MOHAMED NAYEEM,CHENNAI vs. ITO, NON CORP WARD 7(4), CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER :

The assessee filed this appeal against the order of Commissioner

of Income Tax (Appeals)-7, Chennai in ITA No. 8/CIT(A)-7/2016-17

dated 31.10.2018 for assessment year 2013-14.

:-2-: ITA No. 213/Chny/2019

that the assessee was suffering from viral fever, unable to attend to the

office and in view of that there was one day delay in filing the appeal,

which is neither wilful or wanton and prayed to condone the one day delay

of filing the appeal.

practitioner, admitted, inter alia, short term capital gains in his return of

income. The AO found that the assessee, jointly with his wife, purchased

a flat from Tamil Nadu Housing Board for Rs. 24,85,200/- vide document

dated 18.12.2010,. It was sold on 21.06.2012 for a consideration of Rs.

43 lakhs. However, the registration department valued the property at Rs.

50,40,000/-. Adopting the registered value of the property as the sale

consideration u/s. 50C, the Assessing Officer computed the capital gains.

The assessee claimed interest paid on the capital asset as the cost of the

asset. The AO refused to allow the same for the want of the evidences.

Aggrieved, the assessee filed an appeal before the CIT(A), wherein the

assessee, inter alia, claimed that he is co-owner of the property, the value

of the property has to be referred to the departmental valuer u/s. 50C,

certain cost of improvement made on the flats are to be considered, etc.

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The Ld. CIT(A) on due examination held, inter alia, that there is no clear

demarcation regarding the specific contribution of the assessee’s wife out

of her own sources, and no corroborative evidences such as return of

income etc have been furnished towards the claim. Therefore, the Ld.

CIT(A) upheld the stand taken by the AO that the property has to be

assessed in the assessee’s hand only. During the course of appeal, the

property was referred to the DVO and the DVO furnished the valuation

report. The Ld. CIT(A) found that the DVO valued the fair market value of

the property at Rs. 47,28,600/- to which the assessee had no objection

before the DVO. Therefore, the Ld. CIT(A) held that since the assessee

has agreed to the fair market value adopted by the DVO, it has to be

adopted as the sale consideration. Before the Ld. CIT(A), the assessee

pleaded that the difference between sale consideration specified in the

documents at Rs. 43 lakhs and the fair market value determined by the

DVO at Rs. 47,28,600/- being very small, pleaded that the sale

consideration received by the assessee is to be taken for the purpose of

computation of capital gains. The Ld. CIT(A) held that the DVO report is

self-speaking and the valuation made by the DVO was accepted by the

assessee. Therefore, the assessee’s plea is without basis and hence

directed the AO to adopt the fair market value of the property at Rs.

47,28,600/- as fixed by the DVO. With regard to the issue of the interest

paid on the capital asset forming part of the cost of capital asset, after

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going through the interest certificate furnished by the Allahabad Bank and

the return copy of the assessee for the last several years, the Ld. CIT(A)

held that the assessee has not been claiming interest paid on the housing

loan. Therefore, she held that there is no reason to deny the benefit of

interest claim and accordingly allowed the appeal on this issue. Aggrieved

against that order, the assessee filed this appeal.

our attention to the concise grounds of appeal submitted that the assessee

is a co-owner of the property, however, the capital gain on the entire

property was assessed in the hands of the assessee. The Ld. CIT(A) erred

in sustaining such action of the Assessing Officer. The Ld. AR submitted

that the Ld. CIT(A) erred in mechanically adopting the fair market value

determined by the DVO without assigning proper reason and justification

and failed to appreciate the fact that the difference between actual value

and the DVO value is less than 10%. Therefore, the value shown by the

assessee should have been accepted. The AR further submitted that the

Ld. CIT(A) having found that the assessee purchased the flat availing

housing loan, paid the interest on such loan from the date of purchase to

sale but he has not claimed such interest again the rental income admitted

in the income returns of earlier years etc., erred in partly allowing the

interest expenditure for the assessment year 2013-14 alone as a

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deduction, instead of directing the AO to allow the entire interest at Rs.

3,62,367/-. Therefore, he pleaded that the assessee’s appeal to be

allowed. Per contra, the Ld DR submitted that the assessee filed his

return of income admitting the capital gains in his hands. Although, he

has taken the plea that the property is of joint ownership, he has not

furnished any evidence that his wife had her own sources of income out of

which the impugned property was purchased and no corroborative

evidences such as returns of income etc have been furnished. Therefore,

the assessee’s plea for the joint ownership has been correctly rejected by

the lower authorities and hence, the Ld. DR supported the orders of the

lower authorities. Before the Ld. CIT(A), the assessee sought a reference

to the DVO for fixing the fair market value of the property. On a

reference, the DVO after giving due opportunity to the assessee, fixed the

value at Rs. 47,28,600/-, which has been accepted by the assessee also.

Therefore, the fair market value determined by the DVO shall be taken as

the full value of consideration received as the result of transfer in

accordance with sub section 6 of section 16A r.w. section 50C. Therefore,

the Ld. DR submitted that the orders of the lower authorities be sustained.

With regard to the issue that the interest paid on the capital asset to be

considered as part of cost of the asset, the Ld. DR supported the order of

the Ld. CIT(A).

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material. The assessee admitted the short term capital gains in his return

claiming that he is the owner of the flat purchased from the Tamil Nadu

Housing Board. However, during the assessment and appeal proceedings,

he claimed that he is a co-owner of the property. But, he has not

furnished any evidences before the lower authorities that he is a joint

owner of the property. Therefore, we do not find any reason to interfere

with the orders of the lower authorities. Therefore, the assessee is

correctly treated as owner of the property. As per documents, the flat was

sold for Rs. 43 lakhs. However, the registration authority fixed the value of

the property at Rs. 50,40,000/-. Since, the assessee objected to the

adoption of the value fixed by the registration department, the property

was referred to the DVO. The DVO after giving due opportunity to the

assessee fixed the value at Rs. 47,28,600/-. The assessee has accepted

this value before the DVO also. Therefore, the fair market value

determined by the DVO at Rs. 47,28,600/- is directed by the Ld. CIT(A) to

be adopted as the full value of consideration received as a result of

transfer. This is in accordance with provisions of section 50C r.w.s. 16A of

the Wealth Tax Act. Therefore, we do not find any merit in the

submissions of the assessee. With regard to the assessee’s claim that the

interest paid on the capital asset should form part of the cost of asset

when computing the capital gains, it is clear from the order of the Ld.

:-7-: ITA No. 213/Chny/2019 CIT(A) that the assessee has furnished interest certificate from Allahabad

Bank certifying interest payments and return copies etc for the last several

years. On examination of them, the Ld. CIT(A) has recorded a finding that

the assessee has not claimed interest on the housing loan against the

income from house property. Therefore, the Ld. CIT(A) held that there is

no reason to deny the benefit of the claim of the assessee as the bank

interest certificate indicates payment of interest towards housing loan.

On such facts and circumstances, we are of the view that the assessee’s

interest claim for the entire loan period claimed at Rs. 3,62,367/- must

form part of the cost of asset, subject to verification of the quantum of

interest actually paid. Therefore, this issue is remitted back to the AO for

due examination and for due re-computation of capital gains accordingly.

This ground is allowed.

Order pronounced on 06th January, 2021 at Chennai.

Sd/- Sd/- (वी दुगा� राव) (एस जयरामन) (S. JAYARAMAN) (V. DURGA RAO) लेखासद�य/Accountant Member �या�यकसद�य/Judicial Member

चे�नई/Chennai, 1दनांक/Dated: 06th January, 2021 JPV

:-8-: ITA No. 213/Chny/2019 आदेशक*&�त3ल4पअ5े4षत/Copy to: 1. अपीलाथ)/Appellant 2. &'यथ)/Respondent 3. आयकरआयु6त ) अपील(/CIT(A) 4. आयकरआयु6त/CIT 5. 4वभागीय&�त�न�ध/DR 6. गाड�फाईल/GF