KIRAN INTERNATIONAL, MUMBAI V. ACIT CEN CIR-9, MUMBAI

CO 34/MUM/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6451 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 18-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: DILIP LAKHANI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVAN , JM ITA NOS.4730 & 4731/MUM/2009 : ASST.YEARS 2005-2006 & 2006-2007 THE ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 9 MUMBAI. VS. M/S.KIRAN INTERNATIONAL 10, GITANEEL ARCADE, 85 HILL ROAD BANDRA (WEST), MUMBAI 400 050. PAN : AAAFK7384F. (APPELLANT) (RESPONDENT) CO NOS.33 & 34/MUM/2010 : ASST.YEARS 2005-2006 & 20 06-2007 M/S.KIRAN INTERNATIONAL 10, GITANEEL ARCADE, 85 HILL ROAD BANDRA (WEST), MUMBAI 400 050. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 9 MUMBAI. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI P.K.B.MENON ASSESSEE BY : SHRI DILIP LAKHANI DATE OF HEARING : 18.08.2011 DATE OF PRONOUNCEMENT : 26.08.2011 O R D E R PER R.S.SYAL, AM : THESE TWO APPEALS BY THE REVENUE AND EQUAL NUMBER O F CROSS OBJECTIONS BY THE ASSESSEE RELATE TO THE ASSESSMENT YEARS 2005-20 06 AND 2006-2007. SINCE ALL THESE APPEALS ARE BASED ON IDENTICAL FACTS AND COMM ON GROUNDS, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE RAISED IN ASSESSMENT YEAR 2005-20 06 BY THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF SALE OF FLAT BY APPLYING THE PROVISIONS OF SECTION 50C O F THE ACT. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN TH E BUSINESS OF REAL ESTATE DEVELOPMENT. IT UNDERTOOK A HOUSING PROJECT OF DEVE LOPMENT OF ADDITIONAL FLOOR TO THE EXISTING BUILDING TARANG. LOADING OF TDR WAS DONE AT ASSESSEES COST AND THE SAID DEVELOPMENT WAS COMPLETED DURING THE FINAN CIAL YEAR 1998-99 AND FLATS ITA NOS.4730 & 4831/MUM/2009 CO NOS.33 & 34/MUM/2010 M/S.KIRAN INTERNATIONAL. 2 WERE SOLD. THERE WAS CERTAIN CANCELLATIONS AND RESA LE OF FLATS DURING THE SUBSEQUENT YEARS. SECOND PROJECT OF THE DEVELOPMENT BY THE ASS ESSEE IS MUNDHESHWARI WHICH WAS STILL GOING ON. A SEARCH WAS TAKEN U/S.13 2(1) ON 04.10.2006 IN REHAB GROUP OF CASES, OF WHICH THE ASSESSEE IS A PART. TH E ASSESSING OFFICER CALLED UPON THE ASSESSEE TO SHOW AS TO WHY THE PROVISIONS OF SE CTION 50C SHOULD NOT BE APPLIED IN RESPECT OF THE FLATS RESOLD DURING THE COURSE OF ITS BUSINESS. THE ASSESSEE STATED THAT THE FLATS WERE ITS STOCK-IN-TRADE AND THE PROV ISIONS OF SECTION 50C CAN BE APPLIED ONLY WHILE COMPUTING THE INCOME UNDER THE H EAD `CAPITAL GAINS. THE ASSESSING OFFICER NOTED THE OBJECT OF THE PROVISION S OF SECTION 50C AND HELD THAT EVEN THOUGH IT RELATED TO CAPITAL GAINS CHAPTER, Y ET IT WOULD EMPOWER HIM TO VALUE THE PROPERTY PURCHASED / SOLD IN THE MARKET. HE, TH EREFORE ADOPTED THE STAMP VALUE IN PLACE OF SALE CONSIDERATION RECEIVED BY THE ASSE SSEE AND THE DIFFERENCE BETWEEN THE SALE VALUE SHOWN AND STAMP VALUE WAS TAKEN AS I NCOME. THIS RESULTED INTO ADDITION OF RS.21,35,343 IN THE CURRENT YEAR AND RS .24,74,062 IN THE ASSESSMENT YEAR 2006-2007. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LEARNED CIT(A) WHO GOT CONVINCED WITH TH E ASSESSEES SUBMISSION AND HELD THAT SECTION 50C CANNOT APPLY ON THE BUSINESS INCOME. IN REACHING THIS CONCLUSION HE RELIED ON THE ORDER PASSED BY THE MUM BAI BENCHES OF THE TRIBUNAL IN M/S. INDERLOK HOTELS PVT. LTD. VS. ITO DATED 5.02.2 009 IN ITA NO.4376/MUM/2008. THE REVENUE IS IN APPEAL AGAINST THE DELETION OF ABOVE REFERRED TWO ADDITIONS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SECTION 50C IS A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES. SUB-SECTION (1) PROVIDES THAT WHERE THE CONS IDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER BY THE ASSESSEE OF A CAPITA L ASSET BEING LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY, THEN THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR TH E PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIV ED OR ACCRUING AS A RESULT OF SUCH ITA NOS.4730 & 4831/MUM/2009 CO NOS.33 & 34/MUM/2010 M/S.KIRAN INTERNATIONAL. 3 TRANSFER. FROM THE ABOVE PRESCRIPTION OF THIS SECTI ON IT IS SEEN THAT PRIMARILY IT IS A DEEMING PROVISION SUBSTITUTING CONSIDERATION RECEIV ED WITH THE VALUE AS DETERMINED BY THE STAMP VALUATION AUTHORITY. BUT FOR THIS PROV ISION, THERE IS NO MANDATE IN THE ACT TO SUBSTITUTE SALE CONSIDERATION WITH THE STAMP VALUE. IT IS AMPLY CLEAR FROM THE MANDATE OF THIS SECTION THAT IT IS APPLICABLE `FOR THE PURPOSE OF SECTION 48. SECTION 48, IN TURN, DEALS WITH THE MODE OF COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD `CAPITAL GAINS. THIRDLY THIS SECTION APPLIES WHEN A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH IS TRANSFERRED. THE TERM CAPI TAL ASSET HAS BEEN DEFINED U/S.2(14) TO MEAN PROPERTY OF ANY KIND HELD BY THE ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS BUT DOES NOT INCLUDE, INTER ALIA, (I) ANY STOCK IN TRADE ETC. FROM THE DEFINITION OF `CAPITAL ASSET IT IS M ANIFEST THAT THE STOCK IN TRADE STANDS EXCLUDED. WHEN WE REVERT TO SECTION 50C IT BECOMES MORE THAN CLEAR THAT IT IS APPLICABLE ONLY WHEN INCOME IS CHARGEABLE UNDER THE HEAD `CAPITAL GAINS AND NOT OTHERWISE. AS THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF REAL ESTATE DEVELOPMENT AND THE FLATS IN TARANG CONSTITUTED ITS STOCK IN TRADE, OBVIOUSLY SECTION 50C CANNOT APPLY. THE FACT THAT THE ASSESSEE EARNED INC OME FROM THE RETRANSFER OF FLATS FELL WITHIN THE DOMAIN OF `BUSINESS INCOME HAS NOT BEEN DISPUTED BY THE AO. IN SUCH A SITUATION THERE CANNOT BE ANY QUESTION OF AP PLYING THE PROVISIONS OF SEC. 50C. OUR VIEW IS SUPPORTED BY THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN CIT VS. THIRUVENGADAM INVESTMENTS P.LTD. [(2010) 32 0 ITR 345 (MAD.)] . THE VIEW TAKEN BY THE LEARNED CIT(A), BEING IN CONFORMI TY WITH THE LEGAL POSITION AS NOTED ABOVE, DOES NOT WARRANT ANY INTERFERENCE. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS FAIR ENOUGH TO CONCEDE THAT THE FACTS AND CIRCUMSTANCES OF ASSESSMENT YEAR 2006-2007 ARE MUTATIS MUTANDIS SIMILAR TO ASSESSMENT YEAR 2005- 2006. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS HIS CROSS OBJECTIONS FOR BOTH THE YEARS WHEN IT BECAME CLEAR DURING THE COUR SE OF HEARING THAT THE REVENUES APPEALS WERE LIABLE TO BE DISMISSED. ITA NOS.4730 & 4831/MUM/2009 CO NOS.33 & 34/MUM/2010 M/S.KIRAN INTERNATIONAL. 4 5. IN THE RESULT, BOTH THE APPEALS BY THE REVENUE A ND THE CROSS OBJECTIONS BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF AUGUST, 2011. SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 26 TH AUGUST, 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) CENTRAL - VII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.