Fair market value for capital gains turns on comparable sales, property advantages and tenancy; claimed valuation exceeds supporting evidence

Determining the fair market value of property as on 1 April 1981 is material for computing long-term capital gains under the Income-tax Act, 1961. The valuation analysis considers comparable sale instances, the property's superior location and size, and the fact that the comparable property was tenanted. The material indicates that the comparable instance supported a value above Rs. 100 per sq. ft., but did not substantiate the claimed value of Rs. 250 per sq. ft. The discussed valuation adopts Rs. 200 per sq. ft. as the reasonable fair market value for capital-gains computation.

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Issues: Whether the fair market value of the property as on 1 April 1981, for computing long-term capital gains, should be adopted at Rs. 250 per sq. ft. as claimed by the assessee or at a different reasonable value.

Analysis: The assessment under Section 143(3) of the Income-tax Act, 1961 involved determination of the property's fair market value as on 1 April 1981. Comparable sale instances, the property's superior location and size, and the fact that the comparable property was tenanted were relevant to valuation. The comparable instance supported a value higher than Rs. 100 per sq. ft., but the material did not justify adopting the assessee's claimed value of Rs. 250 per sq. ft.

Conclusion: The fair market value was directed to be adopted at Rs. 200 per sq. ft. as on 1 April 1981 for computing capital gains.

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