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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-16, Chennai, in dated 28.03.2017. The assessment was framed by the Income Tax Officer (International Taxation),
Coimbatore for the assessment year 2014-15 u/s.143(1) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 29.12.2016.
2. The two interconnected issues raised by assessee against the order of CIT(A) confirming the action of AO in computing sale consideration in view of section 50C of the Act at Rs.15,14,13,000/- and computed as per circle rates as against the sale value declared in the sale deed at Rs.12,00,00,000/- for the purpose of computation of long term capital gain. The second interconnected issue for the computation of long term capital gain, the fair market value as on 01.04.1981 is to be determined. For this, assessee has raised various grounds which are argumentative and exhaustive and hence, need not be reproduced.
Brief facts are that the assessee during the year under consideration sold her property along with other co-owners vide sale deed document Nos.2103/2013 for a total sale consideration of Rs.12 crores. The assessee’s share in this property was 20% and hence, her share was to the tune of Rs.2.40 crores as per the sale deed. The assessee vide her return of income on 19.06.2014 for 2014-15 admitted long term capital gain of Rs.1,75,95,475/- and claimed deduction u/s.54EC of Rs.50 lakhs. The assessee later invested Rs.1.26 crores in SBI capital gain account scheme on 12.07.2014 and filed her revised return of income on 01.05.2014 admitting long term capital gain of Rs.11,46,590/-. During the course of scrutiny assessment proceedings, the AO noticed from the verification of sale deed that valuation of property was determined at Rs.15,14,93,000/- by the Sub-Registrar for registering the property and additional stamp duty was also paid on 13.09.2013. The AO issued show-cause notice dated 11.08.2016 asking as to why the sale consideration in term of section 50C of the Act should not be adopted at Rs.15,14,93,000/- for the purpose of computation of long term capital gain. The assessee submitted a letter dated 18.08.2016 objected to the proposal to adopt the aforesaid value of Rs.15,14,93,000/- and also made a request to refer the property to the DVO to determine the fair market value in term of section 50C(2) of the Act.
The AO referred the property for valuation to the DVO for ascertaining the fair market value in term of section 50C(2) of the Act to determine the long term capital gain. The DVO returned the F.No.DVO/MDS/CG(08)/2016-17 dated 09.09.2016 by observing as under:-
“On perusal of the copy of sale deed details and records of the Registration Authorities, the stamp duty valuation was objected before the first appellate authority under sec.47A(1) of Indian Stamp Duty Act, and accordingly the DRO(Stamps) being the 1st appellate authority has refixed the stamp duty valuation for this subject transaction took place vide Doc. No.2103/2013 of SRO, Coimbatore joint-1. As per the provision of sub section-2 of sec.50C of the IT Act, inserted w.e.f 01.01.2003 by the Finance Act, 2002, "the Assessing Officer can entertain any appeal by the assessee of such value assessed by the stamp duly valuation authority and adopted by the Assessing Officer, only if the value so adopted by the Stamp Valuation Authority has not been disputed in any appeal or revision or no reference has been made before any other authority, Court of High Court". In view of above, the reference of this case to Valuation Cell u/s.50C seems to be invalid in the context of Income Tax Act and hence no action is taken on this reference.”
No reference was made by DVO and AO assessed the long term capital gain based on value adopted by Sub-Registrar at Rs.15,14,93,000/- and consequently assessee’s share of 20%. The assessee before AO raised the objection that it is the purchaser who raised the issue before DRO(Stamps) for charging more stamp duty while registering the sale deed at value of Rs.15,14,93,000/- as against sale consideration recorded in the sale deed at Rs.12,00,00,000/-. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) also confirmed the action of the AO by holding as under:- Thus, DVO has given his finding that stamp duty value so adopted for the property has been disputed in appeal before the appellate authority u/s.47A of the stamp duty Act. Therefore, DVO held that the property referred to him for valuation for the purpose of sec.50C of the Act, the valuation cannot be carried out u/s.50C(2) of the Act. The above findings of the DVO was also communicated to the assessee. The assessee has filed objections the same were duly considered by the AO in the assessment order and finally the assessee's claim that the sale agreement which was made on 03.01.2012 and that the guided value was less as on the date of agreement was also not accepted by the AO on the ground that the sale agreement was not registered and the payment to the seller was made in cash and not through Demand Draft or cheque. I have also considered appellant's submission on the issue during the appeal proceedings and relying on the fact that the sale agreement was not registered and the payment to the seller was made in cash and not through Demand Draft or cheque held that the appellant's ground is not acceptable. Therefore, I confirm the action of the AO to arrive at the market value of the property in view of sec. 50C of the Act at Rs.15,14,93,000/-.The ground of appeal on this issue is therefore dismissed.
Aggrieved, assessee is in appeal before the Tribunal.
Now, before us the ld.counsel for the assessee filed copy of judgment of Hon’ble Madras High Court in the case of Shri J. Nithyanandan vs. ITO in TCA No.959 of 2018, dated 13.10.2020,
wherein the ld.counsel for the assessee referred to the following substantial question of law formulated by Hon’ble High Court:- “1. Whether the adoption of stamp duty value fixed by the DRO (Stamps) on July 2011 at the instance of the purchaser of the immovable property is correct pertaining to the transaction of sale of property in June 2009 for the purpose of levy of capital gains tax in terms of Section 2(47) read with Section 45 read with Section 50C of the Act?
