Shri Rajendra H. Seth, Ahmedabad V. The ACIT., Circle-3, Ahmedabad

ITA 1495/AHD/2007

• Counselvise Citation: 149520514 RSA 2007
• Duration Of Justice: 4 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: S N SOPARKAR
• Keywords: Sale consideration of property below Jantri Value; Share purchase agreement; Cost of acquisition; Fair market value; Valuation report
• Section: 50C

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND A.L. GEHLOT, A M SHRI RAJENDRA H. SETH, PROP. SHRADDHA AUTOMOBILES, 456, K.B. COMMERCIAL CENTRE, NR. DINBAI TOWER, LAL DARWAJA, AHMEDABAD. VS. ASSTT. CIT, CIR-3, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. N. SOPARKAR, SR.ADVOCATE RESPONDENT BY:- SHRI B. L. YADAV, DR DATE OF HEARING : 20/10/2011 DATE OF PRONOUNCEMENT : 11/11/2011 O R D E R PER A. L. GEHLOT, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 12.12.2006. 2. THE LD. AR SUBMITTED THAT GROUND NO.1 IS GENERAL IN NATURE AND HENCE NO ADJUDICATION IS NEEDED. HENCE THIS GROUND IS DISMISSED. 3. HE FURTHER SUBMITTED THAT THERE ARE THREE EFFECT IVE GROUNDS IN THIS APPEAL- (I) THAT ACTION OF AO BY HOLDING THAT ONLY 1/3 RD OF THE ITA NO.1495/AHD/2007 ASST. YEAR :2003-04 ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 2 CONSIDERATION PAID BY THE BUYER FOR ACQUIRING VACAN T & PEACEFUL POSSESSION OF A PORTION OF THE FLAT WAS TO BE REDUC ED FROM THE TOTAL SALE CONSIDERATION, (II) THE COMPUTATION OF COST OF ACQU ISITION OF THE FLAT AS ON 1.4.1981 AND (III) APPLYING THE PROVISIONS OF SECT ION 50C OF THE ACT. 4. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS COMPUTED CAPITAL GAIN ON SALE OF FLAT AT MUMBAI AS UNDER :- THE COMPUTATION OF LONG TERM CAPITAL LOSS WAS MADE AS UNDER :- SALE PRICE OF PREMKUTIR FLAT 17,750,000 LESS: (A) PAID TO MRS. UMA KAMALKISHORE SETH FOR VACATING THE PORTION OCCUPIED BY HER (B) PREM KUTIR OLD DUES 5916000 315214 6231214 LESS: (A) TRANSFER FEES OF SOCIETY 50% BORNE BY US (B) LEGAL FEES (OLD & NEW) (C) BROKERAGE 443750 200000 177500 821250 NET SALE CONSIDERATION 10,697,536 LESS: INDEXED COST OF ACQUISITION FAIR MARKET VALUE AS ON 1.4.81 IS RS.45,60,000 (AS PER VALUATION REPORT) = 45,60,000 X 447 (2002-03) 100(1991-82) 20383200 LONG TERM CAPITAL LOSS (-) 9685664 AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE THE A O RECOMPUTED THE CAPITAL GAINS AS UNDER :- ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 3 SALE PRICE OF PREMKUTIR FLAT 20,002,000 LESS: (A)PAID TO MRS. UMA KAMALKISHORE SETH FOR VACATING THE PORTION OCCUPIED BY HER 1972000 LESS: (A) TRANSFER FEES OF SOCIETY 50% BORNE BY US (B) LEGAL FEES (OLD & NEW) (C) BROKERAGE 443750 200000 177500 1,79,32,250 NET SALE CONSIDERATION 17,208,750 LESS: INDEXED COST OF ACQUISITION FAIR MARKET VALUE AS ON 1.4.81 IS RS.240000/- (IN VIEW OF INCREASING IN PER SQ.FT., COST OF GARAGE IS DEEMED TO BE INCLUDED IN THIS PRICE) = 240,000 X 447 (2002-03 100 10,72,800 LONG TERM CAPITAL GAIN RS.1,16,35,950/- ASSESSEES SHARE AT 1/7 TH PART RS.23,05,136/- THE LD. CIT(A) CONFIRMED THE RECOMPUTATION MADE BY THE AO AND DISMISSED THE ASSESSEES APPEAL. 