M/s Diyansh Estaes (P) Ltd, Ludhiana V. Income Tax Officer, Ludhiana

ITA 1075/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8922 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SSH SUDHIR SEHGAL; KUSHAL CHOPRA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Fair market value
• Section: 50C; 148; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1075/CHD/2016 ASSESSMENT YEAR: 2009-10 MS. DIVYANSH ESTATES (P) LTD., VS. THE ITO, WARD-6 (1), LUDHIANA LUDHIANA PAN NO. AABCD6823A (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH. SUDHIR SEHGAL & KUSHAL CHOPRA RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 17.11.2016 DATE OF PRONOUNCEMENT : 07.12.2016 ORDER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-3, LUDHIANA DATED 04.07.2016 FOR ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS:- 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN DISMISSING THE APPEAL OF THE ASSESSEE BY CONFIRMING THE ADDITION OF RS. 11,62,367/- BY APPLY ING THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT. 2. THAT THE WORTHY CIT(A) HAS FAILED TO CONSIDER TH E FACT THAT THE ASSESSEE DEALS IN PURCHASE AND SALE OF LAND AND THE SAID LAND WAS HELD STOCK IN TRADE AND, THUS, THE PROVISIONS 2 OF SECTION 50C WERE NOT APPLICABLE TO THE SAID LAND , BEING NOT A CAPITAL ASSET IN THE HANDS OF THE ASSESSEE. 3. THAT THE WORTHY CIT (A) AND ASSESSING OFFICER HA VE CLEARLY MENTIONED IN THE ORDERS THAT THE ASSESSEE D EALS IN PURCHASE AND SALE OF LAND AND, THUS, THE PROVISIONS OF SECTION 50C WERE NOT APPLICABLE AT ALL 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A C OMPANY AND NATURE OF BUSINESS IS SALE AND PURCHASE OF LAND. THE ASSESSE E FILED RETURN OF INCOME DECLARING INCOME OF RS. 4,61,530/- WHICH IS SHOWN F ROM BUSINESS / PROFESSION. THE ASSESSING OFFICER INITIATED RE-ASSE SSMENT PROCEEDINGS U/S 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT' ) AND NOTED IN THE REASONS RECORDED THAT ASSESSEE HAS SOLD PROPERTY AT VILALGE BIRMI, LUDHIANA FOR A CONSIDERATION OF RS. 36,77,000/- JOI NTLY WITH SHRI RAJESH AGGARWAL, DIRECTOR OF THE COMPANY. HOWEVER, AS PER THE SALE DEED, THE FAIR MARKET VALUE OF THE PROPERTY WAS RS. 52,45,500/-. T HE ASSESSING OFFICER WAS, THEREFORE, OF THE VIEW THAT ASSESSEE COMPANY D ID NOT DISCLOSE CAPITAL GAINS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 50C OF THE I.T. ACT. THE ASSESSING OFFICER FOUND THAT ASSESSEES SHARE OF SA LE CONSIDERATION WAS RS. 27,30,133/- AGAINST THE VALUATION OF THE LAND ADOPT ED IN PROPORTIONATE AND MADE ADDITION OF RS. 11,62,367/- WITH THE AID OF S ECTION 50C OF THE ACT. THE LD. CIT(A) CONFIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF ASSESSEE. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE DEALS IN PURCHASE AND SALE OF LAND AND THE SAID LAND WAS HEL D AS STOCK IN TRADE, 3 THEREFORE, SECTION 50C OF THE ACT IS NOT APPLICABLE TO THE SAID LAND. THE ASSESSING OFFICER CONSIDERED THE NATURE OF BUSINESS OF ASSESSEE AS SALE AND PURCHASE OF LAND. PB-6 IS THE BALANCE SHEET OF ASSE SSEE SHOWING THE LAND AS STOCK IN TRADE AT A SUM OF RS. 2,43,45,964/-. PB -7 IS THE PROFIT AND LOSS ACCOUNT IN WHICH SALES HAS BEEN SHOWN IN A SUM OF R S. 27,30,000/-. PB-8 IS VALUE OF LAND AT COST. PB-12 IS SALES DECLARED BY THE ASSESSEE. HE THEREFORE, SUBMITTED THAT SINCE ASSESSEE HELD THE L AND FOR BUSINESS PURPOSES AND SHOWN AS STOCK IN TRADE, THEREFORE, PROVISIONS OF SECTION 50C WILL NOT APPLY IN THIS CASE OF THE ASSESSEE. IN SUPPORT OF T HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HON'BLE ALLAHABAD H IGH COURT IN THE CASE OF CIT VS. KAN CONSTRUCTION AND COLONIZERS (P) LTD AS REPORTED IN (2012) 70 DTR 169 (ALLAHABAD), IN WHICH IT HAS BEEN HELD:- IF THE ASSET IS HELD AS STOCK IN TRADE, THE PROFIT AND GAINS FROM THE SALES IS LIABLE TO BE TAXED AS PROFIT AND GAINS FROM BUSINESS AND NOT AS CAPITAL GAINS. SECTION 50C HAS NO APPLICATION WHERE TRANSFER OF IMMOVABLE PROPERTY IS ON ACCOUNT OF SALE OF STOCK. HE HAS ALSO RELIED UPON THE DECISION OF HON'BLE MA DRAS HIGH COURT IN THE CASE OF CIT VS. THIRUVENGADAM INVESTMENTS (P) LTD. IN ITA NO. 320 ITR 345 (MADRAS) IN WHICH IT WAS HELD AS UNDER:- PROVISIONS OF S. 50C CAN BE APPLIED ONLY TO FIND O UT THE TRUE VALUE OF A CAPITAL ASSET AND NOT FOR COMPUTING BUSINESS INCOME AND, THEREFORE, THE SAME WERE NOT APPLICABLE IN THE MATTER OF COMPUTATION OF ASSESSEE S INCOME FROM THE SALE OF THE PROPERTY WHICH WAS TREA TED AS BUSINESS ASSET AND NOT AS CAPITAL ASSET IN THE HAN DS OF THE ASSESSEE. 4 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE ADDITION IS WHOLLY UNJUSTIFIED. THE ASSESSING OFFIC ER HAS TAKEN THE VALUE OF ACTUAL SALE CONSIDERATION RECEIVED BY THE ASSESSEE OF HIS SHARE IN A SUM OF RS. 27,30,133/-. THIS FIGURE MATCH WITH THE SALES SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AT RS.,27,30,000/-. THE ASSESS EE HAS SHOWN LAND AS STOCK IN TRADE AND LAND IS VALUED IN CLOSING STOC K AT COST AND PROFIT IS COMPUTED AS PER BUSINESS CONDUCTED BY THE ASSESSEE ON SALE AND PURCHASE OF THE LAND. THEREFORE, THE ISSUE IS COVERED BY THE ABOVE JUDGMENTS OF THE HON'BLE ALLAHABAD AND MADRAS HIGH COURT (SUPRA) IN WHICH IT IS HELD THAT IF THE ASSET IS HELD AS STOCK IN TRADE, PROFIT AND LOSS FROM SALES IS LIABLE TO BE TAXED AS PROFIT AND GAINS FROM BUSINESS AND NOT AS CAPITAL GAINS. SECTION 50C IS NOT APPLICABLE WHERE TRANSFER OF IMMOVABLE O F PROPERTY IS ON ACCOUNT OF SALES OF STOCK. THUS, WHOLE ADDITION IT UNJUSTIFIED IN THE CASE OF THE ASSESSEE. FOLLOWING THE RATIO OF THE ABOVE DECI SIONS, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTR E ADDITION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 7 TH DECEMBER, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR