ACIT., Circle-16(2), Hyderabad, Hyderabad V. M/s Pradhan Housing Private Limited, Hyderabad

ITA 1599/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6608 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SRI KUMAR
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Sale consideration of property below Jantri Value; Business income
• Section: 50C

Judgement Text

ITA NO 1599 OF 2014 PRADHAN HOUSING P LTD HYDERABAD PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1599/HYD/2014 (ASSESSMENT YEAR: 2009-10) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD VS. M/S PRADHAN HOUSING PVT. LTD. HYDERABAD PAN: AADCP 6295 J (APPELLANT) (RESPONDENT) FOR REVENUE: SHRI J. SRI KUMAR, DR FOR ASSESSEE : SHRI P. MURALI MOHAN RAO DATE OF HEARING : 21.04.2016 DATE OF PRONOUNC EMENT : 29 .04.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2009-10. IN TH IS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF TH E CIT (A) IN DELETING THE ADDITION MADE BY THE AO U/S 50C OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. IT FILED I TS E-RETURN OF INFOME FOR THE A.Y 2009-10 ON 2.9.2011 ADMITTING TO TAL INCOME OF RS.56,23,630 UNDER NORMAL PROVISIONS AND RS.56,34,2 55 UNDER MAT PROVISIONS.THE RETURN OF INCOME WAS INITIALLY P ROCESSED U/S 143(1) ON 02.11.2010. SUBSEQUENTLY, THE CASE WAS SE LECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE AC T AND THE OTHER RELEVANT NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT ITA NO 1599 OF 2014 PRADHAN HOUSING P LTD HYDERABAD PAGE 2 OF 4 THE ASSESSEE HAS SOLD A PROPERTY ADMEASURING 8214.1 9 SQ. YARDS TOGETHER WITH 3 YEARS OLD RCC BUILDING CONSISTING O F GROUND AND 1 ST FLOORS SITUATED AT MINDI VILLAGE WITHIN THE LIMITS OF GREATER VISAKHAPATNAM MUNICIPAL CORPORATION AREA. HE OBSERV ED THAT THE ASSESSEE HAS SHOWN THE MARKET VALUE OF THE PROP ERTY AT RS.3,78,00,000 IN THE SALE DEED AND ACCORDINGLY THE STAMP DUTY OF RS.35,92,250 WAS LEVIED BY THE SUB REGISTRAR ON THE CHARGEABLE VALUE OF RS.3,78,10,500. HE OBSERVED THA T THE ASSESSEE HAS SHOWN THE VALUE OF THE PROPERTY AT RS. 2.00 CRORES ONLY IN THE COMPUTATION OF INCOME AND SINCE THERE I S A VARIATION IN THE VALUE OF THE INCOME AS SHOWN BY THE ASSESSEE TO THE EXTENT OF RS.1,78,00,000 (I.E. 3,78,00,000 RS.2,00,00,00 0), THE AO HELD THAT THIS AMOUNT OF RS.1.78 CRORES IS LIABLE T O BE ADDED AS DEEMED BUSINESS INCOME AS ACCORDING TO HIM THE ASSE SSEE SUPPRESSED THE REAL VALUE OF THE PROPERTY SOLD. HE ACCORDINGLY BROUGHT THE SUM OF RS.1,78,00,000 AND TREATED THE S AME AS BUSINESS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. AGGRIEVED BY THE SAID ADDITION, ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO DELETED THE SAME HOLDING THAT THE PROVISION OF SECTION 50C IS APPLICABLE ONLY TO INCOME COMPUTED UNDER THE HEAD CAPITAL GAINS AND NOT TO THE BUSINESS INCOME COMPUTED BY THE AO. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT (A), REVENUE IS IN APPEAL BEFORE US. WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AO, THE LEAR NED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT (A) . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED COPIES OF THE F OLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION THAT THE PRO VISION OF SECTION 50C IS APPLICABLE TO ONLY TO INCOME COMPUTE D UNDER THE ITA NO 1599 OF 2014 PRADHAN HOUSING P LTD HYDERABAD PAGE 3 OF 4 HEAD CAPITAL GAINS AND NOT TO INCOME COMPUTED UND ER THE HEAD BUSINESS INCOME. I) KAN CONSTRUCTIONS & COLONIZERS PVT. LTD. VS. CIT (HON'BLE ALLAHABAD HIGH COURT) 20 TAXMANN.COM. 381 II) MUKESH & KISHORE BAROT CO.OWNERS V. CIT (HON'BL E GUJARAT HIGH COURT) 33 TAXMANN.COM 87 III) NEELKAMAL REALTORS & ERECTORS INDIA PVT. LTD V . DCIT (ITAT MUMBAI) 38 TAXMANN.COM 195. 3. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS I N CONSTRUCTION ACTIVITY AND THE AO HAS TREATED THE INCOME FROM SAL E OF THE LANDED PROPERTY AS BUSINESS INCOME. WHILE COMPUTI NG THE BUSINESS INCOME, THE AO HAS INVOKED THE PROVISIONS OF SECTION 50C TO BRING TO TAX, THE DIFFERENCE BETWEEN THE VAL UE SHOWN BY THE ASSESSEE FOR REGISTRATION PURPOSES AND THE VALU E SHOWN IN ITS COMPUTATION OF HIS BUSINESS INCOME. IN THE CASE OF MUKESH & KISHOR BAROT CO OWNERS V. CIT (CITED SUPRA) THE HON 'BLE GUJARAT HIGH COURT HAS HELD THAT SECTION 50C GIVES RISE TO DEEMING FICTION AND THAT SUCH DEEMING FICTION IS TO BE APPL IED IN CASE OF COMPUTATION OF CAPITAL GAIN U/S 48 ONLY. SIMILAR VI EW HAS BEEN EXPRESSED BY THE HON'BLE ALLAHABAD HIGH COURT IN TH E CASE OF KAN CONSTRUCTION & COLONIZERS PVT. LTD (CITED SUPRA ). THEREFORE, IT IS CLEAR THAT THE DEEMING PROVISIONS OF SECTION 50C CANNOT BE APPLIED TO INCOME OTHER THAN CAPITAL GAINS. THE AO HAS APPLIED 50C PROVISION TO THE INCOME COMPUTED UNDER THE HEAD BUSINESS INCOME WHICH IS NOT SUSTAINABLE AND THEREFORE, THE DEEMING ITA NO 1599 OF 2014 PRADHAN HOUSING P LTD HYDERABAD PAGE 4 OF 4 PROVISIONS CANNOT BE APPLIED. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT ( A). 4. IN THE RESULT, REVENUES APPEAL IS ACCORDINGLY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016. S D/ - S D/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH APRIL, 2016. VNODAN/SPS COPY TO: 1. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 16(2), 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 2. M/S. PRADHAN HOUSING PVT. LTD., 34, NAGARJUNA HILLS , PANJAGUTTA, HYDERABAD 500082 3. CIT(A) - V HYDERABAD 4. CIT IV HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER