TMI Blog2021 (6) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... s not permitted. We notice that no doubt the assessee has re valued the fair market value as on 1st April 1981, at ₹ 3,833 per share and we also notice that the assessee has purchased 2,000 shares @ ₹ 1,250 per share in assessment year 2003 04 and we notice that the assessee has claimed indexed cost based on this valuation only. Therefore, it is impractical to calculate the value of un quoted equity shares @ ₹ 3,833, as on 1st April 1981 and the same shares valued and purchased at ₹ 1,250 per share in the assessment year 2003 04. Since the assessee has not submitted Balance Sheet as on 1st April 1981 of the company M/s. Somani Co. Pvt. Ltd., in our considered view, the assessee intend to adopt ₹ 3,883, on 1st April 1981, and at the same time, the assessee cannot claim the value for the assessment year 2003 04 at ₹ 1,250. Therefore, in our considered view, the best possible option available to the assessee is only to adopt the value of fair market value in assessment year 2003 04 and re calculate by adopting reverse indexation to determine the value as on 1st April 1981. Therefore, the value of each share will be @ ₹ 1,250 x ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in this situation the assessee has already kept the agreed settlement amount for purchase of flat with buyer of the land and accepted to receive the promised allotted flat within the prescribed time. Since there was a dispute between the assessee and the builder the flat was not allotted to the assessee within the prescribed time. We notice that the Courts have held that when the assessee performs his part of the duty before the prescribed time and incase there is a reasonable delay or default on the part of builder and failed to comply the agreement within the prescribed time and when the assessee demonstrated the reasonableness of the time frame of investment then the Courts have taken liberal view in giving deduction under section 54F - in the given case the assessee has not received sale consideration to the extent of value of flat and there is no mistake on the part of the assessee, therefore the assessee had paid full purchase consideration for flat, therefore, the assessee is eligible for the claim under section 54F. - ITA no.3642/Mum./2017, ITA no.3888/Mum./2017 - - - Dated:- 1-6-2021 - Shri C.N. Prasad, Judicial Member And Shri S. Rifaur Rahman, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1st April 1981. In the statement of total wealth for the year ended 31st March 1979, the assessee had shown 925 shares of M/s. Somani Co. Pvt. Ltd. and its paid up value @ ₹ 100 per share and fair value as on 31st March 1979 @ ₹ 105 per share. Further, the Assessing Officer vide letter dated 22nd December 2014, the assessee was asked to explain that the value declared as fair market value for the assessment year 1979 80 @ ₹ 105 per share whereas the assessee has shown the value of same shares of M/s. Somani Co. Pvt. Ltd., as on 1st April 1981 @ ₹ 3,833 per share. In response, the assessee vide letter dated 12th January 2015, submitted that M/s. Somani Co. Pvt. Ltd. is an unlisted company and the book value as on 1979 80 was considered for the purpose of wealth tax, however, the provisions of section 55(2)(b)(i) of the Act gives the option to replace the actual cost with the fair market value of the asset as on 1st April 1981. For the purpose of long term capital gain, the cost was replaced with the fair market value and the capital gain calculated accordingly. By adopting the fair market value of each share @ ₹ 3,833 per share as per the valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 1981. The method adopted for determining the fair Market Value of the shares as on 01-04-1981, is the Net Asset Valuation Method. As per this method, the Net Worth of the company is computed and the same is divided by the no. of shares issued by the company. 4. The learned AO has computed the, capital gain by adopting the valuation per share at ₹ 120/- per shares instead of ₹ 3,833/- and has failed to take into consideration that in order to determine the fair market value of a share, the net worth of the company is to be computed which when divided by the no. of shares would determine correct valuation. 5. Accordingly I have obtained a valuation Certificate dated 04/10/2016 from the Chartered Accountant, who has certified the value of the share as on 1st April, 1981 at ₹ 3,881/- per share (Page 75 of the Paper book), and he has based the valuation on the value of the under lying assets (being immovable property and other assets) of the Company, as on 01 04 1981. 6. Kindly note that this Valuation Report makes a reference to another Valuation Report 'i.e. Valuation of Land as 01-04-1981) of the Government Approved Valuer's Report, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings, the assessee only submitted the valuation report pertaining to the land belonging to the said company. The assessee has now submitted a valuation certificate dated 04/10/2016 from the chartered accountant, certifying that the value of the share as on 1st April, 1981 was ₹ 3,881/- per-share. This value was arrived at based on the valuation of the underlying assets of the said company as on 01-04-81. It is the case of the assessee appellant that this certificate had not been submitted at the time fo assessment as it was his bonafide belief that the valuation report pertaining to the land held by the company was sufficient to justified the value per share as on 01/04/81. 4.2 (a)The said issue has been dealt with by the AO in assessment order. The dispute between the AO and the assessee is with regard to the adoption of the fair market value of the share as on v of April, 1981. The assessee in its wealth tax return for AY 1979-80 had declared the fair market value of the said shares as on 31/03/1979 at the rate of ₹ 105/- per-share. However, while adopting the fair market value as on 1st of April, 1981 for the purpose of arriving at the cost of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been submitted at the time to assessment as it was the bonafide belief that the valuation report pertaining to the land held by the company was sufficient to justified the value per share as on 01/04/81. 4.2 (a)The said issue has been dealt with by the AO in assessment order. The dispute between the AO and the assessee is with regard to the adoption of the fair market value of the share as on v of April, 1981. The assessee in its wealth tax return for AY 1979-80 had declared the fair market value of the said shares as on 31/03/1979 at the rate of ₹ 105/- per share. However, while adopting the fair market value as on ist of April, 1981 for the purpose of arriving at the cost of acquisition of the said shares, the assessee is computed value of the same shares at ₹ 3,833/- per-share. It was the case of the assessee that the provisions of section 55(2(b)a) of the I T Act, 1961 give th assessee the option to replace the actual cost with the fair market value of th asset as on i of April, 1981 and the assessee had accordingly adopted thl fair market value at ₹ 3,833/- per-share. The AO rejected the contention of the assessee that the cost of acquisition of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition as on 01.04.1981 of the shares of Somani Co. Pvt. Ltd. is arrived @ ₹ 3881/- per share, after considering Value of Land of said company as on 01.04.1981 at ₹ 7,66,80,110/- as per separate Valuation Report of M/s. Shah Shah, a Govt. approved valuer. The question to be examined is whether or not the revaluation of asset of company is permitted for computing the fair market value of unquoted shares. In this regard, I find that as per Rule 11UA of Income Tax Rules, 1962, the fair market value of unquoted equity shares shall be [(AL)/(PE)*(PV], where A= book value of assets in the balance sheet, L = book value of liabilities in the balance sheet, PE = total paid-up equity share capital, PV = paid-up value of such equity shares. It is therefore, clear that for calculating the fair market value of unquoted equity shares, the revaluation of assets of company is not permitted. Hence, the appellant's method completely devoid of any merit. T further find that when asked to submit the proof of cost during assessment proceedings, the appellant himself has given his Wealth Tax Return for AY 1979-80 in support of his claim. In the said wealth tax return, the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of wealth tax and it is not permissible to import and apply principle laid down under the Income Tax Act to Wealth Tax Act or vice versa. Further, relying upon the decision of the Co ordinate Bench of the Tribunal in Shashi Dharnidharka v/s ITO, ITA no.5314/Mum./2018, order dated 22nd October 2010, the learned Counsel for the assessee submitted that the facts in the present case are identical to the case relied upon by the learned Counsel in Shashi Dharnidharka (supra) wherein it was held that fair market value of the shares as on 1st April 1981, is to be worked out as per the relevant provisions of the Act. Since the Assessing Officer has not considered the valuation report of determining the value of land and building of the company and was restored the matter to the file of the Assessing Officer for fresh consideration. He submitted that even in this case, taxing authorities rejected the valuation report submitted by the assessee and as per section 55A of the Act this issue may be restore to the file of the Assessing Officer for referring the issue under section 55A of the Act for reference to the Valuation Officer. He submitted that as an alternative argument of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t April 1981. He objected to the above adoption of value based on wealth tax valuation rather than calculating the value of shares of un quoted shares. We are in agreement with the assessee that the assessee has an option to replace the value of market value as on 1st April 1981 as per section 55(2)(b)(i) of the Act and also the judicial precedence suggest that wealth tax valuation cannot be adopted for Income Tax purpose. Therefore, the Assessing Officer cannot fully rely upon the value declared for wealth tax purpose in Income Tax assessment. Even the learned CIT(A) accepted provisions of rule 1D of the Wealth Tax rules. Considering the judicial precedence, we are in agreement that the assessee can adopt fair market value based on the re valuation of the assets held by the company as on 1st April 1981. Further, we note that the learned CIT(A) observed that even under rule 11UA of the I.T. Rules, the fair market value of the un quoted equity shares shall be calculated based on the net assets as per the Balance Sheet and re valuation in the Balance Sheet is not permitted. 15. After considering the over all submissions of the assessee as well as the findings of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of our above observations, we do not see any reason to refer this issue to the valuation officer at this stage. Accordingly, ground no.2, is partly allowed. 17. Ground no.3, relates to the dispute in learned CIT(A) s order in confirming the deemed sale consideration at ₹ 8,44,18,460 (being the market value on which stamp duty is paid) as against ₹ 5,72,76,000, being the agreement value and the amount actually received. 18. Brief facts are, the Assessing Officer observed that the assessee has sold land in proprietorship concern M/s. Gopal Corporation, for a consideration of ₹ 5,72,76,000. The assessee filed a copy of agreement and from the agreement, the Assessing Officer observed that stamp duty valuation of the land is ₹ 8,44,18,460. When the assessee was asked why the provisions of section 50C of the Act should not be invoked, in response, the assessee vide letter dated 26th November 2014, submitted that the assessee sold 1,591 sq.mtrs. of open plot to Satguru Corporate Services Pvt. Ltd., @ ₹ 36,000 per sq.mtr. for a total consideration of ₹ 5,72,76,000 and the price was finalized in December 2011, when the ready reckoner rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in December, 2011. 9. The Ready Reckoner rate in 2011 U)1S ₹ 30,300/- 'MV= 4,82,00,000/-) and in 2012 was ₹ 37,900/- per sq. mtr. (MV 6,02,98,900/-). Thus there was an increase of 25% in the ready reckoner rates within a period of 4 days from the end of the calendar year 2011. Thus had the sale agreement been registered in 2011, the agreement value was much higher than the ready reckoner rates. Enclosed on Page 128-133 of the Paper book are the relevant extracts of the Stamp Duty Reckoner showing the values in 2011 2012. 10. The stamp duty has been paid at higher value of ₹ 8,44,18,460/-. This is because, the stamp Authorities computed the value by taking the value by taking the value at 140% of the Ready Reckoner Value of. $s. 6,02,98,900/-, which is inclusive of TDR, although the ready reckoner states that only land capable of utilizing TDR should he valued at 1.4 times the land rate. 11. I had procured a clarification from MMRDA vide letter dated 11.4.2012, that no TDR can be loaded on the said plot of land. Thus I made a claim before the Assessing Officer that the stamp duty was paid by the buyer on ₹ 8,44,18,460/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion] for a consideration of ₹ 5,72,76,000/-. It is the case of assessee that the deal was concluded in December, 2011, however the same could not be completed and registered since the joint sub registrar of assurances was short stuffed and the same came to be registered on 01/04/2012. Further, the ready reckoner rate in 2011 was ₹ 30,300/- [Market Value ₹ 4,82,00,000/-I and in 2012 was 37,900/- per square metre [Market Value ₹ 6,02,98,900/-J. The assessee had contended that the stamp duty authorities had taken the value of lund considering utilisation of TDR [Transfer of Development Rights]. Accordingly, the assessee submitted that the stamp duty authorities had taken valuation at 140% of land value which was not correct as no TDR could be loaded on the said plot of land. The assessee obtained information pertaining to the same through RTI vide letter dated 11/04/2012 and submitted the same before the AO. The AO, held that the assessee should have requested the registrar's office to rectify/ correct the valuation on the basis of the RTI information and as the assessee had not done, it meant that he was satisfied with the valuation. The AO therefore, rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reckoner rates within a period of 4 days from the end of the calendar year 2011. Thus, has the sale agreement been registered in 2011, the agreement value was much higher than the ready reckoner rates. 16. The stamp duty has been paid at higher value of ₹ 8,44,18,460/-.This is because, the Stamp Authorities computed the value by taking the value at 140% of the Ready Reckoner Value of ₹ 6,02,98,900/-, which is inclusive of TDR, although the ready reckoner states that only land capable of utilizing TDR should be valued at 1.4 times the land rate. 17. The Appellant has procured a clarification from MMRDA vide letter dated 11-04-2012, that no TDR can be loaded on the said plot of land, thus the Appellant made the claim before the Assessing Officer that although the stamp duty was paid on ₹ 8,44,18,460/-, the market value has been wrongly computed on the higher amount of ₹ 8,44,18,460/-. 18. In para 5.3 of the Remand Report, the learned AO has held that the Land sold as per Ready Reckoner Rates. We submit that the ready reckoner rates prescribed by the Government are guidelines with respect to the market rates and therefore the immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cir (A) to direct the AO to refer the matter to the DVO, who after considering all the facts and circumstances of the case would arrive at the correct market value. It is provided that where the consideration received or accruing us a result of the transfer of a capital asset being land or building or both is less than the value adopted by an authority of the State Government for the purposes of payment of Stamp duty in respect of such transfer, then the value so adopted by the State Government authority shall be deemed to be the full value of consideration received or accruing as a result of such transfer. The said provisions of sub-section (i) of section 50C are further circumscribed by sub-section (2) of section 50C. in terms of clause ('a) of subsection (2) of section 50C, it is provided that where an assessee claims before the Assessing Officer that the value adopted o4 assessed by the Stamp valuation authority under sub-section (i) exceeds the fair market value of the property as on the date of transfer, then the Assessing Officer may refer valuation of the Capital asset to the Valuation Officer. In this case, factually it is evident that the assessee had claimed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we humbly request your Honour to kindly consider the ready reckoner rates of 2011 and not of 2012. This is because the terms and conditions of the agreement was concluded in 2011 itself, but the mere formality of signing and registering was done on 4th January 2012. Kindly note that the terms and condition of the conveyance Deed was finalized and mutually agreed upon on 14th December 2011, (as can be seen from the email dated 14th December, 2011) and the intention of the Parties to execute and register the same before 31 December, 2011. It was only due to unfortunate circumstances that the same could not he completed. (ii) We request you to kindly refer to the Valuation Report dated 9th February, 2016 which has valued the land in question at ₹ 30,300/- per sq. mtr. The ready reckoner rate for 2011: ₹ 4,82,07,300/- The ready reckoner rate for 2012: ₹ 6,02,98,900/- Agreement consideration : ₹ 5,72,76,000/- Thus it can be seen that the deal was concluded before Dec., 2011 and the consideration agreed upon was ₹ 5,72,76,000/-, (about 19% higher) than the ready reckoner rate for on of ₹ 4,82,07,300/-. Therefore the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 26-11-2016 S. 50C: if the difference between the sale consideration of the property shown by the assessee and the FMV determined by the DVO u/s. 50G(2) is less than 10%, the AO is not-justified in substituting the value determined by the DVO for the sale consideration disclosed by the assessee. Sita Bai Khetan us. ITO (ITAT Jaipur) dated August, 2016 S. 50C: Valuation is a matter of estimation and some degree of difference is bound to be there. If the difference between the stamp duty valuation and the declared sale consideration is less than 10% addition u/s 50C should not be made. ACIT vs. S. Suuarna Rckha (ITA No. 743/Hyd/2009 dated 29 10 2010 Held: if difference between valuation for the purpose of stamp duty and the sale consideration actually received by the assessee is io% or less, then the value actually received by the assessee should be adopted for the purpose of computing the long term capital gain. M/s. LGW Limited vs. ITO (KOL ITAT):A.Y. 09-10, Decided on 0710.2015: ITA No. 267/Ko1/2013 Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference in fair market value of two plots in same area depending upon several factors, hence the said report is not conclusive proof of fair market value of appellant's land being the same as adopted in said report. In view of above, and in the spirit of the provisions of section 50C, I find the assessing officer was bound to adopt the value adopted by stamp valuation authority of ₹ 8,44,19,000/- as the full value of consideration received. This resulted in net addition of ₹ 2,71,43,000/- (i.e. ₹ 8,44,19,000 5,72,76,000), which is confirmed, and therefore, Ground No.3 is dismissed. 23. Aggrieved with the above order, the assessee is in appeal before the Tribunal. 24. Before us the learned Counsel for the assessee brought to our notice the details of sale of plots in the same area plot no.4, sold by Mahalaxmi Rope Works Ltd. He also brought to our notice the area map indicating plots no.4, 9, 3 and 5. All these plots are within the vicinity of the plot no.7. The issue under consideration is only about Plot no.7. He submitted that this plot of land was sold by registered document only on 4th January 2012. He brought to our notice at Page 93 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) in Para 8.6 of his order and further submitted that the assessee s case request for DVO s valuation may not be considered. 26. Considered the rival submissions and perused the material on record. We notice that the assessee has sold Plot no.7, for ₹ 5,72,76,000, on 4th January 2012, however, the assessee claimed that the assessee has negotiated and sold the land based on the earlier stamp valuation rate in December 2011 itself whereas the effective ready reckoner rates were changed w.e.f. 1st January 2012. Further, the assessee submitted that the stamp duty authorities not only adopted effective new rate on this transaction plus adopted TDR @ 140% of the effective rates. Its fact on record that the assessee has not challenged before the stamp duty authorities and also not prayed for reference to the DVO before the Assessing Officer. We notice that it is brought to our notice that in the adjacent Plot no.4, the stamp duty valuation was made adopting new effective rate, however, the TDR rates were not applied on the above said plot which is situated within the vicinity of Plot no.7. In case of Mahalaxmi Rope Works Ltd. (supra) the learned CIT(A) referred the issue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act to the builder M/s. Starlight Systems Pvt. Ltd., to frame whether the above said flat was allotted to the assessee or not. IN response, M/s. Starlight Systems Pvt. Ltd., vide letter dated 16th February 2015 stated that they have not allotted any flat nor received any payment thereof from the assessee. Subsequently, the assessee was informed about the reply to notice under section 133(6) of the Act. In response, the assessee submitted that the dispute was arisen between him and the builder. The builder disputed the allotment of the above said flat to the assessee. Further, the assessee submitted that the assessee had issued a public notice in the newspapers and filed a Suit against the builder in the High Court. In the interim order, the Hon'ble Jurisdictional High Court has restrained the builder from disposing off the said flat namely Flat no.B 504, till pending the hearing and final disposal of the case. Meanwhile, the Assessing Officer informed to the assessee that the deduction under section 54F of the Act can be allowed if the assessee invest / purchase new residential property within the prescribed time. In the given case, the Assessing Officer observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the order of the learned CIT(A). After considering the detailed submissions of the assessee, the learned CIT(A) rejected the submissions of the assessee with the following observations: 9.5 Further, in para 25 to 27 of his submissions, the appellant has also linked the sale of shares to the Agreement dated 04.01.2012 for sale of land to Satguru Corporate Services Pvt. Ltd. (Paper book Page no.93 125, being the subject matter of addition u/s 50C discussed above). I find that nowhere in said agreement, there is any reference of any Escrow Arrangement / Sale of shares. Hence, the said agreement has to be considered independent of any such arrangement, if at all. 9.6 Alternatively, even if it is assumed that the sale consideration of said shares was partly in kind in the form of residential flat to be acquired by the appellant, there is merit in A.O s contention that the investment in purchase of residential property is application of income from capital gains. In my opinion, for computing the capital gain, the sale consideration received as well receivable, need to be taken into account. In view of above, the long term capital gain computed on sale of said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 28.09.2014 5 32572431733 2 Years 20,00,000/- 28.09.2012 28.09.2014 6 32572434814 2 Years 20,00,000/- 28.09.2012 28.09.2014 7 32572436390 2 Years 20,00,000/- 28.09.2012 28.09.2014 8 132572442509 2 Years 20,00,000/- 28.09.2012 28.09.204 9 32572446127 2 Years 20,00,000/- 28.09.2012 28.09.2014 10 32572449912 2 Years 20,00,000/- 28.09.2012 28.09.2014 Total 2,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. However, the documents submitted before us clearly indicate that the stand of the builder is not correct and proper. Considering the decision of the Hon'ble Jurisdictional High Court which was filed before us clearly indicate that there exist dispute with regard to above flat. In our considered view, there is no dispute that the assessee had entered into escrow arrangement with a clear purpose of purchasing the above said flat and accordingly and based on the agreement with the buyer of the land, the assessee has left a portion of the sale consideration in escrow arrangement. Therefore, when the taxing authorities intend to tax the whole sale consideration as taxable consideration which includes the portion of the cost of flat then the assessee has deemed to have paid for the flat as purchase consideration. We notice that the Assessing Officer has taken a stand that in order to claim deduction under section 54F of the Act, the assessee has to demonstrate documentary evidences of the new property and the assessee should have invested / purchased new residential property within the prescribed time. We notice that in this situation the assessee has already kept the agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds no.1(a) to 1(d), raised by the assessee for this assessment year also. 37. The issue arose for our adjudication out of gorunds no.2(a) to 2(d) relates to disallowance of deduction under section 54F of the Act. 38. Having considered the submissions of the learned Counsel appearing for the parties and having perused the material on record, we find that the facts and circumstances of the issue raised by the assessee in this appeal is materially identical to the issue decided by us vide ground no.4, raised by the assessee in its appeal being ITA no. 3642/Mum./2017, vide Para 31 32 above, wherein we have set aside the order passed by the learned CIT(A) and allowed the ground raised by the assessee. Consistent with the view taken therein, we set aside the impugned order passed by the learned Commissioner (Appeals) for the year under consideration allow the grounds no.2(a) to 2(d), raised by the assessee for this assessment year also. 39. In the result, assessee s appeal is partly allowed. 40. To sum up, assessee s appeal being ITA no.3642/Mum./2017 is partly allowed; and assessee s appeal being ITA no.3888/Mum./2017 is partly allowed. Order pronounced in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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