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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N V VASUDEVAN & SHRI INTURI RAMA RAO
O R D E R Per Bench
These are appeals by the 4 different Assessees against four different orders of CIT(A)-7, Bengaluru, dated 22.2.2017, 22.2.2017, 22.8.2016 & 31.5.2017, all relating to AY 2012-13.
All the Assessees in these appeals are co-owners of property situate in S.No.27/1, Lal Bagh Siddhapura Village, Jayanagar 1st Block, Bangalore, measuring 21,832 Sq.ft., hereinafter referred to as “the property”. During the relevant previous year, they sold the property for a sale consideration of Rs.7.25 Crores. The computation of Long term Capital gain on sale of the property is the subject matter of dispute in all these appeals. Though the Assessees have raised several grounds in the grounds of appeal, at the time of hearing, the learned counsel for the Assessees submitted that the only issue that he seeks adjudication by the Tribunal is the determination of Fair Market Value of the property as on 1.4.1981. The undisputed facts are that the property was acquired by Mr. M. Kshetrapal on 12.2.1970, the father of Smt. Soumya Kshetrapal, Smt. Sapna Kshetrapal and Smt. Smitha Raghavendra Kshetrapal (daughters) and husband of Smt.Shobha Kshetrapal.
The computation provisions of Capital gain, in so far as it is relevant for the present appeal, have to be first seen. Sec.45 of the Act lays down that any profit or gain arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head “capital gains” and shall be deemed to be the income of the previous year in which the transfer took place. Sec.48 lays down the manner of computation of capital gain and the relevant portion of the said section for the present case, reads thus:
“Sec.48: The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :— (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto:”
From a reading of Sec.48 of the Act it is clear that from the full value of consideration received on transfer the cost of acquisition of the capital asset and the cost of its improvement are one of the permissible deduction to arrive at the capital gain/loss. The expression “cost of acquisition” has been defined in Sec.55 (2) of the Act. The clause of Sec.55(2) of the Act which is relevant in the present case is clause (b)(i) which reads thus:
“(2) For the purposes of sections 48 and 49, "cost of acquisition",—
(b) in relation to any other capital asset,—
(i) where the capital asset became the property of the assessee before the 1st day of April, 1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset as on the 1st day of April, 1981, at the option of the assessee;
(ii) where the capital asset became the property of the assessee by any of the modes specified in sub-section (1) of section 49, and the capital asset became the property of the previous owner before the 1st day of April, 1981, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee;
It can be seen that clause (b)(ii) of Sec.55(2)(b) would be attracted only when the capital asset became the property of the Assessee by modes specified in Sec.49(1) and the capital asset became the property of the previous owner before the 1st day of April, 1981, that the cost to the previous owner or the FMV as on 1.4.1981 can be adopted by the Assessee.
The Assessees in their respective computation of Long Term Capital Gain (LTCG) opted to adopt the FMV as on 1.4.1981 as the cost of acquisition for computing LTCG. The Assessees adopted Rs.331.34 per sq.ft. as FMV as on 1.4.1981. The Assessees in support of their claim for FMV as on 1.4.1981 relied on two sale instances dated 30.6.1982 and 29.7.1982 in the vicinity of the property of the Assessees which were at Rs.322 per sq.ft., and Rs.128 per Sq.ft.
The AO however obtained details of sale instances at Jayanagar, Sub-Registrar Office and found that Rs.64 per sq.ft as FMV as on 1.4.1981 by relying on the highest of the value out of the 7 sale instances whose details were received from Jayanagar, Sub-Registrar Office. The AO ultimately adopted FMV as on 1.4.1981 at Rs.160/- per sq.ft. as against the claim of the Assessees of FMV as on 1.4.1981 at Rs.331.35/- per sq.ft.
Before CIT(A), the Assessees pointed out that there were sale instances of properties in the vicinity of the Assessees property around 1.4.1981 in which sale value per sq.ft. was Rs.265/- per sq.ft. 322 per sq.ft. and Rs.418 per sq.ft. and those sale instances have been ignored by the AO. The CIT(A) on consideration of the details directed the AO to adopt Rs.245 per sq.ft. as FMV as on 1.4.1981. The following were the conclusions of the CIT(A):
“4.6 The submissions filed by the appellant vide letter dated 28.11.2014, 18.12.2014 and 13.02.2015 along with Annexure, before the AO was closely perused. The details of Form 15 obtained from the office of Sub-Registrar, Jayanagar for the properties registered during the F.Y. 1982-83 was closely perused. Description Date of Sale Book No. FMV per Sq.Ft. of property transaction consideration (Rs.) Year (in Rs.) No.79 30.06.1982 Rs.2,00,000 1143/82-83 322.58 Corp No. 79/7, 20 x 31 House No. 29.07.1982 Rs.5,00,000 1499/82-83 1371.74 138, 27x13.50 ML 31.07.1982 Rs.1,27,500 1517/82-83 265.62 No.126/16 Corp No. 16, 20x24 4.7 The claim of appellant that some of the evidences placed before the AO were not considered in which the comparative figures of FMV were much higher than what is considered by the AO. From the variance of FMV of the same area during the same period clearly shows that there cannot be a definite preposition for calculating the FMV of one particular land in the same vicinity because it all depends upon the location of the land, the area available for construction, its landscaping and the surroundings. In view of the above discussion I am of the opinion that the FMV of Rs.245 per sqft will be just and reasonable. Accordingly appellant gets a relief to that extent and the index cost of the property should be calculated according to the FMV of Rs.245 per sqft as on 01.04.1981.”
Still aggrieved the Assessees are in appeal before the Tribunal praying for a further increase in the FMV as on 1.4.1981. We have seen the three sale instances dated 29.7.1982. showing Rs.418 per sq.ft. and sale instance dated 31.7.1982 showing Rs.265 per sq.ft. and another sale instance dated 30.6.1982 showing sale instance of Rs.322 per sq.ft. From the extract of the details from SRO’s office, it is not possible to identify the property and their nearness and similarity of size, locality etc., to the Assessees’ property. Nevertheless, the valuation of FMV as on 1.4.1981 is always an approximation. There is no valuation report of a registered valuer or DVO to support either claims of the Assessees or the Department. The AO or the CIT(Appeals) have not disputed the fact that the sale instances cited by the assessee do not compare favourably with the assessee’s property in terms of location. They have disputed the value only on the ground that the size of the comparable properties were small. In these circumstances, we are of the view that in interest of justice and fairness and giving the benefit of doubt to the Assessees, it would be appropriate to adopt the FMV as on 1.4.1981 at Rs.300/- per Sq.ft. We hold and direct the AO to adopt the same in computing LTCG.
The other issue with regard to levy of interest u/s.234B and C of the Act, is consequential. Charging of interest is mandatory and if at all the Assessees have grievance in this regard, it is for them to approach the relevant administrative machinery for waiver of interest. The judicial ruling cited by the learned DR are in the context of exercise of discretion by the administrative authorities and therefore they are not being discussed.
In the result, appeals by the Assessees are partly allowed.
Pronounced in the open court on this 25th day of October, 2017.