IT : For computing capital gains under section 48, fair market value of property cannot be determined on basis of guideline value emanating from Sub-registrar's office

IT : For computing capital gains under section 48, fair market value of property cannot be determined on basis of guideline value emanating from Sub-registrar's office unless it is scientifically arrived at

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[2013] 37 taxmann.com 261 (Andhra Pradesh)

HIGH COURT OF ANDHRA PRADESH

Commissioner of Income-tax-I, Hyderabad

v.

Ashven Datla*

GODA RAGHURAM AND M.S.RAMACHANDRA RAO, JJ.

ITTA NO. 111 OF 2012†

NOVEMBER  26, 2012 

Section 55, read with section 48, of the Income-tax Act, 1961 - Capital gains - Cost of acquisition [Guideline value emanating from Sub-Registrar] - Assessee received under a registered gift deed, property from his relative 'R' - 'R' had purchased said property on 21-3-1978 - Assessee sold said property on 1-2-2006 for a consideration of Rs. 5.58 crore - He adopted fair market value of property as on 1-4-1981 at Rs. 750 per sq. yard - Accordingly, assessee offered to tax long-term capital gains at Rs. 2.16 crore - Assessing Officer on basis of a certificate obtained from Sub-Registrar, concluded that fair market value of property in question as on 1-4-1981 was at Rs. 8 per sq. yard - He thus rejected assessee's claim and determined capital gain at Rs. 5.55 crore - Commissioner upheld order of Assessing Officer - Tribunal held that guideline value emanating from Sub-Registrar's office could not be adopted unless it was scientifically arrived at - Tribunal further ruled as a question of fact that assessee had reasonably estimated fair market value as on 1-4-1981 at Rs. 750 per sq. yard - Accordingly, Tribunal accepted amount of capital gain computed by assessee - Whether on facts, there was no perversity in reasoning recorded by Tribunal and, therefore, impugned order passed by it was to be upheld - Held, yes [Paras 4 & 5] [In favour of assessee]

CASES REFERRED TO

 

G. Vijay [IT Appeal No. 277 (Hyd.) of 2003, dated 29-4-2005] (para 4) and ACIT v. Sri Narasing Rao HUF [IT Appeal No. 1240 (Hyd.) of 2007, dated 26-9-2008] (para 4).

JUDGMENT

 

Goda Raghuram, J. - We find no merit in this appeal preferred by the Revenue under Section 260-A of the Income-tax Act, 1961 (for short 'the Act') assailing the order of the Income Tax Appellate Tribunal, Hyderabad 'A' Bench (for short 'the Tribunal') dated 29-10-2010 allowing ITA No. 107/Hyd/2010 preferred by the respondent-assessee.

2. The assessee received under a registered gift deed, dated 24-1-2006 the property admeasuring 8091 sq. yards at Hydernagar, Kukatpally from his relative one Ramachandra Raju.

3. Ramachandra Raju purchased the property on 21-3-1978 for a consideration of Rs.220/- per acre. The assessee sold the property on 1-2-2006 for a consideration of Rs.5,58,30,000/-. In the return filed for the year 2006-07 the assessee adopted the fair market value of the property as on 1-4-1981 at Rs.750/- per sq. yard, exercising the option under Section 49 of the Act. The indexed cost of the land was worked out to Rs.3,01,59,203/- and after deducting this from total sale consideration, the assessee offered to tax long term capital gains at Rs.2,16,70,797/- by claiming an expenditure of Rs.40,00,000/-, By the order of Assessment dated 31-12-2008, the Assessing Officer on coming to the conclusion (on the basis of a certificate obtained from the Sub-Registrar that the fair market value of the property in question as on 1-4-1981 was at Rs.8/- per sq. yard), rejected the assessee's claim as to the fair market value as on 1-4-1981 being Rs.750/- per sq. yard and determined the capital gain at Rs.5,55,08,302/-. The assessee unsuccessfully preferred an appeal, which was rejected by the Commissioner (Appeals), by the order dated 30-12-2009. Thereupon the assessee preferred a further appeal to the Tribunal which was allowed, as already stated, by the order impugned herein.

4. The Tribunal on the basis of its earlier decision in G. Vijay in ITA No. 277/Hyd/2003 dated 29-4-2005, reiterated the principle that the guideline value emanating from the Sub-Registrar's office cannot be adopted unless it is scientifically arrived at; that the State Government had fixed the guidelines in 1976 which were not revised till 1995; and its guideline value/basic value register was not prepared scientifically. The Tribunal also followed its earlier decision in ACIT v. Sri Narasing Rao HUFin IT Appeal No. 1240/Hyd/2007 dated 26-9-2008 for concluding that it is prudent on the part of the lower authorities to estimate the fair market value as on 1-4-1981 on the basis of the valuation officer's report, which was arrived at by the reverse indexation method. Consequently the Tribunal ruled as a question of fact that the property would fetch Rs.750/- per sq. yard if sold in the open market as on 1-4-1981; that the assessee had reasonably estimated the fair market value as on 1-4-1981 at Rs.750/- per sq. yard; that the Assessing Officer and the CIT were not justified in fixing the fair market value as on 1-4-1981 at Rs.8/- per sq. yard and consequently orders of the Commissioner (Appeals) and the Assessing Authority are set aside and remitted the matter to the Assessing Officer to reassess the return considering the fair market value as on 1-4-1981 at Rs.750/- per sq. yard and compute the capital gain accordingly.

5. We find no perversity in the reasoning and the conclusion on facts recorded by the Tribunal, warranting interference under Section 260-A of the Act. The appeal is therefore dismissed after hearing the learned Standing counsel for the appellant Sri J.V. Prasad and Sri K. Vasanth Kumar, the learned counsel for the respondent-assessee who has appeared pursuant to the notice on admission issued by this Court on 20-3-2012. No costs.