "Rabari Vas ' is sold @ 80.00 per Sq. Yard than the value of our commercial cum residential plot located on 40' Main Road with all facility as described above is justified. A multistory building can be constructed on our plot for the purpose of Commercial or Residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the buyer had no right on the same. He further noted that the subject matter of property sold as per the sale deed executed on 09.09.2011 was non-agricultural leasehold open land and nowhere it was mentioned that the construction right of the property was transferred to the buyer. The Assessing Officer also referred to the photograph of the property shown in page Nos. 28 & 29 of the sale deed which clearly evidenced that there was no construction of residential bungalow or the commercial property in existence on the land sold by the assessee. He held that the subject matter of transfer thus was not of residential bungalow of the seller and the construction of Krishna Pottery Works as claimed by the assessee and it was only the open land which was sold/transferred as stated in the property schedule of Banakhat and sale deed. 7. As regards the rate of ₹ 250/- per sq. yard adopted by the assessee as fair market value of the land as on 01.04.1981 on the basis of the valuation report of the Registered Valuer, the Assessing Officer found that there were mistakes in the calculation made by the Registered Valuer while working out the rate of ₹ 250/- per sq. yard on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various issues raised ground-wise relating to the addition made by the Assessing Officer on account of Long Term Capital Gain:- "1. Ground No.1 : "The learned assessing officer has grossly and grievously, erred in law and on facts by ignoring the valuation of the property as on 01/04/1981 as valued by your appellant's valuer while computing the capital gain and hence, valuation given by your appellant be considered as final and long term capital gain be computed accordingly." Ground No.2: "The learned assessing officer has grossly and grievously erred in law and on facts by not considering cost of construction by stating that, there was no construction on land while computing the capital gains and accordingly, your appellant humbly prays to your honour for allowing the cost of construction and indexation thereon from the period 01/04/1981 since, it was constructed before 01/04/1981 considering the valuation made by the registered valuer for computing the long term capital gain accordingly." Kindly refer to Para-6 of my factual submissions on page no.4 wherein, your appellant has pin-pointed that the learned assessing officer has ignored major contents o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request by the purchaser on payment of substantial amount of sale value and it was also very clearly mentioned in the Sale Deed that, the purchasers had removed, some of the structures at their own cost only. In view of the abovenoted submissions, we humbly submit that the values assigned to the structures existing as on date of Agreement to Sell must be considered with indexation for computing the long term capital gain. 2. Ground No.3 "The learned assessing officer has grossly and grievously erred in law and on facts by calculating the cost of the land by taking area of land of 5954 square yards only instead of actual area of land of 8,470 square yards, your appellant humbly prays for your honour to consider the total area of land and cost of construction for 8,470 square yards as claimed by your appellant as final and long term capital gain be computed accordingly." Kindly refer to para-4 of your appellant's factual submission on page no.2 wherein, it was very clearly informed to the learned assessing officer that the total area of land was 8470 Sq.Yds. and as per the proposed town planning scheme no.47 as announced by the government in C.Y. 2009, the clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain u/s 54 instead of deduction of investment under section 54F, your appellant humbly prays your honour to consider the amount of investment u/s 54 as claimed by your appellant as final and long term capital gain be computed accordingly." Kindly refer to Para 6, 7 and 8 on page no.4,5 and 6 of my factual submission wherein, it is very clearly mentioned that, the captioned property had structures like residential bungalow for self and family, Krishna Colony for residence of employees of Krishna Pottery Works, Aacharya Ni Chali (tenanted residential properly) kachchishops and factory of Krishna Pottery Works, Accordingly, it would be very much evident from the list of properties mentioned above that major portion of the property contained only residential premises (self and rented), To evidence this statement, we have enclosed the copies of municipal bills wherein, the names of tenants are mentioned in the bills alongwith the nature of property are very clearly mentioned. Further, a copy of letter for allotment of PAN and PAN Card of your appellant is also enclosed to evidence that your appellant was also residing in the same property till the finalization of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith other records as noted herein below: 1. a) A copy of Agreement to Sale without possession dtd. 15th October,2010 - duly translated in English (Original being in Gujarati] in respect of sale of leasehold rights of the non-agricultural