TMI Blog2010 (9) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... filed details whereby losses in the year were estimated at ₹ 17,93,93,090 by the assessee including long term capital loss of ₹ 5,39,25,300/-. Assessee adopted value of property in question at ₹ 1230/- per sq. mtr as on 1-4-1981 for the purpose of computation of capital gain. The assessee was asked to furnish necessary documentary evidences in support of the value of the property adopted as on 1-4- 1981 at ₹ 1230/- per sq.mt. In response to same, the assessee company filed a copy of valuation report dated 18-12-2003 which was prepared by a registered valuer Shri Y.S. Pathak wherein fair market value hereinafter called FMI as on 1-4-1981 was taken at ₹ 1230/- per sq. mtr. In order to verify the cost of acquisition of land adopted by the assessee at ₹ 1230/- per sq. mtr. as on 1-4-1981 the A.O obtained from the office of the concerned Joint Sub-Registrar certified copies of following sale instances at Dhanori registered in the year 1981. 1. Conveyance deed dated 1-2-1980 (registered in 1981) between Shri Arunak Piyush Oiwan (Vendor) and Shri Subedar Major Karam Singh, Shri Manjeet Singh (Vendees) with regards to land bearing Survey No. 33/1/3/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r office and commercial area on ground floor were taken at ₹ 3000/- per sq. mtr, ₹ 5,000/- per sq. mtrs and ₹ 6500/- per sq. mtrs respectively and the average rate of building was worked out to ₹ 4833/- per sq. mtrs which was enhanced at 15% to arrive at the market rate of ₹ 5558 per sq. mtrs. From this average rate, the value of cost of construction at a lump sum rate of ₹ 2500 per sq. mtr was reduced from the consolidated rate of land and building to arrive at the rate of land as on 1989 at ₹ 3058 per sq. mtrs This rate was reduced to 40% to arrive at the rate of land at ₹ 1230 per sq. mtr as on 1-4-1981. 7. The method of valuation adopted by the Regd. valuer was found by the A.O to be unrealistic and without any scientific basis for the reasons set out below. (a) The valuer stated that the structure on the land was in a dilapidated condition but could not explain as to why the rate of building has been adopted at reckoner rates, which are applicable to new buildings and not to dilapidated building which was constructed in the year 1959-60 and which had hardly any value. (b) For the purpose of arriving at the rate of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was merely a factory shed with AC sheet roofing which by no means was comparable. (g) The valuer also increased the average rate, which itself as mentioned above was unrealistic by another 15% on the ground that generally the market rates are slightly higher than the rates of ready reckoner. For this also, there was no basis in the valuation report nor did the valuer refer to any comparable cases to arrive at such conclusion. According to the A.O, it was an arbitrary figure to notionally enhance the value of the property. (h) The valuer was also informed by the A.O about the sale instances collected by the department and was asked why he had not taken into consideration the sale instances of nearby land from office of sub-Registrar before, arriving at the land value at ₹ 1230/- per sq. mtrs as on 1-4-1981. It was admitted by the valuer than he did not refer to any actual sale instance either of 1981 or of 1989 to support the valuation of land done by him by land and building method applying reckoner rates. (i) The A.O was of the view that the land and constructed areas should have been valued separately. In his opinion, the better option to know the cost of const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under ready reckoner for the year 1989 for the purpose of valuation of developed plot with reference to valuation for residential and commercial building). The competent authority issued a circular for valuing the fair market value as on 1-4-1981with reference to ready reckoner valuation for 1989. The competent authority realized the difficulties to arrive at the fair market value of the properties as on 1-4-1981 for want of comparable instances. Hence to value the property relying on the incomparable instances is not correct. The instances quoted and referred by you are of no value and not at all comparable and hence cannot be relied to arrive at the fair market value of the land as on 1-4-1981. Valuation method The registered Government Valuer correctly valued the land as on 1-4-1981 by discounting at 60% the fair value of developed, sanctioned and cleared plot as per the Ready Reckoner of 1989. The competent authority were also of the opinion that the fair market value of the land were not uniformly available and there was total ambiguity and uncertainty to arrive at the fair market value as on 1- 4-1981 hence the competent authority came out with the circular to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding or both. 9. The submissions made by the assessee were considered by the A.O. with reference to details furnished by the assessee and material gathered by the department. He dealt with the contentions raised by the assessee as follows: The first contention of the assessee is that the instances referred to by the Department relate to land of very small size, which are underdeveloped and unsanctioned without proper layout/plan and zoning, whereas in the case of the subject land, the land is about 26 acres, fully developed and converted with all sanctioned and permissions and amenities and, therefore, the sale instances quoted by the department are not at all comparable to the land in question. The contention of he assessee that the sale instances are incomparable cannot be accepted because the sale instances referred to by the department also pertain to areas in and around residential, commercial and industrial zone of the area, where necessary permissions as required under various laws were obtained such as permission from the authorities of the Urban Land Ceiling Act etc. Further the plots are bound on all sides by other plots and roads implying proper zoning and pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h court in the context of provisions of Chapter XXC, held that the sale instance which was made the basis to show the fair market value was from the adjoining area and because of similarity in location as well as proximity with the land in question, the authorities were right in holding that the transaction in question could be compared with the said sale instance. The next contention of the assessee is that in case of instant property, there is vast difference between the stated consideration in the documents and the market value as per ready reckoner which highlights the absurdity in the values as mentioned in the ready reckoner. Even if the assessee's contention were to be accepted, the difference between the consideration shown in the documents and the guideline rates is at best twice the value of the rates shown in the ready reckoner. But whereas in the valuer's report, he value taken by the valuer is ₹ 1230/- per sq. mt which is about 80 times the consideration shown in the three comparable sale instances obtained by the department from the SRO. As could be seen from the sale deeds, the land in question was sold at ₹ 3767/- per sq. mt and at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 979 (registered in 1981) ₹ 6.25 per sq.mt. 3. Sale deed at 25.8.1990 (registered in 1981) ₹ 8.54 per sq.mt. Accordingly, the A.O worked out the long term capital gain in the following manner. Sale consideration of two properties sold admeasuring 46622 sq. mtrs Rs.23,28,00,000/- Cost of acquisition as on 1-4-1981 @ of ₹ 15.23 per sq.mt. ₹ 7,10,053/- Indexed cost of acquisition s. 34,08,254/- Rs.22,93,91,745/- 11. The assessee agitated the action of the A.O in rejecting the assessee's claim regarding FMV at ₹ 1230/- per sq. mt as on 1-4-1981 and adopting FMV @ 15.23 per sq. mt by making a detailed submissions which are reproduced in para 3.9 of CIT(A)'s order. Having considering the submissions made on behalf of the assessee, the CIT(A) agreed with the finding of the A.O that the valuation has been done by the assessee s valuer without proper basis and by methods which do not yield realistic v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also due to substantial losses, the assessee closed its business activity in the year 1996. Subsequently, the assesseecompany's case was also referred to BIFR. The assessee company had filed the return of income upto A.Y. 1998- 99 and thereafter, the assessee had not filed any return upto A.Y. 2006-07. 15. As stated above in F.Y. 2004-05 the assessee company partly sold above land in two lots. The first sale deed was entered on 1-4-2004, copy of which has been placed at pages 18 to 57 of the paper book filed on behalf of assessee. The second transaction was carried out on 28-3-2005, a copy of which is placed at pages 59 to 91 of the paper book filed on behalf of assessee. Further, the balance portion was sold by the assessee by entering into a development agreement with Reghuleela Builders Pvt. Ltd. a copy of which has been placed at pages 304 to 323 of the paper book filed by the assessee. For calculating the capital gains on the sale of the above lands, the assessee computed the FMV of the said land at ₹ 1230/- per sq. mt. as on 1-4-1981. 16. In the course of hearing, the assessee had referred to valuation report as stated above which is placed at pages 1 to 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined as the price which such property would fetch if sold in the open market on the date of execution of the instrument or the consideration stated in the instrument whichever is higher. As per rule 4(2) of Bombay Stamp (Determination of True Market value of Property) Rules, 1995 it was provided that for determining the stamp valuation rates, the respective authorities would divide the areas depending upon the population, type of land, location, etc. and the rates would be decided considering the established principles of valuation. 18. In this background, the stand of the assessee was that as per the rates specified by the Town Planning Department in 1989 in respect of village Dhanori, the rate for open land was ₹ 1000/- per sq. mt which has not been disputed by revenue. The rate of residential unit was ₹ 3,000/- per sq. mt the rates of commercial units on the upper floor and the ground floor was ₹ 5,000/- and ₹ 6,500/- per sq. ft. respectively. Accordingly, without prejudice the stand of the assessee was that considering the open land only, the minimum land rate was ₹ 1,000/ - per sq. mtr. in 1989 and discounting the same considering the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum market rate of ₹ 400/- per sq. for all lands in Dhanori area including land outside the PMC limits. So the land of Dhanori in PMC area will certainly have higher market value. So was the case with assessee's land because it falls within PMC limits. 20. Let us discuss the value of assessee s land in this background. The land of assessee was being used as industrial/commercial unit and situated in prime location. The assessee's land was bound to fetch a much higher price compared to the other non-PMC lands in Dhanori area. Without prejudice to the above, the rate of ₹ 400/- per sq. mt. was the minimum land rate and considering the above factors, the said land of the assessee ought to have been valued at much higher rate as on 1- 4-1981 being in PMC limits and having benefits of all infrastructures and all civil amenities. 21. Coming to three sale instances relied upon by the A.O., the stand of the assessee was that the lands relied by A.O were not comparable to the land owned by the assessee, hence there was no question of determining the FMV on the basis of those lands. The assessee has raised various contentions to bring out distinction between the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue in all the cases. Sale instances of properties comparable with the subject properties had not been taken into account and properties situate far away from the subject properties had been taken into consideration and the additions and deductions were made without any proper basis. No reasonable basis had been adopted in any of the cases in fixing the fair market value. In some of the cases could be appropriate authority discharge the initial burden. In all the cases there was no difference in the consideration of the materials by the appropriate authority at the time of the issue of notice and the passing of final orders. all the orders were liable to b quashed. The appropriate authority had to issue n objection certificates to the parties in all the cases, as requested by them in the application in form n~. 37-1. This strengthens our view that the three sale instances relied by the A.O were not comparable with the assessee's land and hence the adopting the rates as per these instances for determining fair market value of property is not justified and contrary to the facts on record. 24. Without prejudice to the above, we find that there was not much of a development ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortant to note that the fourth sale instance which was pointed out by the A.O. himself was of ₹ 247/- per sq.mtr. It indicate that the earlier three instances considered by the A.O were not at all comparable and ought to have been rejected. The fourth sale instance was around 1.5 kms. away from the assessee's land in Dhanori village outside the PMC limit while the other three instances were about 3-4 kms from the assessee's land as could be made out from site plan submitted on behalf of assessee and placed at page no. 14 of paper book. The fourth sale instance noted by the A.O indicated that In Dhanori village itself, the development was better towards the assessee's land. This is proved from the fact that within 1.5 kms from the earlier three sale instances, the land rates could increase from ₹ 15/-per sq. mtr. to ₹ 247/- per sq. mtr. i.e. about 16 times and if that be so, the assessee's land was further 1.5 kms from this land having the market rate of ₹ 247/- per sq. mtr. In this way, the FMV of the assessee's land could be about at least 15 times of ₹ 247/-. In view of the above, the rate adopted by the A. O. cannot be accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Dhanori revenue estate falling outside the PMC limits is not justified. We also find that in the case of Vijay Kumar M. Shah Vs. DCIT (126 TTJ 910) the assessee had adopted the FMV at ₹ 2200/- per sq.ft. as on 1-4-1981 on the basis of registered valuer's report as against ₹ 1,154/ - per sq.ft. by departmental valuer. It was held that when the gap is unbridgeable, the average of the two i.e. ₹ 2200 + 1154 / 2 = 1677 was held reasonable. The A.O should make reference to the valuer when he disagrees with the valuation of the assessee. In this view, of above legal discussions, he A.O was not justified in rejecting the assessee's claim of FMV as on 1-4- 1981 at ₹ 1,230/- per sq.mtr. We also find that under the Stamp Duty Act in view of section 2(na) the stamp duty valuation as adopted had to be considered as minimum FMV because consideration as per the agreement is higher than the stamp duty valuation, the same is the market value as per section 2(na). In the present cases, the land being in PMC limit although in revenue estate of Dhonori village had to be considered as much better located land than the other lands in Dhanori village which are outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome under any other head. Similar was also taken in the following decisions: i) Baroda Spinning Weaving Mills (238 ITR 231 (guj) ii) Fabriquip Pvt. Ltd. (260 ITR 207 (Guj) iii) Escorts Electronics Ltd. (258 ITR 23 (Del). Regarding the limit for the carry forward of unabsorbed depreciation it was submitted that unabsorbed depreciation was allowed to be carry forward u/s 32(2) and for this year, there was no provision which provided the time limit to carry forward the depreciation, submitted on behalf of assessee. It was also submitted that the unabsorbed depreciation could be carried forward without any limit. It was also submitted that with effect from A.Y. 1997-98 to 2001-02, a time limit was placed for carry forward of depreciation upto 8 years. However, subsequently, w.e.f. A.Y. 2002-03, such restriction was removed and the depreciation pertaining to any earlier year could be carried forward without any restriction. It was submitted that the law as on the first day of the assessment year is to be considered and since for A.Y. 2005-06 there was no time limit on carry forward of depreciation, the claim of the assessee was justified. In this background, it was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same because the assessee has not been able to substantiate its claim. ITA No. 1329/PN/2009 29. The first issue is with regards to year of levy of capital gain. The assessee has entered into transaction of sale in question through development agreement dated 19-3-2007 and therefore, the terms and conditions laid down under the development agreement play an important role in deciding the issue whether the transfer of land took place in previous year relevant to the A.Y. 2007-08 or that to A.Y 2008-09. However, as per clauses of the agreement it was clear that passing of or transferring of complete control over the property in favour of the developer as on the date of agreement i.e. on 19-3-2007. It is only execution of deed of conveyance which was deferred till the discharge of full consideration as per the agreement and not the transfer of development rights, which had taken place on the date of development agreement i.e. 19-3- 2007 and therefore, the capital gain on the transfer of property is chargeable to tax for the A.Y. 2007-08. This reasoned finding is supported by the ratio of jurisdictional High Court in the case of Chaturbhuj Dwarkadas Kapadia Vs. CIT (2003) 260 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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