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Jupiter Manufacturing Private Ltd. Versus Joint Commissioner of Income Tax, Spl. Range-2, Baroda.

2015 (9) TMI 283 - ITAT AHMEDABAD

Determination of capital gain in respect of sale of factory premises including land - allocation of sale consideration between the land and building - Held that:- It is irrelevant at whose behest certificate was issued. GIDC is a Gujarat Government undertaking and a certificate issued by it cannot be rejected merely on the basis of suspicion or presumption. Therefore, we are of the opinion that the certificate of the GIDC with regard to the rate of plot in the GIDC area at the relevant time is o .....

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value is allocated to the building. But the allocation of sale consideration by Assessing Officer and CIT (A), between the land and building is absolutely without any basis. The historical cost of building or WDV of building cannot be determinative of market value of building on the date of sale. Similarly end use of building by the buyer is also not relevant for determining market value of building on the date of sale. Considering the facts of the case in our opinion the allocation of sale con .....

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ditional evidence i.e. letter of GIDC. In the above circumstances, in our opinion, enhancement was made by the CIT(A), in respect of altogether new point which was not taken by the Assessing Officer in the assessment order, was not an issue before the CIT (A) or ITAT in first round. The matter was set aside by the ITAT to the CIT (A) for the limited purpose of allowing opportunity to the A. O. with reference to the additional evidence. Therefore, the CIT (A) was not justified in taking up altoge .....

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applicable. However, as we have set aside the enhancement made by the CIT (A) on the limited ground that it was beyond the scope of order of set-aside by the ITAT, we do not express any opinion whether the allotment of land by GIDC to the assessee would fall within the ambit of tenancy right or not. In view of above, we direct the Assessing Officer to accept the workings of the capital gain of the assessee and the addition made by him as well as enhancement made by the CIT (A) are deleted. - Dec .....

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l against the determination of capital gain in respect of sale of factory premises including land. The facts of the case are that for the year under consideration the Assessee disclosed the capital gain of ₹ 12,63,766/- for the sale of its factory building including land at Baroda. The total consideration was ₹ 68,83,000/-. The Assessee allocated the same between the land and building as under:- Capital gain related to land. Rs.32,75,000/- Capital gain related to building. Rs.36,08,0 .....

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Long Term Capital gain taxable. 12,63,766 4. The Assessing Officer did not accept the allocation of sale consideration between the land and building by the Assessee. He allocated only ₹ 1,24,001/- towards factory building and remaining towards the land and accordingly worked out the long term capital gain of ₹ 47,47,765/- as under:- Total sale consideration as shown by the Assessee. ₹ 68,83,000/- Less: Cost of factory building as discussed above. ₹ 1,24,001/- Sale conside .....

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n. Before the Ld. CIT (A), Assessee has produced the certificate from Gujarat Industrial Dev elopement Corporation (for short GIDC) as per which for the period1-4-1995 to 31-3-1996 the rate of plot was ₹ 550/- per sq.mt. + frontage charges if applicable. It was claimed by the Assessee that its plot was in the front row in respect of which frontage charges @ ₹ 75/- per sq. mt was applicable and accordingly the Assessee has worked out the fair market value of the land at ₹ 625/- .....

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he Assessing Officer and has not filed necessary explanation and details before the Assessing Officer, however, the Assessee filed letter dt. 23- 02-2002 of GIDC before CIT (A) wherein the sale of land per sq. mtr. is mentioned. The CIT (A) has considered this letter which amounts to important evidence without providing opportunity of hearing to the Assessee ( the letter of GIDC is dtd. 23-2-2002 as stated by the CIT (A) in his order whereas at page-11 of the Assessee s paper book, a photo copy .....

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and decided the issue on those materials and evidence without providing opportunity of hearing to the Assessing Officer. The jurisdictional High Court in the case of CIT v/s. Valimohmed Ahmedbhai 134 ITR 214 (Guj.) wherein it has been held that if the Assessee produces evidence it is necessary to provide opportunity of hearing to the Assessing Officer to oppose it and to test the additional evidence or counter the effect thereof or to produce evidence in rebuttal. In the light of above discussi .....

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ng. ₹ 4,17,847/- Sale consideration relating to land. Rs.64,65,153/- Rs.68,83,000/- 8. Further the CIT (A) enhanced the capital gain determined by the Assessing Officer by the sum of ₹ 17,39,189/- by denying option of adopting fair market value of the land as on 1-4-1981. He was of the opinion that the right of the Assessee to the land was only the tenancy right and therefore, as per section 55 (2)(a). The actual cost of acquisition only has to be considered and not the Fair Market V .....

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83,000/- between the land and building, (2) whether the CIT (A) was justified in making enhancement by denying the option of fair market value as on 1-4-1981 which was accepted by the Assessing Officer. 10. We shall first take up the question of allocation of sale consideration between the land and building. There is no dispute about the total sale consideration of ₹ 68,83,000/-. The Assessee allocated the sale consideration between the land and building by determining the value of the lan .....

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very old and its value cannot be ₹ 36,08,000/-. He therefore adopted the WDV of factory building at ₹ 1,24,001/- as value of the building on the date of sale. The balance sale consideration i.e. ₹ 67,58,999/- was allocated towards the land. The Assessing Officer has not given any reason or justification how the value of the land on the date of sale was ₹ 67,58,999/-. The CIT (A) had accepted the Assessee s allocation of the sale consideration between the land and building .....

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he stand taken in the assessment order. The relevant portion of the Remand Report reads as under:- 3.1. In respect of price of land and factory building, the assessee relied upon the letter issued by Gujarat Industrial Development Corporation dated 27/2/2000. The Ld. CIT (A) has also deleted the addition relying upon the above letter. 3.2. It may be mentioned here that, the purchaser of the said land and factory building M/s. Bearing Mfg. Co. purchased the factory building mainly with the intent .....

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factory building is an old shed which is dismantled by the buyer of the factory and therefore for the reasons given in the assessment order he requested for upholding the capital gain determined by the Assessing Officer. The CIT (A) slightly modified the working of the Assessing Officer and instead of the value of building at ₹ 1,24,001/- he directed to take it at ₹ 4,17,847/- with the following observation:- Thus, on the facts and circumstances of the case, consideration received by .....

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ale consideration towards land. 12. After considering the facts of the case and the arguments of both the sides we are unable to agree with the views of the Ld. CIT (A). We find that in the case consideration before us neither the Assessee nor the Assessing Officer or the CIT (A) has tried to determine the market value of the land as well as building on the date of sale so as to allocate the sale consideration between the land and building. The Assessee considered the market value of land on the .....

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that how the sale consideration allocated by them towards land is a proper sale consideration allocable to land when the GIDC was selling the plot in the Industrial estate @ Rs.,550/- per sq. mt. + frontage charges, then the value determined by the Assessing Officer and the CIT (A) at almost double the rate as per GIDC can be justified. In our opinion, the WDV of the building or construction cost cannot be proper base for determining the Fair Market Value of the factory building. If the histori .....

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rate in the GIDC was higher than that specified by the GIDC above even though these figures were not available to the Assessing Officer as they were submitted late. It is however stated that this being the specified rate of GIDC the question of valuing the land at a higher figure does not arise. As regards the building also it is stated that the Assessing Officer has erroneously mentioned in the order that the factory building is only an old shed which was completely dismantled by the new owners .....

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owkidar, land Leveling, tank etc. (L. S.) 29,92,500.00 6,15,500.00 36,08,000.00 It is submitted that there is no evidence for taking the value at ₹ 1,24,001/- as per WDV. In fact unabsorbed depreciation relating to building was ₹ 1,45,220/- as per record and this should have been added also leading to a value of ₹ 2,69,220/-. This detail was given in the return but in fact the value of the building was far in excess of the same. 2.4. After going through the details submitted by .....

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ry of figures on the part of the Assessing Officer but is not based on any evidence regarding the value of either land or building. In my view as far as the valuation of the land is concerned, I hold that it has been correctly worked out as per GIDC valuation and has to be accepted on the same lines due to lack of any evidence to the contrary. Secondly, it has to be accepted that the WDV is no guideline to the market value of the factory building on the date of sale. It would suffice to mention .....

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the A. O. and the CIT (A) has not allowed any opportunity to the A. O. to rebut the above additional evidence furnished before him. Now after the set aside CIT (A) has confronted the A. O. with the certificate of GIDC. The Assessing Officer in his remand report has not given any cogent reason why the certificate of GIDC should not be accepted for determining the value of the land but reiterated whatever was mentioned in the assessment order. However, the CIT (A) in the subsequent order i.e. the .....

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rmed to appellant by GIDC. No instances of sale of open plots of land in the period in question were referred to. The letter by GIDC issued at appellant s behest cannot be relied upon as indicative of market value of land. 14. We are unable to agree with the above observation of the Ld. CIT (A), that the rate given in the certificate of the GIDC is not relevant. The rate given in the GIDC certificate is the rate on which GIDC allotted plot to the Industrialist at the relevant time. Therefore, th .....

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tificate of the GIDC with regard to the rate of plot in the GIDC area at the relevant time is one of the proper basis for determination of the market value of the plot in that area. The Assessing Officer as well as the CIT (A) has not given any basis for allocation of the sale consideration between the land and building. The WDV of the building cannot be determinative of market value of the building after 20 years. In the allocation of sale consideration between the land and building by the asse .....

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n the date of sale. Considering the facts of the case in our opinion the allocation of sale consideration between the land and building by the assessee deserves to be accepted and we order accordingly. 15. Now we come to the second question in this appeal i.e. enhancement by the CIT (A). We have already mentioned that the ITAT has set aside the matter back to the file of CIT (A) for the purpose of allowing opportunity of being heard to the Revenue with reference to additional evidence produced b .....

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