M/s DLG Farms Private Limited , Mysore V. Income Tax Officer WArd-1(1), Mysore

ITA 1673/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7628 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 21-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P RENUGA DEVI JT BENGALURU
• Assessee Lawyers: BALAKRISHNAN K
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Cost of acquisition
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 1673/BANG/2018 ASSESSMENT YEAR : 2014 - 15 M/S. DLG FARMS PVT. LTD., SY.NO.93/94, HEDIYALA VILLAGE, BEGUR ROAD, HULLAHALLI HOBLI, H.D. KOTE, MYSURU 571 315. PAN: AADCD 0584C VS. THE INCOME TAX OFFICER, WARD 1(1), MYSURU. APPELLANT RESPONDENT APPELLANT BY : SHRI BALAKRISHNAN K., CA RE SPONDENT BY : SMT. P. RENUGA DEVI, JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 11 .06 .201 8 DATE OF PRONOUNCEMENT : 20.07 .2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 30.11.2017 OF THE CIT(APPEALS), MYSORE RELATING TO ASSESSMENT YEAR 2014- 15. 2. GROUND NO.2 RAISED BY THE ASSESSEE WAS NOT PRESS ED AND THE SAME IS DISMISSED AS NOT PRESSED. 3. THE OTHER GROUNDS WHICH REQUIRE ADJUDICATION ARE GROUND NOS. 1 & 3. GROUND NO.1 RAISED BY THE ASSESSEE READS AS FOLLOWS :- ITA NO. 1673/BANG/2018 PAGE 2 OF 8 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN MAKING A DISAL LOWANCE OF RS. 249,800 IN RELATION TO THE PURCHASES MADE BY TH E APPELLANT FROM M/S QUALITY FEEDS WITHOUT CONSIDERING THE DETA ILED SUBMISSIONS AND DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT FOR THE CLAIM OF PURCHASE EXPENSE OF RS. 249,800. THE LEARNED CIT(A) HAS ERRED IN MAKING DISALLOWANCE OF RS. 249,800 BY MERELY RELYING ON THE CONFIRMATION PROVIDED BY T HE SUPPLIER AND CONCLUDING THAT THE APPELLANT HAS NOT FURNISHED ANY CREDIBLE AND VERIFIABLE DOCUMENTARY EVIDENCE WITHOUT CONSIDE RING THE DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT AN D WITHOUT CONSIDERING THE FACT THAT THE APPELLANT HAS ALSO MA DE ACTUAL PAYMENT AGAINST THE PURCHASE INVOICE. 4. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF REARING AND SELLING PIGS. THE ASSESSEE CLAIMED THA T IT HAD PURCHASED FEEDS FROM QUALITY FEEDS OF THE VALUE OF RS.2,49,800. A COPY OF THE BILL NO.1063 DATED 17.12.2013 WAS FILED IN RESPECT OF THE PURCHA SES HAVING BEEN MADE AS ABOVE. THE AO, HOWEVER, ADDED A SUM OF RS.2,49, 800 TO THE TOTAL INCOME OF THE ASSESSEE FOR THE REASON THAT QUALITY FEEDS HAVE NOT SHOWN THE PURCHASES CLAIMED BY THE ASSESSEE FROM THE AFOR ESAID PARTY AS SALES IN THEIR BOOKS OF ACCOUNT. ACCORDING TO THE AO, THE SU PPLY WAS REJECTED BY THE ASSESSEE AND HENCE QUALITY FEEDS HAVE NOT RECORDED SALES BY THEM TO THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS. 5. BEFORE THE CIT(APPEALS), THE ASSESSEE POINTED OU T THAT THE PURCHASES IN QUESTION WERE NOT RETURNED AND IN FACT THE ASSESSEE HAD EVEN MADE PAYMENTS TO QUALITY FEEDS IN RESPECT OF THE AF ORESAID PURCHASES. THE ASSESSEE ALSO SUBMITTED THAT THE CLAIM OF THE A O THAT THE ASSESSEE RETURNED PURCHASES FROM QUALITY FEEDS IS NOT SUBSTA NTIATED BY ANY EVIDENCE AND THEREFORE SHOULD NOT BE BELIEVED. THE CIT(APPEALS), HOWEVER, CONFIRMED THE ORDER OF THE AO BY