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2018 (2) TMI 257 - AT - Income TaxLong term capital gain arising from sale of land was treated by the AO as short term capital gain - Held that:- When agreement to sale in respect of immoveable property is executed a right in personae is created in favour of the vendee and thereby the vendor is restrain from selling the property to someone else because the vendee gets the legitimate right to enforce specific performance of the agreement. In view of the above facts and circumstances of the case as well as the decision Hon’ble Supreme Court in case of Sanjay Lal vs. CIT [2014 (7) TMI 99 - SUPREME COURT] we hold that the transfer of the land in question would be regarded as on the date of agreement to sale dated 11.04.2007. The order of the authorities below qua this issue are set aside. Fair market value adopted by the AO as per Section 50C - determination by DVO - Held that:- It is pertinent to note that there are various factors which effect the fair market value of land in question including the land use, the restriction of built up area, subsequent circular issued by the Government prescribing the rates for the stamp duty authority in respect of the farm house as per the size of the farm house but have not been considered by DVO. Therefore, these aspects are required to be taken into consideration while determining the fair market value of the land in question. We find that the DVO has not given a due waitage to these factors while determining the valuation, therefore, the same is not sustainable. We set aside this issue to the record of the AO/DVO for determination of fair market value after considering all the relevant factors such as the land use, restriction of built up area, the circular dated 14.07.2014 specifying as per rates for the farm house land in accordance with the area of the land and acquisition by Government. The circular dated 14.07.2014 is a useful and relevant guidance for determining the fair market value. Disallowance of cost of improvement - Held that:- Since, this issue of date of acquisition of the land in question has been decided by us by holding that the assessee has acquired the land vide agreement dated 11.04.2007 and therefore, the expenditure incurred for improvement of the land after the said date of acquisition is an allowable claim as per section 48 of the Income Tax Act. Even otherwise if an expenditure is incurred by the assessee for improvement of the land after the agreement to sale dated 11.04.2007 and prior to the sale deed dated 13.04.2010 the fact remains that the expenditure was incurred for improvement of land by the assessee and acquired by the assessee. Therefore we are of the considered view that the expenditure incurred cannot be disallowed when the purchase consideration paid by the assessee prior to the sale deed was accepted and therefore, the expenditure incurred by the assessee prior to the sale deed is also allowable claim. Accordingly, we decide this issue in favour of the assessee.
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