TMI Blog2010 (7) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... i). The AO is directed to allow the claim of the assessee in this regard. However, valuation expenses claimed by the assessee are only to support of its computation of capital gain for income-tax purpose. They cannot be said to be expenditure incurred wholly and exclusively in connection with sale of the capital asset. To the extent of disallowance of valuation expenses, order of learned CIT(A) is confirmed. Thus, ground No. 3 raised by the assessees is partly allowed. claim for exemption u/s 54EC - HELD THAT:- In the present case, the assessees transferred the capital asset on 25-10-2005 and therefore time for making investment has been extended up to 31-9-2006. The assessees have made the investment in long-term specified asset on 10-7-2006 within the extended time-limit laid down by the Circular referred. In view of the above, the assessees were entitled to claim deduction u/s 54EC. We direct the AO to allow claim of the assessees for exemption u/s 54EC. Thus, ground No. 4 is allowed. - N. V. Vasudevan And B. Ramakotaiah,JJ. For the Appellant : Prakash Jotwani For the Respondent : Sanjay Gupta ORDER Per N.V. Vasudevan, Judicial Member.- These are appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owned a Showroom No. D, ground floor in Delstar Premises Co-operative Housing Society Ltd., 9-9A, Nyayamurthi S. Pathkar Marg, Hughes Road, Mumbai-36 (herein-after referred to property ). Smt. Sarla Sakraney Smt. Maya Sakraney owned 1/4th share each over the property and Smt. Roop Sakraney owned share of the property. The aforesaid property was sold by three co-owners on 24-10-2005 for a sale consideration of Rs. 4,05,00,000. Capital gain on such sale was computed by the three co-owners as follows :- Delstar Showroom Capital gains workings : Delstar In Rs. Sales consideration for the property 40,50,00,000 Less: expenses Dividing wall expenses other expenses 1,50,000 Society transfer fees 25,000 Electricity and water meters transfer charges 94,000 Valuation report (current value) 15,000 Valuation report (1981) 31,400 Brokerage 4,05,000 7,20,400 Net consideration 3,97,79,600 1-4-1981 value as per valuation report (area 436 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer computed capital gain shown by the assessees as follows :- Income from capital gains :- Sales consideration for the property 4,05,00,000 Less : expenses claimed by the assessee 7,20,400 Less : disallowed expenses as per 2,90,400,4,30,000 Para 1 of the order 4,00,70,000 Indexed cost of acquisition 91,84,560 (18,48,000 4.97) as per para 2 of the order 3,08,85,440 6. Aggrieved by the aforesaid addition made by the Assessing Officer, the assessees preferred the appeals before the Tribunal. 7. First and foremost objection of the assessees before learned CIT(A) was that reference to the DVO under section 55A was invalid. Under clause (a) of section 55A of the Act, the Assessing Officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee in accordance with the estimate made by the RV, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause (b) of section 55A of the Act, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Ms. Rubab M. Kazerani v. Jt. CIT [2004] 91 ITD 429 (Mum.) (TM) laying down the proposition stated in the earlier sentence. Apart from the above, assessee also challenged the valuation as done by the DVO on merits. 8. With regard to disallowance of dividing wall expenses, electricity and water meter transfer charges, and valuation expenses, the assessee submitted those expenses had been incurred wholly and exclusively in connection with transfer of the showroom. "(i)Dividing wall expenses:-In the year 1964, the showroom (more particularly demarcated as (D) in the plan furnished herewith) had been given on lease to Hindustan Machine Tools Ltd. (HMT). HMT had also taken on lease the adjoining property (more particularly demarcated as (C) in the plan furnished), which belong to one Mahtanis. Since, HMT was desirous of conducting its activities in one large showroom, for the sake of convenience, they broke the adjoining wall and conducted all its activities from Plot Nos. (C) (D). HMT handed over back the possession of the said showroom. Several damages in the said showroom had to be repaired before the same could be made saleable. An amount of Rs. 1,50,000 is an expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference made to the DVO on 5-8-2008, the Assessing Officer has recorded that, the valuer has adopted the rate of Rs. 1,100 for 2436 sq.ft. (for the showroom) and Rs. 