9911796707
TMI Blog2022 (4) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... rned 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 Rs. 3,74,560/-. During the year under consideration, the assessee along with his two brothers namely Shri Yogeshbhai Laxmanbhai Makwana and Shri Subodhbhai Laxmanbhai Makwana had sold an immovable property situated at Saijpura, Naroda, Ahmedabad jointly owned by them to M/s. Shanti Infra Developers, a partnership firm, for a total consideration of Rs. 5,04,43,000/-. The said property comprising of 5327 sq. yards of non-agricultural land bearing final plot No.44 and Krishna Colony plot of 627 sq. yards along with the construction was acquired by the assessee and his brothers by way of inheritance after the death of their father late Shri Laxmanbhai Panchabhai Makwana on 21.06.1986. In the return of income filed for the year under consideration, his 1/3rd share in the Long Term Capital Gain arising from the sale of the said property was declared by the assessee at Rs. 42,55,172/- and after claiming exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction 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 Rs. 80/- per sq. yard rejecting the index cost of construction claimed by the assessee. The contents of the said letter issued by the Assessing Officer to the assessee were as under:- "Please refer to the assessment proceedings pending in your case and hearing took place on various dates and furnished certain details by you 2. On verification of the details furnished, it is noticed that you have shown Long Term Capital gain of Rs. 1,70,304/- after claiming exemption U/s 54B/54D/54G etc. of Rs. 40,84,8698/- on sale of final plat No.44 of TP scheme No.47, Saijpur, Naroda, Ahmedobod admeasuring 5954 sq. yard for a consideration of Rs. 5,04,43,000/- by you and 3 others. On verifying the Long term Capital Gain working it is noticed that you have worked out capital gain on the Long Term Capital Gain dividing the property in three parts as under Area of land Area of land after allotment of Final TP No.47 Value of Land (Residential) 2796 2796 Value of Land (Krishna Colony) 627 627 Value of Land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain 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 residential house. But in your case the residential house were not transferred only the land have been transferred as evidence from the condition No.6 of your Banakhat and as per (parishist in Gujarati) of sale specified in the sale deed dated 09/09/2011 as such capital gain exemption will be available U/s 54F. 3. In the Long Term Capital Gain working you have shown the value of construction as under:- Description Residential Commercial Total Value Residential Bungalow 427000 427000 Shops, Hall & Worker Room 760500 760500 Worker Room (Krishna Colony) 339200 339200 Open Marginal Shed 277200 277200 Ceramic Factory Shed 96000 96000 Ceramic Furnace #01 300000 300000 Ceramic Furnace #02 100000 100000 Chimney of Ceramic Furnace 50000 50000 Compound Wall 109200 109200 Cost-Brick Flooring 33300 33300 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for year 1980/81.(R. Sur. No:- 977, Moja; Saijpur Bogha) SR.NO 1 2 AMOUNT Rs. 20000 Rs. 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 - - DATE OF REGISTRATION 15/07/1981. 05/12/1961. REGISTRATION NO. 8792 2036 RATE PER SQ.MT/SQ. DS. Rs. 200/- PER SQ.YDS. Rs. 218/- PER SQ.YDS. 5. This office has called for the copy of Sale Deed bearing No.8792 dated 15/07/1981 and Registration No.2036 doted 05/12/1981 from the Sub Registrar Office, City Zone. Ahmedabad vide letter dated 05/03/2015. The Sub Registrar vide fetter dated 12/03/2015 submitted the copy of the above documents which is enclosed herewith. On verification of Copy of Document 8792 dated 15/07/1981 it is noticed that the said document was executed between Okhabhai Jorabhai Rabari (Seller) with Mrs. Mohinibai (purchaser) for a consideration of Rs. 20,000/-. In the sold Deed in the Property Schedule it was mentioned that the sale deed were executed in respect of Plot No.21 (Paiki) admeasuring 1000 sq. yards (Paiki) 250 sq. yards out of S.No.16(Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idenced 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 establish your claim that you have sold residential land and construction, commercial land and construction and open land as claimed in your calculation of Capital Gain and the valuation adopted in respect of the same. In the absence of the above details your transaction will be treated as in respect of Open Land and the valuation of Rs. 80/- sq. yard as per the sale instances document No.8792 doted 15/07/1981 will be taken into the calculation of value of land as on 1/4/1981 and the cost of construction on the land claimed by you will be rejected." 