SITARAM AND COMPANY, MUMBAI V. ITO 13(2) (3), MUMBAI

ITA 1108/MUM/2011

• Counselvise Citation: 110819914 RSA 2011
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 23-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 07-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Fair market value
• Section: 143(3); 50C

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.1108 /MUM/2011 ( / ASSESSMENT YEAR : 2004-2005 M/S SITARAM AND CO., C/O CHANDOK AUTO INDUSTRIES, 431 LAMINGTON ROAD, MUMBAI 400 004. / VS. INCOME TAX OFFICER - 13(2)(3), MUMBAI. ./ PAN : AAQ0FS4860L ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY SHRI A.L. SHARMA R SPONDENT BY : MS. SONIA KUMAR ) * / DATE OF HEARING : 23-1-14 ) * / DATE OF PRONOUNCEMENT : 28-2-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) -24, MUMBAI DATED 27-12-2010 AND THE GRIEVAN CE OF THE ASSESSEE AS PROJECTED IN THE GROUNDS RAISED THEREIN RELATES TO THE COMPUTATION OF SHORT TERM CAPITAL GAIN ARISING FROM THE SALE OF GODOWN P REMISES. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 30-10-2004 DECLARING TOTAL INCOME OF RS. 2,15,275/-. IN THE SAID RETURN , SHORT TERM CAPITAL GAIN ARISING FROM SALE OF ITS GODOWN PREMISES AT MASJID, MUMBAI FOR A TOTAL CONSIDERATION OF RS. 20 LACS WAS SHOWN BY THE ASSES SEE AT RS. 12,09,558/-. ITA 1108/M/11 2 AS PER THE REGISTRAR OF THE PROPERTY, THE MARKET VA LUE OF THE GODOWN PREMISES SOLD BY THE ASSESSEE WAS DETERMINED AT RS. 38,49,50 0/- FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. INVOKING THE PROVISIONS OF S ECTION 50-C OF THE INCOME TAX ACT, 1961, THE A.O. ADOPTED THE SAID VALUE AFTE R ALLOWING DEDUCTION OF 10% AS SALE CONSIDERATION AND WORKED OUT THE SHORT TERM CAPITAL GAIN ARISING TO THE ASSESSEE FROM THE SALE OF GODOWN PREMISES AT RES. 31,68,758/- IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE A CT VIDE AN ORDER DATED 30-11-2006. ON APPEAL, THE LD. CIT(A) UPHELD THE OR DER OF THE A.O. ON THIS ISSUE. ON FURTHER APPEAL, THE TRIBUNAL RESTORED TH E MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO REFER THE MATTER TO THE DV O FOR DETERMINING THE MARKET VALUE OF THE PROPERTY OF THE ASSESSEE ON THE DATE OF SALE. ACCORDINGLY, THE VALUATION OF THE PROPERTY WAS DONE BY THE DVO A T RS. 23,16,468/- AND THE SHORT TERM CAPITAL GAIN ARISING FROM THE SALE O F GODOWN PREMISES WAS RECOMPUTED BY THE A.O. AT RS. 20,84,822/- VIDE HIS ORDER DATED 9-12-2009 PASSED U/S 143(3) R.W.S. 254 OF THE ACT. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 254 OF THE ACT, THE ASSESSEE AGAIN PREFERRED AN APPEAL BEFORE THE L D. CIT(A) CLAIMING DEDUCTION ON ACCOUNT OF STAMP DUTY AND REGISTRATION CHARGES OF RS. 4,91,000/- FROM THE COMPUTATION OF SHORT TERM CAPIT AL GAIN BEING THE EXPENDITURE INCURRED FOR MAKING THE PROPERTY MARKET ABLE. THE LD. CIT(A) DID NOT FIND MERIT IN THE CLAIM OF THE ASSESSEE MADE ON THIS ISSUE AND REJECTING THE SAME, HE DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APP EAL BEFORE THE TRIBUNAL. 