ACIT, Bangalore V. M/s. Kapur Oil & Fertiliser Industries, Bangalore

ITA 1241/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51250 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: H N KHINCHA
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Capital Gains
• Section: 143(1); 147; 148

Judgement Text

PAGE 1 OF 8 ITA NO.1241/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.1241/BANG/2010 (ASSESSMENT YEAR 2007-08) THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), BANGALORE. - APPELLANT VS M/S KAPUR OIL & FERTILISER INDUSTRIES, NO.12 REX THEATRE COMPLEX, BRIGADE ROAD, BANGALORE-1. - RESPONDENT (PAN NO.AAIFK1579J) DATE OF HEARING : 11/08/2011 DATE OF PRONOUNCEMENT :26.08.2011 APPELLANT BY : SHRI G V GOPALA RAO, CIT-I RESPONDENT BY : SHRI H N KHINCHA, C.A. ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT IS DIREC TED AGAINST THE ORDER OF LEARNED CIT(A)-I, BANGALORE DA TED 24.8.2010. THE ASST. YEAR CONCERNED IS 2007-08. 2. THE SOLITARY ISSUE THAT IS RAISED IN THIS APPEAL IS WHETHER THE CIT(A) IS JUSTIFIED IN CONCLUDING THAT THE FAIR MARKET VALUE AS ON 1/4/1981 FOR THE PURPOSE OF COMPUTATION OF LONG TER M CAPITAL GAINS PAGE 2 OF 8 ITA NO.1241/BANG/2010 2 SHOULD BE ADOPTED AT RS.145/- PER SFT AS AGAINST RS .45/- PER SFT DETERMINED BY THE AO. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A PARTNERSHIP FIRM. FOR THE CONC ERNED ASST. YEAR, RETURN OF INCOME WAS FILED ON 31.10.2007 DECLARING TOTAL INCOME OF RS.6,25,22,980/-. THE INCOME DECLARED IN CLUDED A SUM OF RS.6,15,92,975/- AS LONG TERM CAPITAL GAINS ON SALE OF IMMOVABLE PROPERTY. THE RETURN WAS PROCESSED U/S 143(1) OF TH E ACT. LATER, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF T HE ACT AND THE ASSESSMENT WAS COMPLETED U/S 143 R.W.S. 147 OF THE ACT, VIDE ORDER DATED 30.12.2009, FIXING TOTAL INCOME AT RS.24,05,6 2,240/-. THE AO ADDED A SUM OF RS.17,80,39,268/- TO THE INCOME RETU RNED FROM THE LONG TERM CAPITAL GAINS. 3.1 BRIEF FACTS IN RELATION TO INCOME ARISING FROM LONG TERM CAPITAL GAINS ARE AS FOLLOWS:- DURING THE PREVIOUS YEAR RELEVANT TO THE ASST. YEA R UNDER APPEAL, THE ASSESSEE SOLD A PROPERTY SITUATED AT 8 TH MAIN, MALLESWARAM, BANGALORE VIDE SALE DEED DATED 11.10.2 006 AND OFFERED A SUM OF RS.6,15,94,975/- AS LONG TERM CAPITAL GAINS. AS THE PROPERTY WAS ACQUIRED BEFORE 1981, THE ASSESSEE HAD ADOPTED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/4/1981 AS COST ACQUISI TION. THE FAIR MARKET VALUE ADOPTED AS ON 1/4/1981 BY THE ASSESSEE WAS AT THE RATE OF RS.245/- PER SFT., BASED ON THE REPORT OF AN AUT HORIZED VALUER. PAGE 3 OF 8 ITA NO.1241/BANG/2010 3 WHEN THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 30.12.2009, THE AO HAD FIXED THE FAIR MARKET VALUE AS ON 1/4/19 81 AT RS.45/- BASED ON THE GOVT. CIRCULAR FOR STAMP DUTY VALUATIO N. 4. AGGRIEVED BY THE ORDER OF ASSESSMENT, THE ASSESS EE CARRIED THE MATTER IN APPEAL, WITH REFERENCE TO THE ISSUE OF ADOPTING FAIR MARKET VALUE AS ON 1/4/1981 AT RS.45/- BY THE A O, BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE ASSESSEE SUBMITTED THAT THE AO HAS ERRED IN MAKING AN ADDITION OF RS.17,80,39,268/- TO THE LONG TERM C APITAL GAIN HOLDING THAT THE ASSESSEE HAD ADOPTED HIGHER RATE OF COST O F ACQUISITION RESULTING IN LESSER CAPITAL GAIN, WHICH IS CONTRARY TO BOTH THE FACTS AND LAW AND IS TO BE DISREGARDED. HE ALSO SUBMITTED