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2021 (6) TMI 935 - AT - Income TaxLTCG - cost of acquisition of 925 shares of Somani & Company - Adoption of FMV - assessee has re–valued the fair market value as on 1st April 1981 - HELD THAT:- We are in agreement with the assessee that the assessee has an option to replace the value of market value as on 1st April 1981 as per section 55(2)(b)(i) of the Act and also the judicial precedence suggest that wealth tax valuation cannot be adopted for Income Tax purpose.Assessing Officer cannot fully rely upon the value declared for wealth tax purpose in Income Tax assessment. Even the learned CIT(A) accepted provisions of rule 1D of the Wealth Tax rules. We are in agreement that the assessee can adopt fair market value based on the re–valuation of the assets held by the company as on 1st April 1981. Further, we note that the learned CIT(A) observed that even under rule 11UA of the I.T. Rules, the fair market value of the un–quoted equity shares shall be calculated based on the net assets as per the Balance Sheet and re–valuation in the Balance Sheet is not permitted. We notice that no doubt the assessee has re–valued the fair market value as on 1st April 1981, at ₹ 3,833 per share and we also notice that the assessee has purchased 2,000 shares @ ₹ 1,250 per share in assessment year 2003–04 and we notice that the assessee has claimed indexed cost based on this valuation only. Therefore, it is impractical to calculate the value of un–quoted equity shares @ ₹ 3,833, as on 1st April 1981 and the same shares valued and purchased at ₹ 1,250 per share in the assessment year 2003–04. Since the assessee has not submitted Balance Sheet as on 1st April 1981 of the company M/s. Somani & Co. Pvt. Ltd., in our considered view, the assessee intend to adopt ₹ 3,883, on 1st April 1981, and at the same time, the assessee cannot claim the value for the assessment year 2003–04 at ₹ 1,250. Therefore, in our considered view, the best possible option available to the assessee is only to adopt the value of fair market value in assessment year 2003–04 and re–calculate by adopting reverse indexation to determine the value as on 1st April 1981. Therefore, the value of each share will be @ ₹ 1,250 x ₹ 100 ÷ 463 = ₹ 270 per share. Since the Assessing Officer cannot adopt the value as per wealth tax valuation considering the judicial precedent, we deem it fit to direct the Assessing Officer to adopt the fair market value as on 1st April 1981 @ ₹ 270 per share. As assessee prayed to restore this issue to the file of the Assessing Officer to refer this matter to the valuation officer. In view of our above observations, we do not see any reason to refer this issue to the valuation officer at this stage. Accordingly, ground no.2, is partly allowed. Reference to DVO - Deemed sale consideration (being the market value on which stamp duty is paid) as against agreement value and the amount actually received - HELD THAT:- We notice that even in case of Mahalaxmi Rope Works Ltd [2019 (3) TMI 1889 - ITAT MUMBAI] stamp duty authorities have applied TDR @ 140% and upon agitation the issue was referred to the DVO and the DVO has valued the property without applying the TDR. Since the issue under consideration is similar to the issue in Mahalaxmi Rope Works Ltd. (supra) case, therefore, in our considered view, for the sake of justice, we restore this issue also to the file of the Assessing Officer and also direct him to refer this case to the DVO and adopt the value based on the report of the DVO to determine the actual capital gains as per law. Accordingly, ground no.3 raised by the assessee is allowed for statistical purposes. Disallowance of deduction u/s 54F - assessee failed to provide any documentary proof that he had invested / purchased a new property - HELD THAT:- Assessee had entered into escrow arrangement with a clear purpose of purchasing the above said flat and accordingly and based on the agreement with the buyer of the land, the assessee has left a portion of the sale consideration in escrow arrangement. When the taxing authorities intend to tax the whole sale consideration as taxable consideration which includes the portion of the cost of flat then the assessee has deemed to have paid for the flat as purchase consideration. We notice that the Assessing Officer has taken a stand that in order to claim deduction under section 54F of the Act, the assessee has to demonstrate documentary evidences of the new property and the assessee should have invested / purchased new residential property within the prescribed time. We notice that in this situation the assessee has already kept the agreed settlement amount for purchase of flat with buyer of the land and accepted to receive the promised allotted flat within the prescribed time. Since there was a dispute between the assessee and the builder the flat was not allotted to the assessee within the prescribed time. We notice that the Courts have held that when the assessee performs his part of the duty before the prescribed time and incase there is a reasonable delay or default on the part of builder and failed to comply the agreement within the prescribed time and when the assessee demonstrated the reasonableness of the time frame of investment then the Courts have taken liberal view in giving deduction under section 54F - in the given case the assessee has not received sale consideration to the extent of value of flat and there is no mistake on the part of the assessee, therefore the assessee had paid full purchase consideration for flat, therefore, the assessee is eligible for the claim under section 54F.
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