M/s. TNK Govindaraju Chetty & Co.Pvt.Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1071/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64151 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2012
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA JT
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Commercial expediency; Revised return
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE SHRI N.S. SAINI , ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ] I.T.A.NO. 1071/MDS/2012 ASSESSMENT YEAR : 2006 - 07 M/S TNK GOVI NDARAJU CHETTY & CO. PVT LTD TNK HOUSE, NO48 ANNA SALAI CHENNAI 600 002 [PAN AAACT1818Q] VS THE DY. CIT MEDIA CIRCLE II CHENNAI ( APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE RESPONDENT BY : SHRI S. DASGUPTA, JT. CIT DATE OF HEARING : 09 - 08 - 2012 DATE OF PRONOUNCEMENT : 09 - 08 - 2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - VI, CHENNAI, DATED 10.2.2012. 2 . GROUND NO.1 & 9 OF THE APPEAL ARE GENERAL IN NATURE AND THEREFORE, REQUIRES NO SEPARATE ADJUDICATION BY US. 3 . GROUND NOS. 2 TO 6 OF THE APPEAL OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF ` 6, 16,323/ - . I.T.A.NO. 1071/2012 : - 2 - : 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF EXHIBITION OF CINE FILMS THROUGH FOUR THEATRES BUILT IN A COMPLEX. THE ASSESSEE FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 15.12.2006 SHOWING INCOME OF ` 1,25,41,577/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) BY FOLLOWING HIS ORDER FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 RELATING TO TWO PROPERTIES, ONE AT DR NAIR ROAD, T. NAGAR, CHENNAI AND THE OTHER AT TONDIARPET, BY DISALLOWING IN TEREST CLAIM OF ` 6,16,323/ - ATTRIBUTABLE TO DIVERSION OF BORROWED FUNDS TOWARDS NON - BUSINESS PURPOSES. 5 . ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD CONCEDED BEFORE HIM THAT FOR ASSESSMENT YEARS 2 004 - 05 AND 2005 - 06 THE TRIBUNAL IN I.T.A.NOS.1049 AND 1109/MDS/2009, ORDER DATED 23.09.2011 HAD REVERSED THE ORDER OF THE CIT(A) AND RESTORED THAT OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: 'THUS WHAT IS NOTICED IS THAT THE ASSESSEE HAS BORROWED FROM THE SAME PERSON BY PAYING INTEREST BUT HAS GIVEN NON - INTEREST BEARING ADVANCES TO THE SAME PERSON. WHERE IS THE COMMERCIAL EXPEDIENCY? THE ASSESSEE HAS BEEN UNABLE TO EXPLAIN THIS TRANSACTION. ONCE THIS INTEREST PORTION IS REMOVED, THE INTEREST PAYMENTS TO THE BANKS ARE BUT MINOR. THIS CLEARLY SHOWS THAT THE ADVANCEMENT OF NON - INTEREST BEARING FUNDS TO RELATED PARTIES IS NOT COMPELLED BY ANY COMMERCIAL EXPEDIENCY. THE A SSESSEE HAS ALSO NOT PROVED BEFORE US ANY COMMERCIAL EXPEDIENCY IN RE GA RD TO ANY OF TH E INTEREST - FREE ADVANCES GIVEN TO THE RELATED PARTIES. THE CLAIM OF THE ASSESSEE THAT IT HAD ADEQUATE NON - INTEREST BEARING , FUNDS TO GIVE THE INTEREST - FREE ADVANCES IS SEEN OTHERWISE IN SO FAR A S THE NON - INTEREST BEARING FUNDS AVAILABLE WITH THE ASSESSEE IS IN THE FORM OF PROFITS I.T.A.NO. 1071/2012 : - 3 - : OF THE YEAR WHICH OBVIOUSLY CANNOT BE DETERMINED UNTIL THE END OF THE YEAR. EVEN ASSUMING THAT THESE FUNDS WERE AVAILABLE . IT WOULD HAVE TO BE SEEN IN LINE WITH THE CASH BOOK OF THE ASSESSEE. HERE IT WOULD BE PERTINENT TO NOTE TH AT THE RESOLUTION TO ADVANCE THE AMOUNTS TO ONE OF THE CONCERNS, NAMELY M/S. GLENROCK ESTATES P. LTD. TO AN EXTENT OF R S .2 5 0 LAKHS WAS HELD ON 22.04.2002, I.E. AT THE BEGINNING OF THE FINANCIAL YEAR WHEREAS THE PROFITS COULD BE DETERMINED ONLY DURING THE END OF THE FINANCIAL YEAR. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS LIABLE TO BE REVERSED AND WE DO SO. IN THE CIRCUMSTANCES, THE DISALLOWANCE OF INTEREST AS MADE BY THE ASSESSING OFFICER STANDS RES TORED AND T HE FINDING OF THE LEARNED CIT(A) STANDS REVERSED ON THE ISSUE.' 6 . THE A.R OF THE ASSESSEE VERY FAIRLY SUBMITTED BEFORE US BY FILING A COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 IN I.T .A.NOS.1049 AND 1109?MDS/2009, DATED 23.9.2011 THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E CIT(A). IT IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 7 . GROUND NOS. 7 & 8 OF THE APPEAL ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN COMPUTING LONG TERM CAPITAL GAINS IN RESPECT OF T. NAGAR PROPERTY OF ` 25 LAKHS. 8 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSE RVED THAT IN RESPECT OF T. NAGAR PROPERTY, THE COMPANY ADMITTED ` 25 LAKHS FOR CAPITAL GAINS WHICH WAS RETRACTED THROUGH A REVISED I.T.A.NO. 1071/2012 : - 4 - : STATEMENT FILED ON 31.3.2008. THE ASSESSEE HAS NOT FILED ANY REVISED RETURN. HENCE, THE REVISED TOTAL INCOME HAS NO VALIDI TY. THE ASSESSING OFFICER FURTHER OBSERVED THAT THIS SUM OF ` 25 LAKHS HAS BEEN RECEIVED FROM M/S ARIHANT FOUNDATION LTD. TOWARDS THE SALE CONSIDERATION OF THE LAND. NO DOCUMENTS HAVE BEEN REGISTERED DURING THE YEAR, HENCE, THE ASSESSEE CLAIMS THAT THIS SHOULD BE TREATED AS AN ADVANCE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS ALREADY HANDED OVER THE POSSESSION OF LAND TO THIS DEVELOPER FOR CONSTRUCTION AND HAS GIVEN POWER OF ATTORNEY IN THEIR FAVOUR FOR REGISTRATION OF LAND. ALSO, SUMS HAVE BEEN RECEIVED IN EARLIER YEARS. THE SUM OF ` 25 LAKHS RECEIVED DURING THE YEAR CAN ONLY BE TAKEN AS SALE CONSIDERATION DURING THE YEAR AND IS TAKEN FOR COMPUTATION OF CAPITAL GAINS. 9 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE TRIBUNAL IN ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 IN I.T.A.NOS.1049 AND 1109/MDS/2009, ORDER DATED 23.9.2011 HAS REVERSED THE FINDING OF THE CIT(A) AND RESTORED THAT OF THE ASSESSING OFFICER. THE CIT(A), THEREFORE, FOLLOWING THE ABOVE QUOTED ORDER OF THE TRIBUNAL DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE. 10 . WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEARS 2004 - 05 AND 2005 - 06, HAS HELD AS UNDER: IN REGARD TO THE APPLICABILITY OF THE PROVISIONS OF SEC. 50C, A PERUSAL OF PROVISIONS OF SECTION 50C CLEARLY SH OWS THAT IT IS THE CONSIDERATION RECEIVED OR ACCRUING AS I.T.A.NO. 1071/2012 : - 5 - : A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND AND BUILDING, WHICH IS CONSIDERED. IF SUCH VALUE IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY FO R THE PURPOSE OF STAMP DUTY IN RESPECT OF THE TRANSFER, THE VALUE SO ADOPTED IS TO BE TREATED AS THE FULL CONSIDERATION. HERE IN THE PRESENT C ASE WHAT IS NOTICED IS THAT THE ASSESSEE HAS BEEN REGISTERING A PART OF THE UNDIVIDED INTEREST IN THE LAND TO VAR IOUS PERSONS DURING VARIOUS YEARS. WHEN THE ASSESSEE REGISTERS ITS UNDIVIDED INTEREST IN THE LAND TO VARIOUS PERSONS, EACH TRANSACTION HAS TO BE CONSIDERED INDEPENDENTLY AND INDIVIDUALLY AS EACH TRANSFER IS A TRANSFER OF THE CAPITAL ASSET BEING THE UNDIVID ED INTEREST IN THE LAND. IT CANNOT BE SAID THAT AT THE END OF THE SALE OF ALL THE UNDIVIDED INTEREST CAPITAL GAINS IS TO BE DETERMINED. EACH TRANSACTION GIVES RISE TO CAPITAL GAINS AND THE PROVISIONS OF SEC. 5 OC WOU L D APPLY TO EACH TRANSACTION INDEPENDENT LY AND INDIVIDUALLY. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS NOT ON A RIGHT FOOTING. CONSEQUENTLY THE SAME IS REVERSED AND THAT OF THE ASSESSING OFFICER IS RESTORED.' 11 . WE, THEREFORE, DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHICH IS CONFIRMED AND THE GROUND S OF APPEAL OF THE ASSESSEE ARE DISMISSED. 12 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 09 TH OF AUGUST , 2012, AT CHEN NAI. SD/ - SD/ - (VIKAS AWASTHY) JUDICIAL MEMBER ( N.S.SAINI ) ACCOUNTANT MEMBER DATED: 09 TH AUGUST, 2012 RD COPY TO: APPELLANT / RESPONDENT / CIT(A) /CIT/ DR