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.
| Larger Bench of Bangalore CESTAT decides five key issues in relation to Turnkey Projects The Bench of in the case of M/s Lanco Infratech Ltd. 2015 TIOL-768-CESTAT – BANG-LB has decided five key issues relating to Service tax on various infrastructure projects undertaken for Government. The same has been discussed below: | | S.no. | Issue | Larger Bench held that | | 1. | Whether laying of pipelines for lift irrigation systems, transmission, and distribution of drinking water or sewerage, undertaken for Government/ Government undertakings should be classified under ECIS erection, commission or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise; or installation of plumbing, drain laying or other installations for the transport of fluids, enumerated in Section 65(105)(zzd) as defined under Section 65(39a), during 16.06.2005 to 31.05.2007; or must be classified under CICS, as amounting to the construction of pipeline or conduit; and if classifiable under the latter provision, whether the activity is not taxable since it is not used or to be used, engaged or to be engaged primarily for industry or commerce; | Laying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal, undertaken for Government/ Government undertakings and involving associated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations, and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period up to 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS); | | 2. | Whether construction of canals for irrigation purposes and laying of pipelines including as part of lift irrigation systems, undertaken for the Government/ Government undertakings is liable to service tax under WCS as turnkey projects, including engineering, procurement, and construction or commissioning projects under clause (e) of Explanation (ii) in the definition of WCS or is excluded from the ambit of WCS since it is in respect of a “Dam” and thus stands excluded from WCS, as defined; | (i) Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract “in respect of dam” and is thus excluded from the scope of “Works Contract Service” defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision;(ii) Turnkey/ EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105) (zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. In the light of the decision in Alstom Projects India Ltd., fortified by the Special Bench decision (dated 19.03.2015) in Larsen & Toubro Ltd. reference, a turnkey/ EPC contract is taxable prior to 01.06.2007 as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses (a) to (d),
Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/ EPC contract, classifiable as Commercial or Industrial Construction Service (CICS) prior to 01.06.2007, would be classifiable under clause (b), Explanation (ii), Section 65(105)(zzzza) on and from 01.06.2007 and would not be eligible to service tax if the rendition of service thereby is primarily for non-commercial, non-industrial purpose, in view of the exclusionary clause in clause (b) of the definition of WCS. This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65 (105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable services like ECIS, CICS or COCS; and other services when bundled to amount to turnkey/ EPC;(iii) Construction of canals/ pipelines/ conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/ Government undertakings would be for non-commercial, non-industrial purposes, even when executed under turnkey/ EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to service tax, in view of the exclusion enacted in clause (b); | | 3. | Whether, turnkey projects, including engineering, procurement, and construction or commissioning (EPC) projects specified in clause (e) is merely an enumeration of the mode of execution of taxable services specified in clauses (a) to (d) or is a wholly distinct taxable service and is eligible to service tax as an independent species of works contract service; | | 4. | Whether, even if clause (e) in Explanation (ii) of WCS is considered a distinct and independent service, where construction of canals for irrigation purposes and laying of pipelines either as part of lift irrigation systems or for transport and distribution of water is undertaken for Government/ Government undertakings, the same is more appropriately covered under clause (b) of WCS i.e. construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, by applying principles of classification set out in Section 65A(2)(a) & (b) and thus fall outside the ambit of the levy, since the activity is not primarily for the purpose of commerce or industry; or whether a contrary view that clause (e) being an independent entry, activities falling thereunder would be taxable even if the rendition of service thereby or thereunder, was not primarily for non-commercial or non-industrial purposes; | | 5. | Where execution of the whole or a part of the work is sub-contracted on back to back basis by the main contractor (which is a joint venture) to sub-contractors, in the absence of any transfer of property in goods involved in the execution of such works, from the main contractor to the Government/ Government undertakings, whether levy of service tax in the hands of the appellant (main contractor) is valid under WCS, in the light of the judgment in State of A.P. vs. L & T Ltd. | Where under an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/ contractee, assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act. | |
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