TMI Blog2012 (9) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... he property under transfer is 'Residential Building. The value is calculated on the basis of rates applicable to the residential building - Decision, Ground partly allowed. Exemption u/s 54 - Can assessee claim exemption for two residential houses on two different stories of same building u/s 54 - Held that:- As decided in case of K.C. Kaushik (1990 (4) TMI 38 - BOMBAY HIGH COURT) - the assessee to be entitled to exemption u/s 54 only in respect of one residential house - Decided in favor of Revenue. - IT APPEAL NO. 3168 (MUM.) OF 2011 - - - Dated:- 20-6-2012 - R.S. SYAL, I.P. BANSAL, JJ. Kirit Dedhia for the Appellant. Jitendra Yadav for the Respondent. ORDER R.S. Syal, Accountant Member This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on 28.02.2011, in relation to the assessment year 2006-2007. 2. The only dispute raised in this appeal is against the computation of capital gain. There are several aspects involved in this appeal relating to computation of capital gain, which we will shortly advert to. Briefly stated the facts of the case are that the assessee entered into development agreement d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred, the A.O. computed capital gain at Rs. 1,44,08,500 by reducing, inter alia, the indexed cost of acquisition at Rs. 59.64 lakh from the total consideration as per section 50C at Rs. 3.98 crore. Thereafter, deduction was allowed u/s 54EC from the above computation. The Assessing Officer also accepted the assessee's claim regarding deduction u/s 54 to the tune of Rs. 8.75 lakh, as relatable to one flat alone, as against claimed by the assessee on both the flats. 3. Apart from assailing the finding of the AO on other aspects, it was contended before the learned CIT(A) that the assessee was entitled to exemption u/s 54 on two flats acquired by her which was erroneously restricted by the A.O. to one flat only. The learned first appellate authority observed that after the passing of the assessment order, the report from District Valuation Officer was received, who valued the property as under:- Value as on 1.4.1981 Rs. 6,85,800 Value as on 10.01.2006 Rs. 2,91,39,000 4. On the requisition by the ld. CIT(A), a remand report was submitted by the Assessing Officer through Addl.CIT, a copy of which was provided to the assessee as well. After goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and was contrary to the scheme of the Act and was beyond his jurisdiction and also failed to direct the Assessing Officer not to substitute the value as at 01.04.1981 as arrived by the DVO. Defects/inconsistencies in the DVO's Valuation of the property as at 01.04.1981. Without prejudice to the ground no.2 stated hereinbefore, the learned CIT(A) ignored the defects inconsistencies pointed out by the Appellant in the valuation report given by the DVO in response to the reference made by the Assessing Officer u/s 55A." 7. It was argued that the learned CIT(A) was not justified in sustaining the action of the A.O. in referring the matter of valuation of property as on 01.04.1981 to the DVO for determining the cost of acquisition. We note that the assessee claimed fair market value of the property as on 01.04.1981, on the basis of report of registered valuer, at Rs. 24 lakh in total. On the other hand, the DVO valued such property as on 01.04.1981 at a total sum of Rs. 6,85,800. In such a situation, the question arises as to whether reference to the DVO u/s 55A was validly made for determining the value of the property as on 01.04.1981? 8. At this stage it will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced. 10. Now turning to clause (b) of section 55A, it is noted that the Assessing Officer is empowered to make a reference to the Valuation Officer where he is of the opinion that the fair market value of the capital asset exceeds the value of 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. Rule 111AA provides percentage of value of asset, at 15% and the amount, at Rs. 25,000. Sub-clause (i) of clause (b) is not applicable in this case, as the assessing Officer was inclined to reduce the estimate of fair market value as declared by the assessee and not to enhance it, which is otherwise the prescription of this provision. Thus the applicability of sub-clause (i) of clause (b) of section 55B is also ruled out. 11. Then comes sub-clause (ii) of clause (b) of section 55A, which is in the nature of residual provision for making reference to a Valuation Officer, where in the opinion of the AO it is necessary to do so, having regard to the nature of the asset and the relevant circumstances. The mandate of this provision, for making a reference to the DVO, is activated where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market value declared by the assessee is supported by the estimate of the registered valuer and the value so claimed is more than the fair market value as per the AO, no reference to the DVO u/s 55A can be made. As admittedly the fair market value of the property declared by the assessee as on 01.04.1981 is duly supported by the report of the registered valuer and further there is no reference to any fact in the assessment order as to the necessity of making a reference to the DVO, we are of the considered opinion that the learned CIT(A) was not justified in adopting fair market value as on 01.04.1981 of Rs. 6,85,800 as worked out by the DVO. The impugned order is set aside to this extent and it is directed to adopt the fair market value of the full property as on 01.04.1981 as shown by the assessee at Rs. 24.00 lacs, which is backed by the report of the registered valuer. 12. The ground no.4 reads as under:- "Defects/inconsistencies in the DVO's Valuation of the property on the date of issue. The learned CIT(A) ignored the defects / inconsistencies pointed out by the appellant in the valuation report given by the DVO in relation to the property on the date of sale in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, when the property under transfer is 'Residential Building'. In our considered, it is the rate applicable to the residential building which should have been applied. We order accordingly. When we apply such rate at Rs. 75,000 per sq.mtr., the rate per sq.feet comes to Rs. 6,970 per sq.feet, as against Rs. 8,200 per sq.ft. adopted by the DVO and Rs. 4,182 per sq.ft. considered by the registered valuer. We direct the AO to compute capital gain by adopting the rate of Rs. 6,970 per sq.ft. u/s 50C of the Act. This ground is partly allowed. 15. Ground no.5 raised by the assessee reads as under:- "Restricting exemption u/s 54 only in respect of one house The learned CIT(A) erred in law in restricting the deduction u/s 54 in relation to only one house though the Appellant had acquired two houses in the same building." 16. It is relevant to note that the assessee was allotted two flats on 2nd and 3rd floors of the proposed building which the assessee claimed to have purchased for the purposes of exemption u/s 54. The Assessing Officer restricted the exemption to one flat by following the order passed by the Special Bench order of the Tribunal in the case of ITO v. Ms. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption u/s 54 only in respect of one residential house. The learned AR strongly argued that the judgment in the case of Karnataka High Court be followed in preference to that of the special bench of the Tribunal and other High Courts as noted above. A feeble unsuccessful attempt was made to distinguish the judgment of the Hon'ble jurisdictional High Court in the aforenoted case. In our considered opinion this contention deserves the fate of dismissal at the very outset for the reason that in the case of K.C. Kaushik ( supra ) it has been held that : "in the absence of any provision to the contrary, in my judgment, the petitioner is entitled to avail of the relief in respect of the capital gain arising on the sale of his flat in 1979 against the flat purchased in that year as also against the flat purchased on July 26, 1980. It has, of course, to be adjusted against one of the flats only . I am inclined to hold that it is for the petitioner to claim relief under this section against the purchase of any one of the flats provided that the other conditions mentioned in the section are satisfied" . A cursory look at the mandate of the above judgment fairly indicates that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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