Whether the interpretation of Section 50C of the Act is correct on the factual matrix of the case while overlooking the scope of sub-section (2) to the said section both by the Valuation Cell and the Respondent/the Assessing Officer while adopting the value determined by the DRO (Stamps) in July 2011 as the sale consideration for the property transferred in June 2009 for the purpose of levy of capital gains tax?
3. Whether the stamp duty value/guideline value as on the date of presentation of the sale document for registration is relevant for the provisions of Section 50C of the Act and not the enhanced value determined under the Stamp Duty Laws subsequently?”
The ld.counsel stated that the Hon’ble High Court has categorically held that mere value fixed by DRO(Stamps) at the instance of purchaser will not affect the rights of seller for asking a reference to DVO and hence, re-computation of sale consideration based on higher value fixed by the Sub-Registrar is for the purpose of computing stamp duty is wholly erroneous. For this, Hon’ble High Court held in para 3 as under:- 3. The dispute in the instant case lies in a very narrow compass. The assessee is an individual, practicing as an Advocate and for the Assessment Year under consideration AY 2010-11, the assessee filed his return of income on 01.11.2012, showing the taxable total income of Rs.2,55,67,170/-. The return of income was initially accepted under Section 143(1) of the Act and thereafter, the assessment was reopened by issuance of notice under Section 148 of the Act dated 21.06.2013. The reassessment proceedings were completed by order dated 25.02.2015 and the taxable total income was determined at Rs.3,72,81,755/-. The Assessing Officer recomputed the Long Term Capital Gains pertaining to the sale of property in Zamin Pallavaram Village and adopted the value of the sale consideration at Rs.3,79,90,860/-, based on the valuation report obtained on 19.02.2015, by applying Section 50C of the Act. The correctness of this decision is called in question in the present appeal, raising the above Substantial Questions of Law. The Tribunal missed to note a very important point that the sale consideration received by the assessee as Vendor of the property was at the rate of Rs.400/- per Square feet for the entire extent and the total sale consideration as reflected in the deed of conveyance is Rs.2,80,00,000/-This fact is not in dispute. Further, the Sub Registrar entertained the document for registration, did not accept the value computed at Rs.400/- per square feet for the purpose of calculating the Stamp duty payable under the Indian Stamp Act on the said deed of conveyance, but determined the value of the property at Rs.555/- per Square feet. Unfortunately, the Assessing Officer, while reopening the assessment, took note of this figure namely Rs.555/- per square feet and recomputed the total sale consideration. The re-computation of the total sale consideration based on the higher value fixed by the Sub Registrar is for the purposes of computing Stamp duty is wholly erroneous. It is not the case of the Assessing Officer that the assessee had received the total sale consideration of Rs.3,79,90,860/-. Rather it is not in dispute that the sale consideration received as reflected in the deed of conveyance is only Rs.2,80,00,000/-. Thus, the Assessing Officer committed a serious error and this error stood perpetuated before the Commissioner of Income Tax (Appeals) as well as before the Tribunal.
On the other hand, the ld. Senior DR relied on the provisions of section 50C(2)(b) of the Act. The relevant provision reads as under:-
50C …….. (2)………. (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, He argued that, as contended by ld.counsel for the assessee the property might have been referred by the purchaser / buyer of the property for the purpose of non-payment of stamp duty before the DRO(Stamps) but that is, in term of this provision binding on the assessee also.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that in the present case the reference to DRO (Stamps) was made by the buyer of the property and not the seller in whose hand the long term capital gain is computed. Here the reference never made by the seller to the DRO (Stamps) and hence, the remedy was never availed by the assessee. This issue is settled by the Hon’ble Madras High Court in the case of Shri J. Nithyanandan, supra, wherein the Hon’ble Madras High Court has considered this issue of reference to DRO (Stamps) at the instance of purchaser of the immovable property and held that adopting the value adopted by DRO(Stamps) for computing stamp duty at the instance of purchaser is wholly erroneous.
Hence, the approach of the DVO in the present case before us is not correct and he should have valued the property at once the reference is made to him by the AO. Accordingly, we restore this matter back to the file of the AO and set aside the orders of AO and that of the CIT(A) and direct the AO to refer the matter to DVO for ascertaining the fair market value in term of section 50C of the Act for computing long term capital gain for the above transaction. In term of the above, this issue is remanded back to the file of the AO, accordingly.
Coming to next issue that is, ascertaining the fair market value as on 01.04.1981.
