TaxTMI 
TaxTMI 
2010 (7) TMI 832
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....9,900 as declared by the appellant. (b)The learned CIT(A) erred in confirming the cost of acquisition of the showroom as on 1-4-1981 at Rs. 18,48,000 instead of Rs. 24,36,000 as disclosed by the appellant. (c)The learned CIT(A) erred in confirming the values adopted by the valuation officer (Rs. 740 per sq.ft.) as against the value adopted by the appellant at the rate of Rs. 1,000 per sq.ft., which was substantiated with sale instances of property in adjacent localities. (3)The learned CIT(A) erred in disallowing the following expenses :- uDividing wall expenses Rs. 1,50,000 uElectricity & water meters transfer charges Rs. 94,000 uValuation Report charges of Rs. 49,400 as the cost of acquisition/improvement under section 48 which was incurred wholly and exclusively in connection with transfer of the showroom. (4)The Assessing Officer erred in not allowing exemption under section 54EC towards investment made in Rural Electricity Bonds. The Assessing Officer erred in not considering that the appellant had made the investments but belatedly and since section 54EC is an exemption provision, the same should be construed liberally. He erred to take into consideration....
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....ere is no dispute that the cost of acquisition of the property has to be worked out by adopting FMV of the property as on 1-4-1981 and applying indexation on such value. The Assessing Officer, however, was of the view that the FMV of the property as on 1-4-1981 adopted by the assessee based on the estimate by the Government registered valuer was high and he therefore referred the matter to the Valuation Officer of the Department (DVO) for determination of FMV as on 1-4-1981. The DVO estimated the FMV of the property as on 1-4-1981 at Rs. 18,41,000. The assessee had raised objection to the valuation of the FMV as on 1-4-1981 as adopted by DVO. On consideration of the above objection, the Assessing Officer was of the opinion that valuation as given by the DVO has to be accepted since it met with all the objections raised by the assessee with regard to the valuation as done by the DVO. 5. It can be seen from the computation of the capital gain as done by the assessee that the assessee had claimed as expenses in connection with the transfer of the capital asset a sum of Rs. 1,50,000 towards dividing wall expenses, electricity and water meters charges of Rs. 94,000 and sum of Rs. 46,....
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.... invoked only in any other case, namely, when the value of the asset claimed by the assessee is not supported by an estimate made by a RV. The assessees thus submitted that on the facts of the present case, clause (b) of section 55A of the Act also cannot be invoked. Therefore, there should be no question of having recourse to sub-clause (ii) of clause (b) of section 55A of the Act. The appellant has relied on Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31 1 (Guj.), CIT v. Daulal Mohta (HUF) [IT Appeal No. 1031 (Bom.) of 2008, dated 22-9-2008], ITO v. Smt. Lalitaben B. Kapadia [2008] 115 TTJ 9382 (Mum.) (URO), Sajjankumar M. Harlalka v. Jt. CIT [2006] 100 ITD 418 (Mum.). Further reference can be made under section 55A(b)(ii ) by the Assessing Officer if he is of the opinion having regard to the nature of asset and other relevant circumstances that it is necessary to do so. It is obligatory on the part of the Assessing Officer to record such other relevant circumstances on the basis of which he forms such opinion in order to refer the matter to the valuation cell under said clause. The appellant further relied on CIT v. Hotel Joshi [2000] 242 ITR 478 3 (Raj.), Smt. Krishnabai Tingr....
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....the tenants handed over the possession back to the above-mentioned assessees, there were certain outstanding payments due to BEST which had to be cleared by the assessee in order to make the sale effective. These expenses are incidental to the transfer of the said showrooms and should therefore be allowed as a deduction from LTCG. (iii) Valuation expenses :-The assessee appointed a RV, Kanti Kamersey & Co., in order to determining the FMV of the premises as on 1-4-1981 and on the current date, the expenses/fees of which amounted to Rs. 31,400 and Rs. 15,000 respectively. These expenditures incurred were necessary in order to compute the correct value of the long-term capital gain and therefore is incidental to the transfer of the above- mentioned showroom.'' 9. On the issue of validity of reference of valuation of the Assessing Officer to the DVO under section 55A(a) and 55A(b)(ii ) learned CIT(A) held as follows :- "As regards the validity of the reference to the valuation officer, the Departmental Circular No. 96, dated 25-11-1972 clarifies the position. Section 55A(b)(ii ) allows the Assessing Officer to make a reference to the valuation officer. The case laws cited by ....
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....ribunal. 12. We have heard the rival submissions. As far as Ground No. 1 is concerned, we are of the view that the reference to the DVO was invalid. On this issue, learned DR relied on the order of learned CIT(A). While learned counsel for the assessee relied on the decisions which were cited before learned CIT(A) and further drew our attention to the decision of Hon'ble Bombay High Court in the case of Daulal Mohta ( supra), wherein, Hon'ble Bombay High Court has approved the decision of Hon'ble ITAT Mumbai, Third Member decision in the case of Ms. Rubab M. Kazerani (supra) and the Hon'ble ITAT Pune decision in the case of Smt. Krishnabai Tingre (supra). Further reference was also made to the decision of Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra). It has to be mentioned here that there is a decision of ITAT Mumbai Bench in the case of Vijaykumar M. Shah v. Dy. Addl. CIT [2009] 29 SOT 338; wherein a contrary view was taken. In the said decision, Mumbai Bench of the Tribunal had taken a view that the Assessing Officer is empowered to make reference under sub-clause (ii) of section 55A(b), even in cases where FMV claimed by the assessee is higher than....
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....sue in favour of the assessee, we refrain from undertaking this academic exercise of disposing this case on merits." 5.In view therefore is no merit in the appeal. Appeal stands dismissed." 13. The Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra) has held on this issue as follows :- "Under clause (a) of section 55A the Assessing Officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the registered valuer, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause (b) of section 55A, the Assessing Officer has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference. As can be seen from the communication dated nil from DVO to the petitioner insofar as the fair market value of t....
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....urpose. They cannot be said to be expenditure incurred wholly and exclusively in connection with sale of the capital asset. To the extent of disallowance of valuation expenses, order of learned CIT(A) is confirmed. Thus, ground No. 3 raised by the assessees is partly allowed. 17. As far as ground No. 4 raised by the assessees in their appeals are concerned, the facts are as follows :- 18. We have already seen that the assessees sold property on 25-10-2005. Section 54EC(1) and Explanations ( b) and (ba ) of the Act reads as follows :- "54EC(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a)if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall....