INCOME TAX ACT, 1961

Section 45

Capital gains - FMV valuation as on 1-4-1981 - Taxability of -

AO noticed that assessee had sold his assets for Rs. 60,05,000 and taken cost of acquisition after indexation at Rs. 52,04,520, which AO found incorrect. Assessee contended that since it acquired the land prior to 1-4-1981, he was entitled to opt for Fair Market Value (FMV) as on 1-4-1981 as per valuation of approved valuer that as per valuation report, the value of the plot was Rs. 7,32,000 as on 1-4-1981 as per provisions contained under section 55(2)(b). But, AO overlooked all these facts and denied the benefit of provisions contained under section 55(2) on the ground that assessee was having only tenancy right in the land. Held: When it was established that property was acquired by assessee on 2-7-1977 as per registered lease deed for the period of 90 years, i.e., prior to 1-4-1981 assessee was entitled for benefit of valuing the property in question on the basis of fair market value as on 1-4-1981 and cost of acquisition was not to be taken into account for computing the capital gain particularly when assessee has opted for use the fair market value. Assessee's leasehold right for a period of 90 years in question was a capital asset and not tenancy rights to which provisions contained under section 50C were applicable and assessee was entitled for benefit of fair market value as on 1-4-1981 in order to compute the capital gain.

REFERRED : ITO v. Hari Om Gupta (2016) 45 ITR (Trib) 137 (Luck) : 2016 TaxPub(DT) 0319 (Luck-Trib) Natraj v. Dy. CIT [ITA No. 3063/Ahd/2010, Order, dated 4-1-2013] : 2013 TaxPub(DT) 0742 (Ahd-Trib) JT. CIT v. Mukund Ltd. (2007) 291 ITR 249 (Mum) : 2007 TaxPub(DT) 1600 (Mum-Trib)

FAVOUR : In assessee's favour

A.Y. :

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