Sankalp Trust, Mysore V. DCIT, Mysore

ITA 1517/BANG/2010

• Counselvise Citation: 151721114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 27-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Assessee Lawyers: R KRISHNAMOORTHY
• Keywords: Depreciation; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.1517/BANG/2010 (ASSESSMENT YEAR : 2006-07) M/S. SANKALP TRUST, 34/1, 5 TH MAIN, YADAVAGIRI, MYSORE-570 020 . APPELLANT. PAN AABTS 2721D VS. DY. COMMISSIONER OF INCOME TAX (ASSESSMENT), SPECIAL RANGE, MYSORE. .. RESPONDENT. APPELLANT BY : SHRI R. KRISHNAMOORTHY. RESPONDENT BY : SHRI S.K. AMBASTHA. DATE OF HEARING : 08.03.2012. DATE OF PRONOUNCEMENT : 08.03.2012. O R D E R PER SHRI JASON P. BOAZ, A.M . : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), MYSORE DATED 22.10.2010 FOR A SSESSMENT YEAR 2006-07. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE-TRUST OWNED A PROPERTY, SANKALP H OSPITAL, WHICH WAS SOLD DURING THE RELEVANT PERIOD TO M/S. PRIME LIFELINE HEALTH CARE P. LTD. VIDE SALE DEED DATED 10.3.2006 FOR A SALE CONSIDERATION OF RS.1,55,00,000 FOR BOTH LAND AND BUILDING. IN THE RETURN OF 2 ITA NO.1517/BANG/10 INCOME FILED, THE ASSESSEE-TRUST, DIVIDED THE SALE CONSIDERATION INTO TWO PARTS, RS.1,38,16,800 WAS SHOWN TOWARDS LAND VALUE AND THE BALANCE AMOUNT OF RS.16,83,200 WAS TREATED AS VALUE OF THE BUILDING SOLD. THE ASSESSE E WORKED OUT THE LONG TERM CAPITAL GAIN (LTCG) ON SALE OF LAND AT RS.1,21,68,733 AND LONG T ERM CAPITAL LOSS ON SALE OF BUILDING AT RS.45,69,615. IN THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSING OFFICER EXAMINED THIS ISSUE. IT IS SEEN FORM THE ORDERS OF ASSESSME NT THAT THERE WAS NO REAL DISPUTE WITH REGARD TO COMPUTATION OF LTCG ON SALE OF LAND, EXCE PT THAT THE ASSESSING OFFICER, ON EXAMINATION OF DOCUMENTS FOUND THAT THE ASSESSEE HA D ACTUALLY PURCHASED THE LAND AT RS.93,509 AND SUBSTITUTED THIS FIGURE IN PLACE OF R S.3,31,603 ADOPTED BY THE ASSESSEE AS FAIR MARKET VALUE (FMV) AS ON 1.4.1981 AND WORKED O UT THE LTCG ON SALE OF LAND AT RS.1,33,52,058. 2.2 THE ASSESSING OFFICER, HOWEVER, DISPUTED THE TREATMENT GIVEN BY THE ASSESSEE TO THE GAIN / LOSS ARISING ON SALE OF BUILDING. WHILE THE ASSESSEE HAD CLAIMED THAT THE SALE OF THE BUILDING SHOULD BE TREATED AS A LONG TERM GAIN, THE ASSESSING OFFICER HELD THAT THE PROVISIONS OF SECTION 50 OF THE INCOME TAX ACT, 196 1 (HEREIN AFTER REFERRED AS 'THE ACT') WERE APPLICABLE SINCE THE ASSESSEE-TRUST WAS CLAIMI NG DEPRECIATION THEREON. THE ASSESSING OFFICER THEN PROCEEDED TO ASSESS THE SHORT TERM CAP ITAL GAIN (STCG) ON SALE OF BUILDING AT RS.9,02,505. 2.3 THE ASSESSEE CARRIED THIS ISSUE OF THE SALE OF SANKALP HOSPITAL PROPERTY, IN APPEAL BEFORE THE CIT(A). IT WAS CONTENDED BY THE ASSESSE E THAT IT WAS A COMPOSITE SALE OF 3 ITA NO.1517/BANG/10 PROPERTY CONSISTING OF LAND AND BUILDING AND AS THE SALE CONSIDERATION WAS NOT BIFURCATED BETWEEN LAND AND BUILDING IN THE REGISTERED SALE DE ED, NO CAPITAL GAIN CAN BE LEVIED AS IT WOULD NOT BE POSSIBLE TO COMPUTE CAPITAL GAIN SEPAR ATELY FOR THE LAND AND BUILDING. THE CIT(A) AFTER CONSIDERING THE ARGUMENTS PUT FORWARD BY THE ASSESSEE, REJECTED THEM AND UPHELD THE ASSESSING OFFICERS FINDING ON THE COMPU TATION OF STCG ON SALE OF BUILDING. 