5. In reply to the show-cause notice issued by the Assessing Officer, the following explanation, in detail, was offered by the assessee vide letter dated 19.03.2015:- "In reply to the above mentioned show cause notice, kindly find our clarification regarding the doubts raised on Long Term Capital Gain of Rs. 1,70,304/- after claiming exemption u/s 45B/54D/54G etc. of Rs. 40,84,868 on sale of FP 44 of TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 which was used for residential purpose by us. 4. The construction is an immovable property and cannot be moved away from one land to another land. Sir, it is not possible to sale the land without passing the possession of construction on the land to the Buyer. The Seller has to either demolish the total construction on the land to make the land "Open to Sky " and then sell the land "Open to Sky" to the Buyer OR pass the possession of the construction (Pratyahsh or Paroksh Kabja) to the "Buyer" along with the possession of the land. Sir, in the registered "Banakhat" or registered "Sales Deed" we as a Seller of said property have never declared that we have sold a "Open to Sky Land" nor the Buyer has declared that they have purchased a "Open to Sky" Land from us. Sir, the "Banakhai" and the "Sales Deed" are itself the evidence that we have sold the land with construction on it. 5. Sir, we have never demolish any construction on the subject land and has passed the possession of construction along with the posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other land 10. Sir, the value of land at all location in a particular ward (say, entire Saijpur Bogha Ward) is never the same as lots of factors are affects the value of land. Few factors as per my knowledge and information are listed below: i. Total plot area of land to be sold or purchased ii. Type of land. A Commercial Land is more costly than a Residential Land and a Residential Land is more costly than an Agriculture Land. iii. Locality where the subject land is situated. Whether the land is located in an undeveloped area, developing area or a developed area. Whether the land is located in a slum area, middle class area, upper middle class area or upper class area. iv. Type of existing constructions nearby the subject land. v. Approach Road to the subject land. vi. Level of subject land compared to the level oj she Approach Road. vii. Availability of Parking Space or any other "Open to Sky land" nearby the land. viii. Availability of Garden, Parks, etc nearby the subject land. ix. Facility of Street Light, Drainage and Pure Water available nearby to the subject land. x. Electric Power Supply Line nearby to the subject land. xi. Mode of Transport (Domest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recently sold this lease rights on 09/09/2011 vide registered Sales Deed. Sir, as per the original Lease Deed executed on 03/05/1947, the value for 8470 Sq. Yard Land was decided to be Rs. 42,350/= as agreed on 03/05/1947. If the amount of Rs. 42,350/= was kept in a Saving Bank Account on 03/05/1947 then what would be the accumulated value with interest (considering Rate of Interest @ 4%, as applied for Saving Bank Account, which is exempted from Income Tax) for the period from 03/05/1947 up to 01/04/1981 (for 137 Quarters)..?. If same is calculated by the formula A=P (I+R/100)^n,, then the Amount comes to Rs. 91,28,951/= and "Rate per Sq. Yard" of Rs. 1078/= as on 01/04/1981. Sir, the rate considered by the "Government Approved Valuer" Mr. Kanu Gajjar of Amee Engineers is very low compared to above calculation still we have considered the same as it was worked out by a Government Approved Valuer and in no circumstances same can be further reduced. 13. Sir, Kindly refer to the "Sales Deed" registered at Sr. No. 2036 / 1981 on 27/02/1981. As mentioned in the Sales Deed total 412 Sq. Yard of Land with very old construction (the construction was done in 1966 ay mentioned on the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " with such narrow entrance. As per Government Norms for the construction of any multistory building the plot area should have good approach road with sufficient "Open to Sky" land (for the reason of fire safety purpose and Transportation of Goods & Public Services). The rate of such a mall residential plot in slum area can't be considered for the valuation of our plo5 bid is good indication that if a small residential plot in a slum area with very narrow entrance and without any facility is sold at the rate of 80.00 per Sq. Yard then the value of our commercial cum residential plot is a justified value. Sir, the rate of a commercial cum residential plot is always much higher compared to the residential plot and the value of our plot is correct in all terms and means. 15. Sir, it is clear that the valuation report done and prepared by Shri Kanu P. Gajjar at Amee Engineers, which is based on the detailed of sale instances quoted and interpreted for determining the valuation of the land and construction, is true in all terms and means. 16. Sir, this is a very long term holding and I shall be allowed to claim the benefits of Long Term Capital Gain without any deduction." 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as on 01.04.1981 at Rs. 80/- per sq. yard rejecting the contention of the assessee that the rate of Rs. 250/- per sq. yard was determined by the Registered Valuer on the basis of other factors also. The Assessing Officer thus held that what was sold by the assessee was only the non-agricultural open land of 5954 sq. yards without there being any residential bungalow or commercial property as claimed by the assessee. He accordingly adopted the cost of acquisition of the land so sold by the assessee being the fair market value of the land as on 01.04.1981 calculated by applying rate of Rs. 80/- per sq. yard on the area of 5954 sq. yards and allowed deduction for the same applying the indexation. He rejected the claim of the assessee for deduction on account of cost of construction of bungalow and commercial area by holding that the same was not subject matter of transfer. He also disallowed the claim of the assessee for exemption under Section 54 of the Act by holding that the Long Term Capital Gain had arisen to the assessee from sale of open land and not the residential house as claimed by the assessee, but allowed exemption u/s 54 of the Act on proportionate basis. He accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential Bungalow 4,27,000 B. Shops, Hall and Worker Room 7,60,500 C. Worker Room 3,39,200 D. Ceramic Factory Shed 2,77,200 E. Open Marginal Shed 96,000 F. Ceramic Furnaces 3,00,000 G. Ceramic Furnaces 1,00,000 H. Chimney of Furnaces 50,000 I. Compound Wall 1,09,200 J. Brick Flooring 33,300 TOTAL Rs. 24,92,400 Most of the construction work was made in the F.Y.1979-80 by the father of your appellant and therefore, it is humbly submitted that at the time of valuing the property as on 01-04-1981, the learned assessing officer has to consider the valuation of the above-noted assets which were in existence and in use as on 01-04-1981 for the purpose of arriving at the cost of the captioned property for computing the long term capital gain. It would not be out of place to invite your kind attention to the fact that the assertion arrived at by the learned assessing officer of treating the sale of property as the sale of land only is very much wrong and out of place. Your appellant and his family members have sold land with existing constructions thereon as clearly defined in the Agreement to Sell as well as in the sale deed, itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty. Factually, the said proposed town planning scheme is finalized only 2-3 months back and yet, the excess land to be acquired by government out of 8470 Sq.Yds. is so far not acquired and the same is in full possession of the buyers only. Your appellant just want to convey that your appellant had invested for 8470 Sq.Yds only and on sale of the said property considering the sale value of 5954 Sq.Yds., he looses his all rights from 8470 Sq.Yds. and the total cost of 8470 Sq.Yds. becomes the total cost for 5954 Sq.Yds. and the said cost of 8470 Sq.Yds. alongwith other constructions added thereafter in the year 1979-80 must be considered with indexation for computing the long term capital gain on sale of the whole property. To give an example, presuming that I am holding 1000 shares of a public limited company at the cost of Rs. 10000/-. After five years, the said company made reduction of capital and it allots 100 shares in place of 1000 shares. Here, my cost of each share after reduction of capita! would be Rs. 10,000/- and thereby Rs. 100 per share, since, my investment in the shares of the said company remains Rs. 10000/- only even after reduction of capital, Similarly, my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities from 1994-95 itself, it ceased to be a commercial premises from that year only. We have also enclosed a copy of application for surrender of the respective licence in the name of Krishna Pottery Works. In view of the abovenoted evidences and explanation, we humbly submit that the captioned property was mainly occupied and used as residential premises and therefore, your appellant is very much entitled to claim exemption and deduction u/s.54 and not u/s.54F as wrongly allowed by the learned assessing officer. 4. Ground No.5: "The learned assessing officer has grossly and grievously erred in law and on facts by totally ignoring the provisions of section 55A as amended to be effective from 01/07/2012 and also, he has ignored the date of transaction being 08/09/2011 and thereby, your appellant humbly prays to your honour to accept the valuation as adopted by your appellant for computing Long Term Capital Gains on sale of the property in question." Referring to the para-5.9.14 on page no.26 of the assessment order, the learned assessing officer has himself mentioned that the department has not objected the valuation report done by the registered valuer, your appellant doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration Dist. Ahmedabad, Sub-Dist. Of City Taluka Ahmedabad-6 (Naroda) - duly translated in English (Original being in Gujarati). f) A copy of letter dtd.12/06/2000 of Sr. Supervisor of workshops, Shram Bhavan, Khanpur, Ahmedabad. In respect of closure of manufacturing process in Krishna Pottery Works - duly translated in. English (Original being in Gujarati). 