Capital gain: Cost of acquisition: Market value as on 01-04-1981: Section 55A: Reference to DVO only when value of capital asset shown by assessee less than its FMV:

In the relevant year, the assessee had sold a property called Laxmi Niwas which was owned by it since prior to 01-04-1981. For computing the capital gain, the assessee got the value of the property as on 01-04-1981 determined at Rs. 2,13,31,000/- from a Government approved valuer. The Assessing Officer referred the case to the DVO u/s. 55A who determined the value at Rs. 1,35,40,000/-. The Assessing Officer adopted the value determined by the DVO and computed the capital gain. The Tribunal allowed the assessee’s claim and held that the cost of acquisition should be taken at Rs. 2,13,31,000/- as determined by the Government approved valuer.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) Reference to the DVO can only be made in cases where the value of the capital asset shown by the assessee is less than its fair market value as on 01-04-1981. Where the value of the capital asset shown by the assessee on the basis of the approved valuer’s report was more than its fair market value, reference u/s. 55A of the Income-tax Act, was not valid.

ii) The Tribunal was right in law in reversing the decision of the Commissioner (Appeals) on valuation of the property at Rs. 1,35,40,000/- made by the DVO as against the valuation done by the Government approved valuer at Rs. 2,13,31,000/-.”