Tribunal Orders AO to Use FMV for Golf Links Property & Treat Panchsheel Park Rental as House Property Income.

The Tribunal allowed the appeal, directing the AO to adopt the FMV as determined by the Registered Valuer for the property at 47, Golf Links, New Delhi. It instructed the use of the cost inflation index for the financial year 1981-82 for calculating the indexed cost of acquisition. Additionally, the Tribunal ruled that the rental income from the Panchsheel Park property should be assessed under the head 'House property', allowing for statutory deductions, as opposed to 'Other sources', based on the principle of consistency in past assessments.

---

---

Issues Involved:
1. Determination of fair market value of property at 47, Golf Links, New Delhi as on 1st April, 1981.
2. Application of the correct cost inflation index for determining indexed cost of acquisition.
3. Assessment of rental income from property at Panchsheel Park, New Delhi under the head 'House property' or 'Other sources'.

Issue-wise Detailed Analysis:

1. Determination of Fair Market Value of Property at 47, Golf Links, New Delhi:
The assessee inherited a residential house property at 47, Golf Links, New Delhi, initially acquired by her father in 1958. Upon his demise, the property was inherited by the assessee's mother and subsequently by the assessee and her siblings. The assessee opted to substitute the fair market value (FMV) as on 1st April 1981 as the cost of acquisition, which was determined by a Registered Valuer at Rs. 73,60,975. The AO referred the valuation to the DVO under s. 55A of the IT Act, who estimated the FMV at Rs. 46,62,280. The CIT(A) averaged the two valuations, resulting in a cost of acquisition of Rs. 15,02,907 for the assessee's 1/4th share. The Tribunal found the reference to the DVO by the AO to be based on subjective and inadequate reasons and upheld the valuation by the Registered Valuer, directing the AO to adopt the value of Rs. 18,40,244 for the assessee's 1/4th share and compute the capital gains accordingly.

2. Application of the Correct Cost Inflation Index for Determining Indexed Cost of Acquisition:
The property in question was acquired by the assessee's mother in 1968. The AO applied the cost inflation index for the financial year 1999-2000, the year the assessee inherited the property. The Tribunal, however, held that the cost inflation index applicable to the financial year 1981-82 should be applied, as the period of holding by the previous owner (assessee's mother) should be included under s. 2(42A) of the IT Act. The Tribunal directed the AO to re-compute the capital gains by applying the cost inflation index of 100% applicable for the financial year 1981-82.

3. Assessment of Rental Income from Property at Panchsheel Park, New Delhi:
The assessee and her husband jointly constructed a residential building on a plot leased to her husband. The assessee incurred 1/3rd of the cost of construction. The AO assessed the rental income from the property under the head 'Other sources' instead of 'House property', as the land was registered in the name of the assessee's husband. The Tribunal noted that in past assessments, the rental income was consistently assessed under 'House property', and the assessee's 1/3rd share was recognized in wealth-tax assessments. Citing the principle of consistency and relevant case law, the Tribunal held that the assessee should be considered the 1/3rd owner of the property, and the rental income should be assessed under the head 'House property', allowing statutory deductions under s. 24 of the IT Act.

Conclusion:
The Tribunal allowed the appeal, directing the AO to adopt the FMV as determined by the Registered Valuer, apply the cost inflation index for the financial year 1981-82, and assess the rental income from the Panchsheel Park property under the head 'House property'.

---