×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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05-09-2019, T.S. Hajee Moosa, Section 47A, 50C, 133(6), Tribunal Chennai
The assessee filed this appeal against the order of Commissioner of Income Tax (Appeals)-13, Chennai, in ITA No.98/CIT(A)-13/AY 2015-16 dated 27.07.2018 for the assessment year 2015-16.
2. The assessee has sold the land at Guindy for a sale consideration of Rs.28,17,03,500/- and the factory building for Rs.1,82,96,500/- for a total of Rs.30,00,00,000/-. The assessee has worked out LTCG for the assessment year 2015-16, adopting guideline value of the property u/s.50C of the Act at
Rs.36,83,81,500/- (43,339 sq. ft. x Rs.8500/- per sq. ft.) , allowed selling and legal expenses for Rs.28,19,570/- and allowed indexed cost of acquisition of land at Rs.30,35,53,290/ adopting guidelinevalue as on 1988 at Rs.684 per sq. ft. (43,339 sq. ft. x Rs.684 per sq. ft. x 1024/100) based on Registered Valuer’s Report and has worked out LTCG at Rs.6,20 08,639/-.
2.1 During the assessment proceedings the AO issued notice u/s.133(6) to the SRO, Adyar and asked him to furnish guideline value of the land in question as on 01.04.1981. The SRO furnished the guideline value @ Rs.20,000/- per ground (2400 sq. ft.) which works out to Rs.8.33 per sq. ft. as on 01.04.1981. Based on this, the AO show caused to the assessee saying that why the cost of acquisition should not be arrived at based on the guideline value furnished by the SRO as on 01.02.1989. The assessee clarified before the AO that in 1975-77 there was no immediate public demand for land in Guindy Estate. As such, the Government has allotted the land to the assessee almost free, so that industries can develop and that is why the rate of land was at the rate of Rs.1.26 per sq.ft. During the period 1975-1980, the amenities and infrastructure development took place in the industrial area of Guindy and it is evident from the approved valuer’s report that the rate of land in 1975 was at Rs 1.26 per sq.ft. In 1975-80, development took place and therefore in 2015, the rate of land is at Rs.8,500/- per sq.ft. Increase in rate from 1975 to 2014 it is Rs.8,499/- per sq.ft. Therefore, average for 39 years (8499/39) increase is for Rs.217/- per year and therefore from 1975-1981 increase for 5 years works out to Rs.1085 per sq.ft. (217 x 5) and accordingly the Government approved valuer has adopted the land rate at Fair Market Value at the rate of Rs.684/- per sq.ft. is reasonable. Considering the indexed cost of acquisition of 1981, the value of the land would be at Rs.48,15,13,626/- as on 01.04.1981 (43339 sq. ft. x Rs.1085 x 1024/100). The AO found that the land has been registered in the name of the assessee M/ s. T.S. Hajee& Co. in the year 1989 and the guideline value supplied by the SRO for the period 01.04.1989 to 31.03.1990 was for Rs.2,50,000/- per ground which works out to Rs.104.16 per sq.ft. during the year 1989-90. Based on that the cost of acquisition was worked out for Rs.45,14,190/- (43,339 sq.ft. x Rs.104.16 per sq.ft.) and indexed cost of acquisition in the year 1989-90 worked out to Rs.2,68,75,178/- (Rs.45,14,190 x 1024/172) and accordingly the AO held that if the indexed cost of acquisition itself works out to Rs.2,68,75,178/- in the year 1989-90 then how come the cost of acquisition would be at Rs.30,35,53,290/- (43,339 sq.ft. x Rs.684 per sq.ft. x 1024 /100) during the year 1981-82 and therefore AO held that the assessee adopting the value of land at the rate Rs.684/- per sq. ft. as on 1981 is unreasonable and not justifiable. Thus, based on this finding the AO calculated sale consideration by adopting guideline value of the property u/s.50C of the Act at Rs.36,83,81,500/- (43,339 sq. ft. x Rs.8500/- per sq. ft.) allowed selling and legal expenses for Rs.28,19,570/- and allowed indexed cost of acquisition of land at Rs.36,98,258/- adopting guideline value