Tribunal allows deduction of employees' contribution within grace period, favors fair market value for capital gains

The tribunal upheld the CIT(A)'s decision allowing the deduction of employees' contribution within the grace period, following the rule favoring the subject in conflicting statutory interpretations among different High Courts. Regarding the determination of fair market value for capital gains, the tribunal agreed that the assessee could adopt the fair market value as on 1-4-1981, but remanded the issue to the Assessing Officer for further examination. The assessee was granted the benefit of claiming the fair market value for computing capital gains, subject to the Assessing Officer's review.

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Issues involved:
The judgment involves issues related to the deduction of employees' contribution under section 36(1)(va) of the IT Act and the determination of fair market value of property as on 1-4-1981 for computing capital gains for Assessment Years 2002-03 and 2003-04.

Issue 1: Deduction of Employees' Contribution
- The revenue contended that the CIT(A) erred in allowing the deduction of employees' contribution within the grace period as per provident fund and employees' state insurance laws.
- The judgment cited decisions of Madras High Court and Shree Ganapathy Mills Company Ltd. supporting that payments within the grace period should be considered paid within the due date as defined in section 36(1)(va) of the Act.
- Despite the Calcutta High Court's judgment favoring the department, the tribunal upheld the CIT(A)'s decision based on the rule of interpretation favoring the subject in case of conflicting statutory interpretations among different High Courts.

Issue 2: Determination of Fair Market Value for Capital Gains
- The assessee sought to substitute the fair market value of property as on 1-4-1981 for the cost of acquisition to compute capital gains.
- The Assessing Officer argued that the assessee had already exercised the option in favor of the original cost of acquisition and was barred from changing it to fair market value.
- The CIT(A) held that the assessee was entitled to adopt the fair market value as on 1-4-1981 under section 55(2)(b) and directed the Assessing Officer to compute capital gains accordingly.
- The tribunal agreed that the assessee had reserved the right to exercise the option in favor of fair market value once ascertained, and allowed the benefit of claiming the fair market value for computing capital gains.
- However, the tribunal accepted the plea to examine the claim on merits by the Assessing Officer, restoring the issue of fair market value to be decided after giving due opportunity to the assessee.

Separate Judgment by Judges:
No separate judgment was delivered by the judges in this case.

This summary highlights the key issues and detailed judgments related to the deduction of employees' contribution and the determination of fair market value for computing capital gains in the mentioned assessment years.

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