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TMI Blog1998 (6) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... of diversion of funds interest-free to sister concerns. The CIT(A), in principle, agreed with the findings of the Assessing Officer but restricted the addition to only ₹ 2,74,430 on the ground that the amount debited to the P&L a/c is only this amount. 3. Before us, the learned counsel for the assessee pleaded that the assessee has no unsecured loans towards the year end, i.e., 31st March, 1994, and so, no disallowance out of the interest paid is called for. It is also argued that the aggregate advances to the above three sister concerns have come down from ₹ 36,30,411 as on 31st March, 1993, to ₹ 13,07,057 on 31st March, 1994. 4. We agree with the findings of the CIT(A). We find that the above mentioned interest-free advances were made in the earlier years when the share capital of the assessee was only ₹ 15,00,000. The shareholders' funds of ₹ 2,15,93,870 as on 31st March, 1994, represent mainly the accretion by way of capital gains on the sale of a flat during the year of account relevant for the assessment year 1994-95. As the advances were made in the earlier years and as in those two years they were made only out of borrowed funds, we have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 1,92,46,110 Long-term capital gains on sale of immovable property 1,87,09,390 It may be observed that the assessee opted for the fair market value of the property as on 1st April, 1981, as permitted under section 55 of the Income-tax Act. The fair market value as on 1st April, 1981, returned by the assessee was supported by a valuation report from an approved valuer, Roshan Nanavati, who valued the property at the rate of ₹ 1,250 per sq. ft. at ₹ 78,87,758 (inclusive of garages, etc.). The Assessing Officer held that the sale instances cited by the said approved valuer were not really comparable as they related to different localities and he worked out the fair market value as on 1st April, 1981, at ₹ 433 per sq. ft. at ₹ 27,57,807 (inclusive of garages, etc.). Thus, there is a big difference between the fair market value as on 1st April, 1981, of the property in question estimated by the approved valuer and that worked out by the Assessing Officer. The CIT(A) agreed with the findings of the Assessing Officer and confirmed the addition made by the Assessing Officer. 7. Before us, the learned counsel for the assessee pleaded that valuation is a techni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that the value as estimated by the registered valuer (i.e., a person registered as a valuer under section 34AB of the WT Act) is less than the fair market value of the asset. Other cases in which a reference may be made to the Valuation Officer would be where the ITO is of opinion that the fair market value of the asset exceeds the value of the asset as claimed by more than 15 per cent of the value claimed or by more than ₹ 25,000, whichever is less or where, having regard to the nature of the asset and other relevant circumstances, the ITO considers it necessary to do so. It will be seen that in case where the assessee has opted for substitution of the cost of acquisition of an asset by its fair market value as on 1st January, 1954, the fair market value as claimed by him may be higher than its actual fair market value. The provisions of sections 55A(a) and (b)(i ) will, therefore, not apply in such a case. It will however, be open to the ITO to make a reference to the Valuation Officer under section 55A(b)( ii)." The learned counsel for the assessee has also relied on the decision of the Hon'ble Punjab & Haryana High Court in the case of Raj Paul Oswal v. CWT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court held that a reference is mandatory when those circumstances are specified. Such is not the case under section 55A of the Income-tax Act. The provisions of section 55A are attracted only when the Assessing Officer is of the opinion that the fair market value of the assets exceeds the value of the assets as claimed by the assessee and not in a reverse case such as the present one where the assessee claimed that the value as on 1st April, 1981, exceeds the fair market value determined by the Assessing Officer. So, on the plain language of the section, the provisions of sections 55A(a) and (b)(i ) are not attracted and that is also made clear by the Board's Circular No. 96 dated 25th November, 1972, extracted hereinabove. As mentioned in the above circular, a reference can be made under section 55A(b)( ii) when having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. In the circumstances, we hold that it is not correct to say that it was mandatory in the present case to have made a reference under section 55A(a) or 55A(b)(i ). 11. However, we are of the view that valuation of a flat is highly technical matter and vari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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