2. Yours honour's kind attention is invited to the copy of sale deed in respect of sale instance mentioned by the Govt. approved valuer and discussed by the learned assessing officer in the assessment order. A copy of the sale deed is enclosed herewith for your kind reference. Analyzing the rate, area and other contents mentioned in the sale deed, it may be noted that the said property was sold in 1981 at Rs. 80/- per Sq.Yds. and the same property was sold in 1946 at Rs. 2 per Sq.Yds. and accordingly, there is an appreciation of 40 times in value of land of that area. As mentioned in our earlier submission dtd.30/07/2016, the property of this sale instance is far away and interior to the main road and main area as shown in the map submitted in the paper book at page no.129. Your appellant has marked the property in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property under consideration i.e. non agricultural land at No. 44 of T.P. Scheme No. 47, Saijpura, Naroda, Ahmedabad measuring 5954 sq. yards was sold by the appellant along with his mother and two brothers to M/s. Shanti Infra Developers for a consideration of Rs. 5,04,43,000/-. The said property had been acquired by the appellant and his family by way of inheritance after death of the appellant's father. It was noted by the AO that out of the total area of 8470 sq. yards, the transaction of sale had been carried out for the area of 5954 sq. yards. Moreover, the appellant worked out the capital gains on transfer of this property by taking the land value of the property at Rs. 250/- per sq. yard on the basis of valuation report of Shri Kanu P. Gajjar dated 06.04.2011. After going through all the submissions made by the appellant and the assessment order wherein the issue as well as the appellant's submission made during the assessment proceedings have been discussed at length, the following points emerge: (i) The appellant vide his letter his letter dated 13.03.2015 made to the AO submitted that the division of the land area was done into three parts based on the valuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. The claim of the appellant in the submission made during appellate proceedings that the said land was sold with construction is negated by the sale deed itself which says that the transaction has been made for open land. Moreover, it is evident from the sale deed and the banakhat that the sale transaction is in respect of an area of 5954 sq. yards and not 8470 sq. yards as claimed by the appellant. Further, the report of the valuer contains factual errors in terms of the area of land and comparison of similar sale instances as has been admitted by him in the statement given to the AO. As such, the same cannot be accepted. It is also seen that the appellant has not given any evidences with respect to the construction claimed to be existing on the property and has merely stated its presence which does not find place in the banakhat. 4.2.3 Considering all these facts, I am of the opinion that the AO has rightly recomputed the capital gains and the addition made by him is therefore confirmed. Further, it is seen that the AO has also granted exemption u/s. 54F to the appellant. Considering these facts, the addition made by the AO is confirmed. Ground of appeal Nos. 1 to 5 are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able instances of sale during the relevant period to arrive at the fair market value of the immovable property at Rs. 250/- per sq. yard. On verification, the Assessing Officer found that there were certain calculation mistakes committed by the Registered Valuer while working out the rate of Rs. 250/- per sq. yard and the same were accepted even by the Registered Valuer himself in the statement recorded on oath. The Assessing Officer accordingly corrected the said mistakes and arrived at a rate of Rs. 80/- per sq. yard which he adopted as the cost of acquisition of the property sold by the assessee being fair market value as on 01.04.1981. At the time of hearing before us, the learned Counsel for the assessee has submitted that the Assessing Officer in the case of one of the brothers of the assessee and co-owners of the property in question Shri Yogeshbhai Laxmanbhai Makwana had accepted the rate of Rs. 250/- per sq. yard as the fair market value of the property as on 01.04.1981. He has submitted that the concerned learned PCIT, however, issued a notice under Section 263 on the basis of proposal received from the Assessing Officer proposing to revise the assessment in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 350/- sq yard & Rs. 400/- sq yard & Rs. 210 sq yard for the different locations, It is viewed that the value adopted by the AO of @ Rs. 250/- was neither less nor more, but reasonable considering location & other factors like proximity distance from Airport Authority, Railway line etc. It has been explained that restrictions are also imposable it plots are very near to Railway line, Airport etc. Thus, it is observed that the working of capital gain based on value of Rs. 250/- Sq. yard by the A.O. was not unreasonable. Hence the order passed by the AO u/s 143(3) of the Act in captioned case was neither erroneous nor prejudicial to interest of Revenue. The proceeding initiated u/s 263 of the Act are hereby dropped." 14. A perusal of the relevant findings/observations recorded by the learned PCIT in the order passed under Section 263 clearly shows that the similar issue was examined by him in the light of the submissions made on behalf of the assessee as well as the fresh valuation report of another Govt. approved Registered Valuer submitted by the assessee. After taking into consideration this relevant documentary evidence, the learned PCIT arrived at a conclusion that the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the purpose of determining the cost of acquisition deductible for the purpose of Long Term Capital Gain. At the time of hearing before us, the learned Counsel for the assessee has reiterated this stand taken on behalf of the assessee before the authorities below which we are unable to accept. As rightly held by the authorities below in this regard, the total area of land having been sold/transferred by the assessee and other co-owners being undisputedly 5954 sq. yards, the cost of acquisition with reference to the land so transferred only can be claimed as deduction. The land reserved for road as well as for Corporation as per the Town Planning Scheme was never the subject matter of transfer and, therefore, the same cannot be considered for the purpose of determining the cost of acquisition for the purpose of computing Long Term Capital Gain arising from the property in question which comprised of plot area of 5954 sq. yards only. At the time of hearing, learned Counsel for the assessee, in reply to a query raised by the Bench, has submitted that the assessee and other co-owners have not received any compensation for the area of land reserved for road and Corporation as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same should have been specified separately. He also found that in the final sale deed dated 09.09.2011 executed in respect of the property in question, nowhere it was mentioned that there was a sale/transfer of residential construction or commercial construction as claimed by the assessee. He noted that in the property schedule, it was clearly mentioned that non-agricultural open land was being transferred. He also found from the photograph of the property shown at page nos. 28 & 29 of the sale deed that there was no residential or commercial construction and it was a clear case of transfer of nonagricultural open land by the assessee to the purchaser. At the time of hearing before us, the learned Counsel for the assessee has relied on the old bills of Municipal Corporation as well as some electricity bills, copies of which are placed in the paper-book, to support and substantiate the case of the assessee that there was a residential bungalow constructed on the property in question sold by the assessee. A perusal of this documentary evidence, however, shows that there is nothing to show that the same were pertaining to the residential bungalow of the assessee or his family. In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been decided by us against the assessee by holding that what was transferred by the assessee was the non-agricultural open land without there being any construction of residential house thereon. Following this conclusion drawn by us, we hold that the assessee is not entitled for exemption under Section 54 of the Act, but he is entitled for exemption under Section 54F as allowed by the authorities below. Ground No.5 of the assessee's appeal is accordingly dismissed. 19. Now we take up the appeal filed by other assessee Shri Subodh Laxmanbhai Makwana being ITA No.1183/Ahd/2017 which is directed against the order of learned CIT(A)-10, Ahmedabad dated 10.02.2017. Grounds raised by the assessee in this appeal read as under:- 1. The Ld. CIT(A) erred on facts and in law in upholding action of Assessing Officer in making addition of Rs. 1,11,64,420/- as long term capital gain. 2. The Ld. CIT(A) erred on facts and in law in upholding action of Assessing Officer in substituting value of property as on 01/04/1981 of his own against value determined and certified by Registered Valuer and adopted for computing long term capital gain by appellant. 3. The Ld. CIT(A) erred on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manbhai Makwana, one of the co-owners of the same property, in ITA No.3270/Ahd/2016, 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 accordingly dismiss Ground No.3 raised by the assessee. 23. As regards the issue involved in Ground No.4 relating to the assessee's claim for deduction under Section 54 on account of investment made in residential house, it is observed that the same is similar to the one involved in Ground No.5 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 hold that the assessee is not entitled fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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