DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), KOLKATA, KOLKATA V. TIRUPATI NIRYAT PVT. LTD., KOLKATA

ITA 1226/KOL/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had allowed the appeal of Tirupati Niryat Pvt. Ltd., a company engaged in real estate and jute products, for the assessment year 2012-13. The primary issue was the computation of long-term capital gains on the sale of land and building by the assessee. The Assessing Officer (AO) had treated the building as a capital asset and computed capital gains based on the stamp duty valuation, which was contested by the assessee. The CIT(A) had deleted the addition of capital gains, referencing a valuation report from the District Valuation Officer (DVO) and applying the safe harbour rule under Section 50C. The Revenue challenged this decision, arguing that the CIT(A) erred in applying the safe harbour rule retroactively and in ignoring the stamp duty valuation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668942 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: PCIT v. GVK project and Technical Services Ltd., Commissioner of Income Tax, (Central) 1 v. Chettinad Logistics (P.) Ltd., Principal Commissioner of Income Tax v. Oil Industry Development Board
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. B. CHAKRABORTY
• Assessee Lawyers: SIDDARTH AGARWAL
• Keywords: Capital asset; Retrospective amendment; Sale consideration of property below Jantri Value; Capital Gains; TDS; Valuation report; Earning of tax free income; Rule 8D
• Section: 6; 14A; 50C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI PRADIP KUMAR CHOUBEY, JM AND SHRI RAKESH MISHRA, AM ITA No. 1226/KOL/2024 (Assessment Year: 2012-13) DCIT, Central Circle-1(1), O/o the DCIT, Central Circle 1(1) Kolkata, Aaykar Bhavan Poorva, 110, Shantipally, EM By Pass PIN-700107, West Bengal Vs. Tirupati Niryat Pvt. Ltd. 145, Rash Behari Avenue, Kolkata-700029, West Bengal (Appellant) (Respondent) PAN No. AABCT4058P Assessee by : Shri Siddarth Agarwal, AR Revenue by : Shri S.B. Chakraborty, DR Date of hearing: 11.06.2025 Date of pronouncement: 23.06.2025 O R D E R Per Pradip Kumar Choubey, JM: This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-20 (hereinafter referred to as the “Ld. CIT(A)”] dated 30.01.2024 for the AY 2012-13. 02. It appears from the report of the registry that the appeal has been filed after a delay of 59 days. At the time of hearing the counsel of the assessee explained the reason for delay in filing the appeal. The Ld. A.R did not raise any objection in condoning the delay. Keeping in view, the submission made by the A.R. and the judicial pronouncement that a case should be decided on merit not on technical issue, the delay is hereby condoned Page | 2 ITA No.1226/KOL/2024 Tirupati Niryat Pvt. Ltd.; A.Y. 2012-13 03. Brief facts of the case are that assessee had filed return of income on 29.09.2012 declaring NIL income. Carried forward loss of Rs. 1,56,15,948/- was shown in the return. The case of the assessee was selected for scrutiny through CASS. The assessee Company is engaged in business of Real Estate and Jute Products. During the year, Assessee had sold land and building. Assessee had computed profit on sale of land and building after segregating the values of land and building. Sale value of building was deducted from the block of fixed asset. However, no capital gains tax was paid. AO is of the view that building is a capital asset of the company. Therefore, long term capital gain was applicable on its sale. AO has further mentioned that the assessee had 1/4th share in the sold land and building. AO has further mentioned that the market value of 1/4th share of the sold land and building, as per Stamp Duty Authority, is Rs. 3,35,54,108/-. After considering the indexed cost of 1/4th share of land and building, AO has worked out the Long-Term Capital Gain at Rs. 1,91,83,329/-. Accordingly, addition of Rs. 1,91,83,329/- has been made to the total income. Aggrieved by the said order assessee preferred the appeal before the ld. CIT (A), wherein the appeal of the assessee has been allowed. 04. Being aggrieved and dissatisfied, the Revenue has preferred the appeal. 05. The ld. DR challenges the very impugned order on the following grounds: - “1. That on the facts and circumstances of the cases, the Id. CIT(A) erred in deleting the income under the head capital gains to the tune of Rs. 1,91,83,329/- and allowing the assessee's claim of safe harbour rule of 5% variation between stamp duty value and sale consideration for the AY 2012-13 under 3rd proviso of Section 50C, when the said proviso to Section 50C and explanatory notesto Finance Act 2018 clearly mentions that the amendment, would be effective from 01.04.2019. 2. That on the facts and circumstances of the cases, the Ld. CIT(A) erred in relying on the decisions of Kolkata, ITAT which held the insertion of the 3rd proviso to section 50C of the IT Act to be a declaratory, curative and procedural amendment in nature when Page | 3 ITA No.1226/KOL/2024 Tirupati Niryat Pvt. Ltd.; A.Y. 2012-13 Explanatory Notes to Finance Act 2018 clearly mentions that the amendment would be effective from 01.04.2019. 3. That on the facts and circumstances of the cases, the Ld. CIT(A) erred in holding that appellant has not earned any exempt income on its investments in the current year hence, disallowance u/s 14A is not sustainable whereas explanation to section 14A held that the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income. 4. That the revenue reserves its rights to substantiate, modify, delete supplement and/or alter the grounds at any time of the appeal proceedings.” 06. Contrary to that the ld. AR supports the impugned order thereby submitting that the ld. AO failed to take note of the fact that the assessee has correctly deducted the consideration of part of building sold from its Written-down value as the building block still existed as per norms of calculation of capital gain on depreciable assets U/s 50 of the Act but the ld. AO erroneously calculated the capital gain in this disregard to the provisions of Section 50 of the Act. The ld. AR further submits that property in question was sold in F.Y. 2011-12, relating to A.Y. 2012-13 at a sale consideration of ₹11,51,08,600/-, whereas the value as per stamp valuation authority was ₹13,42,16,432/-. The ld. AR further submits that the ld. AO passed the assessment order considering the deemed value as per stamp valuation, ignoring the objection raised by the assessee and without considering the request to refer the matter to the DVO for valuation of the property. The ld. AR further drawn the attention of this court that in respect of the assessment of other co-owners of the captioned immovable property reference were made to the DVO by determining the fair value of the property. Further, the valuation report of the DVO providing valuation of the captioned property was received in respect of co-owner, M/s Delight Suppliers Pvt. Ltd. and as per the DVO valuation of the property under consideration was arrived at ₹12,07,89,700/-. The ld. AR submits Page | 4 ITA No.1226/KOL/2024 Tirupati Niryat Pvt. Ltd.; A.Y. 2012-13 that there is no illegality in the impugned order as the ld. CIT (A) discussed the valuation report of the DVO in respect of to the co-owner, M/s Delight Suppliers Pvt. Ltd. and thereafter directed the ld. AO to delete the addition under Long-Term Capital Gain. The ld. AR further submits that assessee has not earned any exempt income on its investment in the current year as no disallowance u/s 14A should be made. 07. Upon hearing the submissions of the counsel of the respected parties, we have perused the order passed by the ld. CIT (A) and find that property in question is situated at 145, Rashbehari Avenue, Kolkata-29, comprising of both land and building. The assessee is one of the co- owners in the said property along with three other co-owners and they are M/s Santosh Promoters Pvt. Ltd., M/s Pennar Trading Pvt. Ltd and M/s Delight Suppliers Pvt. Ltd. It is pertinent to mention here that the ld. AO has calculated the capital gain by taking into consideration of valuation as per stamp duty valuation and ignoring the reality that the assessee has strongly objected the report given by the Stamp valuation authority. It is important to mention here that in the case of one of the co-owners of immovable property reference was made to the DVO for determining the fair value of the property. Valuation report was received from the DVO and as per the report of the District Valuation Officer (DVO) value of the property was arrived at ₹12,07,89,700/- out of which the assessee’s share would be ₹3,01,97,425/-. Since the report of the DVO and the valuation of the property was at ₹12,07,89,700/-, the difference between the value determined by the DVO and the said consideration declared by the assessee is less than 5% of the sale consideration declared by the assessee. We have gone through the order passed by the ld. CIT (A) and find that the ld. CIT (A) in its order has discussed the valuation report of one