TaxTMI 
TaxTMI 
2011 (3) TMI 511
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....rred in deleting the addition made on account of cost of construction of flats of tenants without taking into account the fact that assessee has not realized the sale consideration on the area given to the tenants. 3. On the facts and in the circumstances of the case and in law, the ld. CIT[A] erred in directing the AO to allow the claim of the assessee of Rs.15,00,000/- made u/s.54F without appreciating the fact that assessee is having right to retain area upto 51.33 sq.mt. only as against the area of 71.72 s.mt. retained by the assessee. 2. Ground No.1: After hearing both the parties, we find that the dispute raised is in respect to adoption of fair market value as on 1-4-1981. During the assessment proceedings AO noticed that a....
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....fficer estimated F.MV at Rs.86,250, 15% of the sale cost price of Rs.75,000 without giving any reason whatsoever. The Assessing Officer is not competent to determine the FMV of the property as it requires expertise. Ideally he should have referred the matter to departmental valuation officers or should have adopted the value as per the ready reckoner. In the instant case the registered value of the appellant took the value as per ready reckoner and since the property was occupied with the tenancy, 20% of the value was discounted as per the B.M.C. norms to derive at the cost of the plot. Since the Appellant adopted the value as per BMC rate, the long term capital gains worked by appellant is correct and addition made by the AO is deleted." &....
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....uery by the Bench, Ld.counsel of the assessee admitted that none of the tenant had left the property as on 1-4-1981, therefore, there was hardly any chance of appreciation. The only appreciation possible was that whatever discount assessee got could be added to the fair market value. It seems the valuation has been done on potential area, but such potential area could not come into the picture unless tenants left the property. At the same time, normally, there is a provision in the Act for reference to the DVO because AO has merely added 15% to the purchase cost for determining the fair value which may also not be correct. Further no purpose would be served if he matter is set aside for reference to the DVO because the valuation date is alm....
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....ts are provided flats, free of cost. To determine the profit of the project the total sale consideration and total construction cost should be considered. A.O. is not correct in disallowing cost of construction of flats pertaining to tenants on the ground that no sale consideration was received. The fact that appellant incurred expenditure for construction these flats and incurring such expenditure was must, without which appellant would not have completed the project. In view of this the A.O is directed to allow this expenditure and addition made of Rs.64,72,000 is hereby deleted." 9. Before us, Ld.DR strongly supported the order of the AO. 10. On the other hand, Ld.counsel of the assessee supported the order of the CIT(A).....