5. THE LD. AR SUBMITTED THAT THERE WAS SOME DISPUTE RELATING TO VARIOUS PROPERTIES IN THE FAMILY INCLUDING THE PROP ERTIES SOLD AND FOR WHICH THE ASSESSEE HAS DECLARED CAPITAL GAIN. THE D ISPUTE WAS RESOLVED THROUGH MUTUAL CONSENT WHICH WAS APPROVED BY HONBL E BOMBAY HIGH COURT. AS PER MUTUAL CONSENT THE ASSESSEE HAS TO PA Y RS.59,16,000/- FOR VACATING THE FLAT AND OTHER PROPERTIES. THE AO HAS WRONGLY ALLOWED ONLY 1/3 RD OF THE PAYMENT OF RS.59,16,000/- DEDUCTION FROM TH E TOTAL CONSIDERATION. THE LD. AR REFERRING TO THE DOCUMENT S OF CONSENT TERMS OF ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 4 THE DISPUTE AND DEED OF TRANSFER OF THE FLAT SUBMIT TED THAT RS.59,16,000/- WAS AGREED TO BE PAID BY THE TRANSFEREE TO THE OCCU PANT. THE LD. AR SUBMITTED THAT THE ENTIRE AMOUNT OF RS.59,16,000/- OF THE SALE CONSIDERATION REDUCED FROM THE COST OF THE FLAT. TH E LD. AR FURTHER SUBMITTED THAT THE VALUATION OF FLAT AS ON 1.4.1981 DECLARED BY THE ASSESSEE CONSIDERED IN THE COMPUTATION OF CAPITAL GAIN WAS RS.45,60,000/- SUPPORTED BY VALUATION REPORT. THE L D. AR SUBMITTED THAT THE REVENUE AUTHORITIES WITHOUT CONSIDERING THE FAC TS AND VALUATION REPORT HAVE TAKEN THE VALUATION AS ON 1.4.1981 TO RS.2,40, 000/-. THE LD. AR SUBMITTED THAT THE VALUATION AS ON 1.4.1981 SHOULD BE TAKEN AS 45,60,000 AS THE SAME IS SUPPORTED BY VALUATION REPORT. 6. AS REGARDS APPLICATION OF SECTION 50C OF THE ACT , THE LD. AR SUBMITTED THAT THIS GROUND WAS NOT TAKEN BEFORE THE LD. CIT (A). THEREFORE, THIS GROUND MAY BE DECIDED AGAINST THE A SSESSEE. 7. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE H AS RAISED FOLLOWING ADDITIONAL GROUND:- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF INTEREST EXPENSES OF RS.55,813/- MA DE BY AO OUT OF TOTAL INTEREST EXPENSES DEBITED OF RS.2,7 9,758/- HOLDING THAT THE INTEREST BEARING FUNDS WERE DIVERT ED IN GRANTING NON-INTEREST BEARING LOAN. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT THE APPELLA NT HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO ADVANCE THE LOAN, AND THE INTEREST BEARING FUNDS WERE UTILIZED FOR TH E PURPOSE OF BUSINESS ONLY. LD. CIT(A) OUGHT TO HAVE DELETED THE DISALLOWANCE MADE BY AO. ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 5 8. THE LD. AR SUBMITTED THAT LD. CIT(A) WHILE CONFI RMING THE ORDER OF AO HAS FOLLOWED THE DECISION OF HONBLE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR1 WHICH HAS BEEN OVERRULED BY HONBLE SUPREME COURT IN THE CASE OF M UNJAL SALES CORPORATION VS. CIT (2008) 298 ITR 298 (SC). ACCORD INGLY THE CLAIM MAY BE ALLOWED. 9. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT (A). 10. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND PERUSED THE RECORD. AS REGARDS REDUCING OF THE SALE CONSIDERATI ON OF FLAT BY RS.59,16,000/- WE FIND THAT THERE S NO DISPUTE ABOU T THE FACT THAT AS PER THE CONSENT TERMS BEFORE THE HON. BOMBAY HIGH COURT THIS AMOUNT OF RS.59,60,000/- WAS FOR VARIOUS PURPOSES. RELEVANT P ORTION OF THE CONSENT TERMS IS REPRODUCED BELOW :- 4. AGREED, DECLARED AND CONFIRMED THAT THE PARTIES HEREIN HAVE AGREED TO SELL THE SUIT PREMISES WHICH THE DEFENDAN TS HAVE AGREED TO CONFIRM, TO ONE MR. MADHUSUDAN ISHWARLAL DALAL (THE PURCHASER, FOR SHORT) AND IN THAT REGARD HAVE ENTERED INTO A MEMOR ANDUM OF INTENTION DATED SEPTEMBER, 17, 2002. AGAINST THE DEFENDANTS B EING PAID THE AMOUNT OF RS.59,16,000/- ON OR BEFORE OCTOBER,15, 2 002 IN THE MANNER STATED IN THE MEMORANDUM OF INTENTION THE DEFENDANT S UNDERTAKE TO : 4.1 HAND OVER VACANT AND QUIET POSSESSION OF SUCH PORTI ON OF THE SUIT FLAT AS IN THEIR POSSESSION TO THE PURCHASER. 4.2 EXECUTE THE DEED OF TRANSFER AS PER THE DRAFT APPRO VED AND ANNEXED TO THE MEMORANDUM OF INTENTION DATED SEPTEMBER, 17, 2002. ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 6 4.3 EXECUTE THE DECLARATION CUM INDEMNITY AS PER THE DR AFT APPROVED AND ANNEXED TO THE MEMORANDUM OF INTENTION DATED SE PTEMBER 17, 2002. 4.4 EXECUTE A DEED OF RELINQUISHMENT AS PER THE DRAFT A PPROVED AND ANNEXED TO THE MEMORANDUM OF INTENTION DATED SEPTEM BER 17, 2002. 4.5 HAND OVER VACANT QUIET AND PEACEFUL POSSESSION OF T HE TENANTED PREMISES BEING ROOM NOS.37 IN BHARAT BHAVAN 462-472 , KAILADEVI ROAD, PRINCESS STREET, MUMBAI 400 002, WHICH STAND IN THE NAME OF MR. SHYAM SETH BUT ARE IN THE POSSESSION OF THE DEFENDANTS. 4.6 TRANSFER THE TENANTED PREMISES BEING ROOM NOS.39 IN BHARAT BHAVAN 462-472, KAIBADEVI ROAD, PRINCESS STREET, MU MBAI 400 002, WHICH STAND IN THE NAME OF THE LATE MR. KAMALK ISHORE SETH AND ARE IN THE POSSESSION OF MR. SHYAM SETH WITHOUT DEMANDING ANY FURTHER CONSIDERATION FOR SUCH TRANSFER. 4.7 TRANSFER THE 6 SHARES OF THE CHIKHAL MARKET COMPAN Y LTD. BEARING SHARE CERTIFICATE NOS.1676 TO 1680 AND 2243 ISSUED BY THE COMPANY IN THE NAME OF SHAMSUNDER SETH ALONG WITH T HE USE, OCCUPATION AND POSSESSION OF THE SHOP NO.89 SITUATE D AT SWADESHI MARKET, 89, KRISHNA GULLI, KALBADEVI ROAD, MUMBAI 4 00 002. THE LD. CIT (A) OBSERVED THAT PAYMENT OF RS.59,16,0 00/- WAS NOT ONLY RELATED TO THE FLATS SOLD BUT IT RELATED TO OTHER P ROPERTIES AND RELINQUISHMENT OF OTHER RIGHTS ALSO. THE LD. CIT (A ) WAS OF THE VIEW THAT 1/3 RD PORTION OF PAYMENT IN LIEU OF VACATION OF THE FLAT WILL BE JUSTIFIED. THE ASSESSEE DID NOT FURNISH ANY OTHER BASIS. IN AB SENCE OF MATERIAL A DIFFERENT ESTIMATION OF ALLOCATION OF THE PAYMENT O F RS.59,16,000/- AT THIS STAGE IS NOT POSSIBLE. WE, THEREFORE, CONFIRM THE O RDER OF THE LD. CIT(A) ON THE ISSUE AS THERE IS NO CONTRARY MATERIAL ON RE CORD. 10.1 AS REGARDS VALUATION OF FLAT AS ON 1.4.1981 TH E ADMITTED FACTS OF THE CASE ARE THAT THE VALUE DECLARED BY THE ASSESSEE IS SUPPORTED BY VALUATION REPORT OF A REGISTERED VALUER. THE AO HAS TAKEN DIF FERENT VALUATION ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 7 WITHOUT OBTAINING VALUATION REPORT FROM THE DVO. TH E AO HAS TAKEN THE VALUE AS ON 1.4.1981 ON OTHER BASIS. WE ARE OF THE VIEW THAT ASSESSEES VALUATION AS ON 1.4.1981 IS SUPPORTED BY VALUATION BY A TECHNICAL PERSON I.E. REPORT OF A REGISTERED VALUER AND CONTRARY TO THAT NO SUCH MATERIAL OR DEPARTMENTAL VALUATION REPORT IS AVAILABLE ON RECOR D. MERELY ON THE BASIS OF OTHER GENERAL ENQUIRIES THE VALUATION DECLARED B Y THE REGISTERED VALUER CANNOT BE SUBSTITUTED. WE, THEREFORE, SET ASIDE THE ORDERS OF REVENUE AUTHORITIES ON THIS ISSUE AND DIRECT THE AO TO ADOP T THE VALUATION OF THE FLAT AS ON 1.4.1981 AS DECLARED BY THE ASSESSEE. 10.2 AS REGARDS APPLICATION OF SECTION 50C THE LD. AR HAS HIMSELF CONCEDED, THEREFORE THIS GROUND OF THE ASSESSEE IS REJECTED. THE AO IS DIRECTED TO RECALCULATE THE CAPITAL GAIN AS PER ABO VE DISCUSSION. 11. AS REGARDS THE ADDITIONAL GROUND, WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND ADDITIONAL GROUN D IS ADMITTED. WE FIND SUBSTANCE IN THE SUBMISSION OF LD. AR THAT THE JUDG MENT OF HON. PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUST RIES VS. CIT (SUPRA) HAS BEEN REVERSED BY THE HON. SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATION VS. CIT 298 ITR 298 (SC). THEREFORE, TH E LD. CIT (A)S ORDER IS SET ASIDE. HOWEVER, THE FACTS OF THE CASE ARE RE QUIRED TO BE CONSIDERED IN ACCORDANCE WITH LAW. WE, THEREFORE, FIND IT APPR OPRIATE THAT THIS MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO FOR DECID ING THE ISSUE AFRESH AS ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 8 RECOMPUTATION OF CAPITAL GAINS HAS ALSO BEEN RESTOR ED BACK TO THE AO FOR RECALCULATION. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 11-11-11. SD/- SD/- (BHAVNESH SAINI) (A. L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT M EMBER AHMEDABAD. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.1495/AHD/2007 ASST. YEAR 2003-04 9 1.DATE OF DICTATION 21/10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER /10/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..