ACIT, NEW DELHI vs. SMT. SARASWATI DALMIA, NEW DELHI

per share. Whereas, the remaining 6,18,021 shares were acquired

by him after 01.04.1981 at the same price of Rs.10/- per share.

Whereas, in the computation of capital gain on sale of shares, the

assessee had adopted the cost of acquisition of one equity share

as on 01.04.1981 at Rs. 1675/- per share by invoking the

provisions of section 55(2)(b) of the Act by treating the value as

the FMV. In support of such valuation, the assessee furnished a 11 | P a g e

ITA No.3776/Del/2009 & 4268/Del/2010

valuation report of a Chartered Accountant. On going through the

valuation report, the Assessing Officer observed that while

determining the FMV of the shares, the Valuer has taken the

value of lease hold rights in land and building, admeasuring

22.95 acres (111000 sq. yards) at 48, Kaventer Lane, Sardar Patel

Marg, Chanakyapuri, New Delhi, at Rs.26.89 crores as on

01.04.1981 based on the Valuation Report dated 18.10.2005 of

Accurate Surveyors. On perusal of the balance sheet of EKPL as

on 30.06.1981, the Assessing Officer observed that opening

balance of the leasehold rights in the said property was shown at

Rs.2,75,538/- and there was an addition of Rs.43,24,462/- on

account of revaluation of the lease rights during the year ending

30th June, 1981 and the closing balance was shown at Rs.46

lakhs. Based on the aforesaid facts, the Assessing Officer called

upon the assessee to justify the FMV of the share, valued at Rs.

1675/- per share. In response, the assessee furnished an

exhaustive reply justifying the FMV of shares as on 01.04.1981.

The Assessing Officer, however, was not convinced with the

submissions of the assessee. He observed that the assessee has

not given any basis for revaluation of lease hold rights in the land.

He observed the valuation report of Accurate Surveyors, dated 12 | P a g e

ITA No.3776/Del/2009 & 4268/Del/2010

18th October, 2005 compared the rates of residential land with the

dairy farming land. He further observed that, by no stretch of

imagination, the use of land could have been taken as residential

instead of dairy farming as on 1st April, 1981.

Assessing Officer observed that Valuer has referred to a number

of immovable property transactions claiming to be properties in

the same locality. Whereas, none of the properties were as large

as the property under consideration. He further observed, under

the Income Tax Act, no specific formula is laid down to determine

the FMV of the unquoted shares. Therefore, in absence of any

specific procedure, other acts are to be examined, in which the

procedure has been laid down. Having held so, he referred to Rule

1D of the Wealth Tax Rules and held that the valuation report of

Accurate Surveyors obtained much after the date of relevant

balance sheet is not relevant at all in determining the FMV of

unquoted shares of EKPL under section 55(2)(b)(i) of the Act. He

further observed that the assessee was allotted unquoted shares

of EKPL from time to time during the period 1982-83 to 2000-01

and all throughout the rate of each equity share remained Rs.10

per share. Thus, he observed, when there was no increase in the 13 | P a g e

ITA No.3776/Del/2009 & 4268/Del/2010

value of shares over a period of almost 20 years, the FMV of

shares as on 01.04.1981 could not be Rs. 1675/- per share. On

the aforesaid premises, he concluded that the FMV of each equity

share as on 01.04.1981 is to be taken at Rs. 10 per share.

Accordingly, he proceeded to compute the long term capital gain.

Assessing Officer before learned Commissioner (Appeals). Being

convinced with the submissions of the assessee, learned

Commissioner (Appeals) accepted the FMV of the shares as on

01.04.1981 as claimed by the assessee.

materials on record. Undisputedly, the assessee has adopted the

FMV of each equity share of EKPL as on 01.04.1981 at Rs.1675/-

in terms of section 55(2)(b)(i) of the Act and based on the

valuation report of a Chartered Accountant (CA). It is further

observed, the CA has determined the FMV of the shares based on

a valuation report of another Valuer, i.e, Accurate Surveyors, who

has valued the lease hold rights in land and building held by

EKPL, admeasuring 22.95 acres at a prime location in Delhi. The

Accurate Surveyors have valued the property at Rs.26.89 croes as

on 01.04.1981. Admittedly, while the assessee has furnished 14 | P a g e

ITA No.3776/Del/2009 & 4268/Del/2010

valuation report of experts, determining the FMV of equity shares,

the Assessing Officer has not made any reference to the

Departmental Valuation Officer (DVO) for ascertaining the FMV of

shares as on 01.04.1981. On the contrary, the Assessing Officer

has referred to the balance sheet of EKPL as at 30.06.1981 and

observed that that the value of land and building has been shown

at Rs.46 lakhs.

would mean that the cost of acquisition of the asset to the

assessee or the FMV of the asset as on 01.04.1981, at the option

of the assessee. The expression “fair market value” has been

defined in section 2(22B) of the Act to mean the price that the

capital asset would ordinarily fetch on sale in the open market on

the relevant date. Thus, going by the definition of FMV, it cannot

be said that the value of asset shown at the balance sheet can be

the FMV. Therefore, in our view, the Assessing Officer could not

have referred to cost/value of land and building as shown in the

balance sheet for determining the FMV of the equity shares. More

so, when section 55(2)(b) of the Act provides an option to the

assessee to adopt the cost of acquisition as per FMV. It is further

noticed that the Assessing Officer has made a fundamental error 15 | P a g e

ITA No.3776/Del/2009 & 4268/Del/2010

in determining the value of shares by referring to Rule 1D of the

Wealth Tax Rules. It is observed, the said Rule stood omitted from

the statute w.e.f. 01.04.1989. Therefore, the Assessing Officer has

erred in law in determining the FMV by referring to Rule 1D of

Wealth Tax Rules. He has committed further error by saying that

there is no mode and mechanism for determining the FMV under

the Income Tax Act. Whereas, section 55(2)(b) read with section

2(22B) of the Act provides mechanism for determining the cost of

acquisition. In any case of the matter, to support the FMV of the

shares as on 01.04.1981, the assessee has furnished valuation

report of experts. Whereas, without taking assistance of DVO, the

Assessing Officer has himself assumed role of an expert without

having the requisite expertise or experience to determine the FMV

of the equity shares as on 01.04.1981. It is well known that

valuation is a highly technical subject, hence, has to be dealt by

the experts. Therefore, when the Departmental Valuation Cell is

available, the Assessing Officer, instead of referring the valuation

process to the Valuation Cell, should not have taken the burden

of valuation himself. In this regard, we are supported by the

following decision:

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ITA No.3776/Del/2009 & 4268/Del/2010

learned first appellate authority has himself made inquiry to

ascertain the FMV of the land and building under the possession

of EKPL and as per the records of L & DO for the particular area,

the value of land as on 01.04.1981 was Rs.2,000/- per sq. metre,

which works out to about 81 lakhs per acre, which is much

higher than the value of Rs.46 lakhs as shown in the balance

sheet. It is further evident, though, the Assessing Officer has

observed that the nature and character of land is dairy farming

land, however, the facts on record reveal that EKPL has applied

for conversion of dairy farming use to residential use in the year

1970, which was eventually allowed in the year 1992. Therefore,

the FMV of the lease hold rights has to be ascertained based on

its character of residential use. It is further observed, though, the

Assessing Officer has alleged that the Accurate Surveyors in their

valuation report has not considered the value of land in same

locality, however, the observation is factually incorrect. We may

also observe, merely because the assessee purchased shares of

EKPL over a period of 20 years at the same face value of Rs.10 per

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ITA No.3776/Del/2009 & 4268/Del/2010

share, it cannot be said that the FMV of the shares as on 1st April,

1981 would be Rs.10 per share. This is so because, the actual

cost of acquisition cannot be the FMV as provided under section

55(2)(b) of the Act. In this regard, we refer to the following

decisions:

the case in the light of ratio laid down in the judicial precedents

cited before us, we are of the considered view that the decision of

learned Commissioner (Appeals) on the issue is not justiciable.

Accordingly, we uphold the same by dismissing the ground.

ITA No. 4268/Del/2010

(A) On the facts and in the circumstances of the case, the learned CIT(A) has erred in directing the A.O. to treat Fair Market Value of share of M/s. Edward Keventer(s) Pvt. Ltd. at Rs.1675/- instead of Rs.10 as on 01.04.1981 without giving any specific reason for the same. 24. As could be seen, this ground is identical to ground no. ‘C’ of

ITA No. 3776/Del/2009 decided by us in the earlier part of the

order, facts being identical, our decision therein will apply

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ITA No.3776/Del/2009 & 4268/Del/2010

mutatis mutandis. Accordingly, we uphold the decision of learned

Commissioner (Appeals) by dismissing the ground raised.

Order pronounced in the open court on 31st July, 2023

Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNANT MEMBER VICE PRESIDENT Dated: 31st July, 2023. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi

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