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Income Tax Appellate Tribunal, ‘A’ BENCH, BENGALURU
Before: SHRI SUNIL KUMAR YADAV & SHRI J.SUDHAKAR REDDYShri P.C.Shivalingaiah,
This appeal is preferred by the assessee against the order of the Commissioner of Income-tax(Appeals)-6, Bengaluru, [CIT(A)] dated 25/08/2016, inter alia raising the following grounds:
During the course of hearing the learned AR of the assessee contended that the Assessing Officer (AO) instead of taking valuation of the land and building as on 01/04/1981, has taken 30% of the value taken by Bangalore Metro Rail Corporation Ltd., (BMRCL), as the cost of acquisition of the Page 3 of 5 property. Learned AR of the assessee further contended that the assessee acquired a property comprising of land and three houses on 19/02/1905 and the AO has taken the cost of land at Rs.550/- as on 01/09/1905 and thereafter indexation was given whereas he should have adopted the value as on 01/04/1981 and the value of land could not have remained same as on 01/04/1981 after 76 years. The consideration was also not properly determined by the AO. Therefore, capital gain shown by the assessee should have been accepted, as the computation was in accordance with provisions of law. But the AO computed long term capital gains [LTCG] at Rs.3,61,94,006/- against LTCG shown by the assessee at Rs.67,64,352/- resulting into an addition of Rs.2,94,29,654/-.
In appeal before the CIT(A), assessee did not find favour from him. Now, the assessee is before us and reiterated its contention.
Having carefully examined the orders of the lower authorities in the light of rival submissions, we find that capital gains accrued to the assessee on acquisition of land and three houses of the assessee by BMRCL. The total compensation received by the assessee for land and three houses acquired by the BMRCL was Rs.4,70,81,266/-. The indexed cost of acquisition claimed by the assessee was of Rs.3,588/- for land and indexed cost of improvement of Rs.3,38,42,308/-. After taking into
Page 4 of 5 account indexed cost of acquisition and indexed cost of improvement, the assessee arrived at LTCG of Rs.1,32,31,782/- and on this capital gains, the assessee claimed deduction at Rs.64,67,43/- u/s 54 of the Income-tax Act,1961 [‘the Act’ for short]. Finally, taxable capital gain computed by the assessee is of Rs.67,64,352/-. The AO asked the assessee to furnish basis of indexed cost of improvement of Rs.3,38,42,308/- but the assessee could not furnish the explanation before the AO. The assessee, however, produced valuation report of the registered valuer of three houses acquired, according to which, total value of three houses was of Rs.58,17,929/-. The assessee claimed the value of cost of improvement at Rs.3,3842,308/- for which no explanation was furnished. Undisputedly, the land and property was constructed before 01/04/1981. Therefore, market value of the land and property should have been estimated as on 01/04/1981. Therefore, after giving indexation, cost of acquisition of asset has to be worked out for the purpose of computing LTCG. But from perusal of the orders of the CIT(A) as well as the AO we find that they have estimated cost of land and cost of building on their own without following the procedure laid down under the Act. The cost of acquisition and improvement as claimed by the assessee and as estimated by the revenue cannot be accepted as it is not in accordance with law. Therefore, we set aside the order of the CIT(A) and restore the matter to the file of the AO with a direction to estimate cost of land as well as building
Page 5 of 5 as on 01/04/1981 and thereafter, after giving indexation, long term capital gain is to be worked out and to allow deduction u/s 54, if any.
In the result, the appeal of the assessee stands allowed for statistical purposes.