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2016 (8) TMI 689 - ITAT MUMBAI

2016 (8) TMI 689 - ITAT MUMBAI - TMI - FMV as on 01/04/1981 as per the valuation Report of a registered valuer - assessee had calculated indexed cost of acquisition as per the relevant cost inflation index - AO had adopted the cost of acquisition based on the Wealth tax value mentioned in the probate application - Held that:- For computing the LTCG provisions of section 55 of the Act have to be considered and not the Rule 1D, as envisageed by the Wealth tax Act. See Smt. B. Subhadra. Versus Inco .....

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years of the sale. Here, we would like to refer to the case of Smt. Rajneet Sandhu (2010 (7) TMI 806 - ITAT CHANDIGARH ). In that matter, the Tribunal has held that there was no merit in the plea of Revenue authority that exemption u/s. 54F of the Act can be denied to an assessee on the ground that construction of the house had not been completed. It was further held that the requirement of section 54/54F was that the assessee should have either purchased a residential house being a new asset wi .....

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ssessee, an individual, is deriving income from salary, capital gain and other sources. She filed her return of income 28. 07. 2009 declaring income of ₹ 9. 52 lakhs the AO completed assessment u/s. 143(3)of the Act, on 27. 11. 12, determining her income at ₹ 1. 82 crores. 2. Effective Ground of appeal raised by the AO is about determining the Long Term Capital Gain (LTCG). During the assessment proceedings, the AO found that the assessee had shown an office premises for a total cons .....

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04, 370/- ₹ 1, 80, 92, 220/- Less: Index cost of acquisition ₹ 99, 06, 368/- ₹ 81, 55, 852/- Exemption u/s. F ₹ 81, 85, 852/- Long Term Capital Gain Rs. Nil He further found that the office premises was originally owned by the mother of the assessee, that she had executed a will on 23. 8. 1985 which was registered on 6. 11. 1997 before the Bombay High Court and probate was obtained by the beneficiaries, that as per the Will a discretionary trust was to be created consist .....

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ase on 17. 01. 2008 in favour of the assessee releasing his share in the said premises for a consideration of ₹ 83. 45 lakhs, that after getting the release deed, she became the sole owner of the premises. Considering these facts, the AO held that there was no legal document made while surrendering the share of JVB acquired from deceased PVB, that only a letter was issued to the Co. op. Soc. , that JVB surrendered his share with - out receiving any monetary benefit, that on 25. 01. 2008, h .....

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to take decision on such type of transfers, that the property Office No. 601 was an impartible asset, that the property in question was an undivided unit that each of the beneficiaries was holding 1/3rd share in the office premises, that after death of PVB remaining members became entitled to half portion of the property, that it was surprising that JVB surrendered his ownwership right inherited from his brother without any consideration, the exercise was done with an intention to avoid tax liab .....

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n was made on 27. 01. 11, that no other payment like electricity bills etc. were made, vide his notice dated 15. 09. 2011, he directed the assessee to file copy of completion certificate. As per the AO she did not furnish completion certificate or occupation certificate stating that construction was not over. She held that the construction work remained incomplete or could not be completed within the stipulated time. Therefore, exemption claimed by assessee u/s. 54F, amounting to ₹ 1. 02 c .....

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of adoption of FMV as per Act rather than adopting the method of valuation of WT, that she had inherited the office premises from her mother, that FMV of the asset was to be taken in terms of section 55(2)(b)(ii)of the Act, that there was no justification for not taking the FMV of the asset as on 01. 04. 1981. 3. 1. After considering the submissions of the assessee and the assessment order, the FAA held that the assessee had claimed FMV of ₹ 17. 02 lakhs as on 01/04/1981 as per the valuati .....

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on report of the registered valuer submitted by the assessee, that he had wrongly adopted the Wealth tax value. He directed the AO to adopt the FMV of ₹ 17. 02 lakhs as on 01/04/81 as per the valuation report of the valuer, dated 11/09/2008 instead of the Wealth tax value given in the probate, amounting to ₹ 75, 156/-. Finally, he allowed the appeal filed by the assessee. 3. 2. With regard to the second issue, the FAA held that the AO had disallowed the exemption u/s. 54F of the Act .....

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asset in the purchase of the plot of land and had started construction, that she had complied with the provisions of section 54F of the Act, that that the dominant factor to be seen in the case under consideration was that the entire sum received by the assessee on sale of our old property had been utilised for the purchase of the new property, that the purchase value of the property was more than the long-term capital gain taxable in the hands of the assessee, that it was a crucial factor to de .....

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e amount invested in the land. Finally, he directed the AO to allow the claim of the assessee in respect of the benefit of the exemption claim u/s. 54F of the Act. 4. During the course of hearing before us, the Departmental Representative (DR) argued that there was no difference between the act and the provisions of the Wealth tax act as far as the FMV was concerned, that AO did not have sufficient material to decide the FMV, that in the variation report sale instances were not given, that the v .....

