Catherene Thomas (Smt.) v. ACIT (2020) 78 ITR 18 (SN)(Cochin) (Trib)

S.45: Capital gains — Long-term capital gains — Transfer of land — Reference to Valuation officer — FMV as proposed by AO to be adopted for purposes of computation of capital gains [ S.48, 49 ]

For computing the long-term capital gains on sale of the property, the assessee calculated the fair market value (FMV) as on April 1, 1981 at Rs. 14.50 lakhs.  The Assessing Officer proposed to value the land at Rs. 7,500 per cent which worked to Rs 9.30 lakhs for the entire land.  On no consensus, matter was referred to the Valuation Officer who worked out FMV at Rs. 5,33,800 (which included the cost incurred for improvement of the property).  The CIT(A) enhanced the FMV to Rs 6 lakhs thereby increasing the valuation of trees as cost of improvement by Rs. 66,200. On appeal, the Tribunal held that normally the fixation of minimum value of land is well below the FMV.  The Sub-Court had fixed land value at Rs. 8,000 per cent in 1982 and this was upheld by the High Court. Hence, Valuation Officer’s report could not be taken as totally correct.  Considering the fact that Assessing Officer had initially proposed Rs. 9.30 lakhs as the FMV and this being very old case, FMV to be adopted should be Rs. 9.30 lakhs (which would include cost of improvement such as compound wall, two wells, fruit bearing trees etc) for computing long-term capital gains. (AY.1995-96)