Bhavnagar Jilla Sahkari Kharid Vechan Sangh Ltd., Bhavnagar V. ACIT, Circle-2, , Bhavnagar

ITA 1119/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4351 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDHUT TRIVEDI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Capital Gains
• Section: 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1119/AHD/2018 ASSESSMENT YEAR : 2013-14 BHAVNAGAR JILLA SAHKARI KHARID VECHAN SANGH LTD., OPP. NARESHWAR TEMPLE, HERIS ROAD, AMBA CHOWK, BHAVNAGAR 364 001 PAN : AAALT 0030 F VS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, BHAVNAGAR / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI TUSHAR HEMANI, AR WITH MS. ADITI SHETH, AR REVENUE BY : SHRI VIDHUT TRIVEDI, SR DR / DATE OF HEARING : 19/11/2019 / DATE OF PRONOUNCEMENT: 19/11/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER :- 1. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AG AINST THE ORDER OF THE LEARNED CIT(A)-6, AHMEDABAD DATED 19.02.2018 PASSED FOR ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL, B UT ITS GRIEVANCES REVOLVE AROUND A SINGLE ISSUE VIZ. THE LEARNED CIT(A) HAS E RRED IN CONFIRMING THE ADDITION OF RS.44,58,189/- WHICH WAS ADDED BY THE A SSESSING OFFICER WITH THE AID OF SECTION 50C OF THE INCOME-TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 11.10.2013 DECLARING TOTAL INCOME OF RS.1,26,78,230/-. ITA NO. 1119/AHD/2018 BHAVNAGAR JILLA SAHKARI KHARID VECHAN SANGH LTD VS . ACIT AY : 2013-14 2 IT HAS SOLD TWO PROPERTIES WHOSE DETAILS HAVE BEEN NOTICED BY THE ASSESSING OFFICER ON PAGE NO.2 IN PARAGRAPH NO.3 OF THE ASSES SMENT ORDER. THEY READ AS UNDER:- DATE CONSIDERATION STAMP DUTY PAID VALUE @ 4.9% STA MP DUTY 26.03.2013 35,15,000 4,09,000 83,46,938 26.03.2013 1,13,36,000 13,74,000 2,80,40,816 4. THE LEARNED ASSESSING OFFICER HAS CONFRONTED TH E ASSESSEE AS TO WHY THE VALUE OF THE PROPERTY FOR THE PURPOSE OF DEEMING TH E FULL SALE CONSIDERATION UNDER SECTION 50C BE NOT TAKEN EQUIVALENT TO THE AM OUNT ON WHICH THE SALE DUTY WAS PAID. THE ASSESSEE CONTENDED THAT IT HAS TAKEN THESE PROPERTIES ON LEASE AND IT HAS ONLY SOLD THE LEASE RIGHTS AND SEC TION 50C IS NOT APPLICABLE ON SALE OF LEASEHOLD RIGHTS. LEARNED ASSESSING OFFICE R DID NOT ACCEPT THIS CONTENTION. HE MADE A REFERENCE TO THE VALUATION O FFICER, BUT THE DVO HAS NOT SUBMITTED HIS REPORT AND ACCORDINGLY HE ADOPTED THE VALUE OF THE PROPERTIES ON WHICH THE STAMP DUTY WAS PAID. HE MADE AN ADDITION OF RS.2,15,36,754/-. 