T HAT THE AO HAS ERRED IN REJECTING THE FMV ADOPTED BY THE ASSESSEE A ND IN RECOMPUTING THE CAPITAL GAIN BY ADOPTING THE RATES P RESCRIBED IN GOVT. CIRCULAR NO.RD 329 EST 79 DATED 10.11.1982. THE AS SESSEE CONTENDED THAT HE HAS RIGHTLY ADOPTED FMV WHICH WAS CERTIFIED BY THE AUTHORIZED VALUER AND THE SAME IS TO BE ACCEPTE D AS SUCH. THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS ERRED IN EQUATING THE GUIDELINE VALUE TO FMV. THE ASSESSEE ALSO SUBMI TTED THAT THE FMV AS ADOPTED BY HIM BEING CORRECT IS TO BE ACCEPTED A ND THE VALUE AS ADOPTED BY THE AO BEING WITHOUT BASIS AND CONTRARY TO LAW IS TO BE DELETED. PAGE 4 OF 8 ITA NO.1241/BANG/2010 4 6. THE CIT(A), AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, INCREASED THE FAIR MARKET VALUE TO RS.145 /- PER SFT INSTEAD OF RS.45/- ADOPTED BY THE AO. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 10.2 THE LAST ISSUE IS ON THE DETERMINATION OF VALUE OF LAND AT RS.45 PER SFT ESTIMATED BY THE AO ON THE BASIS OF THE ANNEXURE TO GOVERNMENT CIRCULAR NO.RD 329 EST 79 DATED 10.11.1982 AS AGAINST THE VALUE SHOWN BY THE APPELLANT AT RS.245/-. I OBSERVE THAT SUCH VALUE SHOULD BE BASED ON FAIR MARKET VALUE AND NOT THE GUIDANCE VALUE BECAUSE GUIDANCE VALUE SPEAKS ABOUT THE THRESHOLD BELOW WHICH THE GOVERNMENT HAS RIGHT TO DECLARE THE SALE PRICE AS UNDERVALUATION UNDER REGISTRATION ACT AND CHARGE FINE AND FURTHER STAMP DUTY ON SUCH SALE WHEREAS FAIR MARKET VALUE IS DEPENDANT UPON THE LOCALITY, AREA OF LAND; EXTENT OF LAND, LEVEL OF LAND ETC., AS HAS BEEN ANNUNCIATE D BY THE SUPREME COURT IN THE CASE OF CHIMANLAL HARGOVINDDAS VS SPECIAL L.A.O., A.I.R. 1988, S.C.1652. THIS IS CONSIDERED AS THE MOST JUDICIOUS GUIDELINES IN 1988 WHEN THE STATE GOVERNMENTS HAD NO PRESCRIBED VALUATIONS OF LAND IN THEIR PRIME LOCALITIES. THE HONBLE COURT HAS, IN THE CASE OF CHIMANLAL HARGONDDAS V SPECIAL LAND ACQUISITION OFFICER - AIR 1988 SC 1652 (SC) LAID DOWN SOME PLUS FACTORS WHICH INTENDS TO INCREASE THE NORMAL PRICE AND SOME NEGATIVE FACTOR LEADING TO DECREASE IN THE PRICE OF LAND IN BIG CITIES. SUCH GUIDELINES ARE AS UNDER:- THE GIST OF THE DECISION MAY BE PUT AS UNDER:- PAGE 5 OF 8 ITA NO.1241/BANG/2010 5 PLUS FACTORS MINUS FACTORS (1) SMALLNESS OR MEDIUMNESS OF SIZE (1) LARGENESS OF SIZE (2) PROXIMITY OF DEVELOPED ROAD (2) SITUATION IN TH E INTERIOR AT A DISTANCE FROM THE ROAD. (3) FRONTAGE ON A ROAD. (3) NARROW STRIP OF LAND WI TH VERY SMALL FRONTAGE COMPARED TO DEPTH. (4) REGULAR SHAPE (4) LOWER LEVEL REQUIRING THE DEP RESSED PORTION TO BE FILLED UP. (5) NEARNESS TO OR IN THE DEVELOPED AREA. (5) REMOTENESS FROM DEVELOPED LOCALITY. (6) LEVEL VIS--VIS LAND UNDER ACQUISITION (6) SOME SPECIAL DISADVANTAGE LIKE NON- AVAILABILITY OF GROUND WATER IN THE DEMANDED PLOT. (7) SPECIAL VALUE FOR AN OWNER OF AN ADJOINING PROPERTY. SINCE THE LAND THOUGH IS AT THE OUTSKIRTS OF MALLESWARAM, IT IS NEAR YASHVANTPUR, IS, LEVELED, O F REGULAR SHAPE AND FIT TO BE EXPLOITED COMMERCIALLY AND INDUSTRIALLY BECAUSE OF ITS LARGENESS AND FOLLOWING THE YARDSTICKS NARRATED SUPRA, I FIND THE VALUE OF LAND TAKEN AT RS.145/- PER SQ. FT AS ON 01.04.1981 IS JUSTIFIED. 7. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 8. THE LEARNED DR SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN ADOPTING THE COST OF LAND AT RS.145/- PER SFT AS AGAINST THE VALUE ADOPTED BY THE AO ON THE BASIS OF GUIDELIN ES GIVEN BY THE GOVT. AT RS.45/- PER SFT. 9. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED TH AT THE VALUE ADOPTED AT RS.245/- PER SFT IS BASED ON AN AP PROVED VALUERS PAGE 6 OF 8 ITA NO.1241/BANG/2010 6 REPORT. IT WAS SUBMITTED THAT THE FAIR MARKET VALU E WILL NOT BE THE SAME AS GUIDELINE VALUE BECAUSE GUIDELINE VALUE SPE AKS ABOUT THE THRESHOLD BELOW WHICH THE GOVT. HAS RIGHT TO DECLAR E THE SALE PRICE AS UNDERVALUATION UNDER THE REGISTRATION ACT AND CAN C HARGE FINE AND FURTHER STAMP DUTY ON SUCH SALE. THE LEARNED AR FUR THER RELIED ON THE FINDING OF THE CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. ACCORDING TO US, THE LEARNED A R IS RIGHT IN HIS SUBMISSION THAT THE STAMP DUTY VALUE IS ALWAYS BELOW THE FMV. THE GUIDELINE VALUE/STAMP DUTY VALUE IS THE THRESHOLD LI MIT BELOW WHICH THE GOVT. HAS RIGHT TO DECLARE THE SALE PRICE AS UNDERV ALUED AND CAN CHARGE FINE AND FURTHER STAMP DUTY ON SALE. THE CIT (A), IN THIS INSTANT CASE, HAS FOUND THE PROPERTY IN QUESTION WAS HAVING COMMERCIAL VALUE AND ALSO HAVING REGULAR SHAPE CONSEQUENT TO W HICH IT COULD HAVE FETCHED HIGHER FMV THAN THE STAMP DUTY VALUE FIXED B Y THE GOVT. THE FINDING ENTERED BY THE CIT(A) THAT RS.145/- PER SFT IS REASONABLE AND JUSTIFIABLE HAS NOT BEEN CONTROVERTED BY THE REV ENUE IN ANY MANNER WHATSOEVER. THE TRIBUNAL IN THE CASE OF DR. NARESH BHAT (HUF) IN ITA NO.161/BANG/2011 VIDE ORDER DATED 31 ST MAY, 2011 HAS HELD THAT THE MARKET VALUE OF A SITE IS ALWAYS ABOVE THE VALUE ADOPTED BY THE REGISTRATION AUTHORITY. THE RELEVANT FINDING OF THE TRIBUNAL AT PARA 3.5 READS AS FOLLOWS:- 3.5 HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT IT IS THE ESTIMATION OF THE PAGE 7 OF 8 ITA NO.1241/BANG/2010 7 VALUE OF THE SITE AS ON 1/4/1981 THAT IS IN DISPUTE BEFORE US. THE SITE IS LOCATED AT INDRA NAGAR, WHICH IS A POSH COLONY AS ON THE DATE OF SALE. HOWEVER, THE SAME MAY NOT BE THE POSITION IN THE YEAR 1981 AND THE VALUE HAS TO BE ADOPTED AS PER THE MARKET VALUE AS ON 1/4/1981. FOR ARRIVING AT THE FAIR MARKET VALUE, THERE HAS TO BE THE SALE INSTANCES OR THE AO HAS TO CONDUCT AN ENQUIRY AS TO THE FAIR MARKET VALUE. THE AO HAS TAKEN THE VALUE GIVEN BY THE REGISTRATION OFFICE OF KARNATAKA GOVT. AS ON 1/4/1981 FOR THE PURPOSE OF STAMP DUTY. FOR ARRIVING AT THIS VALUATION BY THE REGISTRATION OFFICE, ONE OF THE CONSIDERATIONS IS UNDOUBTEDLY THE MARKET VALUE OF THE AREA DURING THAT PERIOD. HOWEVER, IT CANNOT BE SAID THAT THE SAME IS ALSO THE FAIR MARKET VALUE AS ON THE SAID DATE. IT IS BEYOND DOUBT THAT THE MARKET VALUE OF A SITE HAS ALWAYS BEEN ABOVE THE VALUE ADOPTED BY THE REGISTRATION OFFICE. THEREFORE, IT CANNOT BE SAID THAT RS.30 ARRIVED AT BY THE AO IS THE CORRECT VALUATION. SIMILARLY, THE VALUATION ADOPTED BY THE ASSESSEE AT RS.1000 PER SFT IS ALSO NOT REALISTIC AND VERY EXCESSIVE. THEREFORE, WE DEEM IT FIT AND PROPER TO ESTIMATE THE FAIR MARKET VALUE OF THE SITE AT RS.200 PER SFT AS ON 1/4/1981 AND THE AO IS DIRECTED TO COMPUTE THE CAPITAL GAINS ACCORDINGLY. 10.1 IN THE LIGHT OF THE ABOVE REASONING, WE CONCL UDE THAT THE CIT(A) IS JUSTIFIED IN FIXING THE FMV AS ON 1/4/198 1 AT RS.145/-. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PAGE 8 OF 8 ITA NO.1241/BANG/2010 8 THE ORDER PRONOUNCED ON FRIDAY THE 26 TH DAY OF AUGUST, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.