SAVITHRI SUNDARAM,CHENNAI vs. ITO, CHENNAI

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ITA 1986/CHNY/2016Status: DisposedITAT Chennai31 January 2017AY 2010-20118 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal partially allowed the appeal concerning grounds 2 and 3. It held that the AO's adoption of Rs. 11.45 per sq.ft. based on guideline values was not necessarily the fair market value (FMV). The Registered Valuer's valuation of Rs. 54 per sq.ft. was also an estimate. In the absence of definitive proof for either, the Tribunal considered the average of the estimated guideline value and the Registered Valuer's estimate to be reasonable. It directed the AO to adopt Rs. 35 per sq.ft. as the FMV as on 01.04.1981 for re-computing capital gains, citing the jurisdictional High Court's decision in Shri J. Chelladurai. For ground 4, the Tribunal dismissed the appeal. It found that the Registered Valuer had valued the entire superstructure, implying the cost of construction was included. Allowing additional deduction for construction cost would amount to double deduction, as the AO had duly considered the building's value as per the valuation report. No separate deduction for additional construction cost was allowed.

What were the facts?

The assessee, Ms. Savitri Sundaram, filed an appeal against the order of the Commissioner of Income Tax (Appeals)-2, Chennai, for Assessment Year 2010-11. The dispute pertains to the computation of long-term capital gains arising from the sale of a property co-owned by the assessee. The property, measuring 5954 sq.ft., was sold for Rs. 6.00 crores on September 12, 2009. The assessee claimed the fair market value (FMV) of the land as on April 1, 1981, at Rs. 54 per sq.ft. based on a valuer's report. The Assessing Officer (AO) referred the valuation to the Sub-Registrar, who provided guideline values. The AO adopted an average of these guideline values, resulting in an FMV of Rs. 11.45 per sq.ft. The assessee also claimed a deduction for additional construction cost incurred in FY 1991-92, which was rejected by the AO and CIT(A).

What were the issues?

1. Whether the Tribunal had to decide on the correctness of the Commissioner of Income Tax (Appeals)'s order dated 24.03.2016, which was challenged by the assessee as contrary to law, facts, and circumstances. 2. Whether the CIT(Appeals) erred in sustaining the computation of long-term capital gains by the Assessing Officer without proper justification, specifically concerning the valuation of land as on 01.04.1981. 3. Whether the CIT(Appeals) erred in confirming the value of the land at Rs. 11.45 per sq.ft. as against the valuer's report of Rs. 54 per sq.ft., considering the assessee's 25% co-ownership and the argument that guideline value is not the sole factor for FMV. 4. Whether the CIT(Appeals) erroneously held that the AO considered the whole value of the building, despite the valuation report only covering the building as on 01.04.1981 and not subsequent additions, and whether the assessee was eligible for deduction of 1/4th of the cost of construction for additions made in 1991-92 with indexation. Assessee's Arguments: - The AO erred in adopting the average of guideline values instead of the Registered Valuer's report for FMV. Guideline value is not FMV. Relied on [2013] 30 taxmann.com 130 (Cochin-Trib) in Shri R. Vidhyadharan v. DCIT and CIT v. J. Chelladurai [2012] 17 taxmann.com 73 (Mad). - The assessee incurred additional construction cost in 1991-92 and should be allowed the indexed cost for her 1/4 share. Revenue's Arguments: - The AO correctly computed capital gains based on guideline values. - The additional cost of construction was already considered by the Registered Valuer, and allowing it separately would amount to double allowance.

Which sections of the Income-tax Act were involved?

Section 54,Section 54EC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘Cc’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH

Hearing: 03.01.2017Pronounced: 31.01.2017

Assessment Order. Both are the estimated values, but not on the basis of any actual transaction. In the circumstance, we hold that the average of the estimated guideline value and the fair market value (as valued by the Registered Valuer) appears to be reasonable and justified and both the parties have agreed for such estimation. Accordingly, we hold that Rs.35/- per sq.ft. is reasonable estimate for valuing the land of 5954 sq.ft. This view also supported by Hon’ble Jurisdictional High Court order in the case of Shri J. Chelladurai cited supra. Accordingly, we direct the Assessing Officer to adopt the rate of Rs.35/- per sq.ft as on 01.04.1981 as FMV and re-compute the capital gains. The appeal of the assessee in ground Nos. 2 & 3 are partly allowed.

I.T.A. No.1986/Mds/2016 :-6-:

7.0 Ground No.4 is related to the additional cost of construction of Rs.2,67,888/- for 576 sq.ft. carried out in the F.Y. 1981-82. The assessee claimed 1/4th of the additional cost of construction. For construction of 576 sq.ft. in 1991-92, the assessee’s share 1/4th being worked out to Rs.66,972/-. The Assessing Officer rejected the claim of the assessee for non-submission of the documentary evidence. The Ld. CIT(Appeals) confirmed the order of the Assessing Officer. The CIT (Appeals) observed that in the absence of bills and vouchers, it is not possible to accept the entries made in the Books of Accounts submitted by the assessee.

8.0 Aggrieved by the order of the Ld. CIT(Appeals), the assessee appealed before us.

Appearing for the assessee, the Ld. AR argued that the assessee has incurred additional cost of construction of Rs.2,67,888/- for construction of 576 sq.ft. in 1991 and the assessee should be allowed the indexed cost of construction for her 1/4th share from the FY 1991-92. In support of the assessee’s claim, the Ld.AR produced the note book containing the details of cost of construction and building plan approvals which were produced before the Assessing Officer and pleaded to allow the additional cost of construction.

I.T.A. No.1986/Mds/2016 :-7-:

9.0 On the other hand, the Ld. DR argued that the Assessing Officer has allowed the cost of construction as per the Valuation Report produced by the assessee in the Assessment Order and hence no further additional cost of construction required to be allowed. According to the Ld.DR, the additional cost of construction was already considered by the Registered Valuer while valuing the property and allowing the additional cost of construction separately tantamount to double allowance of same expenditure. Therefore, the Ld.DR vehemently opposed the contentions of the representative of the assessee.

10.0 We heard the rival submissions and perused the material placed on record.

The assessee has submitted the Valuation Report from Shri P.S.H.Y.

Raju, a Registered Valuer, who has valued the entire super structure of the building at Rs.6,02,135/-. No separate valuation was made by the Registered Valuer from whom the assessee has submitted Valuation Report. Therefore, it was implied that the cost of construction of the building was included in the valuation made by the Valuer. Any further allowance amounts to double deduction of the same amount. The Assessing Officer duly considered the value of the building as per Valuation Report also. Therefore, we are of the considered opinion that no separate deduction needs to be allowed on account of additional cost of I.T.A. No.1986/Mds/2016 :-8-: construction relating to 576 sq.ft. claimed by the assessee. Accordingly, this ground of the appeal is dismissed.

11.0 In the result, the appeal of the assessee is partly allowed.

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