3.1 THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUN AL. THE GROUNDS OF APPEAL PREFERRED BY THE ASSESSEE ARE AS UNDER : 1. THE HON'BLE CIT(A) ERRED IN HOLDING THAT AS IT IS POSSIBLE TO BIFURCATE THE SALE CONSIDERATION BETWEEN THE LAND PORTION AND THE BUILDING PORTION, IT CANOT BE SAID THAT THE COMPUTATION PROVISIONS FAIL AND THAT THE DECISION IN THE CASE OF PNB FINANCE LTD., DECIDED BY THE APEX COURT HAS NO APPLICATION. 2. THE HON'BLE CIT(A) OVERLOOKED THE FACT THAT IF T HE ENTIRE PROPERTY IS NOT A DEPRECIABLE ASSET, THE PROVISIONS OF SECTION 50 HAVE NO APPLICATION A ALL AND ERRED IN HOLDING THAT THERE IS NO NEED TO CONSI DER THIS GROUND IN VIEW OF THE FACT THAT THE ASSESSEE ITSELF HAD BIFURCATE THE SAL E CONSIDERATION BETWEEN THE LAND AND BUILDING IN THE VALUATION REPORT FILED BY IT ALONG WITH THE RETURN OF INCOME OVERLOOKING THE FACT THAT THIS HAS NO BEARIN G ON THE APPLICABILITY OF OR OTHERWISE OF SECTION 50 OF THE I.T. ACT WHICH DEPEN DS UPON THE INTERPRETATION PLACED ON THE WORDS USED IN THE SAID SECTION AS HEL D IN COIMBATORE LODGE 328 ITR PAGE 69. 3. ASSUMING BUT NOT ADMITTING THAT THE COMPUTATION PROVISION RELATING TO CAPITAL GAIN HAS NOT FAILED, THE HON'BLE CIT(A) ERR ED IN NOT HOLDING THAT, IF AT ALL, THE ENTIRE GAIN HAS TO BE ASSESSED AS LONG TER M AND NOT SHORT TERM IN VIEW OF THE FACT THAT THE PROPERTY SOLD WAS A COMPOSITE PROPERTY COMPRISING LAND AND BUILDING AND THAT LAND IS NOT SUBJECT TO DEPREC IATION AND HENCE THE PROVISIONS OF SECTION 50 HAVE NO APPLICATION AT ALL . 3.2 IN THE COURSE OF HEARING THE LEARNED COUNSEL FO R THE ASSESSEE SHRI R. KRISHNAMOORTHY, ADVOCATE FAIRLY CONCEDED THAT THE F ACTS AND THE DECISION OF THE HON'BLE 4 ITA NO.1517/BANG/10 JURISDICTIONAL HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. C.R. SUBRAMANIAN, REPORTED IN 242 ITR 342 (1999), WERE SQUARELY APPLICABLE IN THE INSTANT CASE AND THAT THEREFORE, THE ASSESSEES APPEAL IS LIABLE TO BE DISMISSED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E FACTS INVOLVED IN THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THE CASE OF C.R. SUB RAMANIAN (SUPRA) AND THE DECISION THEREOF IS SQUARELY APPLICABLE TO THE CASE ON HAND. IN THE CASE OF C.R. SUBRAMANIAN (SUPRA), IT WAS HELD BY THEIR LORDSHIPS THAT LAND A ND BUILDING WERE SEPARATE ASSETS FOR THE PURPOSE OF CAPITAL GAINS AND THAT THE PROFIT ARISIN G FROM SALE OF LAND WAS REQUIRED TO BE CONSIDERED AS LTCG AND THE PROFITS ARRIVING OUT OF SALE OF BUILDING SHOULD BE CONSIDERED UNDER SHORT TERM CAPITAL GAIN. WE, THEREFORE, RESP ECTFULLY FOLLOWING THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF C.R. SU BRAMANIAN (SUPRA) UPHOLD THE ORDERS OF THE ASSESSING OFFICER AND CIT(A) & DISMISS THE APPE AL OF ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MARCH, 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 08.03.2012. *REDDY GP 5 ITA NO.1517/BANG/10 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R ASSTT. REGISTRAR, ITAT, BANGALORE .