of the co-owners and Page | 5 ITA No.1226/KOL/2024 Tirupati Niryat Pvt. Ltd.; A.Y. 2012-13 thereafter passed the order in favour of the assessee. The relevant portion of the ld. CIT (A) order is essentially reproduced hereinbelow: - “3.3 I have carefully considered the facts of the case and submission of the appellant. A.O. did not refer the valuation to DVO. However, assessee is a co-owner with Delight Suppliers Pvt. Ltd. Valuation report of the DVO has been received after the assessment order was finalised in the case of Delight Suppliers Pvt. Ltd. As per the valuation report, the estimated value of the property as on 31.01.2012 was Rs. 12,07,89,700/-whereas assessee had declared the sale consideration of Rs.11,51,08,600/- as on 31.01.2012. Thus, the difference between the estimated value and the declared value was less than 5% of the declared value. Appellant in its submissions had claimed that safe harbour rule of 5%, as per the 3rd proviso to section 50C, would be applicable in its case in view of several judicial pronouncements. There are several decisions including those of Kolkata ITAT, as mentioned by the appellant in its submissions, which have held the insertion of 3rd proviso to section 50C of the I.T. Act to be declatory and curative in nature. It is held that this amendment is not a substantive amendment. Rather it is only a procedural amendment. Therefore, even when the statute does not specifically state so, such amendment are in the nature of retrospective amendment and these should be treated as effective from the date when 50C was introduced in the statute, i.e. w.e.f. 01.04.2003. As in the appellant's case, the difference between the estimated value and the declared value does not exceed 5% of the declared value, assessee is entitled for safe harbour rule of 5% as per 3 rd proviso to section 50C, as held in various judicial decisions, as mentioned in the preceding paras. In view of the above discussion, addition of Rs. 1,91,83,329/- under the head 'Long Term Capital gains' is deleted. 4. Grounds of Appeal No.3 4.1 Assessee had made investments in shares. However, assessee had not disallowed any expenses u/s 14A of the IT Act. Hence, invoking circular no. 5/2014 of CBDT, AO has applied Rule 8D and computed disallowable amount u/s 14A at Rs. 75,186/- and added the same to the total income. 4.2 Appellant has pointed out that it has not earned any exempt income on its investments in the current year. Hence, no disallowance u/s 14A should be made in view of the following decisions: 1. Supreme Court Ruling in case of PCIT v. GVK project and Technical Services Ltd. [2019] 106 taxmann.com 181 (SC) 2. Supreme Court of India in case of Commissioner of Income Tax, (Central) 1 v. Chettinad Logistics (P.) Ltd. [2018] 95 taxmann.com 250 (SC) 3. Supreme Court of India Principal Commissioner of Income Tax v. Oil Industry Development Board [2019] 103 taxmann.com 326 (SC) 4.3 I have carefully considered the facts of the case and the submissions of the appellant. There are several judgements, including these cited above by the assessee, which says that disallowance u/s 14A cannot be exceed the amount of exempt income earned during the year. This implies that when no exempt income has been earned, disallowance u/s Page | 6 ITA No.1226/KOL/2024 Tirupati Niryat Pvt. Ltd.; A.Y. 2012-13 14A cannot be made. As appellant has not earned any exempt income on its investments in the current year, disallowance u/s 14A is not sustainable. Hence, AO is directed to delete the addition of Rs. 75,186/-. 5. Grounds of Appeal No No.4: Appellant has submitted that it had claimed TDS credit of Rs.9,02,488/- but AO has given TDS credit of Rs.31,675/- only. Appellant has submitted copy of Form-26AS mentioning that its claim of TDS credit is duly reflected in Form-26AS. AO is directed to make necessary verification as per CBDT Instruction in this regard and allow admissible credit of TDS to the assessee. This ground is allowed for statistical purposes. 6. Grounds of Appeal No(s). 5: This ground is general in nature.” 08. Going over the facts of the case as well as the order passed by the ld. CIT (A), we do not find any infirmity in the impugned order. Accordingly, the order passed by the ld. CIT (A) is hereby upheld and the appeal of the Revenue is hereby dismissed. 09. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 23.06.2025. Sd/- Sd/- RAKESH MISHRA (PRADIP KUMAR CHOUBEY) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Kolkata, Dated: 23.06.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "