COMMISSIONER OF INCOME TAX Vs. JOHN P VALAVI
HIGH COURT OF KERALA
COMMISSIONER OF INCOME TAX
SRI JOHN P. VALAVI
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GOVINDAN NAIR, J. -
(1.) THE Tribunal, Cochin Beneh has referred the following question for our opinion:
"Whether, on the facts and in the circumstance of the case, the Tribunal is justified in holding that in the absence of materials to show that the assessee had received anything more than the consideration stated in the sale deed, the ITO should have not adopted the full value of the consideration for the sale of the land at Rs. 2,000 per cent ?"
(2.) IN the asst. yr. 1968-69 the question of capital gains tax payable by the assessee with reference to a sale that was effected by him on 11th May, 1967 during the relevant accounting period of
12.03 cents and an old building thereon arose for consideration. The consideration stated in the sale deed was Rs. 18,000. The question was whether this should be taken as the value of the
property sold or whether the land value should be fixed at a higher amount to be consistent with
the real market value. An adjoining land, also owned by the assessee, had been compulsorily
acquired and the assessee had claimed compensation at the rates of Rs. 2,000 per cent for the
land acquired. Treating this claim of the assessee as an admission that the value of the land sold
was Rs. 2,000 per cent of the ITO assessed the difference to capital gains tax. In appeal by the
assessee before the AAC the AAC stated in para 4 thus :--
"In computing the capital gains, the ITO has adopted Rs. 2,000 per cent as the value on the date of sale and Rs. 500 per cent as the value as on 1st Jan., 1954. The only evidence with the ITO to support this conclusion is the fact that the appellant demanded Rs. 2,000 from the Government for an adjacent property. The ITO has not found any transaction wherein the value has been shown at Rs. 2,000 per cent. It is not the ITO's case that the Government has accepted Rs. 2,000 per cent as the value of the land. The ITO has not been able to show any circumstances which would indicate that the value mentioned in the document has been deliberately understated by the appellant. In these circumstances, I hold that the ITO was not justified in enhancing the value to Rs. 2,000 per cent."
There was a further appeal by the Department and the Tribunal in para 9 of its order observed as
"9. As regards the acquired lands, the assessee was awarded only Rs. 12,613 as compensation by the land acquisition officer under the Award Nos. 1 and 4 of 1967 dt. 23rd Jan., 1967. But as already pointed out, on a reference made to the Court of Subordinate Judge at Ernakulam under s. 20 of the Land Acquisition Act at the request of the assessee, the learned subordinate Judge, by his judgment dt. 31st July, 1970, awarded compensation at the rate of Rs. 1,500 per cent. Hence the full value of the consideration for the acquired lands has to be calculated at the rate of Rs. 1,500 per cent together with 15 per cent solatium thereon (vide the decision of the Gujarat High Court in Vadilal Soda Ice Factory vs. CIT (1971) 80 ITR 711 (Guj) where it has been held that solatium, though given in consideration of the compulsory nature of the acquisition, still represents consideration for the property acquired and hence should also be taken into account in computing the capital gains)."
It is clear from what is stated in para 9 which we have extracted above that the Tribunal has found as a matter of fact that there is nothing to indicate that the market value of the property
sold by the assessee was anything in excess of what is stated in the document. In view of this
finding neither s. 52(1) nor s. 52(2) of the IT Act, 1961 will apply. It is unnecessary therefore in
this case to consider the decision of this Court in ITO, B-Ward, Ernakulam & Anr. vs. K.P. Varghese
(1973) 91 ITR 49 (Ker) or the Supreme Court decision relied on by the assessee's counsel in ICI
(India) (P) Ltd. vs. CIT, West Bengal (1972) 1 CTR (SC) 21.
(3.) THE question referred to this Court has been framed apparently on the basis of the observations in paras 7 and 8 of the order of the Tribunal. The question cannot be made to depend on the
evidence of receipt of amounts in excess of what is stated in the document. The only question that
can arise, in view of s. 52(2) is, we think, what is the real market value of the property sold at the
time of sale. So the stated consideration in the document will not be final in all cases. In such
cases the question must be to find out what is the real market value. As we understand para 9 of
the order of the Tribunal there is a finding there that there was no material to indicate that the
market value of the land was anything more than the stated consideration in the document. So the
question has to be reframed thus :
"In view of the finding entered by the Tribunal that there was no material to indicate that the
market value of the property sold was higher than what is stated in the document, is the
conclusion reached by the Tribunal that capital gains must be reckoned on the basis of the
consideration stated in the document, right ?";
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