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2016 (5) TMI 623 - ITAT AHMEDABAD

2016 (5) TMI 623 - ITAT AHMEDABAD - [2016] 48 ITR (Trib) 210 - Valuation of property for the purpose of computation of capital gain - estimation of fair market value as on 1.4.1981 - adoption of report from an expert, i.e. Government Approved Valuer - Held that:- 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 .....

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d any material on record for rebutting this contention of the valuation. Therefore, 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 adopte .....

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he 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 .....

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out of which three by the Revenue and other three by the different two Assessees are directed against the separate orders of the ld.Commissioner of Income Tax(Appeals)-I/III, Baroda ( CIT(A) in short) pertaining to Assessment Years (AY) 2008- 09 (in the case of Synbiotics Ltd.) and AYs 2008-09 & 2009-10 (in the case of Ambalal Sarabhai Enterprises Ltd.). Since common issues and facts are involved in these appeals, these were heard together and are being disposed of by way of this consolidat .....

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assessee by adopting sales instance of M/s.Alembic Ltd. instead of adopting the sales instance of assessee s group concern namely M/s.Ambalal Sarabhai Enterprise Ltdf. Wherein the FMV as on 01.04.1981 was adopted at ₹250 per sq.mtrs. and which was located in the same vicinity. 2. On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 3. The appellant craves leave to add to, amend or alter the above grounds as may be d .....

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le 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 scru .....

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ld.CIT(A), who after considering the submissions of the assessee partly allowed the appeal. While partly allowing the appeal, the ld.CIT(A) adopted the cost of acquisition a ₹ 533/- per sq.mtr and, accordingly, recomputed the capital gain. Now the Revenue and the Assessee are both in appeals before us to correctness of the order of the ld.CIT(A). 3. The only ground in assessee s appeal is against estimation of fair market value as on 1.4.1981. The ld.Sr.counsel for the assessee Shri S.N.So .....

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tted that both the authorities have not considered the facts in right perspective and the valuation was made on the basis of conjectures and surmises and, therefore, the same cannot be confirmed. He submitted that before the ld.CIT(A), it was argued that if the valuation as given by the assessee and the AO has given finding that the same was not acceptable and no other basis was available. The ld.CIT(A) ought to have adopted the using the reverse indexation. The ld.counsel for the assessee submi .....

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uation report as furnished by the assessee. He submitted that the Valuation Report as furnished by the assessee does not inspire confidence as valuer has not given any scientific basis and has estimated 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 a .....

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d 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 of the appellant that the FMV determined in the valuation report submitted by it for the purposes of determining FM .....

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so 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 The appellant in its submission in this regard have also accepted that the approved valuer has estimated the value as at 1.4.1981 based on location of the land in posh commercial area and nearest to the main junction of the cross roads in such posh area of Baroda City. The appellant has also submitted that the approved valuer has clearly .....

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the situation as on 1.4.1981. It is a known fact that the Mall Culture stated in India only towards the end of 1990's and the situation of the area in which the land was situated was entirely different as on 1.4.1981. Thus, the valuation report submitted by the appellant cannot be relied upon. 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 inflat .....

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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 .....

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al commercial projects are happening. The price realized by the appellant is of commercial land. But again this argument is true only in regard .to the price realized by the appellant on sale of the land. These factors are not relevant at all for determining the FMV as on 1.4.1981, because as on that day the land was industrial land and was being used for industrial purposes and the commercial development in that area, as taking place on the day of sale, was not there. 4.1. During the course of .....

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ing the fair market value of the asset, in the event, if he 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 .....

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of such property. As per the Government Valuer, the 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. Therefore, 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 v .....

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4/1981 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 ex .....

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stances of the case and in law, the learned CIT(A) erred in directing the AO to adopt the value of ₹550/- per sq.mrs as Fair Market Value as on 01.04.1981 of the land sold by the assessee by adopting sales instance of M/s.Alembic Ltd. instead of adopting the sales instance of assessee s group concern namely M/s.Ambalal Sarabhai Enterprise Ltdf. Wherein the FMV as on 01.04.1981 was adopted at ₹250 per sq.mtrs. and which was located in the same vicinity. 2. On the facts and in the circ .....

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of property @ ₹ 980/- per sq.meter as on 1.4.1981 in ITA No.2624/Ahd/2012. Since there is no change into the facts and circumstances of the present case, therefore taking a consistent view, we dismiss the ground of Revenue s appeal for this year. As a result, Revenue s appeal in ITA No.2602/Ahd/2012 for 2008-09 is dismissed. 6. Now, we take up the Revenue s appeal in ITA No.35/Ahd/2013 and Assessee s appeal in ITA 2786/Ahd/2012 for AY 2008-09. The following grounds have been raised by the .....

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tion 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 .....

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nses of ₹ 10,24,557/- recomputation of capital gain of ₹ 28,19,74,492/- and also made disallowance of salary and wages of ₹ 26,97,170/-. The assessee carried the matter before the ld.CIT(A) who after considering the submissions partly confirmed the disallowance of ₹ 1,31,940/-, miscellaneous expense to the extent of ₹ 2,74,391/- and other expenditure to the extent of ₹ 7,65,001/-. In respect of computing LTCG on sale of factory land, hence rejecting value adop .....

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he assessee submitted that the assessee reserves his right to contest the addition on these disallowances in any other assessment year. 7.1. The ld.Sr.DR has no objection for the submission of the ld.counsel for the assessee. Therefore, ground Nos.1 & 2 are dismissed as not pressed. 8. With regard to Ground No.3, the ld.counsel for the assessee submitted that an identical issue was raised in ITA No.2624/Ahd/2012 for AY 2008-09. The ld.counsel for the assessee adopted the same arguments a wer .....

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ies 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 sq.per 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. Industrial land which cannot be compared with the residential properties However, the ld. .....

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ly 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 .....

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our considered view, it is incumbent upon the assessing authority to call for report from DVO for ascertaining the fair market value of the asset, in the event, if he 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 o .....

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ous factors; namely, location of property, nature of property, usage of property and also future prospects of such property. As per the Government Valuer, the 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. Therefore, 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 .....

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4/1981 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. Hen .....

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mber 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 lower than the value determined by using reverse cost inflation index, then the value adopted is acceptable. But this is not applicable in the present case, because the land is located in Baroda City and several sale instances of sale .....

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ated 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 ind .....

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rial purposes and the commercial development in that area, as taking place on the day of sale, was not there. 4.4. During the course of appellate proceedings, an alternate plea was also raised by the assessee that the average rate of ₹ 1,940/- per sq.mtr. may be adopted being the average of two different rates adopted by the assessee on one hand and the Revenue on the other hand. Admittedly, in the present case, neither the AO nor the ld.CIT(A) called for report from DVO and proceeded to m .....

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epartment 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 .....

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/04/1981 is to be made on the basis of material on record. The valuation in earlier year, had adopted a higher rate of fair market value and the subsequent year, he has adopted a lower rate. Therefore, the valuation adopted by the Government Approved Valuer, cannot be adopted as the valuation has 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 preva .....

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tr. taking the average. Hence, we direct the AO to adopt a cost of acquisition at ₹ 980/- per sq.mtr. calling for report at his stage further delaying 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. Thus, this ground of assessee s appeal is party allowed. 9.1. Therefore, taking a consistent view, we hereby direct the AO to recomputed the capital .....

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accordingly, this ground is allowed for statistical purposes. 11. Now, we take up Revenue s appeal in ITA No.35/Ahd/2013 for AY 2008-09. Grounds read as under:- 1. On the facts and in the circumstances of the case and in law, the ld.CIT(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 O .....

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he 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 also decided accordingly. Thus, ground of Reveue s appeal is dismissed. 12. Now, we .....

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luation Report @ ₹ 950/ sq mtr & ₹ 1550/sq mtr. Alternatively, ld.CIT(A) ought to have estimated FMV @ ₹ 1250/sq mtr and ₹ 993.50/sq mtr for sale of land to Neptune Group & Dhariwal Group i.e. an average of value adopted as per valuation report and that estimated by CIT(A). 3. Confirming disallowance of ₹ 1,89,11,310/- u/s.14A of the Act. 4. Confirming disallowance of salary and wages of ₹ 26,97,170/- pertaining to Packart Press Unit [b] Revenue s appe .....

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2012 for AY 2007-08 (in the case of Synbiotics Ltd.- supra). Respective representative of the parties advanced their arguments as were made in the case of Synbiotics Ltd.(supra). Therefore, consistent view, the ground raised by the assessee is partly allowed. 14. With regard to ground No.3 of the appeal, the ld.counsel for the assessee submitted that the assessee has not earned any income which is not taxable. Therefore, disallowance made u/s.14A is not called for. The ld.counsel for the assesse .....

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dictional 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 capita .....

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sallowance of section 14A can be made is without any basis. Since appellant made investment in shares which will result only in dividends which are exempt from tax, not receiving any exempt income during the year will not entitle appellant to claim expenses relating to investments which will result only in exempt income. Therefore in the absence of clear cut details of utilisation of funds, the formula given in rule 8D which is mandatory this year is to be applied. Since assessing officer worked .....

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essee did not make any claim for exemption. In such a situation, section 14A could have no application. In this case also, the assessee has not claimed any exempt income in this year. Therefore, respectfully following the judgement of Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Winsome Textile Industries Ltd. (supra), we hereby allow this ground and direct the AO to delete the addition. Therefore, ground Nos 1 to 1.2 raised by the assessee in its cross-objection are all .....

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all be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryan .....

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rpose 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 .....

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