SMT LAKSHMI BALAKRISHNAN,CHENNAI vs. ITO NON CORPORATE WARD 1 (3), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -2, Chennai, dated 26.03.2018 and pertains to assessment year 2013-14.

Shri T. Pramodkumar Chopda, the Ld.counsel for the assessee, submitted that the CIT(Appeals) enhanced the long term capital gain by ₹29,73,480/- and disallowed the index cost of the building. According to the Ld. counsel, the assessee entered into a joint development agreement in respect of property at New No.1, Murugesa Mudali Street and No.18/37, Maharaja Syrya Road, Alwarpet, Chennai-18. According to the Ld. counsel, as on 01.04.1981, the assessee disclosed the fair market value at ₹107/- per sq.ft. However, the Assessing Officer by referring to guideline value of Sub-Registrar, has taken the guideline value at ₹20,000/- per ground. The Ld.counsel clarified that per ground means 2400 sq.ft. The Ld.counsel further submitted that the cost adopted by the Assessing Officer was very high when compared to the location of the building. The Ld.counsel also clarified that there was no comparative sale instance in the nearby area, therefore, the fair market value has to be estimated on the basis of the material available. Placing a copy of the valuation report, the Ld.counsel submitted that this is an additional evidence filed before this Tribunal. In the absence of any further material, according to the Ld. counsel, the valuation report filed by the assessee has to be taken into consideration for estimating the fair market value as on 01.04.1981.

On the contrary, Shri R. Clement Ramesh Kumar, the Ld. Departmental Representative, submitted that the valuation report filed by the assessee does not disclose the correct fair market value as on 01.04.1981. Even in the valuation report, according to the Ld. D.R., the valuer has taken the guideline value and he has worked backward for the purpose of ascertaining the fair market value. Therefore, according to the Ld. D.R., the computation of fair market value by the valuation officer has to be ignored.

We have considered the rival submissions on either side and perused the relevant material available on record. The issue arises for consideration is estimation of fair market value as on 01.04.1981. The fair market value is not a constant figure. It may vary depending on various factors such as area of the land, location of the land, infrastructure facilities available around the land and potential for future development, etc. In this case, neither the Assessing Officer nor the valuation officer has considered the location of the property, infrastructure facilities available around the land, area of the land and potential for future development. This Tribunal is of the considered opinion that guideline value does not reflect the fair market value always. The guideline value is only to guide the Sub-Registrar to determine the fair market value for the purpose of collection of stamp duty. Therefore, the guideline value is also one of the factors to be taken into consideration for the purpose of determination of fair market value as on 01.04.1981.

Apart from guideline value, the Assessing Officer is also expected to take into consideration the locality wherein the subject land is situated, infrastructure facilities available around the land, potential for future development, availability of medical facilities, transport facilities like airport, bus stand and railway station.

The next issue arises for consideration is rent paid by the developer / builder for alternative accommodation.

Shri T. PramodkumarChopda, the Ld.counsel for the assessee, submitted that the rent paid by the builder to the assessee during the period of construction was taken as part and parcel of sale consideration by the Assessing Officer. According to the Ld. counsel, the assessee was residing in his own house and to accommodate the assessee during the course of construction, the builder paid rent to the assessee, therefore, it cannot be taken as sale consideration.

We heard Shri R. Clement Ramesh Kumar, the Ld. Departmental Representative also. Since the main issue regarding determination of fair market value is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that this issue also needs to be reconsidered by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and find out whether the rent paid by the developer / builder to the assessee during the course of construction is part of sale consideration or not and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

The next issue arises for consideration is whether the assessee has transferred only a vacant land or land alongwith building.

This issue also needs to be reconsidered by the Assessing Officer for the sake of consistency. Since the main issue of determination of fair market value is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that this issue also needs to be reconsidered by the Assessing Officer.

In the result, the appeal filed by the assessee is allowed for statistical purposes.