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Solatium should also be taken into consideration while computing market value of an asset as on 1-4-1981
Section 48 of the Income-tax Act – Capital gains – Computation of Fair Market Value
Solatium is also to be taken into account for purpose of computing the fair market value of the land.
Section 48 of the Income-tax Act – Capital gains – Computation of Cost of improvement
It is not always possible for an individual to have third party evidence of land improvement expenses and if a small amount is claimed by the assessee, the same is to be allowed [2015] – ITAT DELHI – ITO, , Meerut v. Anil Kumar
FACTS
The assessee sold certain agricultural land. In the computation of capital gains on the sale of the land, he adopted the fair market value of the land as of 1-4-1981 at Rs. 110 per sq. yard, and accordingly, computed the capital gain at Nil.
The Assessing Officer rejected the value so adopted by the assessee. He noted that in the case of another assessee, the Additional Commissioner issued a direction under section 144A, by taking into account all the relevant factors, that the value as of 1-4-1981 is adopted at Rs. 70 per square yard. The Assessing Officer adopted the same rate of Rs. 70 per sq. yard, as FMV as on 1-4-1981.
The Commissioner (Appeals) took into notice judgment of the Supreme Court in Meharban v.State of U.P. [Civil Appeal No. 8196 of 1995, dated 30-4-1997], held that the value of the land to be at Rs. 85 per square yard plus solatium of Rs. 30 per square yard. However, he adopted the FMV at Rs. 85 and decline to take the solatium into account for the computation for this purpose.
On second appeal ITAT held that:
It is found that in the light of Supreme Court’s judgment in the case of Meharban v. the State of U.P.[Civil Appeal No. 8196 of 1995; judgment, dated 30-4-1997], there is indeed no error in rejecting the valuation at the rate of Rs. 70 per square yard adopted by the assessee.
However, the Commissioner (Appeals) was in error to the extent of the non-inclusion of solatium. Solatium is required to be treated as a part of the compensation for Income tax purposes in the light of Gujarat High Court’s judgment in the case of Vadilal Soda Ice Factory v. CIT [1970] 80 ITR 711, and, therefore, as against valuation at Rs. 85 per square yard, he should have taken the same as at Rs. 110 per square yard as claimed by the assessee.
As regards the cost of improvement, there is no dispute about the fact of the leveling having been done but the claim is declined only for want of evidence. In the case of expenses of this nature,i.e. on leveling, etc., it is not always possible to have third-party evidence of expenses.
The assessee is an individual and not a corporate. Keeping in view all these factors, and the smallness of the amount, there are no reasons to decline the claim. The grievance of the assessee is upheld on this count as well.
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