4. IN ITS APPEAL, THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-24 . MUMBAI ERRED IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER IN TAKING THE VALUE AT RS.23,16,000/- INSTE AD OF RS.20,00,000I- REALIZED AND SHOWN BY YOUR APPELLANT . 2. ON THE FACTS AN CIRCUMSTANCES OF THE CASE, THE L EARNED CIT(A) OUGHT TO HAVE ALLOWED THE SUM OF RS.4,91 000 /- BEING ITA 1108/M/11 3 EXPENSES INCURRED BY YOUR APPELLANT FOR MAKING THE PROPERTY MARKETABLE. 3. YOUR APPELLANT SUBMITS THAT YOUR APPELLANT WAS T O PAY RS.4,91 000/- BY WAY OF STAMP DUTY WHICH HAS BEEN P AID BY THE PURCHASER OF THE PROPERTY AND THE PURCHASER HAS CON SIDERED THIS PAYMENT OF THE STAMP DUTY AND PAID THE AMOUNT AFTER DEDUCTING THE STAMP DUTY PAID BY THE VENDOR. 4. YOUR APPELLANT, THEREFORE, SUBMITS THAT THE STAM P DUTY BE ALLOWED AS A DEDUCTION FROM THE CONSIDERATION. 5. FURTHER YOUR APPELLANT SUBMITS THAT THE CIT(A) E RRED IN CONFIRMING THE ACTION OF THE ITO IN NOT ALLOWING TH E CARRY FORWARD LOSS AND DEPRECIATION AS CLAIMED BY YOUR APPELLANT. 6. YOUR APPELLANT SUBMITS THAT THE REPAIRS AND MAIN TENANCE CHARGES AND DEPRECIATION AS CLAIMED BY YOUR APPELLA NT BE ALLOWED IN FULL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1 & 6. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 6. AS REGARDS GROUND NO. 2 TO 5, IT IS OBSERVED THA T THE COMMON ISSUE INVOLVED THEREIN RELATES TO THE ASSESSEES CLAIM FO R DEDUCTION ON ACCOUNT OF EXPENSES OF RS. 4,91,000/- INCURRED ON PAYMENT OF S TAMP DUTY AND REGISTRATION. THIS EXPENDITURE IS CLAIMED BY THE A SSESSEE AS DEDUCTIBLE WHILE COMPUTING THE SHORT TERM CAPITAL GAIN ARISING FROM THE SALE OF GODOWN PROPERTY BEING THE EXPENDITURE INCURRED FOR MAKING THE SAID PROPERTY MARKETABLE. IT IS OBSERVED THAT THE SAID DEDUCTION , HOWEVER, WAS DISALLOWED BY THE LD. CIT(A) FOR THE FOLLOWING REASONS GIVEN I N PARA 2.3 OF HIS IMPUGNED ORDER:- 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. C OUNSEL AND THE COMMENTS OF THE DVO AND THE FACT THAT THE DVO HAS E STIMATED THE FMV OF THE PROPERTY AS ON 17/7/2003 ATRS.23,16,468/ -AFTER TAKING ALL THE FACTORS INTO CONSIDERATION - CLEARLY SHOWS THAT THE FMV HAS BEEN DETERMINED BY THE DVO AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIALS ITA 1108/M/11 4 WHICH WILL INCLUDE THE FACTOR OF DEFECTIVE TITLE ET C. AND FURTHER THE FACT THAT IN THE SALE DEED DT. 17/7/2003 IT IS CLEARLY M ENTIONED IN PARA J AS FOLLOWS :- THE VENDORS HAVE REPRESENTED TO THE PURCHASERS THA T AT THE TIME OF PURCHASE OF THE SAID PREMISES NO DOCUMENTS WERE EXECUTED BETWEEN THE ORIGINAL SELLERS AND THE VENDO RS