ACIT, Bangalore V. M/s MLC Industries Pvt. Ltd., Bangalore

ITA 1131/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5219 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 02-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C R JANARDHAN
• Keywords: Cost of acquisition; Fair market value; Revised return; Capital Gains
• Section: 133A

Judgement Text

PAGE 1 OF 6 ITA NO.1148 & 1131/BANG/2009 1 IN THE INOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE DR. O K NARAYANAN, VICE PRESIDENT AND SMT. P MADHAVI DEVI, J.M. ITA NO.1148/BANG/2009 (ASST. YEAR 2003-04) & ITA NO.1131/BANG/2009 (ASST. YEAR 2004-05) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-12(1), BANGALORE. - APPELLANT VS M/S MLC INDUSTRIES PVT. LTD., NO.1/2, MILLENIA, PURPHY ROAD, ULSOOR, BANGALORE-8. - RESPONDENT APPELLANT BY : SHRI C R JANARDHAN, ADDL. CIT RESPONDENT BY : NONE O R D E R PER P MADHAVI DEVI : BOTH THE APPEALS ARE FILED BY THE REVENUE AGAINS T THE ORDER OF THE CIT(A)-III DATED 27.2.2009. ITA NO.1148/BANG/2009 (AY 2003-04) 2. IN BOTH THE APPEALS, THE COMMON GRIEVANCE OF TH E REVENUE IS THAT THE CIT(A) HAS ERRED IN ADOPTING THE LAND VALU E AS ON 1.4.1981 AT RS.80 PER SFT FOR THE PURPOSE OF COMPUTING THE INDE XED COST OF ACQUISITION OF THE LAND SOLD BY THE ASSESSEE AND THAT THE CIT(A ) HAS ERRED IN HOLDING PAGE 2 OF 6 ITA NO.1148 & 1131/BANG/2009 2 THAT THE LAND SOLD BY THE ASSESSEE WAS COMMERCIAL I N NATURE EVEN AS ON 1.4.1981. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 8.9.2004 DECLARING INCOME OF RS .8,32,26,450/-. A SURVEY U/S 133A WAS CONDUCTED ON THE ASSESSEES BUS INESS PREMISES ON 22.9.2004 AND CONSEQUENT THERETO, THE ASSESSEE FILE D REVISED RETURN DECLARING RS.14,99,82,312/- AS THE INCOME FOR THE R ELEVANT FINANCIAL YEAR. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3), THE A SSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS EARNED AN INCOME OF RS.15,91,98,634/- AS INCOME FROM LONG TERM CAPITAL GAIN. FROM THE COMPU TATION OF THE LONG TERM CAPITAL GAIN, AS PER THE ASSESSEES WORKING, H E OBSERVED THAT THE ASSESSEE HAS CONSIDERED THE COST PRICE AT THE RATE OF RS.80 PER SFT. THE INSPECTOR OF INCOME TAX WAS DIRECTED TO CONDUCT IND EPENDENT ENQUIRIES TO ASCERTAIN THE VALUE OF THE SAID LAND LOCATED AT NO. 1, MURPHY ROAD. BUT AS THERE WAS NO SALE TRANSACTION DURING THE RELEVANT P ERIOD AT MURPHY ROAD, DETAILS ABOUT THE BASE VALUE OF THE LAND AS ON 1.4. 1981 WERE NOT READILY AVAILABLE. THE ASSESSEE, DURING THE COURSE OF SCRU TINY PROCEEDINGS, SUBMITTED THE COPIES OF TWO SALE TRANSACTIONS OF TH E LAND LOCATED AT MURPHY ROAD AND AFTER CONSIDERING THEM, THE ASSESSING OFFI CER ARRIVED AT THE VALUE OF COST PRICE OF THE LAND AS ON 1.4.1981 AT RS.65 P ER SFT. HE ACCORDINGLY COMPUTED THE LONG TERM CAPITAL GAIN AND THE INCOME OF THE ASSESSEE. 