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missions and perused the material. We find that the basic difference between the opinion of the AO and the assessee is about the basis of FMV of the property in question. The AO had adopted the value as per the will that was based on the Wealth tax return, whereas the assessee had filed the valuation report of a registered valuer. For computing the LTCG provisions of section 55 of the Act have to be considered and not the Rule 1D, as envisageed by the Wealth tax Act. We find that in the case of .....

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lue of any immovable property, being a building or land appurtenant thereto, or part thereof, shall be the amount arrived at by multiplying the net maintainable rent by the figure 12. 5 :". Section 55(2)(b)(i) of the Income-tax Act, 1961, read as follows : "55(2) For the purposes of sections 48 and 49, "cost of acquisition", - (b) in relation to any other capital asset, - (i) where the capital asset became the property of the assessee before the 1st day of April, 1981, means .....

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ed as follows : "The amount at which the property would change hands between the willing buyer and the willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. " There is a difference in the terms "fair market value" and "value". For the purpose of valuation under the Wealth-tax Act, it is mandatory to follow Schedule III. In most of the cases, the values so arrived at by applying Schedule III are .....

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g capital gains under the Income-tax Act. 53. Hyderabad Bench ';A'; of ITAT in its order dated 26-12-2002 in I. T. A. No. 19/Hyd. /2002 in the case of Smt. Vijaya Lakshmi V. Gadgil (supra) held in paragraph 28 of the order as follows : ". . . . the value returned for wealth-tax purposes is not, to our mind, conclusive of the matter mainly because that was a valuation made under a different statutory rule, even though the assessee had not indicated as to how exactly the value of S .....

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he Income-tax Act shows that they are not the same and the values arrived at under the Wealth-tax Act are as per certain rules framed under the Wealth-tax Act and in most cases they are different from ';fair market value';. Therefore, the adoption by the Assessing Officer of the values arrived at under the Wealth-tax Act for the purpose of computing capital gains under the Income-tax Act is wrong in law. The decision of the Bangalore Bench of the Tribunal in the case of D. N. Prasanna Ku .....

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e given by the Sub-Registrar, Triplicane, Chennai. As already stated, on a careful consideration of each of the letters and correspondence obtained from the Sub-Registrar, it is clear that the Sub-Registrar has originally and finally stated that the value is ₹ 3, 87, 580 per ground. The instances of sale relied upon by the Sub-Registrar for arriving at this value as well as those relied upon by the assessees are the same and these three sale instances are not controverted by the Revenue. T .....

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. The Hon';ble jurisdictional High Court in the case of MRO and LAO v. Sri Sri Sri Jagannadhaswamyvari Temple, Palakonda, [Appeal No. 1654 of 1988, dated 26- 3-1992], held that "When the rates in the Basic Value Register have been fixed on area-wise, without any scientific data, the values mentioned in the Basic Value Register cannot be treated as comparable values of market value at the relevant time". In this case, the value given by the Sub-Registrar is supported by registered s .....

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the view of the Sub-Registrar, Chennai especially when we have held that the values under the Wealth-tax Act cannot be adopted for the purposes of arriving at the fair market value for the purpose of computing capital gain under the Income-tax Act. Only the aforesaid value can, therefore, be adopted as fair market value as on 1-4- 1981. The claim of the assessees was accepted by the Assessing Officer in the original assessment proceedings despite a petition against the acceptance of the same. T .....

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y legal or factual infirmity, so confirming his order we decide the First Ground of appeal, against the AO. 5. 2. We find that the assessee had invested the entire consideration received on sale of the office premises for purchasing the plot of land and construction of a residential unit. The AO has not contravened both the facts-his only objection was that the unit was not completed within the period of three years of the sale. Here, we would like to refer to the case of Smt. Rajneet Sandhu (13 .....

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We also refer to the case of Sardarmal Kothari (302ITR286) of the Hon ble Madras High Court wherein the Court has discussed the fact of the case and has decided the issue as under: The assessees filed their returns of income claiming exemption of capital gains tax under section 54F of the Income-tax Act, 1961. The Assessing Officer rejected the claim on the ground that the construction of the house was not completed. The Commissioner (Appeals) held that the assessees having invested the capital .....

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ompleted in order to have the benefit under section 54F of the Act. In order to get the benefit under section 54F of the Act, the assessee need not complete the construction of the house and occupy it ; it was enough if the assessee established the investment of the entire net con-sideration within the stipulated period. Following the above, we are of the opinion that there is no need to disturb the order of FAA. Upholding his order, Ground No. 2 is dismissed. CO/11/Mum/2014: 6. The solitary Gro .....

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