ITAT fixes FMV of Land at ₹60/sq.m for Capital Gain Calculation, directs AO to Verify Deduction u/s 54 [Read Order]

The Surat Bench of the Income Tax Appellate Tribunal (ITAT) has partly allowed the appeal by fixing the fair market value (FMV) of land at ₹60 per sq.m as on 01.04.1981 for capital gain computation and directed the Assessing Officer (AO) to verify and allow deduction under section 54 of the Income Tax Act 1961 after the examination of facts.

The assessee, Vasuben Natwerlal Patel, had sold land admeasuring 14,569 square meters at Ambheta, Surat, in which she held a 1/4th share. She adopted the cost of acquisition at ₹110 per sq.m as of 01.04.1981, based on the report of a government-registered valuer for computing the capital gains.

Since the report of the District Valuation Officer (DVO) was not available and the assessment was getting time-barred, the AO, on his own, adopted a rate of only ₹2.26 per sq.m, resulting in the addition of the capital gains.

Subsequently, the DVO furnished his report estimating FMV at ₹26 per sq.m, relying on three comparables ranging between ₹9.62 and ₹64.82 per sq.m.

The assessee argued that the DVO’s rate was on the lower side, while her valuer had considered location and potential value, and requested that either her valuer’s rate or an average be adopted.

The Tribunal observed that even the average of DVO’s comparables was above ₹33 per sq.m, yet the DVO adopted ₹26 per sq.m, which was held to be unreasonably low.

The Bench comprising Pawan Singh (Judicial Member) and Bijayananda Pruseth (Accountant Member) directed the AO to adopt ₹60 per sq.m as the FMV as on 01.04.1981. The AO was further instructed to verify the assessee’s claim of deduction under section 54 and allow it if the statutory conditions were satisfied, after granting a proper opportunity of hearing.

Accordingly, the appeal was partly allowed.

The assessee was represented by Rajesh Upadhyay, while Mukesh Jain appeared for the Revenue.

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