ITO, New Delhi V. M/s. Gulshan Developers Pvt. Ltd., New Delhi

ITA 1516/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3722 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Fair market value
• Section: 50C

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI K.G . BANSAL, ACCOUNTANT MEMBER I.T.A. NO.1516/D/2010 ASSESSMENT YEAR : 2006-07 INCOME-TAX OFFICER , VS. M/S GULSHAN DEVELOPERS WARD-12(3), PVT. LTD., 4, DAYANAND NEW DELHI VIHAR, NEW DELHI PAN NO.AACCG 0728J (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTY, SR. DR RESPONDENT BY: SHRI ASHWANI TANEJA, CA ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDER OF CIT(A)- XV, NEW DELHI, PASSED ON 29.01.2010 IN APPEAL NO.48 7/08-09, PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS TAKEN ONLY ONE SUBSTANTIVE GROUN D TO THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE DI SALLOWANCE OF RS.82,41,520/-, MADE BY THE ASSESSING OFFICER WITHO UT APPRECIATING THE FACT THAT THE FLATS AND THE PLOT HAVE BEEN SOLD AT CONSIDERATION LOWER THAN MARKET VALUE OR THE MINIMUM RATE FIXED B Y THE LAND AND REVENUE DEPARTMENT OF THE GOVERNMENT OF U.P. 2 2.1 THE FACTS OF THE CASE HAVE BEEN MENTIONED BY TH E LEARNED CIT(A) ON PAGE 3 OF THE IMPUGNED ORDER, WHICH ARE R EPRODUCED BELOW:- THE BRIEF BACKGROUND OF THE MATTER IS THAT THE ASS ESSEE COMPANY IS IN THE BUSINESS OF CONTRACTOR AND BUILDE RS. DURING THE IMPUGNED YEAR THE ASSESSEE COMPANY HAS SOLD SOME FLATS AS PER THE DETAILS GIVEN IN THE ASS ESSMENT ORDER. THE SALES CONSIDERATION HAS BEEN CREDITED I N THE PROFIT AND LOSS ACCOUNT AND ACCORDINGLY INCOME TAX RETURN WAS FILED ON THE BASIS OF PROFITS SHOWN AS PER PROF IT AND LOSS ACCOUNT KEEPING IN VIEW THE VARIOUS PROVISIONS OF THE COMPANIES ACT, 1956 AND INCOME-TAX ACT, 1961. LEARNED ASSESSING OFFICER ALSO HAS NOT RAISED ANY OBJECTION IN THIS REGARD AND THE ACCOUNTS OF THE AS SESSEE COMPANY HAVE BEEN ACCEPTED BY THE LEARNED ASSESSING OFFICER. BUT ACCORDING TO LEARNED ASSESSING OFFICE R, THE VALUE OF THE FLATS SOLD BY THE ASSESSEE COMPANY, IF CALCULATED ON THE BASIS OF CIRCLE RATE, IS MORE THA N THE AMOUNT OF ACTUAL SALES CONSIDERATION AND, THEREFORE , ACCORDING TO HIM THE DIFFERENCE AMOUNT IS LIABLE TO BE TAXED UNDER SECTION 50C OF THE ACT, AND ACCORDINGLY HE HAD MADE THE ADDITIONS OF THE CORRESPONDING AMOUNT IN THE ASSESSMENT YEAR AGGREGATING TO RS.82,41,520/-. 2.2 AS THE PROFITS HAD BEEN COMPUTED BY THE ASSESSE E AND OFFERED TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION, THE LEARNED CIT(A), AFTER RELYING ON A NUMBER OF TR IBUNAL DECISIONS, CAME TO THE CONCLUSION THAT THE SALE CONSIDERATION COULD NOT BE SUBSTITUTED BY THE FAIR MARKET VALUE. FOR THE SAKE OF READY REFERENCE, THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED BE LOW:- PERUSAL OF THE FACTS OF THE CASE AND IN THE LIGHT OF THE DECISIONS DISCUSSED ABOVE IT IS ABSOLUTELY CLEAR TH AT PROVISIONS OF SECTION 50C WILL NOT APPLY IN THE CAS E OF TRADING ASSETS. SINCE THE APPELLANT HAS SOLD THE PROPERTIES, WHICH WERE PART OF ITS TRADING ASSETS A ND IN THE 3 REGULAR COURSE OF BUSINESS, THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER IS NOT CALLED FOR. THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE DELETED AND THIS GROUN D OF APPEAL IS ALLOWED IN FAVOUR OF THE APPELLANT. 2.3 BEFORE US, THE LEARNED DR RELIED ON THE ORDER O F THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED COUNSEL FO R THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT(A). HE RELI ED ON THE ORDER OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF INDER L OK HOTELS (P) LIMITED VS. INCOME-TAX OFFICER (2009) 122 TTJ (MUMB AI) 145. THE DECISION OF THE TRIBUNAL IS CONTAINED IN PARAGRAPH NO.12, WHICH IS REPRODUCED BELOW:- WE ARE, THEREFORE, OF THE OPINION THAT, WHEN ADMIT TEDLY IN THE PRESENT CASE THE SALE OF THE FLATS IS TREATED A S THE BUSINESS INCOME AND NOT AS CAPITAL GAIN, HENCE, THE PROVISION OF SECTION 50C IS NOT APPLICABLE. WE, TH EREFORE, DELETE THE ADDITION MADE BY THE ASSESSING OFFICER O F RS.51,22,956/- AND SET ASIDE THE ORDER OF THE CIT(A ) ON THIS ISSUE. THE GROUND NO.1 IS, THEREFORE, ALLOWED . 2.4 HE ALSO RELIED ON THE DECISION OF HONBLE MADRA S HIGH COURT IN THE CASE OF CIT VS. DHIRU VENGABAM INVESTMENTS (P) LIMITED (2010) 320 ITR 345. THE OPERATIVE PORTION OF THE JUDGMENT IS CONTAINED IN PARAGRAPH 6, WHICH IS REPRODUCED BELOW FOR READY RE FERENCE:- IT IS NOT IN DISPUTE THAT THE ACTIVITY OF THE ASSE SSEE IS PROPERTY PROMOTER. IT CAN BE GATHERED FROM THE FAC TS AVAILABLE ON RECORD THAT THE ASSESSEE HAS OBTAINED POWER OF ATTORNEY FROM THE OWNER OF THE PROPERTY AND PAID A SUM OF RS.3,19,49,496/- TO THE OWNER OF THE PROPERTY AN D ALSO INCURRED EXPENDITURE IN A SUM OF RS.2,55,87,815/- I N CONNECTION WITH THE SAID PROPERTY FOR THE ASSESSMEN T YEAR 2004-05 AND THE BALANCE OF RS.63,61,681/- DURING TH E 4 ASSESSMENT YEAR 2004-05 (SIC). THE AMOUNTS SO PAI D WERE SHOWN UNDER THE HEAD LOANS AND ADVANCES IN T HE BALANCE SHEET AND NOT UNDER THE HEAD FIXED ASSETS . LATER ON, THE PROPERTY WAS SOLD TO M/S MRF LTD. FOR A SUM OF RS.5 CRORES BY A DEED OF CONVEYANCE, IN WHICH, T HE ASSESSEE REPRESENTED THE OWNER IN THE CAPACITY OF T HE POWER OF ATTORNEY HOLDER. THE ASSESSING OFFICER, I N ORDER TO DETERMINE THE VALUE OF THE PROPERTY, HAS INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AND THEREBY BR OUGHT THE ENTIRE AMOUNT OF RS.6,94,45,920/-. THE APPELLA TE AUTHORITY HAS DELETED THAT PORTION OF THE ORDER OF THE ASSESSING OFFICER HAVING THE SALE CONSIDERATION TO RS.6,94,45,920/- AS AGAINST RS.5 CRORES- THE APPARE NT SALE CONSIDERATION SHOWN IN THE SALE DEED. THE TRI BUNAL ALSO, TAKING NOTE OF THE FACTS STATED ABOVE, HAS CO ME TO THE CONCLUSION THAT INVOCATION OF SECTION 50C OF TH E ACT IS NOT WARRANTED AS THE PROPERTY WAS NEVER HELD BY THE ASSESSEE AS CAPITAL ASSET AND AS PER THE ACCOUNTS A LSO, THE AMOUNT GIVEN TO THE OWNER OF THE PROPERTY HAS B EEN SHOWN AS LOANS AND ADVANCES THEREBY THE PROPERTY HA S BEEN TREATED AS BUSINESS ASSET AND NOT AS CAPITAL A SSET. THE INVOCATION OF SECTION 50C OF THE ACT AS CAN BE SEEN FROM THE PROVISIONS OF THE ACT CAN BE MADE IN ORDER TO FIND OUT THE TRUE VALUE OF THE CAPITAL ASSET. IN THE VE RY FACTS AND CIRCUMSTANCES OF THE CASE, THE PROPERTY IN THE HANDS OF THE ASSESSEE WAS TREATED AS BUSINESS ASSET AND N OT AS CAPITAL ASSET, THERE IS NO QUESTION OF INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT, WHICH IS, AS ALREADY STATED, PERTAINING TO DETERMINING THE FULL VALUE OF THE CAPITAL ASSET. THE TRIBUNAL HAS TAKEN IN AID THE OBSERVATION OF THE MUMBAI BENCH IN THE CASE OF INDE RLOK HOTELS (P) LTD. VS. INCOME-TAX OFFICER (2009) 122 T TJ (MUMBAI) 145: (2009) 20 DTR (MUMBAI)(TRIB) 148, WHI CH, IN OUR CONSIDERED VIEW, IS IN CONSONANCE WITH THE STATUTORY PROVISIONS AND IS WELL IN ACCORDANCE WITH LAW. 2.5 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. FROM THE DECISION OF THE TRIBUNAL AND HONBLE MADRAS HIGH COURT, REFERRED TO ABOVE, IT IS CLEAR T HAT THE PROVISION 5 CONTAINED IN SECTION 50C IS APPLICABLE WHILE COMPUT ING INCOME UNDER THE HEAD CAPITAL GAINS, AND NOT PROFITS AND GAIN S OF BUSINESS OR PROFESSION. THE ASSESSEE HAS SHOWN INCOME FROM SA LE OF THE TRADING ASSETS AS BUSINESS INCOME. THEREFORE, THE AFORESAID PROVISION IS NOT APPLICABLE IN THE CASE OF THE ASSE SSEE. 3. IN RESULT, THE APPEAL IS DISMISSED. 4. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 18.0 6.2010. SD/- SD/- ( A.D. JAIN ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT. 18/06/2010 NS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).