Brief facts are that, the assessee claimed fair market value of the building as on 01.04.1981 @ Rs.300/- per sq.ft., for the total area of 9201 sq.ft. The AO has not agreed with the value adopted by the assessee as on 01.04.1981. He referred the matter to DVO, who valued the property at Rs.63.28/- per sq.ft. The same was adopted by the AO. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the AO. Aggrieved, assessee came in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee made a claim for valuing the property as on 01.04.1981 by taking fair market value of the property at Rs.300/- per sq.ft. The assessee placed his opinion on adopting of PAR 1992 instead of PAR 1976 adopted by the DVO as per his technical opinion. Finally, the assessee requested to adopt value @ Rs.250/- per sq.ft., to arrive at fair market value as on 01.04.1981. This issue is settled by the Karnataka High Court in the case of N.Govindaraju vs. ITO, [2015] 377 ITR 243, wherein the Hon’ble High Court raised substantial question and then laid down that once the assessee provides reason for determining fair market value of the property by producing relevant material including the valuation report of the Registrar, Vellore, the value so adopted cannot be rejected. Even the fair market value means the price that the capital asset would ordinarily fetch in the open market on sale. It means that higher value should be adopted as done by assessee in the present case. The Hon’ble Karnataka High court considered this issue as under:- “Question 3 relates to the evaluation of the ‘fair market value’ of the property in question as on 1.4.1981. From the record it is borne out that the assessee had claimed the value of the property at the rate of Rs.261/- per sq. ft. but had submitted the valuation report of a registered valuer at Rs.225/- per sq. ft. as on 1.4.1981. However, the same was assessed by the Assessing Officer at the rate of Rs. 84/- per sq. feet and confirmed so by the Tribunal.
Section 48 of the Act deals with the ‘Mode of Computation’ of income chargeable under ‘Capital gains’ and in that context ‘full value of the consideration’ would mean the consideration or price received as a result of the transfer of a capital asset. It is different from ‘fair market value’ of the property, which phrase is used in section 45(2) [relating to capital gains] and section 55(2)(b) [relating to cost of acquisition].
Section 45 of the Act provides for how profit or gain arising from transfer of capital asset is to be charged to income tax as ‘Capital gains’. Sub- section (2) provides that the ‘fair market value’ of the asset would be deemed to be the ‘full value of the consideration’ on the relevant date.
Section 55(2)(b) of the Act provides that ‘cost of acquisition’ of a capital asset, where the capital asset became the property of the assessee before 1.4.1981, would mean the actual cost of acquisition to the assessee or the ‘fair market value’ of the asset as on 1.4.1981, at the option of the assessee. ‘Fair Market Value’ has been defined under subsection (22-B) of section 2 of the Act to be the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date. ‘Full value of the consideration’ has not been defined.
The legislature has expressly drawn a distinction between the two phrases: ‘full value of the consideration’ and ‘fair market value’. The former would be the price received on transfer of a capital asset and the latter would be the price that a capital asset would ordinarily fetch on sale in open market on the relevant date (i.e. 1.4.1981 in the case at hand).
In the present case, the assessee had provided the reasons for determining Rs.225/- per sq. ft. as the fair market value of the property by producing the relevant material, including valuation report of a registered valuer, which all have been ignored while arriving at the price of Rs.84/- per sq. ft. The Assessing Officer assessed the value of the property as on 1.4.1981 on the basis of sale deeds of some nearby properties registered for such price in the year 1981 and thus, arrived at that figure. In our opinion, the same cannot be the proper mode of arriving at the ‘fair market value’ of the property in question as on 1.4.1981, for the purpose of determining ‘Capital gains’ under the Act.
In a recent case of Smt Krishna Bajaj Vs ACIT – 2014(41) Taxman.com 445 (Kar) the question for consideration before this Court was “Whether the authorities were justified in relying on either the guideline value for the purpose of stamp duty and registration charges, or the value adopted under the Wealth Tax Act, for determining the fair market value under the Income Tax Act, 1961”. After considering the facts, this Court has held that “in determining the fair market value under the Act, neither the guideline value prescribed for the purpose of stamp duty and registration under the Karnataka Stamp Act and the Indian Registration Act nor the net wealth value arrived at under the 32 provisions of the Wealth Tax Act, cannot be the guiding factor. The market value of the property is certainly far more than the guideline value.”
In the said case of Smt Krishna Bajaj (supra) the assessee had not provided the valuation report to substantiate the valuation of the property, and in such context it was held that “merely because it was not produced, no adverse inference could be drawn. Even in the absence of production of such report, a duty was cast on the authorities to assess the fair market value independent of the evidence adduced by the assessee. Instead of calling for particulars from the Sub-Registrar’s office about the guideline value, the Assessing Officer himself could have referred the matter to the valuator to get the valuation done under Section 53-A of the Act, which he has not resorted to. …”. In the present case at hand, the valuation report of the registered valuer, valuing the property in question as on 1.4.1981, was filed which, in our opinion, has wrongly been ignored by the Assessing Officer.
In such view of the matter, we are of the opinion that the Tribunal was not justified in arriving at the fair market value of the property in question as on 1.4.1981 without taking into consideration the material 33 on record, including the valuation report filed by the assessee. The matter thus requires to be remanded to the Assessing Officer for determination of the fair market value of the property in question in accordance with law and in the light of the observations made hereinabove.”
Respectfully following the decision of Hon’ble Karnataka High Court in the case of N. Govindaraju, supra, we set aside this issue to the file of AO for re-deciding.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 27th September, 2022 at Chennai.