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2012 (12) TMI 421 - HC - Income TaxApplication of income versus diversion of income at Source - Capital gain from sale of inherited property - settlement between two brothers - the sale consideration of Rs.14 crores was distributed between the respondent and his brother at Rs.6 crores and Rs.8 crores respectively. - AO observed that the sale consideration of the inherited property has to be distributed between the two brothers at Rs.7.00 crores each. - This was on the basis that Rs.1 crore received by respondent 's brother was in excess of that received by the respondent and is, in fact, an application of income received by the respondent and not diversion of income at source. - AO brought to tax the capital gain taxable in the hands of the respondent on the basis of the net consideration of Rs.7 crores as against Rs.6 crores declared by the respondent for sale of New Delhi property. - CIT(A) and ITAT deleted the addition Held that:- the appellant had received only Rs.6 crores for the sale of his rights in the New Delhi property and the same had been offered to tax. There is no provision to tax a person on the basis of the deemed income for the purpose of capital gain tax. - Decided in favor of assessee. Determination of cost of acquisition of inherited property - Fair Market value (FMV as on 1/4/1981) - held that:- the valuation done by an empaneled registered valuer of the Income Tax Department would certainly take precedence over Nabhi's Guide to House Tax. The valuation done by the registered valuer is with regard to the specific property and takes into account its various advantages and disadvantages all of which influence the valuation of the property. As against the above, the Nabhi's Guide to House Tax is generalized guide and does not take into account the peculiar features of the property being valued. Moreover, the determination of the fair market value as on 1/4/1991 is a question of fact which has been examined by both the Commissioner of Income Tax (Appeals) as well as the Tribunal and both have concluded that the fair market value as estimated by the registered valuer at Rs.47.74 lacs as on 1/4/1981 is acceptable. - Decided in favor of assessee. Exemption u/s 54 - purchase of two flats - inter connected by internal stair case. - held that:- two flats were joined together before the respondent assessee became the owner of the two flats. The Certificate from the society also established the fact that two flat Nos. 416A and 516A were joined together and were considered as one residential house. - Exemption allowed - Decided in favor of assessee.
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