TaxTMI 
TaxTMI 
2016 (5) TMI 623
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....ce. 2. First, we take up the cross-appeals for AY 2008-09 i.e. Revenue's appeal in ITA No.2602/Ahd/2012 and Assessee's appeal in ITA No.2624/Ahd/2012. The Revenue and the Assessee have raised the following grounds of appeal:- [a] Revenue's appeal:- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the AO to adopt the value of Rs.550/- per sq.mrs as Fair Market Value as on 01.04.1981 of the land sold by the assessee by adopting sales instance of M/s.Alembic Ltd. instead of adopting the sales instance of assessee's group concern namely M/s.Ambalal Sarabhai Enterprise Ltdf. Wherein the FMV as on 01.04.1981 was adopted at Rs.250 per sq.mtrs. and which was located in the same vicinity. 2. On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. [b] Assessee's appeal:- 1. FMV as at 1.4.1981, for the purpose of computation of long term capital gains on transfer of factory land, be directed to be adopted as per v....
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....on the basis of conjectures and surmises and, therefore, the same cannot be confirmed. He submitted that before the ld.CIT(A), it was argued that if the valuation as given by the assessee and the AO has given finding that the same was not acceptable and no other basis was available. The ld.CIT(A) ought to have adopted the using the reverse indexation. The ld.counsel for the assessee submitted that the sale instances as considered by the AO elide to residential properties situated at 2-3 KMs away from the property of the assessee Therefore, the comparison of both the properties was not justified. In support of submissions placed reliance on the judgement of Hon'ble High Court of Gujarat rendered in the case of Deceaed Shantadevi Gaekwad vs. Dy.CIT reported at (2012) 22 taxman.com 30 (Guj.). 3.1. On the contrary, ld.Sr.DR supported the order of the AO and has taken through the valuation report as furnished by the assessee. He submitted that the Valuation Report as furnished by the assessee does not inspire confidence as valuer has not given any scientific basis and has estimated purely on the basis of conjectures. He further submitted that the case-laws as relied upon by the ld.co....
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....hat he has stated that the land is open plot of non-agricultural land having considerable frontage exposer towards 132 ft; wide road, which is fastly developing as Baroda City's Mall and Hyper Mart Hub. Thus the valuer is again taken into account the present condition of the locality around the land and not the situation as on 1.4.1981. It is a known fact that the Mall Culture stated in India only towards the end of 1990's and the situation of the area in which the land was situated was entirely different as on 1.4.1981. Thus, the valuation report submitted by the appellant cannot be relied upon. 4.2. The appellant has also relied upon the decision of third member in case of 3ahanganj Cold Storage v. ACIT reported at (1010) 133 TTJ (Agra) TM 278 for adopting reverse method of using cost inflation index. In this decision the Bench has held that in the absence of comparable instances, if the FMV adopted as on 1.4.1981 is lower than the value determined by using reverse cost inflation index, then the value adopted is acceptable. But this is not applicable in the present case, because the land is located in Baroda City and several sale instances of sale of land as on 1....
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.... basis for adopting a different rate by the ld.CIT(A) is that in the case of 3rd party, the Department has adopted a rate of Rs. 533 per sq.mt. After considering the totality of the facts of the case and material available on record, we are of the view that both the authorities below are not justified in adopting the rate as the assessee had furnished a report from an expert, i.e. Government Approved Valuer. The sale instances as considered by the AO are pertaining to residential properties and such valuation cannot be adopted in respect of the Industrial Land. The estimation of fair market value depends on various factors; namely, location of property, nature of property, usage of property and also future prospects of such property. As per the Government Valuer, the property has potential of appreciation and of commercial usages. The Revenue has not placed any material on record for rebutting this contention of the valuation. Therefore, after considering the totality of the facts and material available on record, it would be proper that an estimation of fair market value as on 01/04/1981 is to be made on the basis of material on record. The Valuer in earlier year, had adopted a hi....
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....24/Ahd/2012 for AY 2008-09 (assessee's appeal-supra). We have decided the issue of far market value of cost of acquisition of property @ Rs. 980/- per sq.meter as on 1.4.1981 in ITA No.2624/Ahd/2012. Since there is no change into the facts and circumstances of the present case, therefore taking a consistent view, we dismiss the ground of Revenue's appeal for this year. As a result, Revenue's appeal in ITA No.2602/Ahd/2012 for 2008-09 is dismissed. 6. Now, we take up the Revenue's appeal in ITA No.35/Ahd/2013 and Assessee's appeal in ITA 2786/Ahd/2012 for AY 2008-09. The following grounds have been raised by the respective parties:- [a] Assessee's appeal:- 1. Confirming disallowance of Rs. 1,31,940/- being interest on bonds issued to shareholders of Standard Pharmaceuticals Ltd. on amalgamation. 2. Erred in confirming adhoc disallowance of Rs. 2,74,391/- being 5% of other exp. And directors' telephone & vehicle exp. Of Rs. 6,65,001/-. 3. Erred in estimating FMV as at 01.041981 @ Rs. 550/- per sq.mtr for computing LTCG on sale of factory land, hence rejecting value adopted as per Valuation Report @ Rs. 2050/sq mtr. Alternatively, ld.CIT(A) ought....
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....were made in ITA No.2624/Ahd/2012. The ld.SR has also advanced the same arguments as were raised in ITA No.2624/Ahd/2012. 9. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. An identical has been decided by us in assessee's appeal (Synbiotics Ltd._in ITA No.2624/Ahd/2012 by observing as under:- "4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The only issue requires for our adjudication is what should be the correct valuation of property for the purpose of computation of capital gain as on 01/04/1981. The AO has adopted the value of 250 sq.per mtr on the basis of the sale instances related to residential areas situated 2 to 3 KMs away from the property in question. There is no dispute with regard to the fact that property in question. Industrial land which cannot be compared with the residential properties However, the ld.CIT(A) did not accept the fair market value adopted either by the AO or by the assessee and proceeded to make his own estimation. The ld.CIT(A) has decided this issue in paras-4 to 4.3....
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....roperty and also future prospects of such property. As per the Government Valuer, the property has potential of appreciation and of commercial usages. The Revenue has not placed any material on record for rebutting this contention of the valuation. Therefore, after considering the totality of the facts and material available on record, it would be proper that an estimation of fair market value as on 01/04/1981 is to be made on the basis of material on record. The Valuer in earlier year, had adopted a higher rate of fair market value and in the subsequent year, he adopted a lower rate. Therefore, the valuation adopted by the Government Approved Valuer, cannot be adopted as the valuation is made solely on the basis of potential of the land but not on the basis of the actual prevalent rate in the close vicinity. The Revenue has also not placed any material on record, demonstrating the prevalent market rate as on 01/04/1981 in the close vicinity of the land in question. The AO has adopted the cost of acquisition as on 01/04/1981 at Rs. 250/- per sq.mtr. and the ld.CIT(A) adopted the cost of acquisition as on 01/04/1981 at Rs. 551/- per sq.mtr., whereas the assessee has claimed the cost....
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.... realized by the appellant is of commercial land. But again this argument is true only in regard .to the price realized by the appellant on sale of the land. These factors are not relevant at all for determining the FMV as on 1.4.1981, because as on that day the land was industrial land and was being used for industrial purposes and the commercial development in that area, as taking place on the day of sale, was not there." 4.4. During the course of appellate proceedings, an alternate plea was also raised by the assessee that the average rate of Rs. 1,940/- per sq.mtr. may be adopted being the average of two different rates adopted by the assessee on one hand and the Revenue on the other hand. Admittedly, in the present case, neither the AO nor the ld.CIT(A) called for report from DVO and proceeded to make their own estimation. In our considered view, it is incumbent upon the assessing authority to call for report from DVO for ascertaining the fair market value of the asset. In the event, the AO is not satisfied about the claim of the assessee. In the present case, we find that without calling from the DVO's report, the AO has adopted a different rate and the ld.CIT(A) has....
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.... as on 01/04/1981 at Rs. 980/- per sq.mtr. Thus, this ground of assessee's appeal is party allowed." 9.1. Therefore, taking a consistent view, we hereby direct the AO to recomputed the capital gain by adopting the cost of acquisition at Rs. 980/- per sq.meter. Thus, ground of appeal is partly allowed. 10. With regard to ground No.4, the ld.counsel for the assessee submitted that under the identical facts, the Tribunal was pleased to remit the issue back to the file of AO for deciding the same. Therefore, in this year also, this issue may also be sent back to the file of AO for deciding the same. The ld.Sr.DR has no objection. Thus, this ground is sent back to the file of AO and, accordingly, this ground is allowed for statistical purposes. 11. Now, we take up Revenue's appeal in ITA No.35/Ahd/2013 for AY 2008-09. Grounds read as under:- "1. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in directing the Assessing Officer to adopt value of Rs.550/- per sq.mtr. as Fair Market Value as on 01.04.1981 of the land sold by the assessee by adopting sales instances of M/s.Alembic Ltd and ignoring sales instances elide upon by the Assessin....
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.... 13. With regard to ground No.2, the ld.counsel for the assessee submitted that a similar ground has been raised in ITA No.2624/Ahd/2012 for AY 2007-08 (in the case of Synbiotics Ltd.- supra). Respective representative of the parties advanced their arguments as were made in the case of Synbiotics Ltd.(supra). Therefore, consistent view, the ground raised by the assessee is partly allowed. 14. With regard to ground No.3 of the appeal, the ld.counsel for the assessee submitted that the assessee has not earned any income which is not taxable. Therefore, disallowance made u/s.14A is not called for. The ld.counsel for the assessee relied on the judgement of Hon'ble High Court of Gujarat in the case of CIT vs. Corrtech Eergy Ltd. reported at (2015) 372 ITR 97. 14.1. The ld.Sr.DR supported the orders of the authorities below. 15. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement relied upon by the ld.counsel for the assessee. The Revenue has not rebutted the contention that there is no exempt income. The Hon'ble Jurisdictional High Court in the said case held as under:- ....
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.... raised by the assessee in its cross-objection are allowed." 4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-section(1) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of Commissioner of Income Tax v Winsome Textile Industries Ltd reported in (2009) 319 ITR 204 (Punj & Har) in which also ....