5. DISSATISFIED WITH THE ABOVE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LE ARNED FIRST APPELLATE AUTHORITY. IT HAS REITERATED ITS CONTENTIONS. THE LEARNED CIT(A) HAS OBSERVED THAT THE PROPERTY WAS TAKEN BY THE ASSESSEE AT A LO NG TERM LEASE OF 60 YEARS, I.E. IT HAS TAKEN THE LEASEHOLD RIGHTS FROM BHAVNAGAR MU NICIPAL CORPORATION IN 1976 FOR 30 YEARS WHICH HAS BEEN RENEWED IN 1990 FO R FURTHER 30 YEARS. THUS, ACCORDING TO LEARNED CIT(A), THERE IS NO SUBSTANTIA L DIFFERENCE BETWEEN THE SALE OF THE PROPERTY OBTAINED UNDER LONG TERM LEASEHOLD RIGHTS VIS--VIS AS A FREE HOLD PURCHASE. IN PRINCIPLE, THE LEARNED CIT(A) HAS UPHELD INVOCATION OF SECTION 50C, BUT SUBSTANTIALLY REDUCED THE DEEMED S ALE CONSIDERATION AFTER TAKING INTO CONSIDERATION THE DVOS REPORT. THE LE ARNED CIT(A) HAS CONFIRMED ADDITION OF RS. 44,58,189/- AS AGAINST RS.2,15,36,7 54/- MADE BY THE ASSESSING OFFICER. THIS AMOUNT HAS BEEN REDUCED ON THE BASIS OF REPORT OF THE DVO WHO ITA NO. 1119/AHD/2018 BHAVNAGAR JILLA SAHKARI KHARID VECHAN SANGH LTD VS . ACIT AY : 2013-14 3 HAS SUBMITTED HIS REPORT DURING THE PENDENCY OF APP EAL BEFORE THE FIRST APPELLATE AUTHORITY. THE DVO DETERMINED THE FAIR MA RKET VALUE OF BOTH THE PROPERTIES AS UNDER:- SR. NO. PROPERTY FAIR MARKET VALUE (IN RS.) DECLARED VALUE (IN RS.) AS ON DATE 1 CITY SURVEY WARD-4, NAKSHA SHEET NO.36, UPARNA SOCIETY, SURVEY NO.309, F.P. NO.45, BHAVNAGAR-RUVAPARI ROAD, BHAVNAGAR 46,76,123 35,15,000 26.03.2013 2. CITY SURVEY WARD-4, NAKSHA SHEET NO.24, UPARNA SOCIETY, SURVEY NO.303, F.P. NO.46, BHAVNAGAR-RUVAPARI ROAD, BHAVNAGAR 1,46,33,696 1,13,36,000 ACCORDINGLY, THE DIFFERENCE HAS BEEN ADDED. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET CONTENTED THAT THE ACTUAL SALE CONSIDERATION WOULD BE REPLACED UNDER SECTION 50C BY DEEMING SALE CONSIDERATION EQUIVALENT TO THE AMOUNT ON WHICH THE STAMP DUTY WAS PAID. BUT THIS DEEMING FICTION CAN BE INVOKED ON THE BASIS OF LAND OR BUILDING OR BOTH. ON THE OTHER NATURE OF C APITAL RIGHTS, SECTION 50C IS NOT APPLICABLE. THIS ISSUE HAS BEEN CONSIDERED IN VARIOUS CASES AND HE RELIED UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. GREENFIELD HOTELS & ESTATES (P.) LTD. [2016[ 389 IT R 68 (BOMBAY) AND THE ORDER OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF SURESHC HANDRA PAREKH VS. ITO (ITA NO. 841/AHD/2015). HE PLACED ON RECORD COPY O F THIS ORDER. 