1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 292 OF 2009 The Commissioner of Income Tax ..Appellant. V/s. Mr. Roosi K.Modi ..Respondent. Mr.Vimal Gupta for appellant. None for respondent. CORAM : V.C.DAGA AND J.P.DEVADHAR, JJ. DATED; 30TH JULY, 2009 P. C. :- 1. In this appeal filed under section 260A of the Income Tax Act, 1961, according to the revenue, the following two substantial questions of law arise from the order of the Tribunal dated 28/06/2006 passed in the Income Tax Appeal No.5981/Mum/2000:- 1. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in allowing the appeal of assessee directing to adopt the value property at Rs.1,10,00,000/- as per DVO's report which was not available before A.O. ? 2. Whether on the facts and in the circumstances of the case and in law, the ITAT is right in directing to deduct entire cost of land from the compensation instead of 50% of 1/3 as per development agreement ? 2 2. The assessment year involved herein is AY 1997-98. 3. Mrs. Manek B. Cooper and her brother Mr. R.K. Modi, respondent herein (hereinafter referred to as assessee) were the co-owners of the property known as "Ashley House" and open land admeasuring 47,144.70 sq. mtrs. The Government of India, Ministry of Finance issued Notification dated 20th September, 1962 to acquire the said property for the Central Excise Department but the process of acquisition of land was not completed for long time. In November, 1979 the State Government notified the said land as surplus land under the Urban Land Ceiling Act. 4. Some time in the year 1985, Mrs. Manek B. Cooper and the assessee entered into an agreement with a Developer, for development of the property subject to clearance from the Government. After the competent authority held that there was no surplus land, the Central Government issued fresh notification for acquisition of the land. Thereupon, the co-owners entered into a supplementary agreement, under which 2/3rd of the compensation amount received on acquisition of the said land was to be paid to the developer and 1/3rd was to be retained by the two co-owners 5. By Award dated 21/9/1994 the land in question was acquired and the co-owners received compensation amounting to Rs.2,93,95,634/-. 6. While computing the capital gains, the A.O. rejected the fair market value (F.M.V.) of the land determined by the Registered Valuer and referred the matter to the District Valuation Officer (D.V.O.). While the matter was pending before the D.V.O. the A.O. determined the F.M.V. on estimate 3 basis and accordingly computed the capital gain. Thereafter, the report of the D.V.O. was received. The Tribunal found that the D.V.O. in his report had not taken into consideration the costs of boundary wall covering the entire area with the internal road, fountain, main gate two trees and iron fence on all sides and accordingly accepted the report of D.V.O. with marginal variation. As regards the cost of the land to be reduced from the compensation received for computing the capital gain, the Tribunal held that the entire cost has to be reduced from the compensation received by the two co-owners in the ratio of 50% each. 7. The first question to be considered is, whether the F.M.V. determined by the Tribunal on the basis of the report submitted by the D.V.O. is proper ? In the absence of any material irregularity pointed out in the report of the D.V.O., no fault can be found with the decision of the Tribunal in accepting the report of the D.V.O. with marginal variation. 8. As regards the question No.2 is concerned, the argument of the revenue is that the two co-owners have received 50% of 1/3rd compensation and, therefore, 50% of the cost has to be reduced from the compensation received and not the full cost of land acquired. The reasoning given by the Tribunal for deducting the total cost received by the co-owners is that both the co-owners have lost their land on account of acquisition by the Central Government and that they have not received anything over and above the 1/3rd compensation as agreed upon between the co-owners and the developers and, therefore, the entire cost of the property has to be deducted 4 from the compensation received by the two co-owners. There is nothing on record to show that the co-owners have received back any amount out of the compensation paid to the developer. Thus, in our opinion, decision of the Tribunal in deducting the entire cost of the land from the compensation received by the co-owners is reasonable and possible view and, therefore, the second question proposed by the revenue cannot be said to be a substantial question of law arising from the order of the Tribunal. 9. In this view of the matter, we see no merit in the appeal and accordingly the appeal is hereby dismissed with no order as to costs. (J.P.DEVADHAR, J.) (V.C.DAGA, J.)