OBSERVING THAT THE ASSESSEE WAS UNABLE TO ESTABLISH ANY LAPSE IN THE FINDINGS O F THE AO BY FURNISHING ITA NO. 1673/BANG/2018 PAGE 3 OF 8 CREDIBLE AND VERIFIABLE DOCUMENTARY EVIDENCE. AGGR IEVED BY THE ORDER OF CIT(APPEALS), THE ASSESSEE HAS RAISED GROUND NO.1 B EFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. COU NSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BE FORE THE CIT(APPEALS). A COPY OF THE BANK ACCOUNT OF THE AS SESSEE WITH STATE BANK OF INDIA, SME BR. KANJIKODE, KERALA WAS ALSO FILED BEFORE US WHICH SHOWS THAT A CHEQUE FOR RS.2,49,805 WAS PAID FROM THE AFO RESAID BANK ACCOUNT THROUGH CHEQUE NO.359429 TO QUALITY FEEDS. 7. THE LD. DR RELIED ON THE ORDER OF THE AO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A COP Y OF THE BILL DATED 17.12.2013 IS AT PAGE 57 OF ASSESSEES PB. THE LED GER ACCOUNT OF QUALITY FEEDS AS PER BOOKS OF ACCOUNT OF THE ASSESSEE IS AT PAGES 58 & 59 OF ASSESSEES PB. PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE PURCHASED FEED FOR PIGS ON 17.12.13 OF THE VALUE OF RS.2,49,8 00 AND HAD PAYMENT ON 26.12.13 OF RS.2,49,800. THE DEBIT & CREDIT ENTRIE S IN SUPPORT OF THE ABOVE TRANSACTION IS DULY RECORDED IN THE LEDGER ACCOUNT OF QUALITY FEEDS. THE BANK STATEMENT ALSO SUPPORTS THE CLAIM OF THE ASSES SEE FOR HAVING PAID TO QUALITY FEEDS ON 26.12.13. IN THE LIGHT OF THESE E VIDENCE AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE BASIS OF DISALL OWANCE OF PURCHASES AS MADE BY THE AO IS WITHOUT ANY EVIDENCE. 9. THE AO HAS NOT BROUGHT ON RECORD ANY CONFIRMATIO N FROM QUALITY FEEDS AS TO HOW THE PURCHASES BY THE ASSESSEE WERE RETURNED OR REJECTED BY THE ASSESSEE. IT IS CLEAR FROM THE ORDER OF AO THAT QUALITY FEEDS AGREES TO HAVING SOLD TO THE ASSESSEE FEEDS FOR PIGS FOR T HE VALUE OF RS.2,49,800. ACCORDING TO THE ORDER OF AO, WHEN THE INSPECTOR CO NFRONTED THESE FACTS TO QUALITY FEEDS, THEY CLAIMED THAT THE ASSESSEE HAS R ETURNED THE PURCHASES TO QUALITY FEEDS. THIS FACT IS NOT SUPPORTED BY AN Y MATERIAL ON RECORD. IN ITA NO. 1673/BANG/2018 PAGE 4 OF 8 THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE AD DITION MADE BY THE AO AND SUSTAINED BY THE CIT(APPEALS) DESERVED TO BE DE LETED AND THE SAME IS HEREBY DELETED. 10. GROUND NO.3 RAISED BY THE ASSESSEE READS AS FOL LOWS:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING TH E AMOUNT OF DEPRECIATION CLAIMED ON PURCHASE OF OFFICE BUILDING ONLY TO THE EXTENT TO REGISTERED VALUE OF THE IMMOVABLE PROPERT Y AT RS. 45,50,000 WITHOUT CONSIDERING THE ACTUAL COST OF AC QUISITION OF PURCHASE OF OFFICE BUILDING AMOUNTING TO RS. 1,77,3 9,337. THE LEARNED CIT(A) HAS ERRED IN MAKING THE DISALLOWANCE OF DEPRECIATION OF RS. 12,82,472 WITHOUT CONSIDERING T HE FACT THAT REGISTERED VALUE IS ONLY A VALUE FOR THE PURPOSE OF DETERMINING THE STAMP DUTY VALUE OF THE PROPERTY AND WOULD NOT ALTE R THE COST OF ACQUISITION, WHICH IS THE ACTUAL AMOUNT PAID TOWARD S THE PURCHASE OF THE PROPERTY AND WHICH IS MORE THAN THE REGISTER ED VALUE. THE LEARNED CIT(A) IN HIS ORDER HAS ERRED IN CONCLUDING THAT THE DIFFERENTIAL VALUE IS A NOTIONAL REVALUATION OF ASS ET WITHOUT VERIFYING THE ACTUAL PAYMENTS MADE TOWARDS COST OF ACQUISITION OF THE OFFICE BUILDING. THE LEARNED CIT(A) IN HIS ORDE R HAS ERRONEOUSLY STATED THAT THE APPELLANT HAS NOT PROVI DED ANY VERIFIABLE DOCUMENTARY EVIDENCE WITH REGARD TO COST OF ACQUISITION CLAIMED BY THE APPELLANT OF RS. 1,77,39 ,337 WITHOUT CONSIDERING THE DOCUMENTARY EVIDENCE ALONG WITH THI RD PARTY VOUCHERS FURNISHED WITH REGARD TO THE COST OF ACQUI SITION OF THE OFFICE BUILDING. 11. AS FAR AS GROUND NO.3 RAISED BY THE ASSESSEE IS CONCERNED, THE FACTS ARE THAT THE ASSESSEE MADE ADDITIONS TO THE F IXED ASSETS TO THE TUNE OF RS.1,77,39,337. THE ASSESSEE CLAIMED DEPRECIATI ON ON FIXED ASSETS AT 10% VIZ., A SUM OF RS.17,73,934. THE AO VERIFIED T HE CLAIM OF ASSESSEE AND HE NOTICED THAT THE ASSESSEE HAD PURCHASED AN O FFICE BUILDING AT COCHIN. ON PERUSAL OF THE REGISTERED SALE DEED UND ER WHICH THE ASSESSEE PURCHASED THE ABOVE SAID PROPERTY, THE AO NOTICED T HAT THE SALE CONSIDERATION AS PER THE SALE DEED WAS ONLY A SUM O F RS.45,50,000. THE ITA NO. 1673/BANG/2018 PAGE 5 OF 8 SALE CONSIDERATION COMPRISED OF TWO COMPONENTS VIZ. , A SUM OF RS.12,55,000 TOWARDS UNDIVIDED SHARE IN LAND AND TH E REMAINING SUM OF RS.32,95,000 TOWARDS THE VALUE OF BUILDING THAT WAS CONVEYED. SINCE THE ASSESSEE HAD RECORDED A SUM OF RS.1,77,53,257 AS CO ST OF OFFICE PREMISES, THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY DEPRECIATION SHOULD NOT BE ALLOWED ONLY ON THE VALUE OF THE PROP ERTY AS REFLECTED IN THE SALE DEED AT RS.45,50,000. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE VALUE OF THE PROPERTY AS PER THE SUB-REGISTRAR S OFFICE, TRIPUNITHURA, COCHIN WAS ONLY RS.45,50,000, BUT THE ASSESSEE HAD IN FACT PAID A SUM OF RS.1,77,53,257 TO M/S. ASSET HOMES PVT. LTD., WHO S OLD THE PROPERTY TO THE ASSESSEE. IN THIS REGARD, THE ASSESSEE ALSO FILED EVIDENCE TO SHOW THE PAYMENT TO THE TUNE OF RS.1,77,53,237 WAS FROM THE ASSESSEES OWN FUNDS AND OUT OF LOAN AVAILED BY THE ASSESSEE FROM HDFC, COCHIN FOR ACQUIRING THE PROPERTY AND THE SAME WAS PAID TO M/S. ASSET HO MES PVT. LTD., COCHIN. THE DETAILS OF THE PAYMENT ARE RS.10 LAKHS ON 27.02 .13, RS.15 LAKHS ON 30.03.13, RS.23,14,337 ON 06.04.13 & RS.4,25,000 ON 07.04.13 AS EVIDENT FROM RECEIPTS OF THE BUILDER COPIES OF WHICH ARE AT PAGE NOS. 85, 86 & 89 OF THE ASSESSEES PB. HDFC, COCHIN HAS CERTIFIED THAT A SUM OF RS.1,25,00,000 WAS BORROWED FROM THEM FOR ACQUIRING THE PROPERTY AND THAT THE LOAN AMOUNT SO OBTAINED PAID OVER TO M/S. ASSET HOMES PVT. LTD. THE SAME IS AT PAGE 87-88 OF ASSESSEES PB. THE RECEIP T ISSUED BY M/S. ASSET HOMES PVT. LTD. FOR HAVING RECEIVED A SUM OF RS.1,2 5,00,000 IS AT PAGE 190 OF ASSESSEES PB. THE ASSESSEE THEREFORE CLAI MED THAT THE DEPRECIATION CLAIMED BY IT SHOULD BE ALLOWED. 12. THE AO, HOWEVER, WAS OF THE VIEW THAT SINCE THE ACTUAL CONSIDERATION PAID WAS RS.45,50,000 + STAMP DUTY & REGISTRATION FEES OF RS.3,64,630, THE ASSESSEE WOULD BE ENTITLED TO DEPR ECIATION ONLY ON A SUM OF RS.49,14,630. THE AO ACCORDINGLY ALLOWED DEPRECI ATION OF ONLY ITA NO. 1673/BANG/2018 PAGE 6 OF 8 RS.4,91,461 AND DISALLOWED CLAIM OF DEPRECIATION TO THE EXTENT OF RS.12,82,472. 13. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CON FIRMED THE ORDER OF THE AO. HENCE GROUND NO.3 BY THE ASSESSEE BEFORE T HE TRIBUNAL. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. FROM THE DOCUMENTS AVAILABLE ON RECORD, IT IS CLEAR THAT THE ASSESSEE HAD MADE ACTUAL PAYMENT TO THE EXTENT OF RS.1,77,39,337 FOR ACQUIRING THE P ROPERTY. IT IS NOT DISPUTED THAT THIS WAS THE SUM CAPITALIZED AS ACTUAL COST OF THE ASSET IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AO HAS MADE A REFEREN CE TO SECTION 50C OF THE ACT, WHICH IN OUR OPINION, WILL NOT BE APPLICAB LE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THE VALUE ADOPT ED FOR THE PURPOSE OF REGISTRATION IS LESS THAN THE ACTUAL CONSIDERATION PAID BY THE PURCHASER TO THE VENDOR OF THE PROPERTY. SECTION 50C OF THE ACT WILL APPLY ONLY WHEN THE VALUE AS PER THE REGISTRATION DEPARTMENT IS MUCH HI GHER THAN THE CONSIDERATION PAID BY THE PURCHASER TO THE VENDOR O F THE PROPERTY. 15. AS FAR AS DISALLOWANCE OF DEPRECIATION IS CONCE RNED, THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE PROVISIO NS OF SEC.32(1) OF THE ACT WHICH LAYS DOWN THAT DEPRECIATION SHALL BE ALLO WED ON THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSTS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. HE ALSO DREW OUR ATTENTION TO THE PROVISIONS OF THE PROVISIONS OF SECTION 43(6)(A) OF THE ACT WHICH LAYS DOWN THAT WRITTEN D OWN VALUE MEANS IN THE CASE OF ASSETS ACQUIRED IN THE PREVIOUS YEAR, THE A CTUAL COST TO THE ASSESSEE. OUR ATTENTION WAS ALSO DRAWN TO THE PROVI SIONS OF SECTION 43(1) OF THE ACT WHICH TALKS ABOUT ACTUAL COST FOR THE PU RPOSE OF ALLOWING DEPRECIATION. SECTION 43(1) OF THE ACT DEFINES ACT UAL COST AS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE. WE HAVE CONSI DERED THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE STATUTORY ITA NO. 1673/BANG/2018 PAGE 7 OF 8 PROVISIONS REFERRED TO BY THE LEARNED COUNSEL FOR T HE ASSESSEE SUPPORTS THE PLEA OF THE ASSESSEE THAT WHAT IS RELEVANT WHILE AL LOWING DEPRECIATION IS THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSET AND THAT I N THE CASE OF ASSETS PURCHASED DURING THE PREVIOUS YEAR, THE WRITTEN DOW N VALUE MEANS THE ACTUAL COST TO THE ASSESSEE. ACTUAL COST IS THE SU M ACTUALLY PAID BY THE ASSESSEE. THE ASSET IN QUESTION WAS ACQUIRED DURIN G THE PREVIOUS YEAR AND THEREFORE WHAT WOULD BE RELEVANT FOR ALLOWING D EPRECIATION IS THE ACTUAL COST PAID BY THE ASSESSEE. THE EVIDENCE ON RECORD CLEARLY EVIDENCES THE FACT THAT THE ACTUAL OUTFLOW FROM THE ASSESSEE FOR ACQUIRING THE PROPERTY WAS RS.1,77,39,337/-. THEREFORE, THE ASSESSEE WOUL D BE ENTITLED TO DEPRECIATION FROM THE ACTUAL OUTFLOW OF MONEY FOR A CQUIRING THE PROPERTY. THE AO AND THE CIT(APPEALS), IN OUR VIEW, FELL INTO ERROR IN DISALLOWING THE CLAIM OF ASSESSEE FOR DEPRECIATION IN FULL AS CLAIM ED BY THE ASSESSEE. THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION A S MADE BY THE ASSESSEE. GROUND NO.3 RAISED BY THE ASSESSEE IS ACCORDINGLY A LLOWED. 16. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2018. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 20 TH JULY, 2018. / D ESAI S MURTHY / ITA NO. 1673/BANG/2018 PAGE 8 OF 8 COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.