Fair market value must be tested through DVO reference when valuer's report is disputed in capital gains computation.

Guideline value is only a relevant indicator of fair market value and is not conclusive for capital gains computation. Where the assessee relies on a registered valuer's report and the valuation is disputed, the proper course is reference to the DVO; the valuation adopted by the lower authorities was therefore not sustained as the final basis, and the matter was remitted for recomputation. Separately, capital gains could not be denied merely because the property was mortgaged to secure borrowings of group concerns, since the sale proceeds remained attributable to the assessee's property and the charging provision applied to the full consideration realised, subject to admissible deductions.

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Issues: (i) Whether the fair market value of the land for capital gains purposes could be accepted on the basis of the registered valuer's report instead of the guideline value, and whether the matter required reference to the DVO; and (ii) whether capital gains could be denied on the footing that the assessee had mortgaged the property as security for borrowings of group concerns and had not directly received the sale consideration.

Issue (i): Whether the fair market value of the land for capital gains purposes could be accepted on the basis of the registered valuer's report instead of the guideline value, and whether the matter required reference to the DVO.

Analysis: Guideline value is only a relevant indicator and is not conclusive of market value. Where an assessee relies on a registered valuer's report and the Assessing Officer is not satisfied with the valuation, the proper course is to refer the matter to the DVO for determination of the fair market value. The valuation adopted by the lower authorities was therefore not sustained as a final basis for computation.

Conclusion: The issue was remitted to the Assessing Officer to make a reference to the DVO and recompute in accordance with law; the ground was allowed for statistical purposes.

Issue (ii): Whether capital gains could be denied on the footing that the assessee had mortgaged the property as security for borrowings of group concerns and had not directly received the sale consideration.

Analysis: Where the assessee itself creates a mortgage over its property and the property is sold to discharge the debt, the sale consideration is attributable to the assessee's property and capital gains arise on the full price realised after admissible deductions. The fact that the borrowing was connected with group concerns did not negate receipt of consideration in law or take the transaction outside the charging provision.

Conclusion: The contention was rejected and the levy of capital gains was upheld.

Final Conclusion: The valuation issue was sent back for fresh determination by the Assessing Officer through DVO reference, while the challenge to capital gains on the mortgage-security transaction failed.

Ratio Decidendi: Guideline value is not conclusive of fair market value, and when a registered valuer's report is disputed the valuation should be tested through reference to the DVO; separately, sale proceeds of mortgaged property sold to realise the debt remain attributable to the assessee for capital gains computation.

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