INCOME TAX ACT, 1961

--Income --Diversion by overriding title vis-a-vis application of income Sale consideration of inherited property distributed between two brothers not equally as per MoU--Assessee and his brother had inherited a property which was sold for a consideration of Rs. 14 crores. The total consideration of Rs. 14 crores was shared between the two brothers in accordance with Memorandum of Understanding in writing arrived at between them which provided that assessee's brother would receive Rs. 1 crore more than assessee's half share from the sale proceeds. Consequently, the sale consideration of Rs. 6 crores was declared by assessee. Assessing officer took the sale value at Rs. 7 crores in the hands of assessee on ground that Rs. 1 crore received by assessee's brother was in excess of that received by assessee and was, in fact, an application of income received by assessee and not diversion of income at source. Commissioner (Appeals) held that by virtue of Memoradum of Understanding it was clear that the income of Rs. 1 crore was diverted before it reached assessee and was thus not includible in the assessee's income. Tribunal upheld the finding of Commissioner (Appeals) and observed that the assessment could not be based on the perception of assessing officer that assessee should have received Rs. 7 crores as sale consideration. Held: Both Commissioner (Appeals) as well as Tribunal had, on consideration of all the facts involved, concluded as a finding of fact that assessee had received only Rs. 6 crores for the sale of his rights in the property and the same had been offered to tax. By virtue of MoU, the income of Rs. 1 crore was diverted before it reached to assessee. In view of the above, no substantial question of law arises.

Income Tax Act, 1961, Section 4

INCOME TAX ACT, 1961

--Capital gains--Cost of acquisition FMV as on 1-4-1981--During the course of assessment proceedings, assessee had filed a valuation report by a registered valuer who was empanelled by Income Tax Department. The valuation report showed the value of the inherited property as on 1-4-1981 was Rs. 47.74 lakhs. Assessing officer applied the Nabhi's Guide to house tax and held that the fair market value of the property on as 1-4-1981 was Rs. 17.33 lakhs and not Rs. 47.74 lakhs as arrived at by empanelled registered valuer. Commissioner (Appeals) held that the registered valuers report could not be doubted as it explained the basis for adopting the value and thus the registered valuer's report valuing the inherited property at Rs. 47.74 lakhs as its FMV as on 1-4-1981 was accepted. Tribunal upheld the finding of Commissioner (Appeals) that the valuation of a property differs depending upon its size, location, road frontage, corner plot, etc., even in respect of two properties situated in the same locality. Held: The valuation done by the registered valuer was with regard to the specific property and takes into account its various advantages and disadvantages all of which influence the valuation of the property. As against the above, the Nabhi's Guide to House Tax was generalized guide and did not take into account the peculiar features of the property being valued. The valuation done by an empanelled registered valuer would certainly take precedence over Nabhi's Guide to House Tax. Therefore, Tribunal was justified in accepting the FMV as on 1-4-1981 estimated by the registered valuer.