M/S. MANISH FILMS PVT. LTD., Indore V. THE ITO 3(1), Indore

ITA 152/IND/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7490 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-11-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Assessee Lawyers: KAPIL SHAH A RS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Question of law
• Section: 43B; 50C; 68

Judgement Text

[ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.152/IND/2015 ASSESSMENT YEAR: 2010-11 M/S. MANISH FILMS PVT . LTD. C/O SHRI JAGDISH SHARMA J-59, MIG COLONY, INDORE / VS. ITO - 3(1) INDORE ( APPELLANT ) ( REVENUE ) P.A. NO. AADCM7398D APPELLANT BY SHRI AJAY TULSIYAN & SHRI KAPIL SHAH, A.RS RESPONDENT BY SHRI RAJIB JAIN, D.R. DATE OF HEARING: 27.11.2018 DATE OF PRONOUNCEMENT: 10.01.2019 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER O F THE CIT(A)-I, INDORE DATED 30.10.2014 PERTAINING TO T HE [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 2 ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 3 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME ON 29.9.2010. THE CASE WAS SELECTED FOR SCRUTINY ASSESSM ENT. ASSESSING OFFICER THEREAFTER ISSUED STATUTORY NOTICE . IN RESPONSE TO NOTICE, THE ASSESSEE ATTENDED THE ASSESSME NT PROCEEDINGS AND FILED EXPLANATION TO THE QUERY RAISED DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFF ICER OBSERVED THAT ASSESSEE COMPANY HAD CLAIMED SLUMP SALE O F [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 4 ASSET OF THE COMPANY AT RS.2,25,00,000/-. HOWEVER, AS PER THE STAMP VALUATION AUTHORITY, VALUE WAS ADOPTED AT RS.4,18,00,000/-. THE A.O. THEREFORE ADOPTED THE VAL UE U/S 50C OF THE ACT AND ASSESSED THE INCOME AT RS.2,09,99,101/-. AGAINST THIS, THE ASSESSEE PREFERR ED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING SUBMIS SIONS PARTLY ALLOWED THE APPEAL. THEREBY, THE LD. CIT(A) AFFI RMED THE FINDING OF THE ASSESSEE IN RESPECT OF ADOPTING TH E VALUE OF PROPERTY AS PER THE STAMP VALUATION AUTHORITIES. AG AINST THIS FINDING, THE ASSESSEE IS IN PRESENT APPEAL. GROU ND NOS.1 TO 2.6 ARE AGAINST ADOPTING THE VALUE AS PER THE STAMP VALUATION AUTHORITY. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE AUTHORITIES BELOW HAVE FAILED TH APPRECIATE THE FACTS IN RIGHT PERSPECTIVE AND SUBMITTED THAT SECTION 50C OF THE ACT WOULD NOT BE APPLICABLE ON TH E FACTS OF THE PRESENT CASE AS IN THE PRESENT CASE, THE ASSESSE E HAS MADE SLUMP SALE. IT HAS TO BE COVERED U/S 50B OF THE ACT. [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 5 AS PER SECTION 50B OF THE ACT, THE VALUATION ASSESSED BY STAMP VALUATION AUTHORITIES CANNOT BE ADOPTED. 3. LD. COUNSEL FOR THE ASSESSEE HAS TAKEN US THROUGH T HE PROVISIONS OF SECTION 50B OF THE ACT AND SALE DEED EX ECUTED BY THE VENDOR ASSESSEE. HE ALSO DREW OUR ATTENTION TO THE NEWSPAPER CLIPPINGS BY THE VENDEE OF THE PROPERTY IN SUPPORT OF CONTENTION THAT THE SALE SO EXECUTED WAS A SLUMP SALE. HE HAS ALSO DRAWN OUR ATTENTION TO THE DEFINITION OF SLUMP SALE AS DEFINED U/S 2(42C) OF THE ACT. IN SUPPORT OF THIS CONTENTION LD. COUNSEL HAS RELIED ON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL, MUMBAI IN THE CASE OF DCIT VS. SUMMIT SECURITIES LTD. IN ITA NO.4977/MUM/2009. FURTHER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN IF IT IS NOT TREATED AS A SLUMP SALE, IN THAT EVENT ALSO THERE WOULD NOT BE APPLICATION OF SECTION 50C OF THE ACT AS THE PROPERTY IN QUESTION IS A LEASE HOLD PROPERTY ON 30 YEARS LEASE BY INDORE DEVELOPMENT [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 6 AUTHORITY. HE SUBMITTED THAT WHAT IS TRANSFERRED ARE MERELY THE LEASE HOLD RIGHTS PERTAINING TO THE CAPITAL ASSETS. LD. COUNSEL IN THIS REGARD HAS RELIED UPON TH E JUDGEMENT OF HON'BLE MUMBAI HIGH COURT RENDERED IN T HE CASE OF CIT VS. GREEN HOTELS AND ESTATES PVT. LTD. IN ITA NO.735 OF 2014 REPORTED IN 389 ITR 0068 (BOM.). LD . COUNSEL FURTHER RELIED ON THE DECISION OF COORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF ATUL G. PURANIK VS. IT O REPORTED IN 11 ITR 0120. THE RELIANCE IS ALSO PLACED ON THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS TR IBUNAL IN THE CASE OF KANCAST PVT. LTD. VS. ITO (2015) 68 SO T 0110 (PUNE). LD. COUNSEL SUBMITTED THAT IN THE LIGH T OF THESE DECISIONS, THE ASSESSING OFFICER OUGHT NOT TO HAVE INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT. 4. ON THE CONTRARY, LD. D.R. OPPOSED BOTH THE SUBMISSIONS OF THE ASSESSEE AND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE CONTENT ION OF [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 7 THE ASSESSEE THAT THE TRANSFER OF THE SALE WAS A SLUMP SAL E IS CONTRARY TO THE RECORDS. HE SUBMITTED THAT THE SUBSEQUENT ARGUMENT WITH THE BUYER WOULD NOT ENTITLE THE ASSESSEE TO CLAIM THE TRANSACTIONS AS SLUMP SALE. HE SUBMITTED THAT IF THE CLAIM OF THE ASSESSEE IS ACCEPTED , THEN IN EVERY SUCH TRANSACTION, THE TAX PAYER WOULD C LAIM BENEFIT OF SECTION 50B OF THE ACT ON THE BASIS OF TH E MANUFACTURED POSSESSION LETTER. HE POINTED OUT THAT CLAUSE (5) OF THE SALE DEED WAS EXECUTED ON 18.9.2009 . IT CATEGORICALLY STATES THAT THE POSSESSION OF THE PROPERT Y IN QUESTION HAS BEEN HANDED OVER. SO SUBSEQUENT POSSESSIO N LETTER IS MERELY A DEVICE TO BRING THE TRANSACTION WIT HIN THE AMBIT OF SECTION 50B OF THE ACT, WHICH IS NOT PERMIS SIBLE UNDER THE LAW. IN RESPECT OF THE SUBMISSION THAT EV EN OTHERWISE ALSO PROVISIONS OF SECTION 50C OF THE ACT WOULD NOT BE APPLICABLE AS THE ASSESSEE HAS MERELY TRANSFERRED THE LEASE HOLD RIGHTS WHICH IT HAD FROM THE INDORE [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 8 DEVELOPMENT AUTHORITY FOR 30 YEARS. HE SUBMITTED TH AT THE LEASE HOLD RIGHTS FOR 30 YEARS CANNOT BE CONSIDERED ME RELY AS LEAST HOLD RIGHTS BUT TO BE CONSIDERED RIGHTS IN PERPETUITY. THEREFORE, ANY LEASE HOLD RIGHTS ABOVE 1 2 YEARS TO BE TREATED AS RIGHT IN PERPETUITY AND THE PROVISIO NS OF SECTION 50C OF THE ACT WOULD BE APPLICABLE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FIRST CONTENTION OF TH E ASSESSEE IS THAT THE TRANSACTION WOULD FALL WITHIN THE AMBIT OF SECTION 50B OF THE ACT. THEREFORE, PROVISIONS O F SECTION 50C OF THE ACT CANNOT BE APPLIED. IT IS CONTENDED TH AT THE TRANSACTION IS A SLUMP SALE AND A STRONG STRESS IS LAID O N THE SUBSEQUENT POSSESSION LETTER AND THE NOTIFICATION MADE BY THE VENDEE IN NEWS PAPER. FOR THE SAKE OF CLARITY, THE RELEVANT CLAUSES OF SALE DEED EXECUTED BY THE ASSESSEE ARE TO BE CONSIDERED. AS PER THE CLAUSE (2), THE PROPER TY IS [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 9 DESCRIBED AS LAND AND BUILDING AND IT IS ALSO STATED THAT THE ELECTRICITY AND WATER CONNECTION IN RUNNING CONDITION IS PART OF THE SALE. THIS CLAUSE DOES NOT SAY ANYTHING ABOUT THE FURNITURE AND FIXTURES AND OTHER GADGETS. ADMITT EDLY, THE ASSESSEE HAS BEEN RUNNING A CINEMA HALL. SO IT CANNO T BE ASSUMED THAT THE CINEMA HALL WAS WITHOUT ANY MACHINERY, FURNITURE OR OTHER GADGETS NECESSARY FOR DISPLAYING THE MOVIES. FURTHER, IT IS NOTED THAT AS PER CLAUSE (5) OF THE SALE DEED, IT IS STATED THAT VACANT POSSESSION OF THE BUILDING HAS BEEN HANDED OVER BY T HE ASSESSEE TO THE VENDEE. THESE TWO CLAUSES MAKES IT CL EAR THAT NO OTHER ARTICLES, MACHINERY, ETC. WERE SUBJECT O F THE SALE. BEFORE ASSESSING OFFICER IT HAS BEEN CATEGORICALL Y STATED BY THE ASSESSEE COMPANY THAT IT SOLD CINEMA UNDERTAKING IN THE NAME AND STYLE OF M/S. MANMANDIR CINEMA. WE ARE UNABLE TO ACCEPT CONTENTION OF THE ASSESSEE THAT THE SUBJECT MATTER OF THE TRANSACTION WAS THE [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 10 UNDERTAKING NAMELY M/S. MANMANDIR BUT AS PER THE SALE DEED, IT WAS ONLY LAND AND BUILDING. THEREFORE, THE C ASE LAWS AS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE WO ULD BE OF NO HELP TO THE ASSESSEE. THE CLAIM OF THE ASSESSEE THAT IT WAS A SLUMP SALE HAS BEEN RIGHTLY REJECTED BY THE AUTHORITIES BELOW. NOW COMING TO ANOTHER SUBMISSION OF THE ASSESSEE THAT WHAT IS TRANSFER IS THE LEASE HOLD RI GHTS. THE REVENUE HAS NOT DISPUTED THE FACT THAT THE PROPERT Y IN QUESTION WAS ON THE BASIS OF LEASE HOLD RIGHTS. EVEN I N THE SALE DEEDS, IT HAS BEEN DESCRIBED SO. THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. GREEN FIELD HOTELS AND ESTATES PVT. LTD. (SUPRA) CONSIDERING THE QUESTION O F LAW URGED BY THE REVENUE WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER OF THE CIT(A) IN D ELETING THE ADDITION OF LONG TERM CAPITAL GAIN OF RS.80,58,000/- ON THE GROUND THAT PROVISIONS OF SECTION 50C OF THE I.T. AC T, 1961 [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 11 WERE NOT APPLICABLE TO TRANSFER OF LAND AND BUILDING BEI NG A LEASE HOLD PROPERTY. THE SAID QUESTION WAS DISMISSED ON THE GROUND THAT THE REVENUE HAD NOT PREFERRED ANY APPE AL AGAINST THE ORDER OF THE TRIBUNAL RENDERED IN THE CASE OF ATUL G. PURANIK VS. ITO (2011) 11 ITR 0120 ON THE QUESTION OF LAW BY FOLLOWING THE JUDGEMENT OF THE HO N'BLE APEX COURT IN THE CASE OF UNION OF INDIA VS. SATISH P. SHAH 249 ITR 221. THE LD. COUNSEL FOR THE ASSESSEE HAS ALS O RELIED UPON THE DECISION OF THE COORDINATE BENCH REN DERED IN THE CASE OF ATUL G. PURANIK VS. ITO (SUPRA). THE F ACTS IN THAT CASE AS NOTED BY THE TRIBUNAL THAT THE ASSESSEE WAS ALLOTTED RIGHTS IN THE PLOT ON 16 TH AUGUST, 2004 AS COMPENSATION FOR THE ACQUISITION OF LANDS ACQUIRED BY TH E SPECIAL LAND ACQUISITION OFFICER WAY BACK IN THE YEAR 1970/1972. IT IS NOTED THAT THE LEASE HOLD RIGHTS WE RE FOR 60 YEARS. THE TRIBUNAL AFTER CONSIDERING THE VARIOUS C ASE LAWS HAS HELD AS UNDER: [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 12 [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 13 [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 14 6. WE FIND THAT BEFORE THE AUTHORITIES BELOW NO SUCH SUBMISSIONS WERE MADE. MERELY IT WAS STATED THAT THE A .O. OUGHT TO HAVE REFERRED THE VALUATION TO THE VALUATION OFFICER. HOWEVER, THIS BEING THE LEGAL ISSUE THE ASS ESSEE HAS RELIED UPON THE DECISION OF COORDINATE BENCH. WE THEREFORE, SET ASIDE THIS ISSUE TO THE FILE OF THE LD. CIT(A) FOR HIS DECISION. GROUND NOS.1 TO 2.6 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UNDER: THAT THE LD. CIT(A) ERRED IN UPHOLDING THE AO'S AC TION IN NOT CONSIDERING/ENTERTAINING THE CLAIM MADE BY THE APPE LLANT DURING THE ASSESSMENT PROCEEDINGS OF ALLOWING DEDUCTION U/S 43 B IN RESPECT OF INTEREST ACTUALLY PAID TO FINANCIAL INSTITUTION DUR ING THE YEAR, WHICH WAS SUO MOTO DISALLOWED IN THE EARLIER YEARS DUE TO NON PAYMENT. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE APPELLANT IS LEGALLY ENTITLED TO CLAIM DEDUCTION U/S 43B IN R ESPECT OF SUCH INTEREST IN THIS YEAR, AND IT IS PRAYED THAT THE SA ME MAY VERY KINDLY BE ALLOWED. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN NOT ALLOWING THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT THE LD. CIT( A) DISALLOWED THE CLAIM MERELY ON THE BASIS FOR WANT OF ANY [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 15 DETAILS OR EVIDENCE. LD. COUNSEL CONTENDED THAT THE PROOF OF PAYMENT OF INTEREST WAS DULY FILED BEFORE THE A.O . HE DREW OUR ATTENTION TO PAPER BOOK PG.NO.71. HE SUBMIT TED THAT LEDGER ACCOUNT IS ENCLOSED AT PAPER BOOK PAGE NOS.7 3 & 74. HE SUBMITTED THAT THE AUTHORITIES OUGHT TO HAVE VERIFIED FROM THE MP FINANCE CORPORATION. 8. LD. D.R. OPPOSED THE SUBMISSIONS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT LD. CIT(A) HAS NOT REJECTED THE CLAIM ON THE GROUND OF ALLOWABILITY. TH E SAME HAS BEEN REJECTED ON THE BASIS OF EVIDENCE BEING NOT PRODUCED. WE FIND BEFORE THE A.O. IT WAS CATEGORICALL Y STATED THAT THE ASSESSEE HAS PAID INTEREST TO THE M.P. FINANCE CORPORATION BEING A STATE ENTITY. THE A.O. OUG HT TO HAVE VERIFIED FROM THE M.P. FINANCE CORPORATION. U NDER THE FACTS DISBELIEVING THE ASSESSEE WAS NOT CALLED FOR . [ITA 152/IND/2015] [M/S. MANISH FILMS PVT. LTD., INDORE] 16 THEREFORE, WE DIRECT THE A.O. TO DELETE THIS ADDITIO N. THIS GROUND OF THE ASSESSEE IS ALLOWED. 10. GROUND NO.4 IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10 . 01.2019. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 10/01/2019 VG/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE