Rieco Industries Limiteed, Pune V. Deputy Commissioner of Income-tax, Circle - 5, Pune

ITA 1627/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2485 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 26-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Valuation report; Capital Gains
• Section: 143(3); 50C; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 16 27 /P U N/201 7 / ASSESSMENT YEAR : 20 08 - 09 RIECO INDUSTRIES LTD., 1162/2, SHIVAJINAGAR, PUNE 411005 . / APPELLANT PAN: A AACR8217P VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 5 , PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI SHASHANK DEOGADKAR / DATE OF HEARING : 05 . 0 8 .201 9 / DATE OF PRONOUNCEMENT: 04 . 0 9 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 4 , PUNE , DATED 0 1 . 0 3 .201 7 RELATING TO ASSESSMENT YEAR 20 08 - 09 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASS ESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING A.O.'S ACTION OF RELYING ON THE ASSTT. VALUATION OFFICER'S REPORT FOR THE PURPOSES OF SEC. 50C, WHEN THE AFORESAID SECTION WAS NOT APPLICABLE TO THE INSTANT CASE IN THE FIRST PLACE. THE LEARNED ITA NO. 16 27 /P U N/20 1 7 RIECO INDUSTRIES LTD. 2 C I T(A) FAILED TO APPRECIATE THE CONTENTIONS AND ARGUMENTS AS ALSO THE CASE LAW ADVANCED IN THIS BEHALF. 2. THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING TH AT THE LAND IN QUESTION WAS A LEASEHOLD LAND AND SEC.50C WAS INAPPLICABLE, AND THE BUILDINGS STANDING THEREON DID NOT EFFECTIVELY HAVE ANY MARKET VALUE, IN AS MUCH AS, AFTER THE EXPIRY OF THE LEASE PERIOD, THE BUILDINGS HAD TO BE DEMOLISHED / SURRENDERED T O THE LESSOR. 3. THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW IN CONFIRMING ADOPTION OF VALUES AS PER THE VALUATION REPORT GIVEN BY THE ASSTT. VALUATION OFFICER. HE FAILED TO APPRECIATE THAT THE SAID REPORT DOES NOT ADDRESS THE ASSESSEE'S OBJECTIONS PROP ERLY AND ADEQUATELY AND OVERLOOKS MANY VITAL FACTORS. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST COMPUTATION OF INCOME FROM CAPITAL GAINS IN THE HANDS OF ASSESSEE, WHEREIN THE CASE OF ASSESSEE IS THAT SINCE THE LAND OWNED BY IT IS LEASEHOLD LAND , THEN THE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF AIR POLLUTION CONTROL EQUIPMENTS, SIZE REDUCTION EQUIPMENTS, PNEUMATIC CONVEYING SYSTEM AND OTHER SP ARES . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD TWO PIECES OF PLOTS OF LAND BEARING NO.49 AND 50 AT MIDC. THE ASSESSEE HAD RECEIVED LESSER SALE CONSIDERATION THAN THE STAMP DUTY VALUATION ADOPTED IN THE CASE FOR BOTH THE PLOTS OF LAND. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THE AFORESAID FACT AND MADE REFERENCE TO THE VALUATION OFFICER UNDER SECTION 50C(2) OF THE ACT. IN THE FINAL ANALYSIS THE SAID VALUATION WAS ADOPTED FOR COMPUTING THE INCOME FROM CAPI TAL GAINS IN THE HANDS OF ASSESSEE. THE SAID COMPUTATION OF ASSESSING OFFICER WAS UPHELD BY CIT(A), AGAINST WHICH THE ASSESSEE IS IN APPEAL. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IT WAS UNDISPUTED THAT BOTH THE PLOTS OF LAND SOLD BY IT WERE ON LEASEHOLD FOR 95 ITA NO. 16 27 /P U N/20 1 7 RIECO INDUSTRIES LTD. 3 YEARS AND WERE TRANSFERRED DURING THE YEAR. ADMITTEDLY, THE SALE CONSIDERATION RECEIVED BY ASSESSEE WAS LESS THAN THE STAMP DUTY VALUATION. HOWEVER, THIS BEING LEASEHOLD LAND, THE PROVISIONS OF SECTION 50C OF T HE ACT WERE NOT APPLICABLE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FILED COPY OF SALE DEED TO PROVE ITS CASE THAT THE SAID LAND WAS LEASEHOLD LAND. HE FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. GREENFI ELD HOTELS & ESTATES (P.) LTD. (2017) 389 ITR 68 (BOM) AND PUNE BENCH OF TRIBUNAL IN KANCAST (P.) LTD. VS. ITO (2015) 68 SOT 110 (PUNE - TRIB.) . 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAD MOVED AN APPLICATION FOR ADJOURNMENT, WHICH WAS REFUSED AS THE MATTER STANDS COVERED BY ORDER OF HONBLE BOMBAY HIGH COURT ON THE ISSUE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE REC ORD. THE ISSUE WHICH ARISES IS WITH REGARD TO TRANSFER OF CAPITAL ASSET BEING LEASEHOLD RIGHTS IN LAND. THE PROPOSITION WHICH HAS BEEN RAISED IN THE PRESENT APPEAL IS WHETHER ON TRANSFER OF SUCH LEASEHOLD RIGHTS IN LAND / BUILDING WOULD ATTRACT THE PROVI SIONS OF SECTION 50C OF THE ACT OR NOT. 8. WE FIND THAT THE ISSUE STANDS COVERED BY THE ORDER OF PUNE BENCH OF TRIBUNAL IN KANCAST (P.) LTD. VS. ITO (SUPRA), WHEREIN IT WAS HELD THAT WHEN ONLY LEASEHOLD RIGHTS IN LAND WHICH WERE ACQUIRED BY THE SAID ASS ESSEE FROM MIDC ON 99 YEARS LEASE BASIS WERE TRANSFERRED, THEN THE PROVISIONS OF SECTION 50C OF THE ACT WERE NOT ATTRACTED. HENCE, THE ASSESSING OFFICER WAS DIRECTED ITA NO. 16 27 /P U N/20 1 7 RIECO INDUSTRIES LTD. 4 TO COMPUTE LONG TERM CAPITAL GAINS ON TRANSFER OF LEASEHOLD LAND BY ADOPTING FULL VALUE O F CONSIDERATION DECLARED BY ASSESSEE IN THE COMPUTATION OF INCOME. 9. THE HONBLE BOMBAY HIGH COURT IN CIT VS. GREENFIELD HOTELS & ESTATES (P.) LTD. (SUPRA) HAD ALSO UPHELD SIMILAR PROPOSITION THAT SECTION 50C OF THE ACT WOULD NOT BE APPLICABLE WHILE COMP UTING CAPITAL GAINS ON TRANSFER OF LEASEHOLD RIGHTS IN LAND AND BUILDING. 10. THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT IN CIT VS. GREENFIELD HOTELS & ESTATES (P.) LTD. (SUPRA) AND P UNE BENCH OF TRIBUNAL IN KANCAST (P.) LTD. VS. ITO (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT WHERE THE ASSESSEE HAD TRANSFERRED RIGHTS IN LEASEHOLD LAND, THEN ON SUCH TRANSFER THE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT ATTRACTE D AND THERE IS NO MERIT IN THE COMPUTATION OF INCOME ON LONG TERM CAPITAL GAINS CARRIED ON BY THE AUTHORITIES BELOW. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ADOPT THE SALE CONSIDERATION AS DECLARED BY ASSESSEE FOR WORKING OUT THE INCOME FROM LONG TERM CAPITAL GAINS IN THE HANDS OF ASSESSEE. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 1 1 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF SEPTEMBER , 201 9 . SD/ - SD/ - ( ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 4 TH SEPTEMBER , 201 9 . GCVSR ITA NO. 16 27 /P U N/20 1 7 RIECO INDUSTRIES LTD. 5 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 4 , PUNE ; 4. THE PR. CIT - 3 , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE