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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 5, Chennai, dated 16.03.2016 and pertains to assessment year 2010-11.
Smt. Pushya Seetharaman, Ld. Sr. Counsel, submitted that the assessee sold a house at door No.31, Model School Road, Thousand Lights, Chennai – 6, for a total consideration of `1,20,000/- on 06.11.2009. The assessee computed the capital loss at `32,000/- after deducting the index cost of acquisition of land at `1,20,08,000/-. However, the Assessing Officer rejected the index cost of acquisition of land as computed by the assessee. The Assessing Officer has taken the guideline value of the land maintained by the State Registration department. According to the Ld. Sr. counsel, guideline value may not reflect the market value. For the purpose of indexation, the market value as on 01.04.1981 has to be estimated. The Assessing Officer has simply adopted the guideline value without estimating the market value. The Assessing Officer has not referred the matter to the valuation officer for valuing the property. The Ld. Sr. counsel further submitted that the assessee has also incurred an expenditure of `2,40,000/- as commission and brokerage for sale of land. This was also not accepted by the Assessing Officer. The Ld. Sr. counsel further submitted that from and out of sale proceeds, the assessee has constructed a residential house at No.7, Mottai Garden, 10th Lane, Old Washermanpet, Chennai-21. However, the claim of exemption under Section 54F of the Income-tax Act, 1961 (in short 'the Act') was not considered.
On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that as per the Annual Information Report, the Assessing Officer came to know that the assessee has sold a property at door No.31, Model School Road, Thousand Lights, Chennai. The assessee claimed before the Assessing Officer that the building was acquired in the year 1972 and the construction was made in the year 1975-76. The assessee estimated the fair market value of the land and building at `19,00,000/- as on 01.04.1981. In the absence of any material before the Assessing Officer, a report was called for from the Sub- Registrar. The Sub-Registrar reported that guideline value as on 01.04.1981 was `15.625 per sq.ft. As per the State PWD rate, the cost of construction of the building comes to `150 per sq.ft.
Therefore, the Assessing Officer estimated the index cost of acquisition at `21,62,425/- and computed the capital gains at `98,37,575/-. Referring to the order of the CIT(Appeals), the Ld. D.R. submitted that market value of the property as on 01.04.1981 cannot be worked out with mathematical accuracy. At the best, it can be estimated. In the absence of any material, according to the Ld. D.R., the CIT(Appeals) has rightly found that guideline value of the State Registration Department and the PWD rate for cost of construction would reflect the fair market value as on 01.04.1981 and accordingly, he confirmed the same.
We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee sold the property and computed capital loss. For the purpose of indexation, the assessee has adopted the value of the land and building at `19,00,000/- as on 01.04.1981.
However, the Assessing Officer computed the same at `21,62,425/- Now, the assessee claims before this Tribunal that the Assessing Officer ought to have referred the matter to the valuation officer for estimating the fair market value as on 01.04.1981. The Assessing Officer adopted the guideline value given by the Sub-Registrar.
This Tribunal is of the considered opinion that the guideline value is only to guide the Sub-Registrar to estimate the market value for the purpose of collecting stamp duty on transfer of the land. The guideline value would not reflect the market value always.
However, the guideline value is one of the factors to be taken into consideration. The market value is not a constant figure. It would fluctuate depending upon various factors, such as the demand for purchase of property, the location of property, area of the property, infrastructure facilities available around, potential for future development, availability of educational institutions, especially around the property, etc. would determine the fair market value of the property as on 01.04.1981. Both the CIT(Appeals) as well as the Assessing Officer has not taken into consideration these factors while determining the cost of acquisition as on 01.04.1981.
Therefore, this Tribunal is of the considered opinion that as rightly submitted by the Ld. Sr. counsel, the matter ought to have been referred to the valuation officer. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter after getting valuation report from the valuation officer. Thereafter, the cost of acquisition has to be estimated as indicated above.
Since the main issue of valuation of property is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that the other issues regarding the payment of commission to the extent of `2,40,000/- and the claim of exemption under Section 54 of the Act also need to be re-examined by the Assessing Officer.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 25th November, 2016 at Chennai.