P.Rajendran, Kancheepuram V. DCIT, Vellore

ITA 1066/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3980 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVASJCIT
• Assessee Lawyers: K ULAGANAATHAN SHANKAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Date of conversion; Fair market value
• Section: 45(2); 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , .. ' #$, & '( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1066/MDS/2016 * +* / ASSESSMENT YEAR : 2008-09 SHRI P. RAJENDRAN, PROP: SHREE RAMKUMAR SILKS, NO.21-A, T.K. NAMBI STREET, KANCHEEPURAM. PAN : AADPR 2756 F V. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I, VELLORE. (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SHRI K. ULAGANAATHAN SHANKAR, FCA /0-. 1 2 / RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT ' 1 3& / DATE OF HEARING : 24.10.2016 45+ 1 3& / DATE OF PRONOUNCEMENT : 23.11.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNA I, DATED 28.01.2016 AND PERTAINS TO ASSESSMENT YEAR 2008-09. 2 I.T.A. NO.1066/MDS/16 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DETER MINATION OF FAIR MARKET VALUE AS ON THE DATE OF CONVERSION OF C APITAL ASSET INTO STOCK-IN-TRADE. 3. SHRI K. ULAGANAATHAN SHANKAR, THE LD. REPRESENTA TIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEES BROTHER PUR CHASED A PROPERTY ON 20.09.1990. BY WAY OF SETTLEMENT DEED DATED 25.03.1996, THE PROPERTY WAS SETTLED IN FAVOUR OF T HE ASSESSEE. THE ASSESSEE CONVERTED THE LAND INTO STOCK-IN-TRADE ON 22.04.2005. THE PLOT WAS SOLD IN THE SUBSEQUENT YEAR, MORE PARTICUL ARLY ON 16.07.2007, 22.10.2007 AND 29.10.2007. REFERRING T O SECTION 45(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), T HE LD. REPRESENTATIVE SUBMITTED THAT WHEN THE CAPITA ASSET WAS CONVERTED INTO STOCK-IN-TRADE, THE GAIN ARISING OUT OF SUCH T RANSFER BECOMES CHARGEABLE TO TAX IN THE YEAR IN WHICH THE PROPERTY WAS ULTIMATELY SOLD IN THE COURSE OF BUSINESS ACTIVITY. THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF CONVERSION SHALL BE DEEMED TO BE FULL VALUE OF CONSIDERATION RECEIVED OR ACQUIRING AS A RESULT OF CAPITAL GAIN. THE ASSESSING OFFICER HAS TAKEN THE GUIDELINE VALUE PRE SCRIBED BY THE STATE REGISTRATION AUTHORITY, AS FAIR MARKET VALUE AS ON THE DATE OF CONVERSION. 3 I.T.A. NO.1066/MDS/16 4. REFERRING TO THE MEMORANDUM EXPLAINING SECTION 5 0C OF THE ACT, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMIT TED THAT WHEN THE CAPITAL ASSET WAS CONVERTED INTO STOCK-IN-TRADE, NO REGISTRATION IS REQUIRED. IT IS ONLY A CONVERSION OF THE ASSET IN THE BOOKS OF ACCOUNT, THEREFORE, THE PROVISION OF SECTION 50C OF THE ACT IS NOT APPLICABLE AT ALL. THE ASSESSING AUTHORITY HAS TO ADOPT THE FAIR MARKET VALUE AS ON THE DATE OF VALUATION. THEREFOR E, ACCORDING TO THE LD. REPRESENTATIVE, THE VALUATION ADOPTED BY BO TH THE AUTHORITIES BELOW ON THE BASIS OF GUIDELINE VALUE IS NOT JUSTIF IED. 5. ON THE CONTRARY, SHRI SHIVA SRINIVAS, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT FOR THE PURPOSE OF C OMPUTING CAPITAL GAIN, THE VALUE DETERMINED BY THE STATE REGISTRATIO N AUTHORITIES FOR REGISTRATION OF DOCUMENT HAS TO BE TAKEN AS CONSIDE RATION RECEIVED BY THE ASSESSEE. IN THE CASE BEFORE US, ACCORDING TO THE LD. D.R., THE ASSESSEE CONVERTED THE CAPITAL ASSET INTO STOCK -IN-TRADE, THEREFORE, THE ASSESSING OFFICER BY APPLYING PROVIS IONS OF SECTION 50C OF THE ACT, HAS TAKEN THE GUIDELINE VALUE AS FA IR MARKET VALUE AS ON THE DATE OF CONVERSION. ACCORDING TO THE LD. D. R., THE GUIDELINE VALUE DETERMINED BY THE STATE REGISTRATION AUTHORIT IES FOR THE PURPOSE OF REGISTRATION OF DOCUMENT ASSUMES SIGNIFI CANCE IN THE 4 I.T.A. NO.1066/MDS/16 ABSENCE OF ANY OTHER MATERIAL AVAILABLE ON RECORD. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIG HTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DETERMINATION OF FAIR M ARKET VALUE AS ON 22.04.2005, BEING THE DATE OF CONVERSION OF LAND IN TO STOCK-IN-TRADE. THE ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT ADOPTED GUIDELINE VALUE PRESCRIBED BY THE S TATE REGISTRATION AUTHORITY. THE ASSESSEE NOW CONTENDS BEFORE THIS T RIBUNAL THAT FOR CONVERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE, RE GISTRATION OF DOCUMENT IS NOT REQUIRED, THEREFORE, THE PROVISIONS OF SECTION 50C OF THE ACT IS NOT APPLICABLE AT ALL. 7. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 45(2) OF THE ACT. FOR THE PURPOSE OF DETERMINING T HE CAPITAL GAIN, THE FAIR MARKET VALUE OF THE ASSET AS ON THE DATE O F CONVERSION, SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION REC EIVED OR ACQUIRING AS A RESULT OF TRANSFER OF CAPITAL ASSET. THEREFORE, FAIR MARKET VALUE HAS TO BE DETERMINED AS ON 22.04.2005. THE ASSESSING OFFICER HAS SIMPLY ADOPTED THE GUIDELINE VALUE 5 I.T.A. NO.1066/MDS/16 PRESCRIBED BY SUB-REGISTRAR. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT GUIDELINE VALUE PRESCRIBED BY THE STATE GOVERNMENT IS ONLY TO GUIDE THE SUB-REGISTRAR TO DETERMINE THE FAIR MARKET VALU E ON THE DATE OF REGISTRATION OF THE DOCUMENT. FAIR MARKET VALUE IS NOT A CONSTANT FIGURE. IT MAY FLUCTUATE DEPENDING UPON VARIOUS FA CTORS. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE FAIR MARKET VALUE OF THE PROPERTY WOULD DEPEND UPON THE LOCATION OF PROPERTY , AVAILABILITY OF INFRASTRUCTURE FACILITIES AROUND THE PROPERTY, FUTU RE POTENTIAL FOR DEVELOPMENT, ETC. GUIDELINE VALUE IS ALSO ONE OF T HE FACTORS TO BE TAKEN INTO CONSIDERATION WHILE DETERMINING THE FAIR MARKET VALUE. THE GUIDELINE VALUE OF THE REGISTRATION AUTHORITIES ALWAYS WOULD NOT REPRESENT THE FAIR MARKET VALUE. IN THE CASE BEFOR E US, THE ASSESSING OFFICER HAS TAKEN THE GUIDELINE VALUE OF THE PROPERTY AS FAIR MARKET VALUE AS ON 22.04.2005. THE COMPARATIV E SALE INSTANCE IN THE SAME LOCALITY HAS NOT BEEN TAKEN INTO CONSID ERATION BY BOTH THE AUTHORITIES BELOW. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER BY TAKING INTO CONSIDERATION THE FACTORS RE FERRED ABOVE WHILE DETERMINING THE FAIR MARKET VALUE. ACCORDINGLY, TH E ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE OF DE TERMINING THE FAIR MARKET VALUE AS ON 22.04.2005 BEING THE DATE OF CON VERSION OF 6 I.T.A. NO.1066/MDS/16 CAPITAL ASSET INTO STOCK-IN-TRADE, IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REC ONSIDER THE ISSUE AFRESH AND DETERMINE THE FAIR MARKET VALUE AFTER CO NSIDERING ALL THE FACTORS REFERRED ABOVE AND THEREAFTER DECIDE THE FA IR MARKET VALUE IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPO RTUNITY TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23 RD NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( . . ' #$ ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 23 RD NOVEMBER, 2016. KRI. 1 /3#8 98+3 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. ' :3 () /CIT(A)-13, CHENNAI 4. PRINCIPAL CIT-8, CHENNAI-34 5. 8; /3 /DR 6. * < /GF.