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE ORDER OF THE LEARNED CIT(A). ITA NO. 1119/AHD/2018 BHAVNAGAR JILLA SAHKARI KHARID VECHAN SANGH LTD VS . ACIT AY : 2013-14 4 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. LEARNED FIRST APPELLATE AUTHORIT Y HAS RECORDED A CATEGORICAL FINDING THAT THESE PROPERTIES WERE TAKEN ON LEASE B Y THE ASSESSEE FROM BHAVNAGAR MUNICIPAL CORPORATION. SHE WAS OF THE OP INION THAT THERE IS HARDLY ANY DIFFERENCE BETWEEN THE LEASEHOLD RIGHTS VIS--V IS AN INDEPENDENT RIGHT IN THE PROPERTY. THEREFORE, SHE EQUATED BOTH THE NATU RE OF RIGHTS; HOWEVER, IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS THIS ASPECT HA S NOT BEEN UPHELD. THE TRIBUNAL IS UNANIMOUS IN ITS CONCLUSION THAT THE TR ANSFER OF LEASEHOLD RIGHTS DOES NOT FALL WITHIN THE AMBIT OF SECTION 50C. THE DISCUSSION MADE BY THE TRIBUNAL IN THE CASE OF SURESHCHANDRA PAREKH VS. I TO (SUPRA) READS AS UNDER:- 7. AS REGARDS THE QUESTION AS TO WHETHER THE PRO VISIONS OF SECTION 50C CAN BE INVOKED IN RESPECT OF THE LEASE HOLD PROPERTY, THIS ISSUE IS NO LONGER RES INTEGRA. THERE ARE SEVERAL DECISIONS OF THIS TRIBUNAL INCLUD ING THE CASE OF DCIT VS. TEJINDER SINGH (SUPRA), ATUL G. PURANIK VS. ITO [132 ITD 499 (MUM TRIB)] IN SUPPORT OF THE PROPOSITION. HON'BLE DELHI HIGH COUR T IN THE CASE OF CIT VS. SHRI KISHAN DAS - ITA NO .64 OF 2014, JUDGEMENT DATED 10.02.2014, HAS APPROV ED THIS SCHOOL OF THOUGHT AND INTER ALIA OBSERVED AS FOLLOW S :- '3. IT IS CONTENDED ON BEHALF OF THE REVENUE THAT T HE TRIBUNAL FELL INTO ERROR BECAUSE SECTION 50C DOES NOT MAKE ANY DISTINC TION BETWEEN PROPERTIES OF ONE KIND AND THE OTHER AND THAT SO LO NG AS THE STATE AUTHORITIES PRESCRIBED A DIFFERENT RATE THAN THE ON E INVOLVED IN THE TRANSACTION, SUCH PRESCRIBED RATE WOULD BE DEEMED T HE RATE FOR THE APPLICATION FOR SECTION 50C. CONTENDING THAT THE DI STINCTION MADE IN THE PRESENT CASE BETWEEN THE FRESH LEASEHOLD RIGHTS AND THE CONSIDERATION PAYABLE AND THE RESIDUAL RIGHTS WAS UNJUSTIFIED, IT WAS ARGUED THAT SUCH DIFFERENCE IS ARTIFICIAL AND UNSOUND. LEARNED COUNS EL RELIED UPON THE DECISION OF THE TRIBUNAL IN ARIF AKHATAR HUSSAIN V. ITO ITA/543/MUM/2010 TO SUBMIT THAT EVEN LEASEHOLD RIGH TS SUCH AS THE PRESENT ONE, WHICH COMPREHENDED ENTITLEMENTS IN RES PECT OF LAND, BUILDING AND OTHER INTEREST WOULD FALL WITHIN SECTI ON 50C AND THE PRESUMPTION TO BE DRAWN AS A CONSEQUENCE. THE DECIS ION IN SHAVO NORGREN (P) LTD. V. DCIT, CIRCLE 3(3) ITA 8101/MUM/ /2011 BY THE MUMBAI BENCH WAS ALSO RELIED UPON TO SAY THAT THE D EVELOPMENT RIGHTS WOULD BE APPREHENDED WITHIN SECTION 50C. THE TRIBUN AL IN THIS CASE RELIED UPON THE DECISIONS OF THE LUCKNOW BENCH IN C ARLTON HOTEL (P) LTD. V. ACIT 2010 (35) SOT 26 (LUCK); MUMBAI BENCH IN AT UL. G. PURANIK V. ITO , 12(1)(1) AND THAT OF THE CALCUTTA BENCH IN DY. CIT V. TEJENDER ITA NO. 1119/AHD/2018 BHAVNAGAR JILLA SAHKARI KHARID VECHAN SANGH LTD VS . ACIT AY : 2013-14 5 