50,000 for car parking space and the basis for adopting the rate is stated to be market feed back and investigation. There is no documentary evidence in support of the rate adopted by the valuer. The valuer has cited sale instances as given in Part II of the valuation report. In the absence of any evidence, the value as on 1-4-1981 adopted by the valuer at the rate of Rs. 1,100 for 2346 sq.ft. for the showroom and Rs. 50,000 for the car parking space appears to be not correct. I am therefore of the view that the correct value of the property referred to above as on 1-4-1981 is necessary in order to arrive at the correct FMV as on 1-4-1981 for the purpose of computation of long-term capital gain earned by the assessee for assessment year 2006-07. Thus, the argument that the reasons must be recorded by the Assessing Officer before making a reference is also met, since the Assessing Officer while making the reference has clearly done so, as evident from his letter of reference to the DVO. The contention that no referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon ble Gujarat High Court and to that extent, we are of the view that the said decision is not binding. The Hon ble Bombay High Court in the case of Daulal Mohta (HUF) (supra) dealt with following substantial question of law :- "B. Whether on the facts and in the circumstances of the case the Hon ble Tribunal was right in law to observe that the Assessing Officer was not justified in making a reference under section 55A of the Act to the DVO for determination of the fair market value of the property?" In para Nos. 4 5 of its Judgment of Hon ble High Court held as follows :- "4.The Tribunal in its order dated 23rd July, 2004 has categorically observed thus :- "The first issue that arises for our consideration is whether the reference made by the Assessing Officer to the DVO under section 55A is bad in law under the facts and circumstances of the case. This issue, in our considered opinion is covered in favour of the assessee and against the revenue by the Judgment in the case of Rubab M. Kazerani reported in 91 ITD 429 (Mum.)(TM). Further the assessee also covered by the Third Member decision of the Pune Bench of the Tribunal, the case of the Krishnabai Tingr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown at Rs. 3,97,000, which is less than the fair market value shown by the assessee as on 1st April, 1981. Therefore, clause (a) of section 55A cannot be made applicable. Clause (b) of section 55A can be invoked only in any other case, namely when the value of the asset claimed by the assessee is not supported by an estimate made by a registered valuer . In the facts of the present case, clause (b) of section 55A also cannot be invoked. Therefore there is no question of having recourse to sub-clause (ii) of clause (b) of section 55A of the Act." 14. In view of the aforesaid decisions, we are of the view that reference by the Assessing Officer to the DVO under section 55A for valuation of FMV of the property as on 1-4-1981 is not valid for the reasons that FMV declared by the assessee as per Government registered valuer s report was more than the FMV as estimated by the DVO. Since determination of the FMV as on 1-4-1981 was based on the report of the DVO, the same is held to be invalid. Consequently, estimation of the FMV of the property as on 1-4-1981 as made by the assessee is directed to be accepted. Ground No. 1 of the assessees is allowed. 15. In view of the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the whole of the capital gain, shall not be charged under section 45. (c)"long-term specified asset", means any bond, redeemable after three years and issued on or after the 1st day of April, 2006,- (i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988); or (ii) by the Rural Electrification Corporation Limited a company formed and registered under the Companies Act, 1956 (1 of 1956); and notified by the Central Government in the Official Gazette for the purposes of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such bond) as it thinks fit." 19. As can be seen from the aforesaid provisions, investment in long-term specified asset has to be made by the assessee at any time within the period of six months after the date of transfer. The Long-term specified assets were bonds issued by National Highway Authority of India (NHAI) and Rural Electrification Corporation Ltd. (RECL). They were permitted to issue bonds to person who wanted to avail benefit under section 54EC of the Act; but a ceiling was fixed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
