TMI Blog2011 (5) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of DVO's report. Under these circumstances, the AO cannot make any reference under clause (a) of section 55A. Also, condition laid down in clause (b)(ii) is not fulfilled since AO has not expressed any opinion about the nature of the asset and other relevant circumstances as to why it is necessary to refer the property to the DVO. Therefore, we do not uphold the reference for determining FMV as on 1.4.81. Encumbrance claim - assessee claimed to have made payment as per terms in the WILL of late Shri Jayantibhai Shah, these payments were made to various persons and were required to be made within 24 months of the death of Shri Jayantibhai Shah - AO disallowed claim only for the reasons that such claim was late and was not made within 24 months of the death - Held that:- Claim cannot be disallowed if it is otherwise legally permissible. Even though WILL required the legal heirs to make the payments on sale of the property within 24 months but in reality sale may take time but for that matter liability created by the charge on the property will not cease to exist - Decided in favor of assessee. - IT APPEAL NO. 1988(AHD.) OF 2009 - - - Dated:- 6-5-2011 - D. K. TYAGI, D. C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO adopted the sale value at Rs. 3,05,66,700/- and cost of acquisition as on 1.4.1981 at Rs. 15,78,000/-. On this basis AO worked out the long term capital gains at Rs. 2,15,33,600/- and assessee's share at Rs. 54,26,467/- as under :- Sale value as per valuation report Rs. 3,05,66,700/- Less: 1. Encumberances out of the sale value as discussed above in para 5 (12,30,000-75000) Rs. 11,55,000/- 2. Legal charges- Rs. 35,440/- Rs. 11,90,440/- Rs. 2,83,78,260/- Less: Cost of house property as on 1.4.81 as per DVO's report Rs.15,78,000/- and index value at Multiplier of 497 Rs. 78,42,660/- Long term capital gain on sale of house property Rs. 2,15,33,600/- Share of the assessee HUF in joint property @ 25.20% Rs. 54,26,467/- When the matter came up before ld. CIT(A) he reproduced the statement of facts and written submissions given by the assessee. He called for a remand report from the AO and finally deleted the addition by accepting capital loss as declared by the assessee as under :- "2.2.1 Having verified th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty on the date of sale. Section 55A can be invoked for determining fair market value of a capital asset for computing capital gains as per section 45(1A), 45(2) 45(4). In these sections he submitted the concept of fair market value has been envisaged and, therefore, the AO has power to determine fair market value by invoking section 55A. But he submitted that for the purpose of section 45(1) the concept of fair market value has not been provided. It is provided in sub-section (1) of section 45that the profits and gains arising from the transfer of capital gains would be chargeable to capital gains. The capital gains is computed u/s 48 which provides the deduction of cost of acquisition and expenditure incurred wholly and exclusively in connection with transfer of capital asset from the full value of consideration. He drew distinction between sub-section (1) and sub-section (1A) of section 45. He submitted that in sub-section (1A) a deeming provision has been created whereby fair market value of the asset on the date shall be deemed to be full value of the consideration. In other words, full value of consideration and fair market value are two different concepts. Section 55A ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary to restore the matter back to the file of ld. CIT(A) as argued by the ld. DR. 6. So far as conflict between section 50C 55A is concerned we are of the view that once transfer of immovable property is involved then provisions of section 50C alone can be invoked. Since section 50C precedes section 55A and wherever it is applicable, then one need not go to section 55A. In any case reference to DVO is already provided in section 50C when certain conditions are fulfilled. Section 50C provides that when transfer of a capital asset being land or building or both is involved and consideration received by the assessee as a result of such transfer is less than the value adopted/assessed/assessable by Stamp Valuation Authorities (SVA) then the valuation adopted by SVA for the purpose of levy of Stamp Duty would be substituted/adopted/will be deemed to be the full value of consideration received or accruing to the assessee as a result of such transfer. Section 50C (2) provides that where assessee considers that value adopted/assessed/assessable by the SVA is more than the fair market value and such valuation made by SVA is not challenged in appeal under Stamp Act or other wise then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the opinion of the Assessing Officer, the value so claimed is less than its market value. Thus, in a case where the value of the asset is claimed by the assessee on the basis of regular books of account maintained for the purpose of construction of the asset and not on the basis of the valuation of the registered valuer, it will not be open for the Assessing Officer to make a reference to the District Valuation Officer unless the Assessing Officer forms an opinion that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so. Thus, the powers under section 55A cannot be exercised in a routine manner. For invoking sub-clause (ii) of clause (b) of section 55A, the Assessing Officer is required to form an opinion on the basis of the material on record that reference to the District Valuation Officer for ascertaining the fair market value of the asset is necessary having regard to the nature of the asset and other relevant circumstances. It is also necessary to record as to why it is necessary to adopt such a course." (on page 482)" 8. Hon. Delhi High Court in CIT v. Smt. Nilofer I. Singh [2009] 309 ITR 233/176 Taxman 252 held refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termining FMV as on 1.4.81. In this regard we refer to section 55A as under :- 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the AO may refer the valuation of capital asset to a Valuation Officer - (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the AO is of the opinion that the value so claimed is less than its fair market value; (b) in any other case, if the AO is of opinion - (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; o (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-section (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-section (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth tax Act 1957 (27 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench in Sajjankumar M. Harlalk v. Jt. CIT [2006] 284 ITR (AT) 156/100 ITD 418. In the case of Ms. Rubab M. Kazerani v. Jt. CIT [2004] 91 ITD 429 (MUM.)(TM) it is held that the reference to DVO cannot be done for determining value as on 1.4.81 if approved valuer's value was on higher side. In Smt. Sarla N. Sakraney v. ITO [2010] 10 taxmann.com 99/[2011] 130 ITD 167 (Mum -ITAT) similar view was held. The head notes from this decision are as under:- "Section 55A of the Income-tax Act, 1961 - Capital gains - Reference to valuation officer - Assessment year 2006-07 - Assessee were co-owners of a property - They sold said property for a sale consideration of Rs. 4.05 crores - In support of computation of capital gain, assessee had filed report of Government registered valuer valuing property as on 1-4-1981 at Rs. 27,29,600 - Assessing Officer, however, was of view that FMV of property as on 1-4-1981 adopted by assessee based on estimate by Government registered valuer was high and he, therefore, referred matter to valuation officer of Department (DVO) for determination of FMV as on 1-4-1981 - DVO estimate FMU of property as on 1-4-1981 at Rs. 18.41 lakhs - Assessee had raised objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there is no such opinion formed, reference would not be valid. Therefore, we do not uphold the reference either for determining FMV as on date of sale or as on 1.4.81. Both are not legally sustainable. We accordingly, uphold the order of ld. CIT(A) and dismiss this ground of appeal filed by the Revenue. 14. The second ground in Revenue's appeal is allowing incumbrance. The assessee claimed to have made payment as per terms in the WILL of late Shri Jayantibhai Shah these payments were made to various persons and were required to be made within 24 months of the death of Shri Jayantibhai Shah. The AO had disallowed the claim only for the reasons that such claim was late and was not made within 24 months of the death. 15. We have heard the parties. In our view the claim cannot be disallowed if it is otherwise legally permissible. Even though WILL required the legal heirs to make the payments on sale of the property within 24 months but in reality sale may take time but for that matter liability created by the charge on the property will not cease to exist. The AO has not challenged the charge on the property. In our view the latches being not unreasonable cannot do away with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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