Fair market value of office units must be based on actual sold area; common areas may influence valuation but are not part of sale area.
In rectifying its earlier order under section 254(2), the ITAT Jaipur held that common portions in the building could not be added to the area of office units actually sold for computing fair market value unless the sale deed so provided. The area stated in the sale deed was the actual area sold, while common area could be considered only as a positive valuation factor because it supported ingress, egress and common use. The fair market value was therefore required to be recomputed on the basis of the actual sold area, with common area affecting valuation but not treated as part of the sale area. This gave partial relief to the assessee.
Issues: Whether, while rectifying the earlier order under section 254(2), the area of common portions in offices sold by the assessee could be added to the area sold for determining fair market value.
Analysis: The earlier order had already directed fresh determination of fair market value on correct facts. On the material noted, the offices sold were the units described in the sale deed, and the area mentioned in the sale deed represented the actual area sold. The common area in the building, though available for ingress, egress and common use, could not be treated as part of the area sold. At the same time, such common area could be taken into account as a relevant positive factor while valuing the offices.
Conclusion: The addition of common area to the sold area was not justified; the fair market value must be recomputed on the basis of the actual area sold, with common area considered only as a valuation factor, not as sold area.
Final Conclusion: The rectification was allowed to the extent of modifying the earlier direction on valuation, resulting in partial relief to the assessee.
Ratio Decidendi: In determining fair market value of immovable property sold as specific office units, common areas may influence valuation but cannot be counted as part of the area actually sold unless the sale deed so provides.
TaxTMI 
AI Drafter ✕
TaxTMI 
