TMI Blog2016 (5) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, after considering the totality of the facts and material available on record, it would be proper that an estimation of fair market value as on 01/04/1981 is to be made on the basis of material on record. The Valuer in earlier year, had adopted a higher rate of fair market value and in the subsequent year, he adopted a lower rate. Therefore, the valuation adopted by the Government Approved Valuer, cannot be adopted as the valuation is made solely on the basis of potential of the land but not on the basis of the actual prevalent rate in the close vicinity. The Revenue has also not placed any material on record, demonstrating the prevalent market rate as on 01/04/1981 in the close vicinity of the land in question. The AO has adopted the cost of acquisition as on 01/04/1981 at ₹ 250/- per sq.mtr. and the ld.CIT(A) adopted the cost of acquisition as on 01/04/1981 at ₹ 551/- per sq.mtr., whereas the assessee has claimed the cost of acquisition as on 01/04/1981 at ₹ 1940/- per sq.mtr. Therefore, it can be fairly inferred that the cost of acquisition would be at ₹ 980/- per sq.mtr to ₹ 1050/- per sq.mtr. taking the average. Hence, we direct the AO to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains on transfer of factory land, be directed to be adopted as per valuation report of Government approved Valuers at ₹ 1,940/- per sq.mtr. as claimed by appellants as against ₹ 550 per sq.mtr. as estimated by CIT(A) and ₹ 250 per sq.mtr. as estimated by AO by rejecting valuation report of government approved valuer and by referring to uncomparable and inapplicable cases. 2. Alternatively, in case FMV as at 1.4.1981 as estimated by Government approved valuer is rejected, then, average rate of ₹ 1,245 per sq.mtr., i.e. average of rate of ₹ 1,940 per sq.mtr. adopted by appellants and rate of ₹ 550 per sq.mtr. estimated by CIT(A), be directed to be adopted as FMV as at 1.4.1981 for the purpose of computation of long term capital gains on sale of factory land. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 29/12/2010. While framing the assessment, the Assessing Officer (AO in short) recomputed the capital gain on transfer of portion of factory land by adopting cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stimated purely on the basis of conjectures. He further submitted that the case-laws as relied upon by the ld.counsel for the assessee are not applicable on the facts of the present as the AO has made assessment on the basis of sale instances. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The only issue requires for our adjudication is what should be the correct valuation of property for the purpose of computation of capital gain as on 01/04/1981. The AO has adopted the value of ₹ 250 per sq.mtr on the basis of the sale instances related to residential areas situated 2 to 3 KMs away from the property in question. There is no dispute with regard to the fact that property in question is an industrial land which cannot be compared with the residential properties However, the ld.CIT(A) did not accept the fair market value adopted either by the AO or by the assessee and proceeded to make his own estimation. The ld.CIT(A) has decided this issue in paras-4 to 4.3 by observing as under:- 4.0 I have considered the appellant's submissions and the AO's observations. The contentions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, because the land is located in Baroda City and several sale instances of sale of land as on 1.4.1981 are available in the residential areas of the city. The AO's observation that the area of Sayajigunj was the main posh locality as on 1.4.1981 is also correct. He has also given several sale instances in his order. The appellant was also confronted with the documentary evidences related to such sale instances during the course of appellate proceedings. The appellant had submitted its objections which mainly consist of fact that these lands are small in area and are located 2 to 3 km. away from the land of the appellant. But still the fact remains that as on 1.4.1981, the land of the appellant was being used as industrial land and was located on out skirts of the Baroda City. Hence the value of the land sold by the appellant cannot be much more different than the sale rates of land in Sayajigunj. 4.3. The appellant has also stated that the AO's contentions may be good where land is sold is industrial land, used as industrial land and is sold for use as industrial land. However in the given case the land in question is located in posh commercial and residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 01/04/1981 is to be made on the basis of material on record. The Valuer in earlier year, had adopted a higher rate of fair market value and in the subsequent year, he adopted a lower rate. Therefore, the valuation adopted by the Government Approved Valuer, cannot be adopted as the valuation is made solely on the basis of potential of the land but not on the basis of the actual prevalent rate in the close vicinity. The Revenue has also not placed any material on record, demonstrating the prevalent market rate as on 01/04/1981 in the close vicinity of the land in question. The AO has adopted the cost of acquisition as on 01/04/1981 at ₹ 250/- per sq.mtr. and the ld.CIT(A) adopted the cost of acquisition as on 01/04/1981 at ₹ 551/- per sq.mtr., whereas the assessee has claimed the cost of acquisition as on 01/04/1981 at ₹ 1940/- per sq.mtr. Therefore, it can be fairly inferred that the cost of acquisition would be at ₹ 980/- per sq.mtr to ₹ 1050/- per sq.mtr. taking the average. Hence, we direct the AO to adopt a cost of acquisition at ₹ 980/- per sq.mtr. calling for report from expert at his stage would further delay the disposal of the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r computing LTCG on sale of factory land, hence rejecting value adopted as per Valuation Report @ ₹ 2050/sq mtr. Alternatively, ld.CIT(A) ought to have estimated FMV @ ₹ 1300/ sq mtr being an average of value adopted as per valuation report and that estimated by ld.CIT(A). 4. Confirming disallowance of salary and wages of ₹ 26,07,170/- and wages of ₹ 26,97,170/- and other expenses of ₹ 7,21,334/- pertaining to Packart Press Unit. [b] Revenue s appeal:- 1. Erred in directing AO to adopt ₹ 550/sq mtr as FMV on 01.04.198, while computing LTCG on sale of land, by adopting sale instances of Alembic Ltd.; ignoring FMV of ₹ 25/sq mtr estimated by AO. 6.1. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 31/12/2010. While framing the assessment, the Assessing Officer (AO in short) made disallowance of ₹ 1,31,940/- on account of Interest on bonds, miscellaneous expenses of ₹ 10,24,557/- recomputation of capital gain of ₹ 28,19,74,492/- and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the ld.CIT(A) did not accept the fair market value adopted either by the AO or by the assessee and proceeded to make his own estimation. The ld.CIT(A) has decided this issue in paras-4 to 4.3 by observing as under:- 4.0 I have considered the appellant's submissions and the AO's observations. The contentions of the appellant that the FMV determined in the valuation report submitted by it for the purposes of determining FMV of the land as on 1.4.1981 is correct is not acceptable. The AO has clearly mentioned in his order that the valuation report nowhere mentions that the nature of land is industrial. The valuation has been done presuming the land to be commercial land despite the fact that as on 1.4.1981 it was an industrial land on which a factory was situated. Also the valuer has not given any sales instances relied upon to arrive at the value of the land. The description of surrounding areas of the land is also that existing as on the date of sale and not as on 1.4.1981. The market conditions as on 1.4.81 has not been mentioned anywhere in the valuation report. 4.1. During the course of appellate proceedings, an alternate plea was also raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the cost of acquisition as on 01/04/1981 at ₹ 250/- per sq.mtr. and the ld.CIT(A) adopted the cost of acquisition as on 01/04/1981 at ₹ 551/- per sq.mtr., whereas the assessee has claimed the cost of acquisition as on 01/04/1981 at ₹ 1940/- per sq.mtr. Therefore, it can be fairly inferred that the cost of acquisition would be at ₹ 980/- per sq.mtr to ₹ 1050/- per sq.mtr. taking the average. Hence, we direct the AO to adopt a cost of acquisition at ₹ 980/- per sq.mtr. calling for report from expert at his stage would further delay the disposal of the matter. Therefore, in the interest of justice and considering the material available on record, we direct the AO to take the cost of acquisition as on 01/04/1981 at ₹ 980/- per sq.mtr and recompute the gain. Thus, this ground of assessee s appeal is party allowed. 4.2. The appellant has also relied upon the decision of third member in case of 3ahanganj Cold Storage v. ACIT reported at (1010) 133 TTJ (Agra) TM 278 for adopting reverse method of using cost inflation index. In this decision the Bench has held that in the absence of comparable instances, if the FMV adopted as on 1.4.1981 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket value of the asset. In the event, the AO is not satisfied about the claim of the assessee. In the present case, we find that without calling from the DVO s report, the AO has adopted a different rate and the ld.CIT(A) has adopted a different rate. The basis for adopting a different rate by the ld.CIT(A) is that in the case of 3rd party, the Department has adopted a rate of ₹ 533 per sq.mt. After considering the totality of the facts of the case and material available on record, we are of the view that both the authorities below are not justified in adopting the rate as the assessee had furnished a report from an expert, i.e. Government Approved Valuer. The sale instances has considered by the AO pertaining to residential properties and such valuation cannot be adopted under the Industrial Land. Estimation of fair market value which demonstrates on various factors; namely, location of property, nature of property, usage of property and also future prospects of such property. As per the Government Valuer, property has potential of appreciation and of commercial usages. The Revenue has not placed any material on record for rebutting this contention of the valuation. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) erred in directing the Assessing Officer to adopt value of ₹550/- per sq.mtr. as Fair Market Value as on 01.04.1981 of the land sold by the assessee by adopting sales instances of M/s.Alembic Ltd and ignoring sales instances elide upon by the Assessing Officer, wherein the Fair Market Value as on 01.04.1981 was adopted at ₹250 per sq.mtrs. which are more appropriate on the facts and circumstances of the case. 2. The appellant craves leave to ad to, amend or alter the above grounds as may be deemed necessary 11.1.The ld.counsel for the assessee submitted that identical facts and circumstances are involved in ITA No.2624/Ahd/2012 for AY 2008-09 and the issue is to be adjudicated with regard to the Fair Market Value (FMV) as on 01/04/1981. The respective representatives of the parties advanced their arguments as were made in ITA No.2624/Ahd/2012 (in the case of Synbiotics Ltd.). 11.2 On the contrary, ld.Sr.DR supported the orders of the authorities below and advanced his arguments as were made in ITA No.2624/Ahd/2012(supra). 11.3. Since the identical issue has been decided by us in ITA No.2624/Ahd/2012-supra, taking a consistent view, this issue is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on record and gone through the orders of the authorities below as well as the judgement relied upon by the ld.counsel for the assessee. The Revenue has not rebutted the contention that there is no exempt income. The Hon ble Jurisdictional High Court in the said case held as under:- 13. We have heard the rival contentions, perused the material on record and gone through the orders of the authorities below. We find that the ld. CIT(A) has decided this issue as under : 3.2 As regards interest, appellant had borrowed funds on which interest was paid. While making investments, both borrowed funds as well as own funds were used hence one cannot say that borrowed funds were used only for business purpose and owned capital was only used for investment. Admittedly no separate accounts are maintained for business and investment activities therefore appellant's claim is not justified that borrowed funds were not used in making investment. In view of this, I do not agree with my predecessor that since appellant had sufficient interest free funds, no part of borrowed funds can be attributed to investments. Further, appellant's argument that it did not earn any exempt inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of Commissioner of Income Tax v Winsome Textile Industries Ltd reported in (2009) 319 ITR 204 (Punj Har) in which also the Court had observed as under : 7. We do not find any merit in this submission. The judgement of this court in Abhishek Industries Ltd (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application. 5. We do not find any question of law arising, Tax Appeal is therefore dismissed. 15.1. Respectfully following the aforesaid judgement of the Hon ble Jurisdictional High Court, we hereby direct the AO to delete the disallowance. 16. Ground No.4 is agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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