2.2 ACCORDINGLY, THE ASSESSEE FILED AN APPEAL BEFO RE THE CIT(A) STATING THAT THE SALE INSTANCES CONSIDERED BY THE A SSESSING OFFICER HAS CERTAIN DISADVANTAGES WHEREAS THE ASSESSEES LAND W AS LOCATED ON THE ROAD AND THEREFORE, HAD COMMERCIAL VALUE. IT WAS SUBMIT TED THAT THE LAND WAS LOCATED ON THE MAIN ROAD AND ALSO FACES THE ULSOOR LAKE AND IS CONSIDERED PAGE 3 OF 6 ITA NO.1148 & 1131/BANG/2009 3 TO BE ONE OF THE BEST LOCALITY WHILE THE OTHER LAND S CONSIDERED BY THE ASSESSING OFFICER WERE VERY CLOSE TO THE SLUM AREA AND THUS HAD LOCATIONAL DISADVANTAGES. THE CIT(A) ACCEPTED THE ASSESSEES CONTENTIONS AND ALSO CONSIDERED THE CIRCULAR NO.RD329 EST-79 DATED 10.11 .1982 ISSUED BY THE GOVERNMENT OF KARNATAKA TO COME TO THE CONCLUSION T HAT THE VALUE OF THE COMMERCIAL LAND IS 25% HIGHER THAN THAT OF RESIDENT IAL LAND. THEREAFTER, HE HELD THAT THE ASSESSEES LAND BEING ON THE MAIN ROA D AND ALSO FACING ULSOOR LAKE, HAD THE ADVANTAGE OF LOCATION OVER THE OTHER TWO LANDS AND IS COMMERCIAL IN NATURE AND THEREFORE COMMANDED A MUCH HIGHER PRICE AS COMPARED TO THE PRICE OF THE OTHER TWO LANDS. TAKI NG INTO CONSIDERATION THE CIRCULAR OF THE GOVERNMENT OF KARNATAKA, THE CIT(A) CAME TO THE CONCLUSION THAT THE FAIR MARKET VALUE AS ON 1.4.198 1 IS RS.81.25 PER SFT AND HE THEREFORE ADOPTED THE COST PRICE OF RS.80 PER SF T ADOPTED BY THE ASSESSEE FOR COMPUTING THE LONG TERM CAPITAL GAINS. 2.3 AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A), T HE REVENUE IS IN APPEAL BEFORE US. 2.4 AT THE TIME OF HEARING, NONE APPEARED FOR THE ASSESSEE INSPITE OF SERVICE OF NOTICE BY RPAD. IN VIEW OF THE SAME, THE APPEAL OF THE REVENUE IS HEARD EX-PARTE QUA THE ASSESSEE. 2.5 THE LEARNED DR RELIED UPON THE ORDER OF THE AS SESSING OFFICER AND REITERATED THE FINDINGS OF THE ASSESSING OFFICE R. 2.6 AFTER HEARING THE LEARNED DR, WE FIND THAT THE CIT(A) HAS BOUGHT OUT DISTINGUISHING FEATURES OF THE ASSESSEE S LAND AND THE OTHER TRANSACTIONS CONSIDERED BY THE ASSESSING OFFICER. THE REVENUE HAS NOT PAGE 4 OF 6 ITA NO.1148 & 1131/BANG/2009 4 BEEN ABLE TO BRING OUT ANY EVIDENCE CONTRARY TO THE FINDING OF THE CIT(A) THAT THOSE TWO LANDS WERE RESIDENTIAL IN NATURE OR THAT THE ASSESSEES LAND IS ON THE MAIN ROAD. THOUGH THE REVENUE HAS STATED TH AT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE LAND WAS COMMERCIAL IN NATURE EVEN ON 1.4.1981, WE ARE OF THE OPINION THAT ITS LOCATION W AS ON THE MAIN ROAD, EVEN AS ON THAT DATE ITSELF, SHOWED ITS COMMERCIAL ADVAN TAGE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND HENCE, THIS GROUND OF APPEAL IS REJECTED. 2.7 IN THE RESULT, THE REVENUES APPEAL FOR THE AS ST. YEAR 2003-04 IS DISMISSED. ITA NO.1131/BANG/09 (AY 2004-05) 3. THE GROUNDS NO.2 AND 3 RELATE TO THE COMPUTATIO N OF THE LONG TERM CAPITAL GAINS BY ADOPTING THE LAND VALUE AS ON 1.4.1981 AT RS.80 PER SFT. THESE GROUNDS BEING THE SAME AS GROUNDS OF AP PEAL FOR THE ASST. YEAR 2003-04, FOR THE DETAILED REASONS GIVEN THEREIN, TH ESE GROUNDS ARE ALSO REJECTED. 3.1 AS REGARDS GROUNDS NO.4 AND 5 RELATING TO DISA LLOWANCE OF INTEREST PAYMENT TO INDIAN OVERSEAS BANK, BRIEF FAC TS ARE THAT FOR THE RELEVANT ASST. YEAR, THE ASSESSEE HAD CLAIMED INTER EST OF RS.1.497 CRORES PAID TO THE INDIAN OVERSEAS BANK. THE ASSESSING OF FICER, HOWEVER, OBSERVED THAT THE BUSINESS OF THE ASSESSEE WAS NOT IN EXISTENCE DURING THE PREVIOUS YEAR 2003-04 AND THEREFORE, THE LOAN AMOUN T BORROWED FROM THE INDIAN OVERSEAS BANK WAS NOT UTILIZED FOR THE CONST RUCTION OF THE SOFTWARE COMPLEX ON WHICH PROPERTY INCOME IS ADMITTED BY THE ASSESSEE COMPANY PAGE 5 OF 6 ITA NO.1148 & 1131/BANG/2009 5 FOR THE ASST. YEAR 2004-05. HE CAME TO THE CONCLUS ION THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE EITHER FROM ITS OWN IN TERNAL RESOURCES NOR FROM THE BORROWED FUNDS MORE SPECIFICALLY, THE LOAN BORROWED FROM THE INDIAN OVERSEAS BANK FOR THE CONSTRUCTION OF THE SO FTWARE PARK. HE THEREFORE DISALLOWED THE ENTIRE INTEREST PAYMENT BY HOLDING THAT IT IS NOT FOR THE PURPOSE OF BUSINESS, AS THE BUSINESS WAS CLOSED ON 8.6.98 AND THE ENTIRE ASSETS AND LIABILITIES WERE SOLD TO M/S WIPRO LTD. EXCEPT THE ULSOOR LAND ON WHICH THE SOFTWARE COMPLEX WAS CONSTRUCTED AND THIS LOAN WAS ALSO NOT UTILIZED FOR CONSTRUCTION OF THE BUILDING ON WHICH RENTAL INCOME WAS ADMITTED. 3.2 AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT EVEN AFTER THE SALE OF ITS MYSORE UNIT ALONG WITH ITS ASSETS AND LIABILITIES TO M/S WIPRO LTD. ON 8.6.98 AND HANDING OVER THE VACANT POSSESSION OF ITS ULSOOR UNIT, THE ASSESSEE WAS STI LL CARRYING ON ITS OPERATIONS FROM THE LEASED PREMISES AT SURVEY NO.67 /3, GOTTIGERE VILLAGE, BANNERGHATTA ROAD, BANGALORE. 3.3 AFTER CONSIDERING THE ASSESSEES CONTENTIONS, THE CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT DISCONT INUED ITS BUSINESS BUT WAS CARRYING ON ITS BUSINESS FROM ANOTHER PREMISES AND THEREFORE, DISALLOWANCE OF INTEREST OF RS.1,49,70,738/- ON THE GROUND OF NON-EXISTENCE OF BUSINESS OF THE ASSESSEE CANNOT BE SUSTAINED. H E THUS ALLOWED THE ASSESSEES GROUND OF APPEAL. 3.4 AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. PAGE 6 OF 6 ITA NO.1148 & 1131/BANG/2009 6 3.5 THE LEARNED DR STRONGLY PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICE BUT HE HAS NOT BEEN ABLE TO REBUT THE FINDINGS OF THE CIT(A) THAT THE ASSESSEES BUSINESS WAS IN EXISTENC E AND THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS FROM ANOTHER PREMISES AT GOTTIGERE VILLAGE. IN THE ABSENCE OF ANY EVIDENCE IN REBUTTAL, WE ARE CONSTRAINED TO CONFIRM THE FINDINGS OF THE CIT(A). ACCORDINGLY, THESE GRO UNDS OF APPEAL ARE REJECTED. 4. IN THE RESULT, THE REVENUES APPEAL FOR THE ASS T. YEAR 2004-05 IS DISMISSED. THE ORDER PRONOUNCED ON MONDAY, THE 7 TH DAY OF JUNE, 2010 AT BANGALORE. SD/- SD/- (DR. O K NARAYANAN) (P MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBE R COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) TH E CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. (7) GUARD FILE, NEW DELHI. MSP/4.6 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.