TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 644
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.... assessee company case was selected for scrutiny by the Revenue for framing assessment u/s 143(3) read with Section 143(2) of the Act. The assessee company made investments in stocks and shares and mutual funds. As per the AO , Dividend income and long term capital gain from these investments is exempt from income tax . The assessee company earned Dividend of Rs. 2,32,66,616/- from the investments which was claimed exempt from Income Tax . As per the AO the direct and indirect expense incurred and attributable to such investments are to be disallowed. The assessee company was asked by the AO to quantify such disallowance in accordance with CBDT circular . The assessee company submitted that the CBDT circular is not applicable to the assessment year under consideration . The assessee company submitted computation of expenses attributable to investment activities as per CBDT circular. The amount of expenses quantified by the assessee company amounting to Rs. 42,02,922/- were disallowed u/s 14A of the Act by the AO. On appeal before the CIT(A) against the orders of assessment dated 22.08.2008 passed by the AO u/s 143(3) of the Act read with Section 142(2A) of the Act , the assessee co....
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.... administrative expenses while for interest the assessee company submitted that it has incurred interest expenditure of Rs. 9.05 lacs on the cash credit facilities which facilities are utilized for meeting working capital requirements and hence no allocation of such interest expenses towards disallowance u/s 14A of the Act can be made. The CIT(A) rejected the contentions of the assessee company and held that both borrowed and own funds are utilized by the assessee company for making investments which is made out of common pool of funds and the AO is justified in making disallowance under Rule 8D(1) of Income Tax Rules,1962 read with Section 14A of the Act as rule 8D(1) of Income Tax Rules, 1962 is retrospective as per decision in the case of Daga Capital Management (supra). 4.Aggrieved by the orders of the CIT(A), the assessee company is in appeal before the Tribunal. 5. Before us, the assessee company submitted that the issue relating to the applicability of Rule 8D of Income Tax Rules, 1962 has been decided by the Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. DCIT (2010) 328 ITR 81 (Bom.) wherein it was held by Hon'ble Bombay High Court that Rule 8D....
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....nsel of the assessee company that the above ground has become infructous as the CIT(A) has already passed orders dated 30.03.2010 u/s 154 of the Act by the CIT(A) amending the appellate order dated 26.05.2009. The assessee company submitted that its grievance is duly redressed by the afore-stated orders dated 30.03.2010 passed u/s 154 of the Act by the CIT(A) and this ground may be dismissed as infructous. The Ld. DR relied upon the orders of the authorities below. We have considered the rival contentions and perused the material on record and we hold that the ground no 2 has become infructous as per statement of the Ld. Counsel of the assessee company as the CIT(A) has already granted relief to the assessee company vide orders dated 30.03.2010 u/s 154 of the Act by the CIT(A) amending the appellate order dated 26.05.2009 and hence this ground is dismissed as infructous. We order accordingly. 9. Ground No. 3 relates to the upholding of disallowance of Rs. 78,700/- incurred by the assessee company treating the same as capital expenditure as against revenue expenditure claimed by the assessee company 10. The A.O. observed that the assessee company has claimed revenue expenditure to....
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....,700/-are revenue in nature to controvert the findings of the CIT(A). In our opinion, these expenditure of Rs. 78,700/- are capital expenditure incurred by the assessee company and has rightly been disallowed by the A.O and sustained by the CIT(A). There is no infirmity in the order of the CIT(A) and the findings of the CIT(A) does not require any interference from our side. This ground of appeal is accordingly dismissed. 15. Ground No. 4 relates to ad-hoc disallowance of Rs. 23,22,920/- i.e. 5% out of provision for expenses of Rs. 4,64,58,410/- . As a practice, the assessee company creates ad-hoc provisions for expenses at the year end which are reversed on the first day of next financial year. The assessee company was asked to explain the details of the provisions of expenses of Rs. 4,64,58,410/- created on 31/03/2005 and actual expenditure incurred by the assessee company against the afore-stated provisions. The assessee company has not deducted TDS on these provisions as in the opinion of the assessee company TDS is not applicable to provisions because payees are not identified and amount are not ascertained with certainty. The assessee company relied upon CBDT notification no....
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....antiate its contentions. The assessee company counsel has stated before us that similar addition in the made in the subsequent year i.e. assessment year 2006-07 which has led to double addition. The AO shall consider the claim of the assessee company for both the years i.e. assessment year 2005-06 and 2006-07 with respect to the assessment records and books of accounts maintained by the assessee company to ensure that no prejudice is caused to the assessee company due to double addition of the same amount leading to double taxation and at the same time the AO shall also protect the interest of revenue after verifying the claim of Rs. 4,64,58,410/- towards provision for expenses debited to the Profit and Loss Account during the assessment year 2005-06 and claimed as revenue expenditure vis-à-vis the actual expenditure incurred by the assessee company against this provision for expenses of Rs. 4,64,58,410/-. The assessee company shall be given opportunity of hearing in accordance with the principles of natural justice and the assessee company shall be allowed to produce relevant evidence in its defense to justify and substantiate its claim of provision for expenses of Rs. 4,64....
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.... on the basis of the valuation report dated 11/11/2004 issued by a government approved registered valuer , Dr. Roshan H. Namavati valuing the said property on 08th November 2004 using land residual technique method. The said registered valuer valued the land and building at total value of Rs. 56,86,38,040/- whereby land value was considered at Rs. 30,94,85,276/- while building value was considered at Rs. 13,09,91,820/- and the builders profit at Rs. 12,81,58,944/- using land residual technique method. It was observed by the AO that in preparing the valuation report the aforestated government appoved registered valuer has mentioned various factors in the report including the rate for 2004 as per stamp duty ready reckoner for Mumbai. It was observed by the AO that the ready reckoner rate adopted is for G ward subzone 17/121 on page 77 of ready reckoner which is Rs. 71,000/- per square meter of commercial building for the year 2004. The government approved registered valuer also considered two other properties at their selling rate of Rs. 7481 per sq. ft. and Rs. 4329/- per square feet which were transferred/sold on May 2000 and December 2001 respectively in his valuation report date....
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....f land as given in the stamp duty ready reckoner for the year 2004 for plot of the assessee which in developed land in sub-zone 17/121 of 2004 stamp duty ready reckoner is Rs. 24,400/- per square meter. The AO referred to Section 50C of the Act and stated that the full value of consideration for the land transferred can be determined on the basis of valuation of the land as per stamp valuation authority for the purposes of Section 48 of the Act to compute capital gain as per Act and in the instant case, the stamp duty rate of land is Rs. 24,400/- per square meter in sub-zone 17/121 which can be adopted .Thus, the AO adopted the 2004 stamp duty ready reckoner rate of the fully developed land as the correct value of the land to determine the full value of consideration received by the assessee company for transfer of the land and hence the value of land computed after considering FSI of 2.35 used on the land computed value of land at Rs. 26,28,36,812/- and balance consideration of Rs. 35,46,02,813/- was adopted for consideration for building and rest Rs. 25,60,375/- was considered for accessories like lift and AC's .Thus, the AO used the building residual technique method to assign s....
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....e for zone 3A which contained the same description of location of property as per zone 17/121 of 2004 ready reckoner by which the total value of land transferred as on 01/04/1981 is Rs. 1,38,15,664/-. The assessee company submitted before the AO that the value of vacant land in the 1981 ready reckoner is not applicable to its case rather the value of the property along with land is applicable as the land was not vacant land as on 01/04/1981. The assessee company submitted that value of property as mentioned in the ready reckoner is Rs. 1000/- psf whereas the valuer has adopted the rate of Rs. 735/- psf. The AO observed that rate as per 1981 ready reckoner is Rs. 880 psf for office premises and not Rs. 1000 psf as mentioned by the assessee company and the rate of Rs. 1000 psf is for shops and commercial area while in this instant case it is the sale of office and not a shop. Thus, the AO due to following reasons held that the valuation report as submitted by the assessee is not acceptable: a) Reference to ASAVARI building is not applicable in this case. b) The assessee has not followed the method of valuation mentioned in the stamp duty ready reckoner for 01/04/1981. c) Th....
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....t (psf) and another admeasuring 462 sq. feet in December 2001 @ Rs. 4329 psf both located at Prabhadevi,Mumbai ) and the ready reckoner rate for office for the year 2004 for G Ward sub-zone 17/121 which was Rs. 71000/- per square meter i.e. Rs. 6596 psf. The value so arrived at by averaging the three rates was Rs. 5520 psf after allowing quantity allowance of 10%. The apportionment of the fair market value was done by the said registered valuer as under : Base Rate Rs.5520/- Less Builder Profit@20% Rs.1104/- Cost of Construction Rs.1750/- Rs.2854/- Value of Land Rs.2666/- psft Based on the above, the said registered valuer worked out the Fair Market value with depreciation in his valuation report dated 11.11.2004 valuing the property as on 08th November 2004 as under: 1. Land Component 116086 sqft area X Rs. 2666 Rs.30,94,85,276/- 2. Construction: a) Building = 116086X1750 Rs.20,31,50,500/- b) Accessories-depreciated cost Rs. 9,75,000/- Rs.20,41,26,000/- Less: Depreciation on main building = 116086X 630 Rs. 7,31,34,180/- Rs.13,09,91,820/- 3. Rs.12,81,58,9....
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....50/- Rs.2,62,75,430/- 3. Builders Profit @20% Rs.1,70,64,642/- Total Rs.8,26,77,140/- The assessee company allocated the builder profit proportionately to the value of the land which then work out the value of land as on 01/04/1981 at Rs. 4,95,67,929/-. The AO rejected both the valuation report given by the registered valuer for the reasons cited in the assessment orders which are detailed in the preceding para's and are not repeated for the sake of brevity. The assessee company submitted before the CIT(A) that the report of the registered valuer is rejected without making statutory reference to the departmental valuation officer(DVO) and instead the valuations are estimated by the AO himself who is not a technical expert and the bifurcation of the land and building were disturbed by the AO. The assessee company submitted that Section 55A of the Act stipulate that it is mandatory on the part of the AO to refer to DVO for valuation of the property if the AO does not agree with the report of registered valuer submitted by the taxpayer . The assessee company submitted that in such a situation if no reference is made to DVO , then the valuation r....
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....d the same : " Above rates are adopted for valuing the property for collecting the stamp duty amount by the state government. Hence in our opinion the same values could be reasonably relied upon with suitable modifications for valuing the property in Mumbai as on 01/04/1981 for capital gain tax purpose. In order to work out capital gain tax, on sale of property acquired before 01/04/1981 , assessee has an option to take the purchase value of that immovable property or value as on 01/04/1981. This value is accepted as acquisition cost and indexing is allowed on this value for working out capital gain tax. If the assessee opts for the purchase value, there is no problem, but in case he prefers the valuation as on 01/04/1981 , which is normally the case, then he has to get a report from the Government Registered Valuer. On the basis of Government Registered Valuer's report he works out the tax amount and pays the capital gains tax. Registered valuers can adopt above values subject to valuation factors mentioned in this book along with their judgment and observations to arrive at just and fair value for capital gain purpose. The rate quoted will differ from structure to stru....
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....ning to the property is "non vacant" land . The assessee company also submitted that the AO erred while valuing the property in 2004 as the AO has adopted the building residual technique and for valuing the same property in 1981, the AO has adopted the value of land by taking ready reckoner rates of 1981 whereby the rate adopted is Rs. 280 psf while the same also is based on FSI of 1.33 while the FSI is 2.35 and the rate will then also comes to Rs. 494.73 psf. The assessee company submitted that the correct basis of valuation should be land residual technique method for assigning value to land and building seperately. The assessee company also rebutted the allegations as contained in the assessment order w.r.t. valuation of November 2004 as under: 1. Reference used in valuation report are 4 to 5 years old - The assessee company submitted that the same are admissible in valuation as well as evidence. Reliance placed by the assessee company on Collector of Raigarh's case A.1964 MP 196 and Gundappa's case 1996 A IHC 502. 2. Reference properties in valuation report are small in size- the assessee company submitted that quantity allowance of 10% is given by the valuer while computin....
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....rrect as the valuation book provides rate of land considering FSI at 1.33 while the assessee company has utilized FSI of 2.35. This need to be done to arrive at correct FMV as on 01/04/1981. The AO itself applied FSI of 2.35 for computing FMV on the date of transfer. 4. The valuer has considered the land area equal to the constructed area- The assessee company submitted that constructed area is plot of area multiplied by the FSI utilized. The area of the plot of the land is 5484.22 square yards and FSI utilized is 2.35 and hence constructed area is 12898.50 square yards or 116086.52 sq feet. 5. The rate mentioned by the assessee company in letter dated 19.08.2008 was not correct- the assessee company submitted that no adequate opportunity was given to the assessee company to explain the same. 6. The correct depreciation rate as provided in the valuation book is not adopted by the registered valuer- The assessee company submitted that the registered valuer has adopted the rate based on quality of construction. 7. The cost of construction of the building as per valuation book is Rs. 80 per square feet as on 01/04/1981 while the valuation report , the cost of construction ....
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....having received Rs. 61,74,39,625/- as sales consideration (Rs.62,00,000/- less Rs. 25,60,375/- for accessories like AC installation , lifts etc) towards land and building. Since the sale consideration was higher then the FMV of the property of Rs. 32,54,51,930/- based on ready reckoner rates, the sales consideration between the land and building should be segregated as under as per method adopted by the AO : Land (Rs.617439625 X Rs. 262836812/Rs.325451930) Rs.49,86,47,719/- Building(balancing figure) Rs.11,87,91,906/- Sales Consideration Rs.61,74,39,625/- Based on the above , the CIT(A) held that the building residual technique adopted by the AO can seriously be doubted. The CIT(A) also find force in the argument of the assessee company (without prejudice) that the AO vide para 9 page 8 of the assessment order has stated that valuation of the property (i.e. office premises) as per ready reckoner of 2004 is to be computed as under: (Value of land + cost of construction ) X 1.2 Further at para 3 page 4 of the assessment order , the AO has admitted that the value of the property (land and building together) as per ready reckoner rate is Rs. 71,000 per square meters. F....
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....basis of valuation of the property adopted by the AO for bifurcation of the sales consideration of Rs. 62 crores and directed the AO to accept the valuation of land and building shown by the assessee company in the valuation report of the registered valuer. Similarly for valuation adopted as on 01/04/1981, the CIT(A) held that the AO erred in adopting the rate of Rs. 280 per square feet which is for the land falling under the category 'Vacant Land' while the NOC issued from the office of the Additional Collector & CA, ULC, Brihanmumbai wherein the ULC had declared that the entire land pertaining to the property is "non vacant" land and there is no surplus vacant land in the property. The CIT(A) held that correct method considering the facts of the assessee's company case will be land residual technique as adopted by the registered valuer in the valuation report. The CIT(A) also held that reference of ASAVARI building was considered in the valuation report to show that on Veer Savarkar Marg (i.e. Prabhadevi where the assessee property is situated ) the valuation cell of the Income Tax Department has accepted the rate of flat as on 01/04/1981 at Rs. 550 per square feet and thus ther....
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....h office Building thereon with aggregate built up area of 12898.50 square yards whereby the building constructed is on plot area of 3224 square yards(approx.) consisting of ground floor and three upper floors (total built up area 116086.52 square feet) and the open plot area is 2260 square yards situated at 414, Veer Savarkar Marg, Prabhadevi, Mumbai for a composite consideration of Rs. 62 crores for which the assessee company placed on record the sale agreement dated 15th March, 2005 for transfer of this property which is placed at page 1-15 of paper book. The Ld. Counsel also stated that two valuation reports both dated 11.11.2004 issued by a very reputed valuer Dr. Roshan H.Namavati,B.E.(Civil) Hons., PH.D., F.I.I.A, F.I.E, F.I.S.,Mumbai, who is a government approved registered valuer , valuing this entire property as on 08-11-2004 and 01-04-1981 are also placed by the assessee company in the paper book at page 16-29. The ld. Counsel with a view to establish high credentials of Dr. Roshan H. Namavati referred to the Hon'ble Supreme Court judgment in the case of Sumangalam Coop. Housing Society Ltd. v. Suo Motu , High Court of Gujarat and Ors. In civil appeal no 3986 of 2004 with....
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....es of computing the long term capital gains on land after allowing the benefit of cost inflation index . The Ld. Counsel relied upon the decision of the Tribunal in the case of Statesman Limited reported in 114 ITD 595(Kol.) to support the proposition that the bifurcation of the values between the land and building is to be done to compute capital gain chargeable to tax under the Act . The Ld. Counsel submitted that the assessee company relied upon the technical expert Dr Roshan H Namavati who is an government approved registered valuer who has submitted the detailed valuation report valuing the property both as on 08-11-2004 and 01-04-1981 after surveying and inspecting the property and based on the comparables being actual sale transactions entered into in the vicinity of the property under consideration as also the ready reckoner rates for stamp duty purposes announced by the Government of Maharashtra for the area where the property is located. The Ld. Counsel submitted that the AO has rejected the technical expert report's on the valuation of this property submitted by the assessee company on his whims and fancies and the AO has not even inspected the property in question. The ....
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....s section, Valuation Officer has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]" The ld. Counsel submitted that as per Section 55A(a) of the Act, the AO has to mandatorily refer the matter to DVO in case in the opinion of the AO the value so claimed by the taxpayer based on the estimate given in the valuation report prepared by government approved registered valuer is less than its fair market value ( provisions as applicable for assessment year 2005-06 under appeal ) as in this instant case the assesee company has duly relied upon the estimates made in the government approved registered valuer report to determine the bifurcation of the composite aggregate consideration of Rs. 62 crores mainly into land and building separately both on the date of sale i.e. 15th March 2005 and also on 01/04/1981. The ld counsel of the assessee company relied upon the decisions of the Tribunal- Agra Benches in Shri Pyare Mohan Mathur, HUF v. ITO reported in (2011) 12 taxmann.com 170(Agra), (2011) 46 SOT 315(Agra), CWT v. Raghunath Singh Thakur (2008) 304 ITR 268 (HP), Sharbati Devi Jhalani v. CWT 159 ITR 549(Delhi HC),Ashwin Vanaspati Industries v. CIT (20....
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....reckoner rates for 2004. Similarly, it was submitted by the ld Counsel that AO adopted ready reckoner rate of Rs. 280 per square feet for vacant land as on 1-4-1981 is also not correct as the land is not vacant as per certificates from the authorities submitted by the assessee company. The ld. Counsel submitted that the AO has not brought on record any cogent material/evidences such as comparables of other sales in vicinity etc to dislodge the technical expert report of government approved registered valuer who has given instances of comparable sales in the vicinity and made due modification to compare with the property under consideration as well as considered the ready reckoner rates announced by the Government of Maharashtra to arrive at the bifurcation of the values of land and building separately which should be accepted. Thus, the Ld. Counsel submitted that the valuation for land and building adopted by the AO should not be accepted rather the values as estimated by the government approved registered valuer should be accepted. The Ld. Counsel showed us the values as computed by the assessee company based on the report of government approved registered valuer as well the value....
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....ted 15th March 2005 included the sale consideration for land, office building constructed on the land and thirdly accessories such as lifts, AC's installations etc. in the said property. The sale agreement dated 15th March 2005 specifies only composite aggregate consideration for above three components being Rs. 62 crores without assigning any specific values to these three components. The dispute has arisen about the allocation/ bifurcation of the sale proceed mainly between the land and Building. It is also stated before us that this office property is owned by the assessee company for a very long period of time i.e. even prior to 01/04/1981 which is not disputed by Revenue and hence there arises a need to value the land as on 01/04/1981 to determine cost of acquisition in terms of Section 55 of the Act read with section 48 of the Act to compute long term capital gain on sale of land after allowing cost inflation index while the Building being part of block of asset on which the assessee company has claimed depreciation , the written down value of the Building shall be taken as cost in terms of Section 50 of the Act to compute short term capital gain without providing the benefit....
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....are meter i.e. Rs. 6596 psf. The value so arrived at by averaging the three rates was Rs. 5520 psf after allowing quantity allowance of 10%. The registered valuer has assigned the cost of construction of the building @ Rs. 1750 per square feet (psf) being costly building of superior quality as mentioned in the valuation report and then the residual value is assigned to the value of land. Thus, the said registered valuer adopted land residual technique method to apportion and assign the values to land and building separately. The apportionment of the fair market value was done as under by the registered valuer : Base Rate Rs.5520/- psf Less Builder Profit@20% Rs.1104/- Cost of Construction Rs.1750/- Rs.2854/- psf Value of Land Rs.2666/- psft Based on the above, the said registered valuer worked out the Fair Market value with depreciation as on 08-11-2004 in his valuation report as under: 1. Land Component 116086 sqft area X Rs. 2666 Rs.30,94,85,276/- 2. Construction: a)Building=116086X1750 Rs.20,31,50,500/- b)Accessories-depreciated cost Rs. 9,75,000/- Rs.20,41,26,000/- Less: Depreci....
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....in developed land in subzone 17/121 of 2004 stamp duty ready reckoner is Rs. 24,400/- per square meter. The AO referred to Section 50C of the Act and stated that the full value of consideration for the land transferred can be determined on the basis of valuation of the land as per stamp valuation authority for the purposes of Section 48 of the Act to compute capital gain as per the Act and in the instant case, the stamp duty rate of land is Rs. 24,400/- per square meter in sub-zone 17/121 which can be adopted .Thus, the AO adopted the 2004 stamp duty ready reckoner rate of the fully developed land as the correct value of the land to determine the full value of consideration received by the assessee company for transfer of the land and hence the value of land computed after considering FSI of 2.35 used on the land computed value of land at Rs. 26,28,36,812/- and balance residual consideration of Rs. 35,46,02,813/- was adopted for consideration for building and rest Rs. 25,60,375/- was considered for accessories like lift and AC's . Thus, the AO has adopted the building residual technique while the registered valuer adopted the land residual technique. We have observed that the asse....
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....r: Land Component Rs.3,93,37,068/- Building Rs.2,62,75,430/- Builder's Profit Rs.1,70,64,642/- Total Rs.8,62,77,140/- We have observed that the assessee company submitted that the basis for valuation by the registered valuer is the sale of two properties in the vicinity (one sold in December 1982 @ Rs. 1250 psf (after adjusting for cut back for time difference the rate adopted was Rs. 922 psf ) and another in 1981 @ Rs. 550 psf and multiplied with 1.5 times to arrive at rate for commercial premises which comes to Rs. 825 psf both located at Veer Savarkar Marg, Mahim,Mumbai and the ready reckoner rate for commercial premises for the year 1981 which was Rs. 720/- per square feet . The value so arrived at by averaging the three rates was Rs. 735/- psf after allowing quantity allowance of 10%. The apportionment of the fair market value was done as under by the registered valuer : Base Rate Rs.735/- Less Builder Profit@20% Rs.147/- Cost of Construction Rs.250/- Rs.397/- Value of Land Rs.338/- psf Based on the above, the registered valuer worked out the Fair Market value with depreciation as under: 1. Land Component 116086 ....
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....s not applicable to its case rather the value of the property along with land is applicable as the land is not vacant land as on 01/04.1981. We have observed that the AO due to following reasons held that the valuation report as submitted by the assessee is not acceptable: a) Reference to ASAVARI building is not applicable in this case. b) The assessee has not followed the method of valuation mentioned in the stamp duty ready reckoner for 01/04/1981. c) The stamp duty ready reckoner provides the rate of developed land as on 01/04/1981 duly factored for FSI. d) The valuation method adopted by the valuer has considered the land area equal to constructed area. e) The rate mentioned by the asssessee in its 19/08/2008 letter is not correct. We have observed that the assessee company also submitted that the reliance placed by the AO on the book titled "Indian Valuers Directory and Reference book incorporating market value of property in Mumbai as on 01st April 1981" by Mr Santosh Kumar & Mr. Sunit Gupta is misconceived as the AO has not appreciated the same : " Above rates are adopted for valuing the property for collecting the stamp duty amount by the state government....
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....ok should not be considered as final and binding. (d) That the valuer has considered two sales instances for computing FMV of the property as rates in the valuation book are not final and binding and these comparables are not doubted by the AO. (e) That the ld author has stated that the income tax department should have no objection if the valuation report is prepared based on rates given in the valuation book and that the valuation report is prepared on the basis of the rates given in the valuation book. We have observed that the assessee company also submitted that the AO erred in adopting the rate of Rs. 280 psf of 'vacant land' for computing the FMV as on 01/04/1981 from ready reckoner rates published by Government for zone 3-A which is not applicable to the property transferred by the assessee company as the property transferred is land and building both and not vacant plot of land. We have observed that the assessee company also submitted before the authorities below that NOC from the office of the Additional Collector & CA, ULC, Brihanmumbai wherein the ULC had declared that the entire land pertaining to the property is "non vacant" land . We have observed that the asses....
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....d that the registered valuer has adopted the rate based on quality of construction. 7. The cost of construction of the building as per valuation book is Rs. 80 per square feet as on 01/04/1981 while the valuation report , the cost of construction is Rs. 250 per square feet- The assessee company submitted that the cost of construction depends upon the quality of construction and if higher value is adopted by the assessee company as compared to ready reckoner rate , then the AO should have no objection as the value of building will be higher. We have observed that the AO rejected both the valuation report given by the government approved registered valuer for the reasons cited in the assessment orders which are detailed in the preceding para's and are not repeated for the sake of brevity. We have observed that the assessee company submitted that the report of the registered valuer is rejected without making statutory reference to the departmental valuation officer(DVO) and instead the valuations are estimated by the AO himself who is not a technical expert and the bifurcation of the land and building were disturbed by the AO. We have observed that the assessee company submitted ....
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....eterioration or obsolescence." We have observed that the assessee company submitted that its case does not fall within above parameters as laid down by the author as above to be covered under building residual technique method as adopted by the AO and the Revenue also has not brought on record any justification to support how the building residual technique is the most appropriate method for bifurcating the values between land and building. We have observed that the AO has not brought on record any cogent material/ evidences such as sales comparables in the vicinity etc. to establish and substantiate that the value assigned by the AO to land and building separately is to be accepted but merely ready reckoner rates for developed land is adopted to assign value to land and then the balance is treated as the value assigned to the Building for valuing as on date of sale in March 2005 while the AO has adopted the ready reckoner rates for vacant land while valuing the land as on 01/04/1981. Thus, no cogent material has been brought on record by the AO such as sales comparables in the vicinity etc. to demolish the valuation report of the said government approved registered valuer while....
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....s the value of the building . It is well established fact that the ready reckoner rate announced by the Government for stamp duty purposes cannot be considered as full value of consideration received/receivable by taxpayer as required to compute the capital gains as per the Act except as provided u/s 50C of the Act whereby the consideration received/receivable by the taxpayer is less than the stamp duty rates adopted by the government , then in that case the stamp duty rates shall be deemed to be full value of consideration received/ receivable by the taxpayer for computing capital gains which is not the case here as the sale consideration of Rs. 62 crores received by the assessee company has been accepted by the Revenue rather the dispute is as to how to bifurcate the sale consideration between the land and building separately to compute capital gains as per the Act and Section 50C of the Act does not provide how to bifurcate the sale consideration between the land and building to compute capital gains as per the Act. . The method of valuation of land and building seperately adopted by AO of building residual technique is not giving appropriate results in this peculiar case keepin....
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....square meters and the depreciation for a 32 year old building should be taken @40%. Accordingly the cost of construction after depreciation works to Rs. 3900 per square meters. Considering this, the CIT(A) held that the value of land would be as under: Value of the Property as per the Ready Reckoner(Rs per sq. meters) Rs.71,000 Less: Builder's Profit @20%(per sq meters) Rs.14,200 Rs.56,800 Less: Cost of Construction(per square meters) Rs.3,900 Value of land Rs.52,900 On allocating builder profit in the ratio of principal values of land and building , the value of land and building per square meters would be as under: Value of Land including Builder profit(per sq mtrs) Rs.66,125 Value of Building including builder profit(per sq mtrs) Rs. 4,875 Total Rs71,000 Therefore, the AO should have segregated the sale consideration between land and building as under: Land (Rs.617439625 X Rs. 66125/Rs.71000) Rs.57,50,45,003/- Building(Rs.61,74,39,625 X Rs. 4875/Rs.71000) Rs.4,23,94,622/- Sales Consideration Rs.61,74,39,625/- However, the values adopted by the assessee company in the return of income filed with the revenue ....