land situated in the outskirts of Moje. Village Saijpur Boga in the Registration Dist. Ahmedabad, Sub-Dist Of City Taluka Ahmedabad - 6 (Naroda). Submitted in paper book atSr.No.2 -page no. 5 to 25. b) A copy of sale deed did. 08/09/2011- duly translated in English (Original being in Gujarati) in respect of sale of leasehold rights of the nonagricultural land situated in the outskirts of Moje. Village Saijpur Boga in the Registration Dist. Ahmedabad, Sub-Dist. Of City Taluka Ahmedabad - 6 (Naroda), -submitted in paper book at Sr.No.3 - page no.26 to 55. c) A copy of affidavit dtd.28/07/2016 of Makwana Rajendrabhai Laxmanbhai - duly translated in English (Original being in Gujarati).Submitted in paper book atSr.No.10 - page no.99 to 103. d) A copy of Sale Deed dtd. 13/10/1975 in respect of sale of leasehold rights of 999 years of the property situated in the outskirts of Moje. Village SaijpurBoga in the Registration Dist. Ahmedabad, Sub-Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abovenoted submission, your appellant prays to your honour to kindly allow the appeal and oblige. Your appellant would be pleased to submit further submission and/or explanations, if any, asked for in this connection on hearing from your honour." 10. The learned CIT(A) did not find merit in the submissions made on behalf of the assessee and proceeded to confirm the addition made by the Assessing Officer on account of Long Term Capital Gain for the following reasons given in paragraph Nos. 4.2 to 4.2.3 of his impugned order:- "4.2 I have considered the assessment order and the submissions made by the appellant. The AO made the impugned the addition holding that the subject matter of transfer was open land and not land with construction. He also did not accept the valuation report furnished by the appellant during the assessment proceedings because the said contained factual errors in respect of the area of the land and the comparison with other sale instances. The appellant on the other hand contended that the land had been sold with construction and that the rate of valuation taken by the registered valuer was also correct and that the AO had no authority to reject the valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial premises has been mentioned. (iv) On page No. 10 of the banakhat, it is clearly stated that the final plot No. 44 is approximately 5954 sq. yards of non agricultural land. (v) Further, the sale deed of the said property which was concluded on 09.09.2011 states on page No.5 that the final plot No. 44 allotted to the assessee was of 5954 sq. yards non agricultural land leasehold "open land" called majkur jamin. (vi) Further, the appellant does not have any evidences regarding the value of the commercial properties claimed by him and also does not have any evidences regarding the construction of the said shops/commercial properties, etc. (vii) A perusal of the valuation of the report calculated by the. Registered Valuer is also seen as being incorrect since the area measured is wrong. Further, the valuer has also made a mistake by taking the sale instances as "land with construction" whereas the transfer was only in respect of land. Thus, the valuation of land is to be taken as ₹ 80/- per sq. yard and not ₹ 250/-claimed by the valuation report. (ix) A statement u/s. 131 was recorded by the AO from Shri Kanu P. Gujjar, approved valuer wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant. 4. The Ld. CIT (A) erred on facts and in law in upholding action of Assessing Officer in non granting deduction for indexed cost of construction on the grounds that there was no construction on the land inspite of furnishing of all relevant information and documents. Alternatively, Ld. CIT(A) ought to have allowed indexed capital loss for the construction standing on the land 5. The Ld. CIT(A) erred on facts and in law in not adjudicating ground in relation to restricting deduction u/s 54/54F. 6. The Ld. CIT(A) erred on facts and in law in not adjudicating ground in relation to non invoking of provisions of section 55A of the Act by the Assessing Officer while substituting value of property as on 01 /04/ 1981 of his own against value determined and certified Registered Valuer for the purpose of computing long term capital gain by appellant. 12. We have heard arguments of both the sides and also perused the relevant material available on record. Ground No.1 raised by the assessee in this appeal is general in nature while Ground No.6 raised by the assessee is not pressed and argued by the learned Counsel for the assessee at the time of hearing. 13. As reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the co-owners of the property, having dropped the proceedings under Section 263 of the Act, it cannot be said that there is a decision on merit rendered by him accepting the rate of ₹ 250/- per sq. yard of the property as on 01.04.1981. After going through the order of learned PCIT dated 24.10.2016 passed under Section 263 of the Act in the case of Shri Yogeshbhai Laxmanbhai Makwana, a copy of which is placed on record by the learned Counsel for the assessee, we are unable to accept the contention of the learned DR. It is observed that the proceedings under Section 263 initiated in the case of Shri Yogeshbhai Laxmanbhai Makwana, one of the co-owners of the property in question, on the similar issue, were dropped by the concerned learned PCIT after recording his findings/observations as under:- "Facts of the case have been considered alongwith submissions made by the AR. It is observed that the value adopted by shri Kanubai Gajjar was not correct & there were many flaws as discussed above. The report of another Govt. approved Registered valuer Shri Bakul Desai dated 09-03-2016 determining value of plot as on 01-04-1981 appears to be more reasonable & based on geographi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue thus has already been decided on merit by the learned PCIT in the case of Shri Yogeshbhai Laxmanbhai Makwana, one of the co-owners of the property in question, after taking into consideration all the relevant aspects and we do not find any justifiable reason to take a different view in the matter. We accordingly direct the Assessing Officer to adopt the rate of ₹ 250/- per sq. yard as the cost of acquisition as on 01.04.1981 being the fair market value of the property in question while computing the Long Term Capital Gain and allow Ground No.2 of the assessee's appeal. 15. The issue involved in Ground No.3 relates to the area of land to be taken into consideration for determining cost of acquisition to be deducted while computing Long Term Capital Gain. 16. As per Banakhat as well as sale deed, 5954 sq. yards of land was sold/transferred by the assessee and other co-owners to the purchaser. While computing the Long Term Capital Gain arising from the said transfer, cost of acquisition being the fair market value as on 01.04.1981 was worked out by the assessee taking into consideration the area of land of 8470 sq. yards. In this regard, it was contended on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly acquired by them. In that view of the matter, we uphold the impugned order of the learned CIT(A) on this issue and dismiss Ground No.3 of the assessee's appeal. 17. As regards the issue involved in Ground No.4 as to whether the property sold by the assessee was comprising of any residential or commercial construction as claimed by the assessee, it is observed that even though there was a mention of a residential bungalow and commercial structure in the valuation report of the Registered Valuer which was taken into consideration in estimating the cost of the property as on 01.04.1981, the Assessing Officer and learned CIT(A) have taken a view on the basis of various adverse findings/observations recorded by them that what was sold/transferred by the assessee was only the non-agricultural open land without there being any construction of residential and commercial nature. In this regard, the learned Counsel for the assessee has submitted that there is a clear mention in the agreement to sale/banakhat that the property was being sold/transferred together with construction. The Assessing Officer, however, found that the construction referred to in Banakhat was a road side construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with reference to the property sold or transferred by the assessee and since there is nothing on record to conclusively prove that the residential and commercial construction was also transferred by the assessee, we find ourselves in agreement with the authorities below that what was transferred or sold by the assessee was only the non-agricultural open land and the assessee, therefore, was not entitled for deduction on account of cost of acquisition of residential and commercial construction. Ground No.4 of the assessee's appeal is accordingly dismissed. 18. As regards the issue involved in Ground No.5 relating to the assessee's claim for deduction under Section 54 on account of investment made in residential house, it is observed that deduction of ₹ 40,84,868/- under Section 54 was claimed by the assessee while computing the Long Term Capital Gain arising from the transfer of the property in question by treating the same as a residential property. The Assessing Officer, however, held that it was a case of transfer of non-agricultural open land by the assessee without there being any construction of residential house and the assessee, therefore, was not entitled for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against value determined and certified Registered Valuer for the purpose of computing long term capital gain by appellant. 20. Ground No.1 raised by the assessee in this appeal is general in nature while Ground No.5 raised by the assessee is not pressed and argued by the learned Counsel for the assessee at the time of hearing. 21. As regards the issue raised in Ground No.2 relating to the cost of acquisition of the immovable property sold as claimed by the assessee at ₹ 250/- per sq. yard being the fair market value as on 01.04.1981, it is observed that the same is similar to the one involved in Ground No.2 of the appeal of the assessee Shri Rajendrabhai Laxmanbhai Makwana, one of the co-owners of the same property, in ITA No.3270/Ahd/2016, which has already been decided by us in the foregoing portion of this order. Since the material facts relating to this issue as involved in the case of Shri Subodhbhai Laxmanbhai Makwana are similar to the case of Shri Rajendrabhai Laxmanbhai Makwana, we follow our conclusion drawn in the case of Shri Rajendrabhai Laxmanbhai Makwana and direct the Assessing Officer to adopt the rate of ₹ 250/- per sq. yard as the cost of acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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