The Bangalore bench of Income Tax Appellate Tribunal(ITAT)ruled that the guidance value of land or building should be used to determine the consideration when the transfer value of a capital asset is not determinable.
The Department, appellant- assessee,raised ground on issue regarding the relief granted by the CIT(A) concerning the full value of consideration.
In the case of Alagappa Muthiah (HUF),the CIT(A) found that the full value of consideration of Rs. 120,03,46,357 included incorrect elements, such as the cost of land, excessive finance costs, and administrative costs. The appellant’s DVO report, which lacked supporting bills and vouchers, indicated an underestimated valuation.
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Additionally, the appellant cited Karnataka High Court decisions that ruled unsupported construction costs could not be used as the full value of consideration. Based on the guideline value of the land, the CIT(A) determined the deemed value of consideration for the land transfer to be Rs. 93,80,19,968.
The Tribunal heard both parties and reviewed the records, noting that the Assessing Officer had incorrectly included elements such as land cost, excessive finance costs, and administrative costs in the cost of construction. The CIT(A) had directed the exclusion of these items, finding the AO’s method to be incorrect.
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The bench observed that the CIT(A) had followed relevant High Court rulings, including those in the cases of Shankar Vittal Motor Company Ltd. and Smt. Sarojini M. Kushe, which advised using the guideline value of the land to determine the full value of consideration. The CIT(A) applied this approach and determined the full value based on the guideline value.
A two-member bench comprising Soundararajan K(Judicial Member) and Chandra Poojari(Accountant Member) found no issues with the CIT(A)’s approach and dismissed the grounds raised by the revenue.
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