2007 (12) TMI 239 - AT - Income Tax

Tribunal affirms fair market value for capital gain calculation, stresses evidence-based valuation

The Tribunal upheld the assessee's fair market value of Rs. 11.50 lakhs per acre as on 1-4-1981 for computing capital gain, dismissing the revenue's ... Cost Of Acquisition Issues involved:The judgment involves the computation of capital gain arising from the sale of land by co-owners, focusing on the adoption of fair market value for cost of acquisition u/s 55(2)(b) of the Income-tax Act, 1961.Issue 1: Computation of Capital GainThe dispute revolves around the cost of acquisition of the land for computing capital gain/loss from its sale. The assessee declared a loss based on a cost of acquisition of Rs. 11,50,000 per acre, while the Assessing Officer adopted a lower rate of Rs. 90,000 per acre. The primary contention is the adoption of fair market value as on 1-4-1981 for cost of acquisition.Issue 2: Fair Market Value DeterminationThe assessee opted to consider the fair market value of the land as on 1-4-1981 at Rs. 11.50 lakhs per acre. The Assessing Officer, however, valued it at Rs. 90,000 per acre. The dispute centers on the evidence supporting the fair market value adopted by the assessee, including an agreement to sell and a registered valuer's report, compared to the Assessing Officer's valuation based on instances from the State Revenue Department.Judgment:The Tribunal upheld the assessee's fair market value of Rs. 11.50 lakhs per acre as on 1-4-1981 for computing capital gain, dismissing the revenue's appeal. The Tribunal found the evidence presented by the assessee, including the agreement to sell and the registered valuer's report, to be substantial and justifying the fair market value adopted. In contrast, the Assessing Officer's valuation lacked factual support and failed to provide a valid reason for disregarding the assessee's evidence. The Tribunal emphasized the importance of fair market value determination for accurate computation of capital gain, highlighting the need for evidence-based valuation in such cases.Separate Judgment:No separate judgment was delivered by the judges in this case.