SINGH 19 TAXMAN.COM 4 IN ALL THESE, THE VARIOUS BENCHES OF THE TRIBUNAL APPEAR TO HAVE STRICTLY CONSTRUED THE LETTER OF SEC TION 50C TO SAY THAT THE CONVEYANCE HAS TO BE COMPLETE IN RESPECT OF ALL ENT ITLEMENTS TO THE PROPERTY. IN THE PRESENT CASE, THE TRIBUNAL HAS UPH ELD THE VALUATION OF THE ASSESSEE. WE NOTICE THAT APART FROM THE THREE B ENCHES, DECISIONS OF WHICH HAVE BEEN RELIED ON, THE TRIBUNAL ALSO CONSID ERED THE DISTINCTION MADE BETWEEN SECTION 50C AND 54D(1) WHICH SPECIFICA LLY PROVIDES THAT CAPITAL GAINS FROM, TRANSFER BY WAY OF COMPULSORY A CQUISITION UNDER ANY LAW OF CAPITAL ASSET BEING LAND, BUILDING OR ANY RI GHT IN THE LAND OR BUILDING...................... ?. SECTION 50C, ON T HE OTHER HAND, TALKS OF, TRANSFER BY ASSESSEE OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH. THE CONTRAST IN LANGUAGE, GIVEN THAT SECTION 50C IS A S PECIFIC PROVISION, WHICH SEEKS TO ENACT A PRESUMPTION IS SIGNIFICANT. THE VALUATION OF THE CONCERNED STATE AGENCY OR THE GOVERNMENT THAT THE C OST OF THE LAND IS, IN THE CIRCUMSTANCES, HIGHER, IS DETERMINATIVE. WE NOT ICE THAT IN THE PRESENT CASE, THERE HAS BEEN NO SUCH VALUATION. THAT APART, THE TRIBUNAL ADOPTED AN APPROACH WHICH, WITH RESPECT, APPEARS TO BE CORR ECT, IN THAT IT TOOK NOTE OF THE PROPORTIONATE TRANSFER OF LEASEHOLD RIG HTS FOR 54 YEARS. IF THE REVENUE'S CONTENTIONS WERE TO BE CONCEDED, THEN IN THE GIVEN FACTS OF CASE, IF THE LEASEHOLD RIGHTS FOR RESIDUAL PERIOD O F 3 OR 4 YEARS WERE TO BE VALUED AT PAR WITH THE COST OF ACQUISITION OF THE F ULL TENURE OF THE LEASE OF 90 YEARS, ABSURD AND ANOMALOUS RESULTS WOULD ENSUE. ' 9. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, WITH THE HELP OF SECTION 50C, THE FULL SALE CONSIDERATION DECLARED BY THE ASSESSEE CANNOT BE REPLACED WITH THE DEEMED SALE CONSIDERATION CONTEMPLATED UNDER SECTIO N 50C. THE ASSESSING OFFICER HAS MADE THE ADDITION WITH THE HELP OF SECT ION 50C ONLY. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADD ITION. 10. AS FAR AS CHARGING INTEREST UNDER SECTION 234 A /B/C IS CONCERNED, IT WILL BE CONSEQUENTIAL. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 19 TH NOVEMBER, 2019 AT AHMEDABAD. SD/- SD/- ( WASEEM AHMED ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED 19/11/2019 *BT ITA NO. 1119/AHD/2018 BHAVNAGAR JILLA SAHKARI KHARID VECHAN SANGH LTD VS . ACIT AY : 2013-14 6 / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '! / THE RESPONDENT. 3. & ( / CONCERNED CIT 4. ( ) ( / THE CIT(A)- 5. & , & , /DR,ITAT, AHMEDABAD, 6. 1 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) & ITAT, AHMEDABAD 1. S