Income Tax Appellate Tribunal - Mumbai
Ajit India ( Madras) P. Ltd, Mumbai vs Assessee on 20 August, 2014
ुं ई यायपीठ "ए" मब
आयकर अपील य अ धकरण, मब ुं ई
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM)
सव ी बी.आर.बा करन, लेखा सद य एवं ववेक वमा, या यक सद य के सम
आयकर अपील सं./I.T.A. No.1209/Mum/2012
( नधारण वष / Assessment Year : 2001-02)
Ajit India (Madras)P. Ltd. बनाम/ Income Tax Officer 6(1)(2),
Atur House, 1st Floor, Vs. Aayakar Bhavan, M K Road,
87, Dr.A B Road, Churchgate
Worli Naka, Mumbai-400020.
Mumbai-400018
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAACA8776E
अपीलाथ ओर से / Appellant by : Shri Mohsin H Contractor
यथ क ओर से/Respondent by : Shri Pitambar Das
सन
ु वाई क तार ख / Date of Hearing : 6.8.2014
घोषणा क तार ख /Date of Pronouncement : 20.8.2014
आदे श / O R D E R
Per B.R.BASKARAN, Accountant Member:
The appeal filed by the assessee is directed against the order dated 07.10.2010 passed by Ld CIT(A)-14, Mumbai and it relates to the assessment year 2001-02.
2. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the amount of the fair market value as on 1.4.1981 determined by the AO for the purpose of computing the Capital gains.
3. The facts relating to the issue cited above are stated in brief. The assessee was allotted a piece of land admeasuring 0.50 acres in an Industrial Estate located in Chennai by Tamilnadu Small Industries Development 2 I.T.A. No.1209/Mum/2012 Corporation Ltd in the year 1979 at a cost of Rs.27,500/-. The assessee obtained assignment of land by paying 50% of the cost on 23.02.1979. During the year under consideration, the assessee sold the above said industrial land for a sum of Rs.1.55 crores. While computing the Capital gain, the assessee adopted the fair market value as on 1.4.1981 at Rs.25.00 lakhs. The assessee claimed that it had spent money on improvement of the land also. However, it did not furnish any document to substantiate the said claim. The AO made enquiries with the Tamilnadu Small Industries Development Corporation Ltd to ascertain the market value as on 1.4.1981. The above said Company wrote a letter dated 04.03.2004 to the AO, wherein it stated that the land cost at Industrial Estate, Guindy for the year 1981-82 was Rs.1.35 lakhs per acre. Accordingly, the AO adopted the fair market value of the impugned property at Rs.67,500/- as on 1.4.1981 and accordingly computed the Capital gain. The order of the AO was confirmed by Ld CIT(A). However, in the appeal filed before the ITAT, the Tribunal expressed the view that the AO should have referred the matter of valuation to the DVO for ascertaining the fair market value. Accordingly, the Tribunal set aside the matter to the file of the AO for examining the issue afresh.
4. In the set aside proceedings, the AO referred the matter of valuation to the DVO, who determined the fair market value at Rs.44,000/-. Accordingly, the AO recomputed the Capital gain by adopting the fair market value as on 1.4.1981 at Rs.44,000/-. The Ld CIT(A) confirmed the same and hence the assessee has filed this appeal before us.
3 I.T.A. No.1209/Mum/2012
5. The Ld Counsel appearing on behalf of the assessee submitted that the DVO has determined the fair market value without duly considering the various materials placed before him and also without considering the submissions made before him. The Ld A.R submitted that the assessee had obtained a valuation certificate from a registered valuer, who had determined the fair market value of the impugned property as on 1.4.1981 at Rs.21,60,000/-. He submitted that the Registered Valuer has considered the nature of the land, its advantages, the Guide line Value fixed by the State Government for collecting Stamp duty etc. and accordingly determined the fair market value. He further submitted that the DVO, on the contrary, did not furnish any basis for determining the fair market value as on 1.4.1981 at Rs.44,000/-. He submitted that the Guide Line Value fixed by the State Government for the purpose of collecting stamp duty was Rs.1,20,000/- per cent as on 1.4.1981. He further submitted that the prevailing market value of the impugned property was more than the above said amount. He further submitted that the assessee has carried out improvement in the land by way leveling, forming approach road, making drainage and water supply arrangements, installation of electricity polls and construction of compound wall. He submitted that the DVO did not take into account the improvements made by the assessee. Accordingly, the Ld A.R submitted that the value determined by the Registered Valuer be adopted as the fair market value as on 1.4.1981.
6. On the contrary, the Ld D.R submitted that the assessing officer has adopted the value determined by the DVO and the DVO has determined the fair market value as on 1.4.1981 at Rs.44,000/- by conducting inspection of the property and making necessary enquiries. He further submitted that the DVO 4 I.T.A. No.1209/Mum/2012 has also considered the objections of the assessee. Accordingly, the Ld D.R contended that the Ld CIT(A) was justified in confirming the assessment order, wherein the value determined by the DVO has been adopted.
7. We have heard the rival contentions and perused the record. There is no dispute with regard to the fact that the assessee had purchased the impugned land prior to 1.4.1981 and hence it is entitled to adopt the fair market value as on 1.4.1981 (hereinafter "FMV") as its cost for the purpose of computing Capital Gains. In the original assessment proceedings, the AO had adopted the FMV at Rs.67,500/-. However, in the impugned set aside proceedings, the AO adopted the rate of Rs.44,000/- determined by the DVO. However, a perusal of the report given by the DVO would show that the said report is very much bald without giving any basis or authority. For the sake of convenience, we extract below relevant observations made by the DVO in his report:-
".....The property was inspected by the then District Valuation Officer on 10.3.2008 & 15.5.2008 and inspected by me on 3-9-2009 market enquiries were made on various dates.
Whereas a Preliminary Order was issued to M/s Ajit India (Madras) Pvt Ltd, Hamid Buildings, No.191, Mount Road, Chennai 600 006 vide F No. DVO/MDS/CG(27)/2008-09 dated 9.6.2009, assessee by the then District Valuation Officer's proposal to estimate the fair market value of the property at Rs.44,000/- (Rupees Forty four thousand only) as on 01-04- 1981 in respect of the above property.
The assessee has submitted his objection vide letter No. Nil dated 7.7.2009 for the preliminary order issued by this office.
Having considered the objections and evidences produced by the assessee and taking into account all relevant materials gathered by me, the fair market value of the property at Plot No.45 (NP), SIDCO developed Plot Estate, Guindy, Chennai - 32, Mambalam, Guindy Taluk, Adayar Village at Rs.44,000/- as on 1.4.1981 as per Annexure 'A' enclosed.5 I.T.A. No.1209/Mum/2012
ANNEXURE Property:- Situated at Plot No.45, Guindy Industrial Estate, Chennai.
Assessee : M/s Ajit India (Madras) Pvt Ltd, Hamid Buildings, No.191, Mount Road, Chennai 600 006.
Land cost of 21780 Sq. ft. @ Rs. 2/Sq.ft. = Rs.43,560/-
Say Rs.44,000/-"
It is pertinent to note that the SIDCO, which developed the industrial estate, itself has written to the assessing officer, vide its letter dated 04-03-2004, that the land cost for the year 1981-82 was Rs.1.35 lakhs (i.e. Rs.67,500/- for the impugned land). Hence the market value of Rs.44,000/- determined by the DVO is liable to be rejected, since the DVO has failed to give any basis and further the said value is very much lower than the value adopted by the AO in the original assessment proceedings, that too on the basis of letter given by SIDCO.
8. The plots developed by SIDCO has been allotted to the assessee and it is in the common knowledge that the plots allotted under Government Schemes enjoy higher market value, since the price of such kind of plots are fixed at a lower rate to achieve the Government's objectives. This fact is very much evident when we consider the "Guide Line Value" fixed by the State Government for the purpose of collecting stamp duty under the Registration Act. The assessee has written a letter dated 01-11-2004 to the concerned Sub Registrar seeking the amount of Guide line value fixed for the impugned property. The Sub-Registrar has certified that the Guide Line Value as on 1.4.1981 for the impugned property was Rs.1,20,000/- per ground. One ground consists of 2400 Sq. Ft. The impugned property is having an extent of 21780 Sq. Ft. Hence the Guide Line Value of the impugned property is Rs.1,20,000 x 21780/ 2400 = Rs.10,89,000/-.
6 I.T.A. No.1209/Mum/2012
9. There should not be any dispute that the fair market value has to be determined by considering various factors. To put it in simple terms, the Fair market Value is nothing but a price that may be agreed between a willing purchaser and a willing seller. The fair market value is not a constant figure. It may differ depending upon the circumstances and factors which are necessarily to be considered. It is well settled principles of law that the fair market value would depend upon various factors such as location of the property, extent of the property, infrastructures available around the locality, access to the infrastructure from the land in question, the guideline value fixed by the government for sale of the property, commercial importance, etc.
10. In this case, the assessing officer has simply adopted the value determined by the DVO. We have already noticed that the report given by the DVO is liable to be rejected. On the contrary, we have seen that the Guide line value as on 1.4.1981 fixed by the State Government for the impugned plot was Rs.10,89,000/-. The other factors such as available infrastructure, access to the infrastructure, commercial importance etc. also need to be taken into consideration. The assessee has also claimed to have carried out certain improvements, which will increase the commercial value of the land. Therefore, this Tribunal is of the considered opinion that the fair market value fixed by the assessing officer at Rs.44,000 is very low. We notice that the Registered Valuer has determined almost the double the amount of Guide Line Value, which also appears to be on the higher side. This Tribunal is of the considered opinion that after taking into consideration the commercial importance of the property and 7 I.T.A. No.1209/Mum/2012 the infrastructures available, the ends of justice would be met if the fair market value of the property as on 1.4.1981 is adopted by increasing the Guide Line value by 25% and the same work out to Rs.13,61,250/- (Rs.10,89,000/- x 1.25). Accordingly, the orders of the lower authorities are set aside and the assessing officer is directed to estimate the fair market value of the impugned property as on 01-04-1981 at Rs.13,61,250/- and compute the capital gain accordingly.
11. In the result, the appeal of the assessee is partly allowed.
The above order was pronounced in the open court on 20th Aug, 2014. घोषणा खल ु े यायालय म दनांकः 20th Aug, 2014 को क गई ।
Sd sd
( ववेक वमा / VIVEK VARMA) (बी.आर.बा करन / B.R. BASKARAN)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मब
ुं ई Mumbai: 20th Aug,2014.
व. न.स./ SRL , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A)- concerned
4. आयकर आयु त / CIT concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मब
ंु ई /
DR, ITAT, Mumbai concerned
6. गाड फाईल / Guard file.
आदे शानस
ु ार/ BY ORDER,
True copy
सहायक पंजीकार (Asstt. Registrar)
आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai