Case Law Details

Case Name : Kaushik Sureshbhai Reshamwlal Vs. ITO (ITAT Ahemdabad)
Appeal Number : Appeal No: ITA No. 3374- 3380/AHD/2009
Date of Judgement/Order : 30/04/2010
Related Assessment Year :
Courts : All ITAT (4337) ITAT Ahmedabad (327)

ITAT, AHMEDABAD BENCH `B’, AHMEDABAD,

IN THE CASE OF: Kaushik Sureshbhai Reshamwlal Vs. ITO,

APPEAL NO: ITA NO. 3374- 3380/AHD/2009,

DECIDED ON April 30, 2010

ORDER

These seven appeals by different assessee are arising out of order of Commissioner of Income-tax (Appeals)-IV, Surat in appeal Nos. CAS-IV/100-106/2008-09 dated 12-10-2009. The assessments were framed by ACIT, Circle-7and ITO Ward-7(2) Surat vide their different orders dated 18-12-2008, 16-12-2008 &26-12-2008 respectively for the assessment year 2006-07.

2. Since all these appeals carry only one common issue regarding the computation of capital gains, these appeals are clubbed and heard together and now re being disposed of by this consolidated order. The grounds are common in all the seven appeals and for the sake of convenience and brevity we will discuss in the case of Kaushik Sureshbhai Reshamwlal. The grounds raised by the assessee, which reads as under:-

“1. On the facts and circumstances of the case and in law The Learned Commissioner of Income Tax (Appeal) has erred in enhancing the value of land from Rs.400/- Sq. Mtr. to Rs.5000/- Sq. Mtr. 2. On the facts and circumstances of the case The Learned Commissioner of Income Tax ought to have taken view to accept the sales price at Rs.400/- per Sq. Mtr. Shown by your appellant and deleted the addition of Rs.21,24,472/- being amount estimated at Rs.700/- per Sq. Mtr. By the Assessing Officer.

3. It is therefore prayed that the addition made by The Assessing Officer and there after enhancement made of Rs.1,23,08,119/- by the Learned Commissioner of Income Tax Appeal-IV, may please be deleted.”

3. The brief facts leading to the above issue are that the assessee along with other six family members owned an ancestral agricultural land at Survey No.227 Bhestan, Surat ad measuring 88700 sq. mt. agricultural land falling under Surat Urban Development Authority (SUDA in short), whereby the land ad measuring 6610 sq. mt. was acquired and the balance land of 62090 sq. mt. was left with 14 coowners of Rashamwala family and the above said co-owners agreed to sell the said agricultural land ad measuring 62090 sq. mt. to Shri Hitendra D Patel in April ’05. During the year under consideration survey was conducted on 08-03-2006 on the business premises of M/s. Navjivan Synthetics u/s.133A of the Act, wherein a writing pad containing 8 pages was found and impounded by the Department as Annexure- BF/9. On this writing pad the following jottings were made:-

14-04-2005 Rs. 11,111

20-05-2005 Rs.30,00,000

10-06-2005 Rs.50,00,000

27-07-2005 Rs.60,00,000

05-09-2005 Rs.50,00,000

10-10-005 Rs. 7,00,000

30-11-2005 Rs.55,00,000

14-1-2005 Rs.40,00,000

During the course of survey statements of Shri Bimal V Reshamwala, Vinesh R Reshamwala, Ashutosh R Reshamwala and Balkrishna R Reshamwala i.e. the Karta and members of Reshamwala family were recorded u/s.131 of the Act, wherein all of them stated that the amount written in the impounded writing pad was received from Shri Hitendra D Patel in respect of sale of their agricultural land at Bhestan and the total sale consideration of which was Rs.3,00,11,111/-. During the course of statement they admitted that the said transaction is not recorded in the regular books of account and admitted the sale receipt of Rs.3,00,11,111/- in respect of above agricultural land. The Assessing Officer in view of the above facts bifurcated the total sale proceeds among 14 co-owners of the land and collected cheques for advance tax from them as under:-

Sr

No.

Name Sales

proceeds of

land

Cheque of

Advance tax

1. Shri Sakerial C Reshamwala (HUF) 37,50,000 6,25,000

2. Madhusudan C Reshamwala (HUF) 37,50,000 6,25,000

3. Mohanlal J Reshamwala 37,50,000 6,25,000

4. Rameshchandra J Reshamwala 37,50,000 6,25,000

5. Arvind C Reshamwala (HUF) 25,00,000 4,16,670

6. Indravadan M Reshamwala (HUF) 12,50,000 2,08,330

7. Bhupendra M Reshamwala (HUF) 12,50,000 2,08,330

8. Kaushik S Reshamwala 12,50,000 2,08,330

9. Ashwin M Reshamwala (HUF) 12,50,000 2,08,330

10. Naresh N Reshamwala 15,00,000 2,50,000

11. Hasmukhlal D Reshamwala (HUF) 15,00,000 2,50,000

12. Rasiklal D Reshamwala (HUF) 15,00,000 2,50,000

13. Govardhan D Reshwamwala (HUF) 15,00,000 2,50,000

14. Jaswantlal D Reshamwala (HUF) 15,00,000 2,50,000

Total 3,00,00,000 49,99,990

4. Post survey proceedings, the Revenue summoned the purchaser, Shri Hitendra D Patel and recorded his statement u/s.131 of the Act, wherein he admitted to have purchased the agricultural land for total consideration of Rs.3 crore from Reshamwala Family, and they offered the above sale consideration in their respective return of income qua their individual shares. While framing the assessment the Assessing Officer estimated the value of land @ 700 per sq.mt and worked out capital gains, accordingly at Rs.21,24,472/-, as against the capital gain declared by the assessee at Rs.7,48,128/- and thereby made addition of Rs.19,76,374/-. The AO while computing this capital gain adopted the fair market value of the land at Rs.700/- per sq.mt. as against the stamp valuation fixed by the Registration Authority at Rs.400/- per sq.mt. The assessee disclosed the value in terms of per sq.mt. at Rs.483/- per sq.mt. The Assessing Officer also adopted the cost of acquisition of the above said agricultural land at Rs.25 per sq.mt. as on 01- 04-1981 for computing capital gains, as against the value adopted by the assessee at Rs.60/- per sq.mt. as certified by Register Approved Valuer of the Department. Aggrieved, assessee preferred appeal before CIT(A).

5. The CIT(A) enhanced the sale consideration by adopting fair market value at Rs.5,000/- sq.mt. For this, CIT(A) has recorded the following findings in pages 8, 9

and 10:-

“In the present case, since the cash receipts as noted in the loose paper were found and impounded in Survey, the appellant claimed to have not received any further payment either in cash or in cheques and offered the capital gain only on the amount noted in the loose paper. This is not acceptable since, the appellant has not executed the sales agreement immediately thereafter, but has entered into a registered sales document much later on 2-2-2007 i.e. after a period of more than 1 year which clearly signifies that the appellant must have received the payment even after December 2005 till February 2007 because if the purchaser had made the entire payment in December 2005, he would not have waited to enter into a registered sales deed for a period of more than 1 year. This fact clearly signifies that the sales consideration as shown by the appellant is not correct and just because the unaccounted cash portion of the sales consideration was found and impounded during Survey, the appellant has thereafter, not shown any further receipt and thereby evaded the balance portion which is ought to have been received during the

period between December 2005 to February 2007, when the sales deed was registered. Hence, the sales consideration has to be estimated in the present case as per Section 45. It is pertinent to note that as already discussed above, the New Jantry as made applicable from April 2008 was worked out by the State Government on the basis of the market rates prevailing during the period 2005 and 2006. Another important fact to be noted is that the old Jantry was prevailing since 1999 and was not revised since long and hence, it was very much necessary to bring the Jantry at par with the prevailing market rates in order to eliminate leakages of revenue. The old Jantry Rate of the land under consideration was Rs.400/- whereas the New Jantry Rate is Rs.5,000/-. Thus, there is a huge difference between the old and new jantry rates, which amply evidences that the prevailing market rates were very much higher as compared to the old jantry rates. Therefore, the sales consideration as shown by the appellant as per the old jantry rates, is not at all acceptable. Further, it

is a matter of common sense that property prices would not increase abnormally from Rs.400/- per sq. mt. to Rs.5,000/- per sq. mt. in just a few months, but in fact this suggests that the actual market rates were much higher than the old Jantry prevailing during 2006 i.e. during the period when the deal under consideration was finalized. In the State of Gujarat, stamp duty is recovered as per the provisions of Section 32(A) of the Bombay Stamp Act, 1958. The first jantry was prepare in 1984 and thereafter in 1999. The Jantry made applicable in 2008 was based on the market situation during the period 2005- 2006 i.e. during the period when the subject deal had taken place. Therefore, the revised jantry rate of Rs.5,000/- per sq. mtr. is the perfect basis for determining the market value of the subject land in the year 2006 and the rate of Rs.700/- per sq. mtr. as adopted by the AO is rejected as being without any basis.

Moreover, it is seen that in the valuation report instances of sale of agricultural land has been given by the registered valuer between Rs.15 to 32 and the other rates as given by the valuer are not comparable with the assessee’s case since, they are for NA land and not agricultural land. Thus, when the comparable instances are between Rs.15 to Rs.32 per sq. mtr. the rate of Rs.60 Per Sqr. Mtr. as adopted by the valuer is incorrect and without any basis and therefore, the same cannot be accepted. Accordingly, the cost of acquisition of the land as on 1-4-1981 is taken at Rs.25 per sq. mtr. As determined by the A.O. As regards the area of the land sold I agree with the appellant that when SUDA has acquired 26610 sq. mts. of land out of the total 88,700 sq. mtrs., the sales consideration can be computed only for the balance land of only 62090 sq. mtrs. Further, since, the appellant had acquired 88700 sq. mtrs. originally, out of which 26,610 sq. mtrs. has been lost without any consideration, h  is entitled to claim the cost of acquisition for the entire 88700 sq. mtrs. of land. Hence, the capital gain in the case of the appellant considering the sales area at 62090 sq. mtrs., sales price at Rs.5,000/- per sq. mtr. and FMV as on 1-4-1981 at Rs.25 per sq. mt. for 88,700 sq. mtrs. would work out as follows. Particulars Amount (Rs) Sales Price (62,090 sq. mtrs. X Rs.5,000)

Less: Indexed Cost of Acquisition (88,700 sq. mtrs. X

25 X 497 / 100)

Total Capital Gains of the co-owners

Appellant’s share at 4.16% of Rs.29,94,29,025/-

Less: Shown in the return of income Additions

31,04,50,000

1,10,20,975

29.94.29,025

1,24,56,247/-

1,48,128/-

1,23,08,119/-

In the result the appeal is partly allowed and income enhanced as above.” Aggrieved, the assessee came in second appeal before us in all 7 appeals.

6. The first grievance of the assessee is against the enhancement of value of land from Rs.700/- per sq. mt. to Rs.5,000/- sq. mt. by the CIT(A) as against the fair market value adopted by the assessee at Rs.483/- per sq. mt. (the circle rates fixed by Stamp Duty Registration Authority are at Rs.400/- per sq.mt.) Second, grievance of the assessee is that the agricultural land was ancestral agricultural land and accordingly fair market value as on 01-04-1981 for computation of capital gain i.e. the cost of acquisition, is to be determined according to the assessee as per  valuation report obtained from approved Valuer, Shri P. K. Desai, who valued the land as on 01-04-1981 at Rs.60 per sq. mt. as against this, the Assessing Officer determined the fair market value at Rs.25/- per sq. mt. on the ground that the comparable sale instance given by the Registered valuer ranges from Rs.15/- to Rs.32 per sq. mt.

7. We find one more interesting fact from the orders of the lower authorities as well as from the submissions of the assessee’s counsel and Ld. CIT-DR that the total consideration of Rs.3 crores was received by the co-owners up to Dec.’05 but the sale deeds were registered in Feb’07 and the assessee had to received further amount from the buyers amounting to Rs.8 lakh, which was balance, to be received at the time of registration of sale deed. The Ld. counsel for the assessee before us stated that the lower authorities have failed to appreciate the fact that the deal was entered into in April’05 from where the payment started received from the buyer by the co-owners. Out of 14 co-owners – 3 co-owners, namely Ramkrishna Hasmukhbhai Reshamwala, Sakerlal C Reshamwala and Ashwinbhai M Reshamwala expired in the intervening period on 15-02-2006, 11-03-2006 and 16- 08-2006 respectively. Accordingly, the full and final consideration was received and registered sale deed was executed in Feb’07. According to Ld. counsel, the payment so received is amounting to Rs.2,92,11,111/- as noted in the impounded  writing pad up to Dec’05 and the balance Rs.8 lakh was yet to be received and finally it was received at the time of registration of sale agreement in Mar’06. The Ld. CITDR stated that the CIT(A) has rightly held that the issue under consideration is not determination of sales consideration u/s.50C of the Act but the sale value is being determined u/s.45 of the Act since in the year under consideration the assessee have not entered into any registered sale deed and therefore, the provisions of Section 50C are not applicable. On the other hand, Ld. counsel for the assessee stated that the assessee had received the full sales consideration of Rs.3,00,11,111/- for the said agricultural land up to March’06 and had also given the possession of the said agricultural land in the year under consideration itself but the registration of the sale deed was done later on 02-02-2007 on account of death of 3 co-owners. This is not a case where no sale deed has been registered but in this case, the registration of the sale deed got delayed on account of death of co-owners and therefore, the provisions of Section 50C are clearly applicable.

8. In view of the above facts and circumstances, we find that the circle rates fixed by Stamp Duty Authorities of land at Bhestan for financial year 2005-06 relevant to assessment year under consideration was fixed at Rs.400/- per sq.mt and the sale consideration received by the assessee is @ Rs.483/- per sq.mt. We find that these co-owners have sold the land and received payment of Rs.2,92,11,111/- up to 14-12-2005 and due to death of co-owners in the intervening period, the sale deed could not be registered but the claim of the assessee is that the balance Rs.8 lakh was received as on 31st March, 2006. Finally, the sale deed was registered in Jan. & Feb’07 through two sale deeds registered and the consideration of the sale deeds was amounting to Rs.3,00,11,111/-. We find that the Revenue could not bring any evidence that the entire consideration was not paid on or before 31-03-2006 and possession of land was not handed over by these co-owners to the seller. Even otherwise, we accept the claim of the Revenue that the possession of this land and the balance payment of Rs.8 lakh was delivered at the time of registration of sale deed in Jan. & Feb’07, when the sale deeds were registered, the Revenue cannot assess the capital gain in the assessment year under consideration i.e. assessment year 2006-07. However, the vital issue before us is whether in the case of sale through registered sale agreement, the capital gain is to be computed in terms of Sec.50C of the Act or not. We are of the view that when the asset is transferred in terms of Sec.53A of the Transfer of Property Act, 1882, the provisions of Sec.50C of the Act will apply to the transaction. The relevant provision of Sec. 2(47) of the Act reads as under:-

2(47) transfer, in relation to a capital asset, includes, –

“(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or” Now for the sake of clarity, the provision of Sec.50C of the Act as introduced by Section 24 of the Finance Act, 2002 with effect from 1-4-2003, for and from assessment year 2003-04, namely:-

“S.50C. Special provision for full value of consideration in certain cases, – (1 Where the consideration received o accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereinafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

(2) Without prejudice to the provisions of sub-section (1), where – (a) the assessee claimed before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (30, (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation – For the purposes of this section “Valuation Officer” shall have

the same meaning as in clause ® of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received on accruing as a result of the transfer.”

9. The relevant provision of Section 50C of the Act was explained and elaborated in the following portion of the Departmental Circular No.8 of 2002 dated 27-08-2002, as under:- “37. Computation of capital gains in real estate transactions, – 37.1 The Finance Act, 2002 has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act. 37.3 It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market valu9e to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes the Assessing Officer shall not adopted such fair market value and shall take the full value of consideration to be the value adopted or assessed for stamp duty purposes. 37,4 This amendment will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years [Section 4]”.

10. We further find that this provision was elaborated in the Notes on clauses and Memo. Explaining Provisions in the Finance Bill, 2002 as under:-

Notes on Clauses:-

“Clause 24 seeks to insert a new section 50C in the Income-tax Act to provide for a special provision for full value of consideration in certain cases. The proposed sub-section (1) of the said section seeks to provide that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. The proposed sub-section (2) of the said section seeks to provide that where the assessee claims before any Assessing Officer that the value adopted or assessed by the authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer and the value so adopted or assessed by the authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or a High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957, shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. The Valuation Officer shall be the Valuation Officer as defined in clause ® of section of the Wealth tax Act, 1957. The proposed sub-section (3) provides that where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the authority referred to in sub-section (1), the value so adopted or assessed by the authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.

This amendment will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years.” Memorandum Explaining Provisions of Section 50C in the Finance Bill, 2002, as under:-

“ The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a sate Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act.

It is further proposed to provide that where the as claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the ate of transfer, and he has not dispute the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the Assessing Officer ma refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act. If the fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and will take the full value of consideration to be the value adopted or assessed for stamp duty purposes. It is also proposed to provide that if the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the stamp duty

purposes is revised in any appeal, revision or reference, the assessment made shall be amended to re-compute the capital gains by taking the revised value as the full value of consideration. These amendments will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years. [Clauses 24 and 59]”

11. In view of the above provision and explaining the provision, we are of the view that the law u/s. 50C had been provided adequate protection to the tax-payers against adoption of arbitrary values for the computation of capital gains and the following precautionary are provided:-

(i) The value which is considered as the proper value of the property as fixed by the authority for registration for stamp duty purposes is presumed to be the fair market value for the purposes of computation of capital gains on the sale of property.

(ii) It is open to the taxpayer to plead that such stamp value is abnormal and contest the same in appeal under the stamp law requiring adoption of reduced value. If such value is reduced in appeal under the provisions of the relevant stamp law, such reduced value would alone be adopted.

(iii) Where such stamp value is not disputed, it is open to the assessee to require the Assessing Officer to refer the valuation to the Valuation Officer, who shall fix the valuation by adoption of the procedure prescribed under section 16A of the Wealth-tax Act. It is such value, which will be adopted by the Assessing Officer.

12. We further find from the Memorandum Explaining the provision of Section 50C in the Finance Bill, 2002, which clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority of a Sate Govt. for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed accordingly u/s.48 of the Act. In case the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to re-compute the capital gains by taking the revised value as the full value of consideration. Accordingly, we are of the view that the provisions of section 50C are applicable only for the computation of capital gains in real estate transaction. We find from Section 50C of the Act that it creates a legal fiction thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated accordingly. Legal fiction cannot be extended any further and has to be limited to the area for which it is created. Hon’ble Andhra Pradesh High Court in Addl. CIT v. Durgamma P. (1987) 167 1TR 776 (AP) held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. The Hon’ble court was dealing with the provisions of sec. 171(1) of the I.T.Act in the context of which it was held that joint family shall be deemed to continue for the limited purpose of assessing cases of joint families which have been hitherto assessed as such. It Is not possible to extend that

fiction to other cases. Similar view was taken by the Hon’ble Kerla High Court in CIT

