ACIT, CHENNAI vs. K.A.FATHIMA, CHENNAI

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ITA 1698/CHNY/2013Status: DisposedITAT Chennai06 September 2016AY 2009-108 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the sole issue was the estimation of the fair market value (FMV) as on 01.04.1981. The Tribunal opined that the guideline value of the Sub-Registrar is only one factor and does not always reflect the market value. The FMV should be determined considering various factors like location, infrastructure, public access, potential for development, and proximity to public institutions. Given that Sarangapani Street, T. Nagar, is a prime area with good infrastructure, the Tribunal found the CIT(Appeals)'s conclusion that the assessee's estimated FMV was reasonable and acceptable to be correct. Regarding the building value, the Tribunal noted that the debris from demolition would have fetched ₹15 lakhs in 1982, and the assessee claimed only 46% of this amount. The Tribunal found this claim to be reasonable and upheld the CIT(Appeals)'s decision. Therefore, the Tribunal found no reason to interfere with the order of the lower authority and confirmed it.

What were the facts?

The Revenue is in appeal against the order of the CIT(Appeals) for Assessment Year 2009-10. The assessee purchased a house property in 1976 for ₹1,67,000. While computing capital gains, the assessee adopted the fair market value (FMV) of the property as on 01.04.1981 at ₹20,62,500, based on a construction agreement dated 23.02.1983. The Assessing Officer (AO) used the guideline value of ₹27,000 per ground as on 01.04.1981. The CIT(Appeals) found the assessee's adopted FMV reasonable, considering comparable properties and the value of building debris. The AO had also noted the building was old and demolished in 1983, suggesting depreciation should be considered. The assessee claimed 46% of ₹15 lakhs for the building value, which the CIT(Appeals) found reasonable.

What were the issues?

1. Whether the Tribunal had to decide the question of law: Whether the CIT(Appeals) erred in accepting the fair market value of the property as on 01.04.1981 adopted by the assessee, when the Assessing Officer had adopted the guideline value? - Assessee's contention: The guideline value is only one factor and may not reflect the actual market value. The CIT(Appeals) correctly considered comparable properties and localities to determine the market value as on 01.04.1981. - Revenue's contention: The CIT(Appeals) erred by comparing the property with those on Cathedral Road and Pantheon Road, which are commercial areas and not comparable to Sarangapani Street, T. Nagar. The guideline value should have been given more weight. 2. Whether the Tribunal had to decide the question of law: Whether the CIT(Appeals) erred in accepting the value of the building as determined by the assessee, without considering depreciation? - Assessee's contention: The value of the building should be determined on the basis of market value, not book value after depreciation. The CIT(Appeals) correctly found the assessee's claim of 46% of ₹15 lakhs (value of debris) to be reasonable. - Revenue's contention: The AO found the building to be 38 years old and demolished in 1983. Depreciation should have been considered, limiting the market value. The assessee did not value the land and building separately.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRIN.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

For Respondent: Dr. Anita Sumanth, Advocate
Hearing: 08.06.2016Pronounced: 06.09.2016

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – VI, Chennai, dated 29.04.2013 and pertains to assessment year 2009-10.

2.

The only issue arises for consideration is computation of capital gain.

3.

Smt. E. Sulochana, the Ld. Departmental Representative, submitted that the only issue arises for consideration is determination fair market value as on 01.04.1981. According to the Ld. D.R., the assessee purchased a house property at Door No.47, Sarangapani Street, T. Nagar, Chennai, for a total consideration of `1,67,000/- on 23.01.1976. While computing the capital gain, the assessee computed the index cost of acquisition at `1,20,03,750/- by adopting the fair market value of the land and building as on 01.04.1981 at `20,62,500/-. According to the Ld. D.R., the assessee was placing reliance on the construction agreement said to be entered into with Shri Gopal Achari on 23.02.1983. The Assessing Officer found that the guideline value of the property as on 01.04.1981 at Sarangapani Street, T. Nagar is only `27,000/- per ground. The Assessing Officer accepted this guideline value for the purpose of computing the fair market value as on 01.04.1981. Accordingly, the Assessing Officer computed the capital gain. However, on appeal by the assessee, the CIT(Appeals) found that the guideline value indicates the value of property at `27,000/- per ground as on 01.04.1981. The CIT(Appeals) found that it was not clear whether the Sub-Registrar office was giving value of the same property in question or of a different property. According to the Ld. D.R., the CIT(Appeals) has also placed reliance on the judgment of Apex Court in respect of properties, which are located at Cathedral Road and Pantheon Road. After observing that Cathedral Road and Pantheon Road are commercial area, the CIT(Appeals) found that the fair market value adopted by the assessee is reasonable.

According to the Ld. D.R., the properties at Cathedral Road and Pantheon Road cannot be compared with the property at Sarangapani Street, T. Nagar. According to the Ld. D.R., for the purpose of comparison, the property has to be situated in the same area, therefore, the comparison made by the CIT(Appeals) is not justified.

4.

Referring to the value of the building, the Ld. Departmental Representative submitted that the Assessing Officer found that the building was 38 years old and it was demolished in 1983.

Therefore, according to the Ld. D.R., after allowing depreciation, the market value will be very limited as compared to the value adopted by the assessee. According to the Ld. D.R., the Assessing Officer has also found that the assessee has not valued the building separately. The assessee also did not accept the value of land and building. However, according to the Ld. D.R., the assessee adopted the market value at `7,50,000/- per ground as on 01.04.1981. The CIT(Appeals), however, found that the remains of the building when demolished would have fetched `15 lakhs in the year 1982 and the assessee has adopted only 46% of `15 lakhs and this was reasonable. Therefore, according to the Ld. D.R., the CIT(Appeals) accepted the fair market value adopted by the assessee as on 01.04.1981. According to the Ld. D.R., the depreciation has to be taken into consideration while valuing the property as on 01.04.1981.

5.

On the contrary, Dr. Anita Sumanth, the Ld.counsel for the assessee, submitted that the Assessing Officer simply adopted the guideline value for the purpose of adopting the fair market value.

According to the Ld. counsel, guideline value is one of the factors to be taken into consideration and the guideline value may not reflect the market value. According to the Ld. counsel, what is required to be determined is the market value of the property and not the guideline value. The guideline value is only to guide the Sub- Registrar to determine the market value for the purpose of collecting stamp duty. The Assessing Officer, according to the Ld. counsel, without making any further investigation, accepted the guideline value as fair market value. According to the Ld. counsel, the CIT(Appeals), after comparing the value of various properties, including the properties at Cathedral Road and Pantheon Road, and civil suits pending in the property, found that nearer and comparable properties and localities have to be taken into consideration for the purpose of valuing the property as on 01.04.1981. Accordingly, the CIT(Appeals) found that the value adopted by the assessee is reasonable, hence, needs to be accepted.

6.

Coming to the value of the building, the Ld.counsel for the assessee submitted that the CIT(Appeals) found that the remains of the building when demolished would have fetched `15 lakhs in the year 1982. When the remains of the building would have fetched `15 lakhs, the Assessing Officer, should take entire `15 lakhs as market value. In fact, according to the Ld. counsel, the assessee is claiming 46% of `15 lakhs, which was found to be reasonable. The value of the building has to be determined on the basis of market value and not after reducing the depreciation. According to the Ld. counsel, what is required to determine is market value as on 01.04.1981 and not the book value.

7.

We have considered the rival submissions on either side and perused the relevant material available on record. The only issue arises for consideration is estimation of fair market value as on 01.04.1981. For the purpose of computing the capital gain, the Assessing Officer disallowed the claim of the assessee on the basis of guideline value of Sub-Registrar. The guideline value of the Sub- Registrar was `27,000/- per ground as on 01.04.1981. The Assessing Officer, adopted the fair market value as on 01.04.1981 at `27,000/- per ground. This Tribunal is of the considered opinion that the Assessing Officer was expected to determine the fair market value as on 01.04.1981. Fair market value is nothing but a price that may be agreed between the willing purchaser and willing seller. Guideline value will not always reflect the market value. The guideline value is only to guide the Sub-Registrar to determine the market value for the purpose of collecting stamp duty. Therefore, this Tribunal is of the considered opinion that the guideline value of Sub-Registrar is one of the factors to be taken into consideration for the purpose of determining the fair market value as on 01.04.1981.

Moreover, the location of the property, infrastructure facilities available around the property, public access to the property, distance between the bus stand, railway station, airport from the property, potential for future development, proximity to the schools, colleges and other public institutions, etc. are needed to be taken into consideration for the purpose of determining the fair market value. In the case before us, the property is admittedly located at Sarangapani Street, T. Nagar, which is one of the prime areas in the city of Chennai and there are several infrastructure facilities such as railway station, bus stand, market around the locality. There are schools, institutions and business establishments are available around the locality. While taking into consideration all the facilities available in the locality, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the fair market value estimated by the assessee as on 01.04.1981 is reasonable and acceptable one. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

8.

Now coming to the value of the building, if the property was demolished as on 01.04.1981, it would have fetched `15 lakhs in respect of debris and other material used in construction. The assessee has claimed only 46% of `15 lakhs estimated. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the claim of the assessee is reasonable. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

9.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced on 6th September, 2016 at Chennai.

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