How to calculate fmv as on 01.04.1981

Tax queries 2810 views 4 replies

Ashish M

Chartered Accountant

2731 Points Posted on 05 November 2011

Hi friends,

The assesssee acquired the property in 1941. for Cap gain purpose, he took value as on 01.04.1981.

Issue

The transfer took place in 2008. on the date of transfer, the property was commercial, hence the value as per commercial rates were taken as a Full value of consideration. But when it came to cost, he takes FMV as on 1.4.1981 taking it as a commercial property. When in actuality, the property in 1981 was a residential property.

He says that, since on date of transfer, the property is commercial, hence while taking COA as FMV on 1981, the valuation be done taking it as commercial property.., when in actuality, it is residential at that time.

What should be the COA., Whether as per commercial rates or residential rates??

Also, the lease deed contains a clause which says that the lessee 'may' with the consent of the lessor, build shop in the premises. Does this makes it a commercial property.??

Pls refer case law, if any!!!.. Thanks!

Replies (4)

CA Ksheerabthi Nathan

CA in practise

167 Points Posted on 06 November 2011

according to section 48,indexed cost of acquisition can be availed by an assessee by taking the FMV of the property as on 1.4.89 if the property is acquired before 1.4.89.the assessee can opt for FMV OR COST whichever is beneficial to the assessee

U S Sharma

glidor@gmail.com

21068 Points Posted on 06 November 2011

Originally posted by : Ashish M
	Hi friends, The assesssee acquired the property in 1941. for Cap gain purpose, he took value as on 01.04.1981. Issue The transfer took place in 2008. on the date of transfer, the property was commercial, hence the value as per commercial rates were taken as a Full value of consideration. But when it came to cost, he takes FMV as on 1.4.1981 taking it as a commercial property. When in actuality, the property in 1981 was a residential property. He says that, since on date of transfer, the property is commercial, hence while taking COA as FMV on 1981, the valuation be done taking it as commercial property.., when in actuality, it is residential at that time. What should be the COA., Whether as per commercial rates or residential rates?? Also, the lease deed contains a clause which says that the lessee 'may' with the consent of the lessor, build shop in the premises. Does this makes it a commercial property.?? Pls refer case law, if any!!!.. Thanks!

from 1941 to 2008. let the municipality decide when it get converted from residencial to commercial as per their records, for incometax purpose the value as on 1-4-81 is only significant to get the indexed cost.

Ashish M

Chartered Accountant

2731 Points Posted on 09 November 2011

But for the purpose of indexation, the value to be taken is also an important question.

Because it can increase or decrese the cost of acquisition. If we take the COA as the commercial rates, the COA will be higher,... but if we take COA at the residential rates, COA will be lower. Assessee is taking the former, being benificial to him.!!!

But the concept says the latter.!!!!!