v. Kar Valves Ltd. (1987) 168 ITR 416 (Ker.) wherein it is held that legal fiction is limited to the purpose for which they are created and could not be extended beyond that legitimate frame, Hon’ble Kerala High Court was dealing with the case where assessee sought to take advantage of sec.41(2) by submitting that if liabilities are not liquidated and outstanding are not collected, then business could be deemed to continue. Hon’ble Allahabad High Court in Controller of estate Duty v. Krishna Kumar Devi (1988) 173 ITR 561 (All) held that in interpreting the legal fiction the court should ascertain the purpose for which it was created 2nd after doing so assume all facts which are logical to give effect to the fiction, Hon’ble Supreme Court in CIT v. Mother India Refrigeration Pvt. Ltd. (1985) 155 ITR 711 (SC) held that legal fictions are created only for some definite purpose and they must be limited to that purpose and should not be extended beyond that legitimate field. In CIT v, Bharani Pictures (1981) 129 ITR 244 (Mad,) it is held that legal fictions are for a definite purpose and are limited to the purpose for which they are created and should not be extended beyond its legitimate field. The statutory fiction introduced in one enactment cannot be incorporated in another enactment. The point that legal fiction cannot be extended to a new field was highlighted by Hon’ble Madras High Court in CIT v. Rajam T.S, (19SS) 125 ITR 207(Mad,) wherein it is held that section 41(2) creates a legal fiction under which the balancing charge is treated as business income chargeable to tax but when this amount is distributed to shareholders then it would not become deemed dividend and it would be only a capital receipt and not distribution of accumulated profits. Thus, a legal fiction was invoked in the hands of the assessee company and was not extended in the hands of the shareholders. In the present case, section 50C creates a legal fiction for taxing capital gains in the hands of the seller and the difference between apparent consideration and valuation done by Stamp Valuation Authorities to be assessed as capital gain. It is for the legislature to introduce legal fiction to overcome difficulty in taxing certain receipts or expenditure which otherwise was not possible under normal provisions of the Act. It is with this purpose that when it was found difficult to prevent tax evasion by understating apparent sale consideration as compared to the valuation made by Stamp Valuation Authorities for the purposes of levying stamp duty then it was thought necessary to introduce section 50C for substituting apparent sale consideration by valuation done by Stamp Valuation Authorities. Hon’ble Madras High Court in CGT v, R. Damodaran (2001) 247 ITR 698 held that Stamp Valuation Authorities have their own method of evaluating the property. Merely because for the purpose of stamp duty, property is valued at higher cost, it cannot be said that assesses has made more payment than what is stated in the sale deed. We are in full agreement with the arguments of the assessee that Section 50C is applicable in the present case and this provision being a deeming provision will apply for determining the full value of consideration as a result of transfer of capital assets for the purposes of computation of capital gains u/s.48 of the Act. We further find that there is no evidence on record to show that the consideration over and above, what has been recorded in the sale deed/agreement, has been made by the assessee and in the absence of the same, no addition can be made by estimating and substituting the market value. Accordingly, we delete the addition made by the lower authorities in these appeals.

13. As regards to the issue of cost of acquisition to be estimated by adopting fair market value as on 01-04-1981 for the purposes of computing the indexation value, the Assessing Officer has estimated the cost of acquisition at Rs.25/- per sq.mt. on the basis of report of assessee’s registered valuer approved by the Department, taking comparable sale instances given by the valuer, which ranged from Rs.15/- to Rs.32/- per sq.mt. The assessee has adopted the value at Rs.60/- per sq.mt. on the basis of report given by registered valuer approved by Department, who has valued on the basis of many factors as locality, traffic jam, fertility of land etc. We find that the Revenue could not substantiate the value adopted by the lower authorities at Rs.25/- per sq.mt which has no basis. The value adopted by the assessee of land at Rs.60/- per sq.mt. is based on a technical report of registered valuer approved by the Department. Accordingly, we accept the value adopted by the assessee for computation of capital gains at Rs.60/- per sq.mt. and directing the Assessing Officer

to adopt this value for the computation of capital gains in these appeals.

14. Similar being the issues and facts in ITA No.3375 to 3380/Ahd/2009 in the cases of Ashwiin M Reshamwala (HUF), Hasmukh D Reshamwala (HUF), Jaswantial D Reshamwala (HUF), Mohanlal J Reshamwala, Arvindlal C Reshamwala (HUF) and Rameshchandra J Reshamwala (HUF), these appeals are also decided in terms of the above. Accordingly, both the issues of the assessee’s appeals are allowed in favour of the assessee and against the Revenue. The orders of the lower authorities are reversed.

15. In the result, the appeals of the assessees are allowed.

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