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The Tax Publishers Samir Kumar Addy v. ITO [ITA No. 1097/Kol/2013, dt. 11-5-2016] : 2016 TaxPub(DT) 2537 (Kol-Trib) Valuation of stamp authority v DVO fair market value on sale date - which one to be adopted. *Facts:* Assessee along with his brother were co-owner with 50% share in a property which was held prior to 1-4-1981. The said property was sold for INR 90 lakhs. Stamp value on the date of sale was 2.76 crores. Fair market value as on 1-4-1981 of the said property was 43.40 lakhs. The assessee offered his capital gains as under: In crores Sale value - 2.76 Less: indexed cost of acquisition - 2.52 (0.4340/100 x 582) Capital gains - 0.24 50% share there of - 0.12 Amount invested in 54 EC - 0.40 Capital gains taxable is thus NIL. It was noticed by the assessing officer that the other brothers assessing officer had referred the valuation to DVO who estimated the fair value on 01-4-1981 at 14.56 lakhs only. Applying this the assessing officer calculated Capital gains as under: In crores Sale value - 2.76 Less: indexed cost of acquisition - 0.84 (0.1456/100 x 582) Capital gains - 1.92 50% share there of - 0.96 Amount invested in 54 EC - 0.40 Capital gains taxable is thus 0.56. Aggrieved assessee went in appeal to Commissioner (Appeals) on plea that the DVO in the brothers case had estimated the fair value on date of sale at 1.68 crores. Thus even if the same was applied the computation will be as under and the officer cannot take only one piece which he likes (cost of acquisition at FMV of DVO) leaving out one at stamp value instead of DVO (FMV at date of sale of DVO). In crores Sale value - 1.68 Less: indexed cost of acquisition - 0.84 (0.1456/100 x 582) Capital gains - 0.84 50% share there of - 0.42 Amount invested in 54 EC - 0.40 Capital gains taxable is thus 0.02 This was refused by the Commissioner (Appeals) upholding the assessing officers order. On further appeal by assessee: The brothers case in the meantime got decided in the ITAT Shri Dilip Kumar Addy vide ITA No.227/Kol/2013 dated 16-9-2015 wherein this Tribunal held that the value as on the date of sale as estimated by the DVO should be taken as full consideration received on transfer for the purpose of computation of long term capital gain instead of the stamp value. Held in favour of the assessee that the sale value of the property is to be taken at 1.68 crores and capital gain accordingly computed thus the computation before the Commissioner (Appeals) will be the capital gains (i.e 0.02 crores as taxable capital gain). Applying Sunil Kumar Agarwal v. CIT., ITA 221 of 2013 & GA No.3686 of 2013 - High Court of Calcutta, it has been held that "the Valuation by the departmental valuation officer, contemplated under section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the district sub registrar for the purpose of the stamp duty. The legislature has taken care to provide adequate machinery to give fair treatment to the citizen/Tax payer. There is no reason why the machinery provided by the legislature should not be used and benefit thereof should be refused. Even in a case where no such prayer is made by the learned Advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. Note: It is not necessary to apply stamp value in all cases especially in cases where DVO has himself given a fair market value on the sale date lower than the stamp value.

The Tax Publishers

Samir Kumar Addy v. ITO [ITA No. 1097/Kol/2013, dt. 11-5-2016] : 2016 TaxPub(DT) 2537 (Kol-Trib)

Valuation of stamp authority v DVO fair market value on sale date - which one to be adopted.

Facts:

Assessee along with his brother were co-owner with 50% share in a property which was held prior to 1-4-1981. The said property was sold for INR 90 lakhs. Stamp value on the date of sale was 2.76 crores. Fair market value as on 1-4-1981 of the said property was 43.40 lakhs. The assessee offered his capital gains as under:

In crores

Sale value - 2.76

Less: indexed cost of acquisition - 2.52 (0.4340/100 x 582)

Capital gains - 0.24

50% share there of - 0.12

Amount invested in 54 EC - 0.40

Capital gains taxable is thus NIL.

It was noticed by the assessing officer that the other brothers assessing officer had referred the valuation to DVO who estimated the fair value on 01-4-1981 at 14.56 lakhs only. Applying this the assessing officer calculated Capital gains as under:

In crores

Sale value - 2.76

Less: indexed cost of acquisition - 0.84 (0.1456/100 x 582)

Capital gains - 1.92

50% share there of - 0.96

Amount invested in 54 EC - 0.40

Capital gains taxable is thus 0.56.

Aggrieved assessee went in appeal to Commissioner (Appeals) on plea that the DVO in the brothers case had estimated the fair value on date of sale at 1.68 crores. Thus even if the same was applied the computation will be as under and the officer cannot take only one piece which he likes (cost of acquisition at FMV of DVO) leaving out one at stamp value instead of DVO (FMV at date of sale of DVO).

In crores

Sale value - 1.68

Less: indexed cost of acquisition - 0.84 (0.1456/100 x 582)

Capital gains - 0.84

50% share there of - 0.42

Amount invested in 54 EC - 0.40

Capital gains taxable is thus 0.02

This was refused by the Commissioner (Appeals) upholding the assessing officers order. On further appeal by assessee:

The brothers case in the meantime got decided in the ITAT Shri Dilip Kumar Addy vide ITA No.227/Kol/2013 dated 16-9-2015 wherein this Tribunal held that the value as on the date of sale as estimated by the DVO should be taken as full consideration received on transfer for the purpose of computation of long term capital gain instead of the stamp value.

Held in favour of the assessee that the sale value of the property is to be taken at 1.68 crores and capital gain accordingly computed thus the computation before the Commissioner (Appeals) will be the capital gains (i.e 0.02 crores as taxable capital gain).

Applying Sunil Kumar Agarwal v. CIT., ITA 221 of 2013 & GA No.3686 of 2013 - High Court of Calcutta, it has been held that "the Valuation by the departmental valuation officer, contemplated under section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the district sub registrar for the purpose of the stamp duty. The legislature has taken care to provide adequate machinery to give fair treatment to the citizen/Tax payer. There is no reason why the machinery provided by the legislature should not be used and benefit thereof should be refused. Even in a case where no such prayer is made by the learned Advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.

Note: It is not necessary to apply stamp value in all cases especially in cases where DVO has himself given a fair market value on the sale date lower than the stamp value.