HEREIN AND THE PAYMENT TOWARDS THE PURCHASE OF THE SAID PREMIS ES WAS CONFIRMED BY THE RECEIPT DATED 20TH MARCH, 1988 AND NO STAMP DUTY WAS PAID AT THAT TIME. THE PURCHASER HEREIN HA S PAID THE STAMP DUTY ALONG WITH THE PENALTY APPLICABLE ON THE RECEIPT DATED 20.03.1988 OF RS. 4,91;4O0/ (RUPEES FOUR LACS NINETY ONE THOUSAND FOUR HUNDRED ONLY) APPLICABLE ON THE S AID TRANSACTION VIDE CHALLAN NO. 88,89 ADJ./IMPD. NO. 1 18712, DATED 09.10.2002 ON BEHALF OF THE VENDORS HEREIN AN D IT IS AGREED BETWEEN THE PARTIES HERETO THAT THE PAYMENT OF STAMP DUTY SHALL BE CONSIDERED AS THE PART CONSIDERATION TOWARDS THE PURCHASE OF THE SAID PREMISES. THE ABOVE SHOWS THAT THE APPELLANT HAS BEEN GIVEN T HE SUM OF RS. 4,91,000/- BY THE PURCHASER OF THE PROPERTY IN THE SALES CONSIDERATION OF RS. 20 LAKHS AND THUS PLEA OF THE APPELLANT IS REJECTED AND THIS GROUND OF APPEAL IS DISMISSED AND NO FURTHER DEDUCTION CAN BE ALLOWED ON THIS ACCOUNT. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL PLACED ON RECORD, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE ON PAYMENT OF STAMP DUTY A ND REGISTRATION CHARGES. ALTHOUGH, THE MARKET VALUE OF THE PROPERTY AS ON TH E DATE OF SALE WAS ESTIMATED BY THE DVO AT RS. 23,20,468/- AND THE VAL UE SO ESTIMATED WAS TAKEN AS DEEMED SALE CONSIDERATION FOR THE PURPOSE OF COMPUTING SHORT TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT, THE FACT REMAINS THAT AS PER THE RELEVANT CLAUSE OF THE SALE DEED AS EXTRACTED IN THE RELEVANT PORTION OF THE LD. CIT(A)S IMPUGNED ORDER REPRODUCED ABOVE, THE ASSESSEE WAS LIABLE TO PAY THE STAMP DUTY AND REGIS TRATION CHARGES. THE ASSESSEE DID NOT GET REIMBURSEMENT OF THIS AMOUNT F ROM THE PURCHASER SEPARATELY AS THE SAME WAS CONSIDERED AS PART CONSI DERATION OF RS. 20 LACS TOWARDS THE PURCHASE OF THE PROPERTY. THE EXPENDIT URE OF RS. 4,91,400/- ON MAKING THE PROPERTY MARKETABLE THUS WAS FINALLY INC URRED BY THE ASSESSEE ITA 1108/M/11 5 FROM THE SALE CONSIDERATION OF RS. 20 LACS RECEIVED BY HIM AND THE SAME, IN OUR OPINION, WAS DEDUCTIBLE IN COMPUTING THE SHORT TERM CAPITAL GAIN BEING THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE COST OF IMPROVEMENT TO THE ASSET SOLD. WE, THEREFORE, DIRE CT THE A.O. TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF EXP ENDITURE INCURRED ON PAYMENT OF STAMP DUTY AND REGISTRATION CHARGES AMOU NTING TO RS. 4,91,000/- WHILE COMPUTING THE SHORT TERM CAPITAL GAIN AND ALL OW GROUND NO. 2 TO 5 OF THE ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2014. . ) 0 1 28-2-2014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 28-2-2014. [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 4 () / THE CIT(A)24, MUMBAI. 4. 4 / CIT 13, MUMBAI 5. $8 , * 8 , / DR, ITAT, MUMBAI H BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI